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The Higher Education Act of 1965 (HEA; P.L. 89-329), authorizes the operation of programs and activities that make federal financial assistance available to individuals who are pursuing a postsecondary education and to institutions of higher education (IHEs). It also authorizes a number of other activities and functions. While the HEA was last comprehensively reauthorized in 2008 under the Higher Education Opportunity Act (HEOA; P.L. 110-315 ), it has been amended on numerous occasions since then. Amendments to the HEA in the 114 th Congress include those made under the Federal Perkins Loan Program Extension Act of 2015 ( P.L. 114-105 ), and the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). On Wednesday, June 22, 2016, the House Committee on Education and the Workforce marked up and ordered reported the following five bills that would amend selected HEA programs and activities: H.R. 5528 , the Simplifying the Application for Student Aid Act; H.R. 3178 , the Strengthening Transparency in Higher Education Act; H.R. 3179 , the Empowering Students Through Enhanced Financial Counseling Act; H.R. 5529 , the Accessing Higher Education Opportunities Act; and H.R. 5530 , the HBCU Capital Financing Improvement Act. This report identifies and describes how the proposals made in these five bills would amend the programs and activities authorized under the HEA. Each bill is described separately. Under federal student aid need analysis procedures, a student's calculated ability to pay for higher education is known as the "expected family contribution" (EFC). The EFC is determined by a formula that considers the income and assets of the student and, if applicable, the student's parents or spouse. Information to calculate the EFC is collected via the Free Application for Federal Student Aid (FAFSA). If applicable, family members who have submitted their income tax returns for the applicable tax year prior to completing the FAFSA may be able to import tax information to the FAFSA using the Internal Revenue Service Data Retrieval Tool (IRS-DRT). H.R. 5528 would make several changes to the FAFSA completion and submission process with the intent of reducing respondent burden in completing the form. Finally, the bill would make technical changes to the calculation of the annual adjustment percentage for federal Pell Grants. The HEA specifies that the EFC formula considers the income and other tax information of the student's family in the calendar year prior to the academic year (i.e., the EFC for the 2015-2016 academic year was based on information from the 2014 income tax return). However, the HEA also grants ED the authority to adjust this definition and base EFCs on tax returns from the second preceding year ("prior-prior year"). ED will exercise this authority for the first time in academic year 2017-2018 when it will base EFCs on information from 2015 tax returns. H.R. 5528 would amend the HEA to specify that ED "shall" base income for the purposes of calculating the EFC on information from the second-preceding tax year. This would make permanent ED's recent administrative change of basing federal student aid on prior-prior year tax information. Sponsors of the bill and student aid stakeholder organizations have suggested that this shift in the reference year will make it more likely that applicable tax information will be available through the IRS-DRT and thus reduce the amount of information that families must input to the FAFSA manually. Currently, a family may submit the FAFSA through ED's website or via a paper application. H.R. 5528 directs ED to "make the electronic version of the forms ... available through a technology tool that can be used on mobile devices." The bill specifies that the mobile version of the FAFSA shall be available within 180 days of enactment and must permit the user to save responses and submit the form to ED. The bill directs ED to conduct consumer testing "to ensure the forms and technology tool are designed to be easily usable and understandable by students and families." As noted above, some families may use the IRS-DRT to import tax information into the FAFSA. H.R. 5528 directs ED to "make every effort" to increase the functionality and reliability of the IRS-DRT and reduce the amount of information that must be manually entered into the FAFSA. The bill also specifically directs ED to implement the IRS-DRT such that families of all tax filing statuses (single, married filing jointly, married filing separately) can use the tool to its full capability. The total maximum Pell Grant award amount is the sum of the discretionary base maximum award and the mandatory "add-on" award. For award year (AY) 2014-2015 through AY2017-2018, current law permits the total maximum Pell Grant award to increase with inflation as long as the discretionary base maximum award is $4,860. The inflation rate is calculated as the change in the Consumer Price Index for All Urban Consumers (CPI-U), as measured from the most recently completed calendar year before the start of each applicable award year. H.R. 5528 would modify the calculation of the inflation rate to measure the change in CPI-U over the most recently completed fiscal year. This change would only apply to AY2017-2018, as current law does not authorize the total maximum Pell Grant award amount to adjust automatically thereafter. The HEA was amended by the HEOA to establish a number of provisions that require the reporting and publication of detailed information about institutions of higher education and their offerings, the students who attend them, and college costs and prices. Current requirements include the reporting and publication of this information on the College Navigator website, the development of net price calculators and multi-year tuition calculators, and the publication of College Affordability and Transparency Lists and State Higher Education Spending Charts. H.R. 3178 would establish a College Dashboard as the successor to the College Navigator website, and would revise the information required to be reported on it. The bill would also repeal the requirement to publicize College Affordability and Transparency Lists and State Higher Education Spending Charts, revise the requirements applicable to net price calculators, and repeal the requirement for multi-year tuition calculators. The HEA currently requires the Department of Education to make certain types of consumer information about IHEs that participate in the Title IV federal student aid programs publicly available on the College Navigator website. H.R. 3178 would require ED to establish a new consumer-tested College Dashboard website to succeed the College Navigator website. With the College Dashboard, requirements for the reporting and disclosure of consumer information would be revised. For instance, the bill would require the publication of information on completion rates for all undergraduate students, rather than only for first-time, full-time undergraduate students, as is currently required. Information on completion rates would also be disaggregated for a variety of student subgroups; and the reporting of information on topics such as cost of attendance, net price, financial aid, student loan debt, and veterans education benefits would be required to be reflective of undergraduate student enrollment as a whole, as opposed to only first-time, full-time students. Additionally, requirements for the reporting of information on academic faculty would be added, while the reporting of information on undergraduate admissions and standardized test scores would be eliminated. H.R. 3178 would also require that students who complete a FAFSA be provided with a link to the College Dashboard website for each institution they include on the FAFSA. The HEA requires each IHE that participates in the Title IV federal student aid programs to make a net price calculator available on its website to help current and prospective students obtain estimates of their net price at the institution. Net price is the average amount a student pays to attend an IHE in a single academic year, after subtracting need-based and merit-based grant and scholarship aid (i.e., aid that does not need to be repaid). H.R. 3178 would establish new, minimum requirements for net price calculators, including that IHEs provide clearly labeled and prominent links to their net price calculator on the portions of their websites where information on costs and student aid is made available. Net price calculators also would be required to display results for the various components of the cost of attendance of a full-time undergraduate student (e.g., tuition and fees, room and board, books and supplies), and estimated total need-based and merit-based grant and scholarship aid available to a full-time undergraduate student. In addition, information would need to be provided on the percentages of students who receive need-based or merit-based grant or scholarship aid. H.R. 3178 would also prohibit IHEs from selling or disclosing to third parties any personally identifiable information provided by users of net price calculators. The HEA requires that Title IV-participating IHEs make available loan entrance and loan exit counseling to certain Direct Loan (DL) borrowers, which generally provides borrowers with information relating to their Direct Loan terms and conditions, and with debt management strategies in the case of exit counseling. The provision of this loan counseling is intended to provide borrowers with information about the federal student aid debt they may incur and the consequences of doing so. H.R. 3179 would make numerous amendments to the current loan counseling requirements, with the intent of enhancing the timing, frequency, and content of the counseling to enable borrowers to make sound borrowing decisions. HEA Section 485(l) requires IHEs to provide entrance counseling at or prior to the time of disbursement of Direct Loans to most first-time DL borrowers. In general, entrance counseling is not required for borrowers of Direct PLUS Loans who are parents borrowing on behalf of their dependent undergraduate students. In addition, all DL borrowers, except for Parent PLUS Loan borrowers, must undergo exit counseling if they are graduating, leaving school, or dropping below half-time enrollment. Individuals who only receive Pell Grants are not required to undergo any statutorily prescribed financial aid counseling; those Pell Grant recipients that are also first-time DL borrowers are required to undergo the Section 485(l) entrance counseling. Rather than require entrance counseling, H.R. 3179 would require that each individual who receives a Pell Grant or a Direct Loan (other than a Direct Consolidation Loan), including Parent PLUS Loan borrowers, receive annual financial counseling. Thus, all borrowers, regardless of whether they are first-time or parent borrowers, and all Pell Grant recipients would be required to complete financial counseling annually. H.R. 3179 would retain the requirement that all DL borrowers, except for Parent PLUS Loan borrowers, who are graduating, leaving school, or dropping below half-time enrollment complete exit counseling. HEA Section 485(l) specifies the information that must be provided to DL borrowers during entrance counseling. In general, the information provided relates to loan terms and conditions and borrower rights and responsibilities. For instance, entrance counseling must explain the effect of accepting the loan on the borrower's eligibility for other forms of financial assistance, provide information on how interest accrues and is capitalized, and provide sample monthly payment amounts based on a range of levels of indebtedness or the average indebtedness of other borrowers in the same program at the same school. H.R. 3179 would require specific information to be given to specific individuals, based on the type of federal student aid they receive. H.R. 3179 would require that all individuals undergoing annual financial counseling receive information on budgeting for educational expenses, an explanation of their right to request a copy of their credit report annually and free-of-charge, the estimated average income and employment rates in their state of domicile for individuals based on educational attainment, and an introduction to specified financial resources. H.R. 3179 would require that, in their annual financial counseling, each student receiving a Pell Grant be provided with an explanation of the terms and conditions of the federal Pell Grant, including an explanation of why the student may have to repay the Pell Grant, the maximum number of enrollment periods for which the student may be eligible to receive a Pell Grant, and a statement of the amount of enrollment periods remaining for which the student may be eligible to receive a Pell Grant. For annual financial counseling for DL borrowers, H.R. 3179 would retain many of the elements currently required for first-time DL borrower entrance counseling. Additional information would be provided to individual borrowers based on the type of loan they borrow. For all DL borrowers, except Parent PLUS Loan borrowers, additional information provided in annual financial counseling under H.R. 3179 would include, but not be limited to, an explanation that the borrower should consider accepting other forms of financial aid (e.g., a grant or scholarship) before accepting a federal student loan; a recommendation that the borrower exhaust their federal student loan options before borrowing private education loans and an explanation that federal student loans typically offer more favorable terms and conditions than private education loans; and an explanation of a borrower's rights and responsibilities regarding private education loans. For all DL borrowers, H.R. 3179 would also require that annual financial counseling include the anticipated monthly payment amount and, if applicable, the estimated projected monthly payment amount under various repayment plans for which an individual may be eligible (e.g., under the standard repayment plan and an income-based repayment plan for all DL borrowers other than Parent PLUS Loan borrowers). Under current regulations, IHEs are encouraged, but not required, to obtain "affirmative confirmation" (i.e., written confirmation) from the student that he or she accepts the loan before disbursing loan funds to the student. H.R. 3179 would require that IHEs ensure borrowers accept their Direct Loans by either signing a master promissory note for the loan or by signing a separate statement affirmatively accepting the loan, which could be done electronically or in writing, after completion of the annual financial counseling and before loan disbursement. HEA Section 485(b) and accompanying regulations require IHEs to provide all DL borrowers, except Parent PLUS Loan borrowers, with exit counseling if they are graduating, leaving school, or dropping below half-time enrollment. The information provided in the exit counseling generally pertains to available repayment plans and debt management strategies and to borrower rights and responsibilities. H.R. 3179 would retain the current existing exit counseling requirements and would require some additional information to be provided to DL borrowers (excluding Parent PLUS Loan borrowers). New information to be included in exit counseling would include a summary of the outstanding balance and principle and interest due on all loans made under HEA Title IV, an explanation of the grace period preceding repayment, and information on available repayment plans based on the borrower's outstanding loan balance. Currently, IHEs may develop their own entrance and exit counseling, which could be online, in writing, or in person, so long as it fulfills the HEA requirements. IHEs may also use the ED-developed online entrance and exit counseling tools, which satisfy IHEs' responsibility for providing counseling. Currently, HEA Section 485(l) specifies that the Secretary shall encourage IHEs to provide entrance counseling through the use of interactive programs that use simple and understandable language, but it does not specify the ways in which that might be done and does not explicitly require ED to maintain an online counseling tool. H.R. 3179 would require ED to maintain online financial and exit counseling tools that are consumer tested, understandable, and freely available to all IHEs. Under H.R. 3179 , IHEs would have the option to use ED's new online counseling tools or to provide their own online or in-person counseling. IHEs choosing to provide their own counseling would be required to ensure that the counseling is interactive and that it tests an individual's understanding of the terms and conditions of their federal student aid. Finally, H.R. 3179 would also specify several administrative procedures for the provision of online counseling, such as requiring ED to maintain a record of individuals who have received and completed counseling using the online tool. H.R. 3179 would require ED to conduct a longitudinal study on the impact and effectiveness of the annual financial and exit counseling and ED's newly developed online counseling tool required under the bill. Additionally, ED would be required to issue interim reports on a regular basis evaluating the progress of the study and reporting any short-term findings. Finally, to carry out the various provisions required under the act, H.R. 3179 would make available $2 million of the amounts currently available to ED in support of student aid counseling and prohibit additional funds from being appropriated for such purposes. Title V-A of the HEA authorizes the Developing Hispanic Serving Institutions (HSIs) program, which provides grants to institutions of higher education with large undergraduate Hispanic enrollments (Hispanic-serving institutions; HSIs) to support and expand educational opportunities for Hispanic students and to enhance the academic offerings and institutional stability at HSIs. H.R. 5529 would make changes to the authorized uses of grant monies awarded to HSIs under the program with the intent of potentially increasing the number of Hispanic physicians in the workforce and expanding the types of educational offerings at HSIs, while achieving a zero budget score. HEA Section 503 authorizes HSI program grants to be used for a variety of statutorily specified activities, such as constructing, maintaining, and renovating instructional facilities; operating tutoring, counseling, and student service programs designed to improve academic success; and increasing the number of Hispanic and other underrepresented graduate and professional students that the institution can serve by expanding courses and institutional resources. H.R. 5529 would expand the authorized uses of Title V-A HSI grants to include (1) the operation of student support services designed to enable the successful advancement of students from four-year institutions of higher education to postbaccalaureate doctoral degree programs for healthcare occupations, and (2) the development and expansion of access to dual or concurrent enrollment programs and early college high school programs. The Title V-A HSI program is funded through annual discretionary appropriations. The authorization of appropriations for the program expired at the end of FY2014. Section 422 of the General Education Provisions Act (GEPA) provided an automatic one-year extension of the program's authorization of appropriations through FY2015. That authorization of appropriations was not subsequently extended. In the interim, annual appropriations have continued to be provided each fiscal year, and the program has continued to operate on that basis. In FY2016, the program received $107,795,000 in appropriations. H.R. 5529 would authorize appropriations in the amount of $107,795,000 for FY2016 only. It would also make Section 422 of the General Education Provisions Act inapplicable to the Developing HSIs program, so that no automatic extension would be provided. Because the amount that the bill authorizes to be appropriated for FY2016 was precisely the same as the amount that has already been provided for ED to operate the Developing HSIs program, and because the GEPA automatic one-year extension does not apply, it appears that the bill intends that no further appropriations for the program be provided to expand the type of allowable uses for Developing HSI program grants. HEA Title III-D authorizes the Historically Black College and University (HBCU) Capital Financing (Cap Fin) program, which is a loan guarantee program that offers federal assistance to approximately 100 HBCUs in obtaining low-cost capital financing for campus maintenance, renovation, and construction projects. H.R. 5530 would make several changes to the program's operations, support, and congressional oversight. Under the HBCU Cap Fin program, rather than directly providing capital financing loans to HBCUs, ED contracts with a private, for-profit corporation to act as the Designated Bonding Authority (DBA) and to operate the program. The DBA issues taxable bonds on behalf of HBCU borrowers, and ED guarantees full payment on the qualified bonds issued by the DBA. Bond proceeds are then used by the DBA to provide low-interest loans to eligible HBCUs. HBCUs must use at least 95% of an HBCU Cap Fin loan to complete statutorily authorized capital projects. The remaining 5% of the loan must be deposited into a pooled escrow account, which is used to cover any delinquencies or defaults by an institution in the program. If no institution defaults during the period in which the participating HBCU has an outstanding loan, the HBCU will receive its portion of the escrow after final loan repayment. H.R. 5530 would replace all references to the "pooled escrow" account with the phrase "bond insurance fund." It has been reported that the pooled escrow account component of the HBCU Cap Fin program presents a problem for some state institutions because, under the laws of their state, they are prohibited from assuming the liability of another institution. Replacing the term "pooled escrow" with the term "bond insurance fund" is intended to maintain the current form and functionality of the pooled escrow account, while increasing access to the HBCU Cap Fin program for those HBCUs for which the pooled escrow account component is a barrier to participation under state law. In support of the HBCU Cap Fin program goals, the HEA authorizes the Secretary to provide technical assistance to eligible HBCUs to prepare them to obtain and maintain a capital improvement loan, including an HBCU Cap Fin loan. H.R. 5530 would authorize the Secretary to provide financial counseling to eligible HBCUs, along with the currently authorized technical support. Finally, HEA Title III-D establishes the HBCU Capital Financing Advisory Board, which is tasked with advising ED on the capital needs at HBCUs and how those needs can be met through the program. H.R. 5530 would amend the HEA to direct the HBCU Capital Financing Advisory Board to annually submit to the authorizing committees a report describing the loans currently in the program and administrative and legislative recommendations for addressing issues related to construction financing for HBCUs. | On Wednesday, June 22, 2016, the House Committee on Education and the Workforce marked up and ordered reported five bills that would amend several of the programs and activities authorized under the Higher Education Act of 1965 (HEA). H.R. 5528, the Simplifying the Application for Student Aid Act, would amend procedures for completing the Free Application for Federal Student Aid (FAFSA) to mandate the use of income and tax information from the second preceding (prior-prior) year for purposes of calculating a student's expected family contribution (EFC), to require development of a tool that facilitates completion of the FAFSA using a mobile device, and to promote enhancements in the capacity of the Internal Revenue Service Data Retrieval Tool (IRS-DRT) to be used to populate portions of the FAFSA. H.R. 3178, the Strengthening Transparency in Higher Education Act, would revise the types of consumer information about institutions of higher education that must be disclosed through a new Department of Education College Dashboard, which would succeed the current College Navigator website and revise the types of information on college costs and prices that must be made available through net-price calculators. H.R. 3179, the Empowering Students Through Enhanced Financial Counseling Act, would establish annual requirements for the counseling of federal student loan and Pell Grant recipients, with the aim of enhancing the timing, frequency, and content of the counseling to better enable borrowers to make sound decisions concerning their federal student aid. H.R. 5529, the Accessing Higher Education Opportunities Act, would amend the Developing Hispanic-Serving Institutions program to allow the use of funds for offering student support services to enable the advancement of students from baccalaureate programs to postbaccalaureate degree programs for healthcare occupations. H.R. 5530, the HBCU Capital Financing Improvement Act, would make several changes to the Historically Black College and University (HBCU) Capital Financing Program to enhance program operations, support, and congressional oversight. This report identifies and describes how the proposals made in these five bills would amend the affected programs and activities authorized under the HEA. Each bill is described separately. This report will be updated to reflect legislative developments. |
The Federal Communications Commission (FCC) regulates a number of disability-related telecommunications services, including video relay service (VRS). VRS is a form of telecommunications relay service (TRS). The service allows persons with hearing disabilities, using American Sign Language (ASL), to communicate with voice telephone users through video equipment rather than through typed text. Video equipment links the VRS user with a "communications assistant" (CA) so that the VRS user and the CA can see and communicate with each other in signed conversation (see Figure 1 ). VRS has quickly become a very popular service. It offers several features not available with the text-based TRS: People with hearing disabilities can communicate using ASL rather than typing what they want to say. This allows them to incorporate facial expressions and body language into their conversations, which cannot be done using text. A VRS call is more like a telephone conversation between two hearing persons. For example, the parties can interrupt each other. The parties cannot interrupt each other during a traditional TRS call because the parties have to take turns communicating with the CA. Conversation flows more naturally between the parties, so the conversation may take place more quickly than with TRS. VRS calls may be made between ASL users and hearing persons speaking either English or Spanish. VRS is different from other forms of TRS in two important ways: (1) the conversation between the VRS user and the CA is made through a video link and sign language rather than typed text; and (2) the service relies on the Internet, rather than the public telephone system, for the connection between the VRS user and the CA. Also, unlike some other forms of TRS, VRS is not mandatory. VRS is free to the caller, and VRS providers are reimbursed for their costs from the TRS Fund. Since July 1, 2011, the TRS Fund has been administered by Rolka Loube Saltzer Associates, LLC (RLSA). Prior to that date, the fund was administered by the National Exchange Carriers Association. VRS providers are subject to certain requirements and prohibitions: Eighty percent of all VRS calls must be answered within 120 seconds. Service must be offered 24 hours a day, seven days a week. VRS providers must provide their users with a 10-digit telephone number, so users will be able to make 911 calls and have their location data routed to the appropriate emergency agency. Preferential treatment of calls is prohibited. VRS (and TRS) providers must handle calls in the order in which they are received. They cannot selectively answer calls from certain consumers or certain locations. Equipment distributed by a certified VRS provider must be interoperable with the technology of other certified VRS providers. VRS (and TRS) providers may not offer financial incentives to use their service or to make more or longer VRS (or TRS) calls. The VRS program is funded through the larger TRS Fund. The TRS Fund is a revolving fund financed through contributions by all providers of interstate telecommunications services. Contributions are based on a "contribution factor" that is set on an annual basis by the FCC. On June 29, 2018, the FCC set VRS rates for the 2018-2019 fund year (July 1, 2018, through June 30, 2019) (see Table 1 ). For VRS providers with 500,000 or fewer monthly minutes, the per-minute VRS compensation rate is $5.29. Based on these compensation rates, the maximum rates within the range of VRS rates proposed by the Commission, projected demand for the services, and projected Fund administration expenses, the FCC adopted a funding requirement of $1,497,699,377, and a carrier contribution factor of 0.02801. The FCC has implemented changes to the VRS program to reduce fraud and abuse, better manage the amount of money that is collected to fund the program, and take advantage of technological advancements. The primary concern of the deaf and hard-of-hearing community appears to be that cuts to the fund may result in fewer and less-qualified ASL interpreters, which would decrease the functional equivalency of the service. Additionally, it is concerned that changes in technology—even "better" technology—will decrease competition among service providers, possibly decreasing innovation. Moreover, the community believes that changes in the technology could pose challenges to some users and make placing and receiving calls more difficult. The deaf and hard-of-hearing community will likely continue to contact Congress whenever changes are proposed for the VRS program. The community relies heavily on the program, so it is understandable that they might view any proposed changes with concern. However, the FCC also has a responsibility to make sure that the fund remains solvent and to take advantage of advances in technology that it has determined will improve the system. Congress may wish to monitor the current proposed changes to the system to ensure that the FCC, while working to modernize TRS technology and minimize financial abuse, also gives full consideration to the concerns of the deaf and hard-of-hearing community. | The Federal Communications Commission (FCC) regulates a number of disability-related telecommunications services, including video relay service (VRS). VRS allows persons with hearing disabilities, using American Sign Language (ASL), to communicate with voice telephone users through video equipment rather than through typed text. VRS has quickly become a very popular service, as it offers several features not available with the text-based telecommunications relay service (TRS). The FCC has adopted various rules to maintain the quality of VRS service. Now VRS providers must answer 80% of all VRS calls within 120 seconds. VRS providers must also offer the service 24 hours a day, seven days a week. Additionally, in June 2010, the FCC began a comprehensive review of the rates, structure, and practices of the VRS program to minimize waste, fraud, and abuse and update compensation rates that had become inflated above actual cost. Rules in that proceeding were issued in June 2013. The new rules initiated fundamental restructuring of the program to support innovation and competition, drive down ratepayer and provider costs, eliminate incentives for waste, and further protect consumers. In addition, the new rules transition VRS compensation rates toward actual costs over the next four years, initiating a step-by-step transition from existing tiered TRS Fund compensation rates toward a unitary, market-based compensation rate. On June 20, 2017, the FCC extended existing (2016-2017) VRS rates on a provisional basis. For VRS providers with more than 500,000 monthly minutes, the per-minute VRS compensation rates are: $4.06 for minutes that fall within Tier I (a provider's first 500,000 monthly minutes); $4.06 for minutes that fall within Tier II (a provider's second 500,000 monthly minutes); and $3.49 for minutes that fall within Tier III (a provider's monthly minutes in excess of 1,000,000). For VRS providers with 500,000 or fewer monthly minutes, the per-minute VRS compensation rate is $4.82. Based on these compensation rates, the maximum rates within the range of VRS rates proposed by the Commission, projected demand for the services, and projected Fund administration expenses, the FCC adopted a funding requirement of $1,328,188,285, and a carrier contribution factor of 0.02289. Congressional interest in the VRS program is twofold: eliminating fraud and abuse in the program and maintaining the usefulness of the program for users. Controversy has arisen over the latest proposals for change to the program being considered by the FCC. The FCC believes that rate structure changes are needed to reduce fraud and better manage the VRS program, but the deaf and hard-of-hearing community is concerned that funding cuts will result in fewer and less-qualified ASL interpreters. Additionally, the FCC has proposed changing the technologies used to operate and use the system, but the community is concerned that changes in technology will decrease the quality of the system as it is now and also potentially pose challenges to some users. |
The Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations subcommittees are charged with drafting bills to provide annual appropriations for the Department of Transportation (DOT), the Department of Housing and Urban Development (HUD), and six small related agencies. Typically, these bills are reported out by the appropriations committees and presented to the House and Senate for consideration. If a bill is passed in each house, final legislation is produced in a conference agreement. Title I of the annual THUD appropriations bill funds DOT. The department is primarily a grant-making and regulatory organization. Its programs are organized roughly by mode of transportation, providing grants to state and local government agencies to support the construction of highways, transit, and intercity passenger rail infrastructure, while providing regulatory oversight to promote safety for the rail, transit, commercial trucking and intercity bus, and maritime industries, as well as noncommercial drivers. The Federal Aviation Administration (FAA) is exceptional among DOT's largest offices, in that while it administers grants for airport development and regulates the safety of aviation operations, the largest portion of its budget and workforce is dedicated to operating the U.S. air traffic control system. Title II of the annual THUD appropriations bill funds HUD. The department's programs are primarily designed to address housing problems faced by households with very low incomes or other special housing needs. These include several programs of rental assistance for persons who are poor, elderly, and/or have disabilities. Three rental assistance programs—Public Housing, Section 8 Vouchers, and Section 8 project-based rental assistance—account for the majority of the department's nonemergency funding. Two flexible block grant programs—the HOME Investment Partnership Program and Community Development Block Grants (CDBG)—help communities finance a variety of housing and community development activities designed to serve low-income families. Other, more specialized grant programs help communities meet the needs of homeless persons, including those with AIDS. HUD's Federal Housing Administration (FHA) insures mortgages made by lenders to home buyers with low down payments and to developers of multifamily rental buildings containing relatively affordable units. Title III of the THUD appropriations bill funds a collection of transportation-related agencies and housing and community development-related agencies. They include the Access Board, the Federal Maritime Commission, the National Transportation Safety Board, the Amtrak Office of Inspector General (IG), the Neighborhood Reinvestment Corporation (often referred to as NeighborWorks), the United States Interagency Council on Homelessness, and the costs associated with the government conservatorship of the housing-related government-sponsored enterprises, Fannie Mae and Freddie Mac. Table 1 provides a timeline of legislative action on the FY2015 THUD appropriations bill. The discretionary funding allocation to the Senate THUD subcommittee is $2.4 billion more than that provided to the House subcommittee. This difference creates an additional difficulty in reaching agreement on a final FY2015 THUD appropriation level. Table 2 shows the discretionary funding provided for THUD in FY2014, the Administration request for FY2015, and the amount allocated by the House and Senate Appropriations Committees to the THUD subcommittees. Table 3 lists the total funding provided for each of the titles in the bill for FY2014 and the amount requested for that title for FY2015. As is discussed later, much of the funding for this bill is in the form of contract authority, a type of mandatory budget authority. Thus, the discretionary funding provided in the bill (often referred to as the 302(b) allocation) is only about half of the total funding provided by this bill. The President's FY2015 budget included a request for $126.7 billion for THUD, $22 billion more than appropriated for THUD in FY2014. Most of this increase was for highway, transit, and rail funding under the Administration's surface transportation reauthorization proposal. The request for HUD is $4 billion more than provided in FY2014, but $3 billion of that increase reflects a decline in offsetting receipts; the decline in offsetting receipts means that HUD's appropriation would have to increase by $3 billion in order to provide the same amount of funding as HUD received in FY2014. The House bill would provide a total of $105.5 billion for FY2015. While this is $1 billion over the amount provided in FY2014, in effect it is a reduction of $2 billion in total spending authority from FY2014, due to the $3 billion decline in offsetting receipts. The committee recommended that the reduction be divided roughly evenly between DOT and HUD, with cuts in DOT's TIGER grant program (-$500 million), New Starts transit grant program (-$252 million), Amtrak (-$200 million), and rescissions of other DOT funding (-$354 million). HUD's funding would increase by $1 billion less than the reduction in offsetting collections. The Senate Committee on Appropriations recommended a total of $108.1 billion. This is $3.7 billion over the amount provided in FY2014, but only $700 million more than the FY2014 level once the $3 billion reduction in offsetting receipts in FY2015 is taken into account. The Office of Management and Budget reported that, as a result of the discretionary spending limits set in the Bipartisan Budget Act of 2013 ( P.L. 113-67 , Division A), no sequester reductions are required for FY2015. Table 4 shows funding trends for DOT and HUD over the period FY2009-FY2014, omitting emergency funding and other supplemental funding, and the amounts requested for FY2015. The purpose of Table 4 is to indicate trends in the funding for these agencies, thus emergency supplemental appropriations are not included in the figures. The funding numbers cited in discussions of the THUD appropriations bill can be confusing. Different totals, all of which may be correct, may be published by the committees in their tables and press releases, reported in the press or by advocates, and even presented in this report. This is possible because the THUD appropriations bills include different types of funding mechanisms and savings mechanisms, which can result in different figures being reported for the same programs, depending on how the numbers are presented. The following section of this report explains the different types of funding often included in the THUD appropriations bill. Most of the programs and activities in the THUD bill are funded through regular annual appropriations , also referred to as discretionary appropriations. This is the amount of new funding allocated each year by the appropriations committees. Appropriations are drawn from the general fund of the Treasury. For some accounts, the appropriations committees provide advance appropriations , or regular appropriations that are not available until the next fiscal year. In some years, Congress will also provide emergency appropriations , usually in response to disasters. These funds are sometimes provided outside of the regular appropriations acts—often in emergency supplemental spending bills—generally in addition to regular annual appropriations. Although emergency appropriations typically come from the general fund, they may not be included in the discretionary appropriation total reported for an agency. Most of the Department of Transportation's budget is in the form of contract authority . Contract authority is a form of budget authority based on federal trust fund resources, in contrast to "regular" (or discretionary) budget authority, which is based on resources in the general fund. Contract authority controls spending from the highway trust fund and the airport and airways trust fund. Congressional appropriators are generally subject to limits on the amount of new non-emergency discretionary funding they can provide in a year. One way to stay within these limits is to appropriate no more than the allocated amount of discretionary funding in the regular annual appropriations act. Another way is to find ways to offset a higher level of discretionary funding. A portion of the cost of regular annual appropriations for the THUD bill is generally offset in two ways. The first is through rescissions , or cancellations of unobligated or recaptured balances from previous years' funding. The second is through offsetting receipts and collections , generally derived from fees collected by federal agencies. When the Appropriations Committee subcommittees are given their "302(b) allocations"—that is, when the total amount that the Appropriations Committee has to spend for a fiscal year is divided among the subcommittees—that figure includes only net discretionary budget authority (non-emergency appropriations, less any offsets and rescissions); contract authority from trust funds is not included. That omission can lead to confusion, as the annual discretionary budget authority allocations for THUD are typically around half of the total funding provided in the bill, with the remainder made up of contract authority. Once the THUD subcommittees receive their 302(b) allocations, they must decide how to allocate the funds across the different agencies within their jurisdictions. As shown in Figure 1 , for net discretionary budget authority (appropriations, less any offsets), the majority of funding allocated by the appropriations subcommittees generally goes to HUD (about two-thirds in FY2013). However, when contract authority—which, as noted earlier, is not allocated by the appropriations committees—is included, the total resources available to DOT are greater than the resources available to HUD. Besides the level of the 302(b) allocation, one of the most important factors in determining how much in new appropriations the THUD subcommittees will provide each year is the amount of savings available from rescissions and offsets. Each dollar available to the subcommittees in rescissions and offsets serves to reduce the "cost" of providing another dollar in appropriations. As shown in Table 5 , in FY2014, without rescissions and offsets, it would have "cost" the THUD subcommittees an additional $12.8 billion to provide the same amount of appropriations. The amount of these "budget savings" can vary from year to year, meaning that the "cost" of providing the same level of appropriations may vary as well. Due to a $3 billion reduction in offsetting collections in FY2015 compared to FY2014, it would cost the THUD subcommittees an additional $3 billion in discretionary funding in FY2015 to provide the same level of total funding as provided in FY2014. But with a 302(b) discretionary allocation that was only $1.1 billion higher than THUD's net FY2014 level, the House THUD subcommittee was not given sufficient funds to make up the shortfall. Table 6 presents a selected account-by-account summary of FY2015 appropriations for DOT, compared to FY2014. Roughly three-fourths of DOT's budget is mandatory budget authority (contract authority) derived from the highway trust fund. The authorizations for that funding expire at the end of FY2014, but the highway trust fund is projected to reach insolvency before that date. Thus Congress is considering FY2015 DOT appropriations in the context of uncertainty about DOT's future program structure and funding. Overall, the FY2015 budget request totals $90.9 billion in new budget resources for DOT. The requested funding is $20 billion more than that enacted for FY2014. The Administration request reflects its surface transportation reauthorization proposal, which envisions $302 billion over four years for highways, transit, and intercity passenger rail. This is an average of $78 billion each year; by contrast, the current authorization provided $105 billion over two years, an average of $52.5 billion annually. Highway, transit, and intercity passenger rail programs would all see significant funding increases under this proposal. Transportation authorization is outside the jurisdiction of the appropriations committees, but since most of DOT's appropriations come from the highway trust fund, the status of the fund is a key concern. The House bill would provide $70.2 billion in net new budget authority, $1 billion (1%) less than provided in FY2014. The Senate Committee on Appropriations recommended $71.7 billion, $500 million (1%) more than provided in FY2014. Virtually all federal highway funding, and most federal transit funding, comes from the highway trust fund, whose revenues come largely from the federal motor fuels excise tax ("gas tax"). For several years, expenditures from the fund have exceeded revenues; for example, in FY2014, revenues are projected to be approximately $39 billion, while authorized outlays are projected to be approximately $53 billion. Congress transferred more than $54 billion, mostly from the general fund of the Treasury, to the highway trust fund during the period FY2008-FY2014 to keep the trust fund solvent. In April 2014 the Congressional Budget Office (CBO) projected that the trust fund would become insolvent in FY2015, though the highway account may be unable to provide payments in a timely manner even before the end of FY2014. One reason for the shortfall in the highway trust fund is that the federal gas tax has not been raised since 1993. The tax is a fixed amount assessed per gallon of fuel sold, not a percentage of the cost of the fuel sold: whether a gallon of gas costs $1 or $4, the highway trust fund receives 18.3 cents for each gallon of gasoline and 24.3 cents for each gallon of diesel. Meanwhile, the capacity of the federal gas tax to support transportation infrastructure has been diminished by inflation (which has reduced the purchasing power of the revenue raised by the tax) and increasing automobile fuel efficiency (as more efficient vehicles are able to travel farther on a gallon of fuel). CBO has forecast that gasoline consumption will be relatively flat through 2024, as continued increases in the fuel efficiency of the U.S. passenger fleet will offset increases in the number of miles driven. Consequently, CBO expects highway trust fund revenues of $37 billion to $38 billion annually from FY2014 to FY2024, well short of the current $53 billion annual level of authorized expenditures from the fund. When the authorization provided by MAP-21 expires at the end of FY2014, Congress will again face policy choices concerning surface transportation. Among the options are to reduce the scope of federal highway and transit programs to match current trust fund revenues, to increase federal taxes on motor fuels to support the programs at current or increased funding levels, or to obtain funding from other sources, such as the general fund. Over the longer term, increases in vehicle fuel efficiency resulting from previously enacted legislation and greater use of electric vehicles are likely to constrain motor fuel consumption, leaving in question the viability of motor fuel taxes as the principal source of surface transportation funding. The Transportation Investments Generating Economic Recovery (TIGER) grant program originated in the American Recovery and Reinvestment Act ( P.L. 111-5 ), where it was referred to as "national infrastructure investment" (as it has been in subsequent appropriations acts). It is a discretionary grant program intended to address two criticisms of the current structure of federal transportation funding: that virtually all of the funding is distributed to state and local governments which select projects based on their individual priorities, making it difficult to fund projects that have national or regional impacts but whose costs fall largely on one or two states; and that federal transportation funding is divided according to mode of transportation, making it difficult for major projects in different modes to compete on the basis of comparative benefit. The TIGER program provides grants to projects of national, regional, or metropolitan area significance in various modes on a competitive basis, with recipients selected by U.S. DOT. Congress has continued to support the TIGER program through annual DOT appropriations. There have been five rounds of TIGER grants (from ARRA funding, and from FY2010-FY2013 annual appropriations), with the sixth round (FY2014) in process. After the restructuring of DOT programs in the MAP-21 reauthorization, the TIGER program is virtually the only remaining discretionary grant program for surface transportation (other than the FTA's Capital Investment Grant program, popularly referred to as New Starts, discussed below). It is heavily oversubscribed; for example, DOT has announced that it received a total of $9.5 billion in applications for the $600 million available for FY2014 grants. The U.S. Government Accountability Office (GAO) has reported that, while DOT has selection criteria for the TIGER grant program, it has sometimes awarded grants to lower-ranked projects while bypassing higher-ranked projects, without explaining why it did so, raising questions about the integrity of the selection process. DOT has responded that its project rankings are based on transportation-related criteria (e.g., safety, economic competitiveness), but that it must sometimes select lower-ranking projects over higher-ranking ones to comply with other selection criteria established by Congress, such as geographic balance and a balance between rural and urban awards. The Administration requested $1.25 billion for the TIGER program for FY2015, roughly double the $600 million Congress provided in FY2014. The FY2015 House bill would provide $100 million for the program, far less than the amount requested and $500 million (83%) less than provided in FY2014, while retaining the provisions requiring an equitable distribution of funds geographically and between urban and rural areas, and with a maximum grant size of $15 million. The Senate Committee on Appropriations recommended $550 million, far less than the amount requested and $50 million (8%) less than provided in FY2014. The EAS program seeks to preserve commercial air service to small communities by subsidizing the cost of service that would otherwise be unprofitable. The costs of the program doubled between FY2008 and FY2012, in part because route reductions by airlines resulted in new communities being added. Congress made changes to the program in 2012, including allowing no new entrants, capping the per passenger subsidy for a community at $1,000, limiting communities less than 210 miles from a hub airport to a maximum average subsidy per passenger of $200, and allowing smaller, less expensive planes to be used for communities with few daily passengers. Supporters of the EAS program contend that preserving airline service to small communities was a commitment Congress made when it deregulated airline service in 1978, anticipating that airlines would reduce or eliminate service to many communities that were too small to make such service economically viable. Supporters also contend that subsidizing air service to smaller communities promotes economic development in rural areas. Critics of the program note that the subsidy cost per passenger is relatively high, that many of the airports in the program have very few passengers, and that some of the airports receiving EAS subsidies are little more than an hour's drive from major airports. As Table 8 shows, the Administration requested $155 million for the EAS program in FY2015, in addition to $106 million in mandatory funding. This is $8.6 million (3%) less than the FY2014 funding ($149 million appropriation plus $121 million in mandatory funding). The House bill would provide $149 million in discretionary funding, the same amount as in FY2014, but with an estimated reduction in the overflight fee revenues, the total available funding would be $6 million (2%) less than requested. It would also lower the maximum rate of subsidy per passenger from $1,000 to $500, except for communities willing to pay part of the subsidy cost. The Senate Committee on Appropriations recommended $155 million, the amount requested. Reflecting the Administration's surface transportation reauthorization proposal, the budget proposed a total of $4.8 billion for a new National High Performance Rail System program within the Federal Railroad Administration, consisting of two grant programs: $2.5 billion for a Current Passenger Rail Service grant program (which would primarily fund maintenance and improvement of existing intercity passenger rail service, i.e., Amtrak) and $2.3 billion for a Rail Service Improvement grant program (which would fund new intercity passenger rail projects as well as some improvements to freight rail). The funding would come from a transportation trust fund rather than discretionary funding. The Administration made a similar proposal in FY2014. Neither the House nor the Senate would provide funding for these new programs. The 111 th Congress (2009-2010) provided $10.5 billion for DOT's high speed and intercity passenger rail grant program, beginning with $8 billion in the American Recovery and Reinvestment Act of 2009. Since then, Congress has provided no additional funding and in FY2011 rescinded $400 million of the unobligated portion of the $10.5 billion already appropriated. This program has provided funding mainly to develop intercity passenger rail service with top speeds of 90 or 110 miles per hour. Only one state, California, is actively pursuing development of a high speed rail line that would provide dedicated tracks for passenger trains traveling at speeds greater than 150 miles per hour. California has received $3.6 billion in federal funding for this project, but the total cost of constructing the line is estimated at more than $70 billion, and the prospects for financing the full project are uncertain. The Administration proposed in its FY2015 budget to place Amtrak's funding into a new Federal Railroad Administration account—Current Passenger Rail Service—and requested $2.45 billion for the account. It would fund publicly owned passenger rail asset development and maintenance, primarily Amtrak. Congress provided $1.39 billion in capital, operating, and debt service grants for Amtrak in FY2014. Amtrak also submits a grant request to Congress each year, separate from the Administration's budget request. The agency requested $1.62 billion for FY2015. This is almost $1 billion less than its request in FY2014; compared to FY2014, the FY2015 request asks for less money for capital improvements and for debt service, and omits funding for station improvements to comply with requirements of the Americans With Disabilities Act (ADA), for new equipment purchases and equipment lease buybacks, and for the NEC Gateway expansion project. Amtrak's request was $600 million less than the Administration request for Amtrak. Although Amtrak's request used different categories than the Administration request for Amtrak, some of the differences are evident: the Administration requested $550 million for the NEC and $350 million for the ADA-required station improvements, while Amtrak requested $445 million for the NEC and nothing for the ADA-required station improvements. The House would provide $1.19 billion for Amtrak for FY2015, $200 million (14%) below its FY2014 funding. The Senate Committee on Appropriations recommended $1.39 billion, the same amount provided in FY2014, and much less than requested by Amtrak and the Administration. Table 9 shows the amount of funding appropriated for Amtrak grants in FY2013 and FY2014, requested by the Administration for FY2015, and proposed by the House and Senate. The majority of FTA's $10 billion funding is funneled to state and local transit agencies through several formula programs. The largest discretionary grant program is the Capital Investment Grants program (commonly referred to as the New Starts program). It funds new fixed-guideway transit lines and extensions to existing lines. Before 2012, the program had two components, New Starts and Small Starts, based on project cost. The New Starts component funds capital projects with total costs over $250 million and which are seeking more than $75 million in federal funding; and the Small Starts component funds capital projects with total costs under $250 million and which are seeking less than $75 million in federal funding. In the transit program reauthorization enacted in 2012, Congress added a third component, Core Capacity. This component funds expansions to existing fixed-guideway systems that are at or near capacity. The Capital Investment Grants program provides funding to large projects over a period of years. Much of the funding for this program each year is committed to existing New Starts projects with multi-year grant funding agreements. FTA reports that its existing grant agreements will require $1.41 billion in New Starts funding in FY2015. For FY2015, the Administration requested $2.5 billion for the program, roughly $550 million (28%) more than the $1.94 billion appropriated in FY2014. The House bill would provide $1.69 billion, $250 million (13%) less than the FY2014 level. The Senate Committee on Appropriations recommended $2.161 billion, less than requested but more than provided in FY2014. According to the committee, that amount would fully fund all projects included in the Administration request that are currently under construction or expected to begin construction during FY2015. The federal share for New Starts projects, by statute, can be up to 80%. Since FY2002, DOT appropriations have included a provision directing FTA not to sign any full funding grant agreements that provide a federal share of more than 60%. The House bill would lower the maximum federal share to 50%. Critics of this provision note that the federal share for highway projects is typically 80% and in some cases is higher. They contend that, by providing a lower share of federal funding (and thus requiring a higher share of local funding), this provision makes highway projects relatively more attractive for communities considering how to address transportation problems. Advocates of this provision note that the demand for New Starts funding greatly exceeds the amount available, so requiring a higher local match allows FTA to support more projects with the available funding. They also assert that requiring a higher local match likely encourages communities to estimate the costs and benefits of proposed transit projects more carefully, reducing the risk of subsequent cost overruns. The House and Senate bills include several policy provisions. In the House bill, these include amendments that would prohibit the use of funds in the bill for the California high-speed rail project; to subsidize Amtrak food and beverage service and to subsidize the Amtrak route with the highest per-passenger subsidy (the Sunset Limited); to approve the application by Air Norwegian International, an Ireland-based subsidiary of a Norwegian air carrier, to serve the United States; to administer NHTSA's Roadside Survey of Alcohol and Drugged Driving; and to let DOT work with states to promote motorcycle safety (such as by enacting helmet laws). The Senate bill was amended in committee to suspend portions of the commercial driver hours-of-service rules for roughly a year, pending a study of their cost and benefits. In June 2013, two new requirements took effect: drivers are required to take at least 34 hours off duty, covering two consecutive 1 a.m.-5 a.m. periods, after working for 60 hours in a seven-day period (or 70 hours in an eight-day period). And drivers are only allowed to take this 34-hour "restart" once in a 168-hour (seven-day) span. If drivers work for less than 60 hours in a week, they do not have to take the 34-hour restart; for example, if a driver worked 8 hours every day, for a total of 56 hours in a seven-day period, that driver could continue to work every day without taking a 34-hour rest period. The purpose of the 2013 change in the hours-of-service rules was to promote highway safety by reducing the risk of driver fatigue. Under the previous rules, drivers had to take a 34-hour restart period after working for 60 hours in a seven-day period (or 70 hours in an eight-day period). But drivers could start this rest period at any time, and could take more than one such rest period per week. Thus a driver was able to work the maximum permitted time per day (14 hours) and take the 34-hour restart after five days, and then, after a rest period of as little as one night and two daytime periods, work 14 hours a day for another five consecutive days. FMCSA asserted that this schedule allowed a driver to work up to 82 hours over a seven-day period, which it judged to be insufficient to prevent the driver being fatigued while driving. By limiting the use of the 34-hour restart to once in a seven-day (168-hour period), FMCSA sought to limit drivers to a maximum of 70 hours of work in a seven-day span. And by requiring that the 34-hour restart period cover two 1 a.m.-5 a.m. periods, the current rule allows drivers to get more sleep during the 1 a.m.-5 a.m. period, when studies indicate that sleep is most restorative (compared to sleeping during other times of the day). The amendment would suspend that requirement for roughly a year, while returning the requirement to what it was prior to June 2013. The amendment would also require DOT to study the impact of the current (post-June 2013) requirements to see if the benefits of the changes outweigh the costs. FMCSA published a cost-benefit analysis in the final rule that implemented the change, but proponents of this amendment say that now that the rule has been in effect for many months, the impacts can be more accurately estimated, and that the impacts are greater than FMCSA previously estimated. This change was supported by commercial trucking groups and opposed by highway safety groups. Table 10 presents an account-by-account summary of FY2015 appropriations proposals for HUD, compared to FY2014 enacted levels. For a more detailed discussion of proposed HUD funding in FY2015, see CRS Report R43548, Department of Housing and Urban Development: FY2015 Appropriations , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. The Federal Housing Administration (FHA) insures private mortgage lenders against losses on certain mortgages made to eligible borrowers. If such a borrower defaults on the mortgage, FHA repays the lender the remaining amount that the borrower owes on it. The provision of FHA insurance is intended to make mortgage credit more widely available, and at a lower cost, than it might be in the absence of the insurance. The Federal Credit Reform Act of 1990 (FCRA) specifies the way in which the costs of federal loan guarantees, including FHA-insured loans, are recorded in the federal budget. It requires that the cost of loans insured in a given fiscal year be recorded in the budget as the net present value of all of the expected future cash flows from the loans that will be insured in that year. This is referred to as credit subsidy (and the net present value of the cash flows expressed as a percentage of the volume of loans expected to be insured in that year is the credit subsidy rate ). FHA's largest program insures mortgages on single-family homes, and that program is administered through the Mutual Mortgage Insurance Fund (MMI Fund). Historically, the mortgages insured under the MMI Fund each year have been expected to have a negative credit subsidy cost, meaning that the money that those loans will earn for the government (such as from fees paid by borrowers) is expected to exceed their costs (such as from claims paid to lenders for defaulted mortgages). A negative subsidy cost results in offsetting receipts , which, in the case of the MMI Fund, can offset other costs of the HUD budget. For FY2015, the President's budget estimated that the MMI Fund would generate $12.2 billion in negative credit subsidy. Combined with an additional $876 million in negative credit subsidy from other FHA programs, the President's budget estimated that FHA would generate about $13.1 billion in negative credit subsidy in FY2015 that could be used as offsetting receipts. The Congressional Budget Office (CBO) does its own estimates of FHA's credit subsidy rate and offsetting receipts, and the CBO estimates are used by congressional appropriators to determine budget authority. CBO's estimate for the amount of negative credit subsidy that will be generated by the loans insured under the MMI Fund in FY2015 is $4.2 billion lower than the estimate included in the President's budget. CBO estimates that loans insured under the MMI Fund in FY2015 will result in $8 billion in negative credit subsidy for the MMI Fund rather than the $12.2 billion estimated in the President's budget. Because offsetting receipts are subtracted from gross budget authority to arrive at net budget authority, a lower amount of offsets reduces the amount of new appropriations that can be provided while remaining within agreed-upon limits on net budget authority. The Section 8 project-based rental assistance (PBRA) account provides funding to administer and renew existing project-based Section 8 rental assistance contracts between HUD and private multifamily property owners. Under those contracts, HUD provides subsidies to the owners to make up the difference between what eligible low-income families pay to live in subsidized units (30% of their incomes) and a previously agreed-upon rent for the unit. No contracts for newly subsidized units have been entered into under this program since the early 1980s. When the program was active, Congress funded the contracts for 20- to 40-year periods, so the monthly payments for owners came from the original appropriations. However, once those contracts expire, they require new annual appropriations if they are renewed. Further, some old contracts do not have sufficient funding to finish their existing terms, so new funding is needed to complete the contract (referred to as amendment funding). As more contracts have shifted from long-term appropriations to new appropriations, this account has grown and become the second-largest account in HUD's budget. The FY2015 President's budget proposed a decrease of almost $200 million in PBRA compared to FY2014 ($9.7 billion compared to $9.9 billion). The budget also proposed that all PBRA contracts be funded on a calendar year (CY) schedule, from January through December. Currently, PBRA funding is based on the month in which contracts were entered into. In recent years, due to funding levels for the program, HUD has sometimes "short-funded" contracts, providing owners with less than one year of funding. The President's budget proposed that FY2015 funding be used to fund all contracts through CY2015 (in some cases, this would mean less than one year of funding would be needed). Then, FY2016 funding would be used to fund all contracts for the full 2016 calendar year at an estimated cost of $10.8 billion. Calendar year funding would bring PBRA in line with Section 8 tenant-based rental assistance and Public Housing, where units are already funded on a calendar year basis. Both the House-passed bill ( H.R. 4745 ) and Senate Appropriations Committee-passed bill ( S. 2438 ) follow the President's proposal for calendar year funding, and would provide $9.7 billion for PBRA. The Senate Appropriations Committee "reluctantly" agreed with the proposal to shift to calendar year funding, and stated that " due to the budget constraints for fiscal year 2015, the Committee accepts this approach as the best option for preserving HUD's housing assistance programs." (See S.Rept. 113-182 .) The House Appropriations Committee reported that it expected HUD to "plan for the sustainability of the new payment cycle beyond calendar year 2015, and ... to accurately reflect the twelve months of funding required to support the new approach in its annual budget request for fiscal year 2016." (See H.Rept. 113-464 .) The HOME Investment Partnerships Program is a flexible block grant that provides formula funding to states and local jurisdictions to use for a wide range of affordable housing activities that benefit low-income households. The President's budget requested $950 million for the HOME program, a 5% decrease from the FY2014 enacted level of $1 billion. The request included up to $10 million as a set-aside for the Self-Help Homeownership Opportunity Program (SHOP), which is currently funded in its own account. The House-passed bill ( H.R. 4745 ) would provide $700 million for HOME, which is $250 million less than the President's budget request and $300 million less than was provided in FY2014. Like the President's budget request, it would provide up to $10 million for SHOP within the HOME account, rather than funding SHOP within its own account. The Senate Appropriations Committee-reported bill ( S. 2438 ) would fund the HOME account at $950 million, the same level as requested in the President's budget. The Senate Committee-reported bill would provide $10 million for SHOP, but would continue to provide this funding in its own account rather than as a set-aside within the HOME account. The President's budget also included several legislative proposals related to HOME. One proposal involves the thresholds for local jurisdictions to become eligible to receive their own allocations of HOME funds (localities that receive their own allocations of HOME funds are referred to as participating jurisdictions). Currently, a local jurisdiction becomes eligible to receive a direct allocation of HOME funds if it is eligible for a formula allocation of at least $500,000 in a given year, or at least $335,000 in years when less than $1.5 billion is appropriated for the program. The President's budget proposes removing the lower threshold, so that localities would only become eligible to be participating jurisdictions if they were eligible for a formula allocation of $500,000, regardless of the total amount of appropriations in a given year. The budget also proposes revising provisions regarding "grandfathering" of participating jurisdictions. Currently, a locality that has been participating in the program can continue to participate even if its formula allocation falls below the threshold. The proposal in the budget would eliminate this grandfathering, and instead would allow a locality to continue to qualify as a participating jurisdiction for a five-year period. The budget noted that, due to a higher number of participating localities and decreasing appropriations in recent years, many jurisdictions are receiving allocations that are too small to effectively administer affordable housing programs. Removing the lower threshold and ending grandfathering would result in fewer participating localities, but higher grant amounts for localities that continue to participate. The House-passed bill contains language that has been included in recent appropriations laws that would disregard the lower threshold for localities to become participating jurisdictions during the fiscal year, meaning that localities would have to reach the higher $500,000 threshold in order to become participating jurisdictions even with a total program appropriation of less than $1.5 billion. The bill does not include the permanent changes that are included in the President's budget, such as permanently changing the threshold requirement or making changes to the grandfathering provision. The Senate Appropriations Committee-reported bill also contains the language that would disregard the lower threshold for localities to become participating jurisdictions in FY2015. The Senate Committee-reported bill also adopts some legislative changes included in the President's budget request, but like the House-passed bill, it does not permanently change the threshold requirements or make changes to the grandfathering provision. Table 11 presents appropriations levels for the various related agencies funded within the Transportation, HUD, and Related Agencies appropriations bill. The Neighborhood Reinvestment Corporation, commonly known as NeighborWorks America, is a government-chartered nonprofit corporation that supports a national network of local organizations that engage in a variety of community revitalization and affordable housing activities by providing those local organizations with grants, training, and technical assistance. In addition to receiving an annual appropriation for these activities, since 2008 NeighborWorks has also received additional funding for housing counseling organizations to use solely for foreclosure prevention counseling. This is known as the National Foreclosure Mitigation Counseling Program (NFMCP) and is intended to be a temporary program to address high residential foreclosure rates in recent years. The President's FY2015 budget requested a total of $182 million for NeighborWorks, including $132 million to support its traditional core activities and $50 million for the NFMCP. This is compared to a FY2014 funding level of $204 million, which included nearly $137 million for its traditional activities and $67.5 million for the NFMCP. Like the President's budget request, the House-passed bill would provide a total of $182 million for NeighborWorks, with $132 million going to core activities and $50 million going to the NFMCP. The committee report cites improvement in housing markets as a reason for reducing funding for the NFMCP, and the bill allows NeighborWorks to use up to $4 million to begin winding down the program. The Senate Appropriations Committee-reported bill would provide a total of nearly $187 million to NeighborWorks, about $5 million more than the House-passed bill and the President's request. Of that amount, nearly $137 million would be for NeighborWorks' core programs, and $50 million would be for the NFMCP. | The House and Senate Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations subcommittees are charged with providing annual appropriations for the Department of Transportation (DOT), Department of Housing and Urban Development (HUD), and related agencies. THUD programs receive both discretionary and mandatory budget authority; HUD's budget generally accounts for the largest share of discretionary appropriations, but when mandatory funding is taken into account, DOT's budget is larger than HUD's budget. Mandatory funding typically accounts for around half the total annual THUD appropriation. The THUD bill's appropriation totaled $104 billion in FY2014: $51 billion in net discretionary funding and $53 billion in mandatory funding. But there is a decrease of $3 billion in offsetting receipts to HUD for FY2015 compared to FY2014. Thus, just to maintain the FY2015 THUD bill's overall budgetary resources at the same level as in FY2014, the THUD bill would need $3 billion more in budget authority than it received in FY2014. The House Appropriations Committee's FY2015 discretionary budget allocation to its THUD subcommittee is $52 billion ($1 billion more than the FY2014 discretionary funding level); the Senate Appropriations Committee's FY2015 allocation to its THUD subcommittee is $54 billion ($3 billion more than FY2014). The Administration requested net budget authority of $127 billion (after scorekeeping adjustments) for the THUD bill for FY2015, an increase of $22 billion (21%). Most of this increase was for highway, transit, and passenger rail programs in DOT, reflecting the increased funding proposed in the Administration's surface transportation reauthorization proposal. Congress is considering DOT appropriations in the context of the expiration of highway and transit authorizations at the end of the summer of 2014, and the projected insolvency of the highway trust fund before the end of the summer. The Administration requested a total of $91 billion in discretionary and mandatory funding for DOT for FY2015, an increase of roughly $20 billion (28%) over FY2014. The House provided $70 billion for DOT, $1 billion less than in FY2014. The reductions were primarily to the TIGER grant program (-$500 million), the New Starts transit grant program (-$253 million), and Amtrak capital grants (-$200 million). The Senate Committee on Appropriations recommended $72 billion for DOT, $1 billion more than the FY2014 level. The President requested $37 billion in net new budget authority for HUD in FY2015, $4 billion more than provided in FY2014 ($33 billion). The House provided $35 billion for HUD, $2 billion above the net discretionary funding in FY2014. The Senate Committee on Appropriations recommended $36 billion, $3 billon more than the FY2014 level. The Administration requested a total of $346 million for the agencies in Title II (the Related Agencies). This is $20 million (5%) less than the $366 million they received in FY2014. The reduction is almost entirely in the Neighborhood Reinvestment Corporation ($204 million in FY2015, $182 million requested). The House agreed to the requested level; the Senate Committee on Appropriations recommended $351 million, adding $4.6 million to the Neighborhood Investment Corporation. |
The designation of Mr. Bill Lann Lee by the Attorney General on December 15, 1997, as Acting Assistant Attorney General for Civil Rights in the Department of Justice (DOJ) revived a longstanding interbranch controversy over the legal propriety of the failure of executive branch departments and agencies to consistently comply with the provisions of the Vacancies Act. Since at least 1973, DOJ has taken the position that any executive department or agency whose authorizing legislation vests all powers and functions of the agency in its head and allows the head to delegate such powers and functions to subordinates in her discretion, does not have to comply with that Act, which limits the time during which advice and consent positions may be filled by temporary designees before a nomination is forwarded to the Senate. All executive departments have such provisions. As a consequence, during 1998 some 20% of the 320 advice and consent positions in the departments were being filled by temporary designees, most of whom had served beyond the 120-day limitation period of the Act without presidential submissions of nominations. Several bills introduced in the 105 th Congress sought to remedy what was seen by many to be noncompliance with the Vacancies Act that seriously undermined the Senate's confirmation prerogative. Following hearings on S. 2176 , the Federal Vacancies Reform Act of 1998 was reported by the Senate Committee on Governmental Affairs on July 15, 1998. Although the bill failed to survive a cloture vote on the Senate floor on September 24, 1998, negotiations between the Senate sponsors and the Administration continued, and a compromise was reached on a revision and included in the FY 1999 Omnibus Consolidated and Emergency Supplemental Appropriations Act, which became law on October 21, 1998 ( P.L. 105-277 , Division C, title I, section 151). The new Vacancies Act rejects the DOJ position on temporary appointments and makes it clear that the Act is the exclusive vehicle for temporarily filling vacant advice and consent positions unless Congress expressly provides otherwise. The legislation provides substantial incentives for prompt presidential submissions of nominations, including an increase in the time during which an acting officer may serve when timely nominations are submitted. But the President's choices of action are strictly confined and the failure to comply with the statute's requirements may lead to the vacation of the authorities and responsibilities of the office and to rendering the actions of acting officials void without the possibility of subsequent ratification. Special provision is made for vacancies that occur during a change of Administration after a presidential election. Finally, responsibility for monitoring compliance with the provisions of the law is placed with the Comptroller General. This report will proceed as follows. First, the legislative history of the Vacancies Act is briefly described with particular attention to the early understanding of DOJ with respect to its intended purpose and coverage. That legislative history is also examined for clues as to the congressional intent with respect to the applicability of the Act to DOJ. Next, the development of the conflicting provisions of DOJ and the Comptroller General is reviewed and explained, followed by a recounting of Congress' 1988 attempt to resolve the uncertainty of DOJ's stance through amendatory legislation. The discussion continues with a review of the events that precipitated the most recent controversy and confrontation and the history of the legislative actions that culminated in the passage of the new legislation, and concludes with a detailed description and analysis of that legislation. The Vacancies Act, originally passed in 1868, was intended to prevent the President from delaying sending forth nominations for advice and consent positions which could thereby evade the Senate's confirmation prerogative, and to provide the exclusive means for temporarily filling vacancies in covered positions unless Congress explicitly provided a superseding mechanism. Only two options were available under the statute: either a first assistant or a presidential designee who had previously received Senate confirmation could serve for a strictly defined and limited period. Prior to 1988, the limitation period was 10 days (until 1891) and then 30 days. In that year it was increased to 120 days. An unbroken line of Attorneys General and Office of Legal Counsel opinions from 1880 through 1977 reflected the understanding that there could be only one limited period of occupancy per vacancy (a first assistant's and a presidential designee's service could not be piggybacked) and that a pending nomination did not toll the limitation period. These opinions held that once the time period was exhausted, the office had to remain vacant and the powers and duties of the office could not be lawfully exercised. The Act was understood by the Department of Justice (DOJ) to apply in this rigid manner whether bureau chiefs or the heads of cabinet departments were involved. The only recourse of a President to fill a position in the event the Vacancies Act was unavailable was the nomination process or a recess appointment. However, since 1973, DOJ has taken the position that the Vacancies Act only "provides one [possible] method for filling certain positions on an interim basis", and that some departments and agencies, including DOJ, "have statutory authority to assign duties and powers of positions on a temporary basis outside the Vacancies Act". DOJ asserts that it has such authority under Section 509 of title 28, which provides that "[a]ll functions of other officers of the Department of Justice and all functions of agencies and employees of the Department of Justice are vested in the Attorney General," and under Section 510 which permits the Attorney General "from time to time to make such provisions as he considers appropriate authorizing the performance by any other officer, employee, or agency of the Department of Justice of any function of the Attorney General." It also contends that these "vesting and delegation" provisions make the time limitations of the Vacancies Act on the filling of vacant positions inapplicable to the Department. This special authority is said to date from the establishment of the Department in 1870. In the past, DOJ has denied the applicability of the Vacancies Act, relying on Sections 509 and 510, with respect to vacancies in the offices of FBI Director and Assistant Attorney General for the Criminal Division, and the Departments of Health and Human Services (HHS), Education, and Labor, with the apparent support of DOJ, have adopted the same rationale with respect to administrative provisions in their own enabling legislation that similarly vests all powers and functions of the departments in their heads and allows discretionary delegations to subordinate officers and employees. With equal consistency, the Comptroller General of the United States has disputed DOJ's position. The Comptroller argued that the language and history of the Vacancies Act establish that it is the exclusive authority for the temporary filling of vacant positions which require presidential appointment with the advice and consent of the Senate unless there is specific statutory language providing another means for filling the particular vacancies. Neither the DOJ provisions, nor similar provisions in other department enabling statutes, which have common origins, the Comptroller General argued, have either the requisite specificity or legislative purpose to effect a displacement of the scheme of the Vacancies Act. Following challenges in 1986 to rulings of non-compliance with the Act by the HHS, Labor and Education Departments, the Comptroller General requested that Congress address the growing compliance problem it was facing. Two significant amendments were made to the Act. First, the Act was amended to cover all executive departments and agencies, thereby overruling a 1973 court ruling limiting its coverage to executive and military departments. Second, Section 3348 was rewritten to allow 120 days, rather than 30 days, for a temporary designee to fill a vacancy. The new provision was designed to give the President more time to find a nominee and at the same time emphasize the centrality and importance of the Senate's confirmation prerogative. Thus, if a nomination was sent forward, the time limitation was abated during the period during which it was under consideration. Only if the nomination was rejected or withdrawn did the clock start ticking again on the temporary assignee. In its report, the Senate Committee expressed the belief that in this manner it was dealing with the interpretative controversy between DOJ and the Comptroller General. By giving more leeway to the President to find a nominee, and tying the time limitation on "actings" to the prompt forwarding of nominations, the Committee believed it made more effective and clear the Section 3349 declaration that the Act's provisions are the sole means for filling vacancies in covered agencies. A 1989 opinion by DOJ's Office of Legal Counsel acknowledged the Senate Committee's disagreement with its "longstanding view that the Vacancies Act does not extinguish other general authorities relating to the appointment of officers," but characterized the Committee report's explanation of the statutory changes as an improper and unsuccessful effort to "alter the proper construction of a statute through subsequent legislative history." The opinion signaled that DOJ would continue to adhere to its position that certain provisions in agency enabling statutes may trump the Vacancies Act. The effect of the application of DOJ's supersession policy throughout the executive branch, and consequently on the Senate's confirmation power, has been significant. At the Justice Department, 45 individuals since 1981 have been designated as "actings" in advice and consent positions for periods exceeding the permissible limitation of the Vacancies Act. The acting head of the Department's Criminal Division served in excess of 30 months until a nomination was submitted on March 13, 1998, and the acting Solicitor General served over 14 months until his resignation without any nomination being submitted. As late as September 1998 there were three other positions in the Department which were being filled by temporary designees for which nominations were submitted after the expiration of the 120-day limitation periods. Similar situations presently exist in all the other executive departments. For instance, as of February 1998, 9 vacant advice and consent positions at the Commerce Department were being filled by actings. Of the 9, 7 had occupied the offices in excess of 120 days. One had served for three years. Nominations were pending for 5 of the 7 positions, but none were submitted prior to the expiration of the 120-day statutory limit. In all of the 14 executive departments there were, as of February 28, 1998, 64 acting officials in the 320 advice and consent positions, 43 of whom were serving beyond the 120-day limit of the Act. The Department of Justice's contention that Section 14 of its 1870 enabling legislation, which vests all powers and functions of the Department in the Attorney General and allows her to delegate these powers and functions to such officers and employees as she deems necessary, supersedes the Vacancies Act and permits her to fill vacant advice and consent positions for an indeterminate period, does not appear supportable. A review of the legislative history of the provisions asserted to be the basis of the supersession does not provide the necessary explicitness and clarity to support the claim. In fact, the debates on the establishment of the Department in 1870 indicate that the provision said to be the original source of the authority had a wholly different purpose and did not in any way address the problem of vacant advice and consent positions. The singular purpose of the 1870 legislation was to bring order out of the chaos which fragmentation and dispersal of legal authority throughout the federal government over time had engendered. As succinctly put by Representative Jenckes, the principal sponsor of the bill, "It is for the purpose of having a unity of jurisprudence, if I may use that expression, in the executive law of the United States, that this bill proposes that all the law officers herein provided for shall be subordinate to one head". The debates concerning Section 14 make it evident that it was not a provision designed to override the recently enacted Vacancies Act. Its purpose was purely administrative, to establish a chain of command and to allow the Attorney General flexibility in organizing the new department which would have transferred to it a myriad of new substantive authorities and responsibilities and new legal personnel from other executive departments, a purpose consonant with the centralization of control of legal business in a law department. It is not the type of explicit exemptive provision that would take it out from under general legislation like the Vacancies Act which was itself meant to be preemptive in nature. Further, the presence in Section 2 of the legislation of a provision making the new Solicitor General the Attorney General's chief (or first) assistant with the authority to act in his stead in the event of a vacancy in that office, is an indication of not only a congressional awareness of the Vacancies Act, but of an intent to utilize it to further its purpose of unifying the governmental law functions in one agency, in this instance by protecting the Attorney General's office from potential presidential intrusions in case of a vacancy. By directing that the Solicitor General act as the temporary head of the department in case of a vacancy, it precluded presidential use of the alternative method of filling a vacancy, designation of another advice and consent official from another agency. The subsequent legislative and administrative history of the Department's authorizing legislation also provides no support to the contention that the so-called "vesting and delegation" provision was meant to displace the Vacancies Act with respect to DOJ vacant positions. Similar provisions in the 13 other Executive departments also lack the necessary clear legislative intent to support a supersession theory. The Constitution directs how officials who will exercise substantial authority under the laws are to be selected. Under the Appointments Clause, Art, II, sec. 2, cl. 2, the President is vested with the authority (and duty) to appoint all officers of the United States, subject to Senate confirmation, but Congress, by law, may vest the appointment of inferior officers elsewhere, i.e., in the President alone, in the courts of law, or in the heads of departments. The President may also, under certain circumstances, fill vacancies in such offices through "recess appointments" which expire at the end of the next session of the Congress in which they were issued. Art. II, sec. 2, cl. 3. Over the years, Congress has established a legislative scheme to protect the Senate's constitutional role in the confirmation process. The Vacancies Act traces its legislative origin to a 1795 enactment limiting the time a temporary assignee could hold office to six months. All subsequent vacancies legislation contained some time limitation on temporary occupancy. Congress has also enacted provisions requiring that filling of vacancies by recess appointments be promptly followed by submissions of presidential nominations for such positions, and prohibiting the payment of salary of recess appointees who had been rejected by a vote of the Senate. Congress' historic attention to the protection of the Senate's confirmation prerogative accords with the Supreme Court's view of the high importance the appointments process has in our constitutional scheme of balanced, separated powers. The Court has made it clear that "the principle of separation of powers is embedded in the Appointments Clause," Freytag v. Commissioner of Internal Revenue , 501 U.S. 868, 882 (1991), and most recently emphasized that the Clause "is more than a matter of `etiquette or protocol', it is among the significant structural safeguards of the constitutional scheme." Edmond v. United States, 117 S.Ct. 1573, 1579 (1997). See also, Confederated Tribe of Siletz Indians of Oregon v. United States , 110 F.3d 688, 696 (9 th Cir. 1993)("The Appointments Clause serves as a guard against one branch aggrandizing its power at the expense of another."). DOJ's position in the instant situation appears to misconceive the import of the constitutionally mandated appointment process and the carefully circumscribed roles that the President and the Senate play in that process. On March 18, 1998, the Senate Governmental Affairs Committee held an oversight hearing on the failure of executive agencies to adhere to the directives of the Vacancies Act. Witnesses from both sides of the aisle (Senators Byrd and Thurmond), a representative of the Comptroller General, and academics, generally concurred that the non-compliance with the Act was unlawful but that the Act needed to be strengthened and clarified to make it effective. Senators Byrd and Thurmond announced that they were introducing legislation to address the problem. Department of Justice representatives declared the agency's continued adherence to its position. Several remedial bills were subsequently introduced. S. 1761 , introduced by Senator Byrd, provided that anyone performing the duties of a position that had been vacant in excess of the 120-day limitation of Section 3348 would not be paid for any day that such duties are performed, even if the person performing such duties occupied another position for which he was being paid. The bill provided that the Director of the Office of Management and Budget report monthly to the Comptroller General about vacancies in advice and consent positions and directed the Comptroller General to report when the 120-day period had been exceeded to the Congress, the President, the Treasury Secretary, and the Office of Personnel Management. The Vacancies Act was deemed to have superseded any other provision of law unless that law expressly provided that it supersedes the Act. The new provisions were to be prospective and to have no effect on pending nominations or occupiers of vacant positions. S. 1764 , introduced by Senators Thurmond and Lott, proposed more extensive revisions to the Vacancies Act. The bill made it clear that it is the exclusive vehicle for temporarily filling vacant advice and consent positions in executive agencies. For another statutory provision to supersede the Act it must expressly have provided that it was intended to do so. The President could fill vacancies only with the first assistant of the officer who was serving on the date the vacancy occurs or with an officer who had received Senate confirmation and was currently serving. If a vacant office was not temporarily filled in the manner provided within 120 days, the office was to remain vacant until a person was nominated by the President and confirmed by the Senate. A validly assigned acting official could serve for 120 days, but if that period was exhausted without the submission of a nomination the position must remain vacant until a nominee was confirmed. No one who performed the duties of the vacant office after the 120-day period had expired could be paid, either out of monies appropriated for the vacant position or for the position the assignee occupied while performing such duties. The heads of all executive departments and agencies were required to report vacancies in advice and consent positions upon their occurrence to the Comptroller General, and if the Comptroller General determined that the 120-day period had passed without submission of a nomination, he was required to report that determination to the Congress, the President, the Secretary of the Treasury, and the Office of Personnel Management. The bill was to apply prospectively to vacancies that occurred after enactment. H.R. 3420 , introduced by Representative Hyde and 12 others, would have amended Section 510 of title 28 to reject the applicability of Justice's "vesting and delegation" theory to itself, and specifically make the Vacancies Act applicable to the Department. It also provide that if the 120-day period of the Act lapse without the submission of a nominee for a Department vacancy, the United States Court of Appeals for the District of Columbia would appoint an acting official for the vacant position who would serve until the vacancy was filled, but the court could not appoint a current nominee or a person who had previously served as an acting official under the terms of the Vacancies Act. Following the March hearing, Chairman Thompson introduced his own legislative proposal. S. 2176 , the Federal Vacancies Reform Act of 1998, was introduced in the Senate on June 16, 1998 by Senators Thompson, Byrd, Thurmond, Lott and Roth. The bill, as amended, was reported by the Senate Committee on Governmental Affairs on July 15, 1998. S. 2176 made clear that the Vacancies Act was to apply to all positions in executive agencies requiring Senate confirmation (except for positions in independent regulatory agencies and other boards and commissions, and for approximately 40 positions, including that of Attorney General, that may be temporarily filled under other specific statutes). The bill repudiated the contention of the Department of Justice that the head of a department may temporarily fill a position under a law authorizing that head to delegate or reassign duties among other officers in the department. A person would have been prohibited from serving as an acting officer if: (1) that person was serving as a first assistant when the incumbent of the position resigned or was unable to continue to serve; (2) during the 365-day period preceding the appointment, such person served as first assistant for less than 180 days; and (3) the President nominates that person for the position. The bill extended from 120 to 150 days the time period that an acting officer might serve, and would have extended that period for another 150 days if a nomination were submitted. If a nomination was not submitted within 150 days of the vacancy, however, then the office would remain vacant, and the duties of the office could be performed only by the head of the agency. Any action taken by an acting officer in violation of these provisions would be invalid, and no one would be permitted to ratify those actions. If the President submitted a nomination after the 150 days, an acting officer could be allowed to serve while the nomination was pending, or until 150 days after it was withdrawn or rejected. Each executive agency would be required to report to the Comptroller General an existing vacancy, the name of the person serving as acting officer and when such service began, the name of any nominee and when such nomination was submitted, and the final disposition of the nomination. The Comptroller General was to notify the Congress, the President, and the Office of Personnel Management when the 150-day limit was reached. The Thompson bill and the Committee Report also addressed Vacancies Act issues raised in an appellate court ruling in Doolin Security Savings Bank, F.S.B. v. Office of Thrift Supervision , 139 F. 3d 203 (D.C. Cir. 1998), motion for recall of mandate denied , 1998 WL 549461 (D.C. Cir., Sept. 1, 1998). In that case, the incumbent Director of OTS, Timothy Ryan, on the day he resigned assigned all his duties to the then Deputy Director for Washington Operations, Jonathon Fiechter, who then served for almost four years. No nomination for the office was made during that period. Two days after Fiechter resigned, President Clinton invoked the Vacancies Act to designate Nicolas Retsinas, a HUD assistant Secretary, to be the acting Director. Within 120 days, the President submitted a nominee for Director, who was thereafter confirmed by the Senate. Doolin Bank challenged the legality of the initiation of an enforcement proceeding by Fiechter during his tenure. The court held that the Vacancies Act applied to the situation. It ruled, however, that the 120-day time limit of Section 3348 does not begin to run until the President acts to designate a current advice and consent official or a first assistant succeeds by operation of law. In the situation before it, neither occurred until Retsinas was designated four years after Ryan left. The court refused to consider Doolin's contention that Fiechter was actually Ryan's first assistant because the "argument comes too late," having not been raised in the administrative proceeding below or in its opening brief to the appeals court. But the court commented that since it held that Retsinas effectively ratified Fiechter's actions after he took office, "we do not decide whether Fiechter lawfully occupied the position of Director." Thus the Court did not address the effect of Section 3349, which makes the Act the exclusive vehicle for temporarily filling vacant positions, on Fiechter's assignment. Further, the Court's assumption that the lack of presidential action does not trigger the time limits of the Act, and the failure to definitively resolve the validity of the Fiechter designation, left open the possibility of revitalized use of the Justice Department's "vesting and delegation" theory, or the assignment of acting officials by outgoing officials coupled with presidential inaction without regard to the requirements of the Vacancies Act. The Senate Committee's concerns with the Doolin decision—that it recognized a right in the President to do nothing under the Vacancies Act and thereby allow an agency to designate an acting head for an indefinite period, and also the ability of a lawful successor of an unlawful acting official to retroactively ratify and make valid actions of the predecessor that might have otherwise been voidable—were strongly voiced in the Committee's Report, in the floor debate, and in the bill that reached the floor. A threat of filibuster in support of the Administration's opposition to the bill, and the failure to muster the 60 votes necessary to invoke cloture, prevented a Senate vote on S. 2176 . However, a period of intense negotiations between the Senate sponsors and Administration officials followed and an agreement on a compromise measure was reached and included in the FY 1999 Omnibus Consolidated and Emergency Supplemental Appropriations Act, which passed the House on October 20 and the Senate on October 21, and was signed into law on October 21 as P.L. 105-277 , Division C, title I, section 151. The Federal Vacancies Reform Act of 1998 completely supplants current law. The new legislation appears to reflect a variety of decisional factors: the lessons of the 1988 experience when imprecise legislative drafting allowed the Executive to evade the Senate Committee's intended goals; the realization that piecemeal remediation of the 130-year-old statute would not address and resolve contemporary problems in policing, through the confirmation process, the effective and efficient staffing of a responsible political bureaucracy; and the understanding that the congressional goals of timely presidential submission of nominations and minimization of the period during which unconfirmed acting officials serve in key positions meant to be politically responsible and responsive, had to be balanced against executive concerns that the vetting process for potential officeholders has become more complex, difficult and protracted, and that the need for flexibility in maintaining the continuity and quality of administration during the period of interim service of an acting official was being unduly constrained by current law. The re-write appears animated by these considerations. The President now has three options when an advice and consent position in any executive agency becomes vacant as a result of the death, resignation or other inability to perform the functions and duties of the office. Under new Section 3345 the President may allow the first assistant to such officer to assume the functions and duties of the office; or he may direct a current officer in any agency who has been subject to Senate confirmation to perform those tasks; or he may select any officer or employee of the subject agency who has been with that agency for at least 90 of the 365 days preceding the vacancy and is at least at the minimum GS-15 grade level. However, a person may not temporarily serve if that person did not, in the previous 365 days, served as a first assistant, or was first assistant for less than 90 days, and the President submits a nomination of that person to the Senate. Section 3345 (b) (1). Section 3345 (a) is designed to provide optimal flexibility and administrative continuity in the case of a covered vacancy. A first assistant may now be either one who is designated such by law or by agency regulation. If there is no provision of law or agency regulation designating such a person, and the President deems it inappropriate to assign an advice and consent officer from another agency to occupy the office, he may select a person in the agency who has been there a sufficient amount of time and at a high enough grade level to perform the duties of the office. The limitation of Section 3345 (b) (1), noted above, is to prevent placing an employee in an agency simply for the purpose of having him in place while his nomination is pending. The desirability of administrative continuity in office also explains the exception in Section 3345 (e). Where a person is serving in a position for a term of years and the term expires, he may continue to hold that office (subject to the time limitations of Section 3346) if the President nominates him for reappointment to that same office. Under Section 3346, a person who is serving in an acting capacity pursuant to Section 3345 may temporarily hold that office for 210 days beginning on the date the vacancy occurs. The limitation period is suspended, however, if a first or second nomination is submitted to the Senate for as long as the nomination is pending in that body. If the first nomination is rejected by the Senate, or is withdrawn or is returned to the President, the acting officer may continue to serve for no more than 210 days after such action. But if a second nomination is submitted within that 210-day period, the acting officer may serve until the second nomination is confirmed, or for no longer than 210 days after the nomination is rejected, withdrawn, or returned. If a vacancy commences during a sine die congressional adjournment, the 210-day limitation period does not begin until the Senate reconvenes. New Section 3347 declares that Sections 3345 and 3346 are the exclusive means for authorizing the temporary filling of advice and consent positions unless (1) Congress expressly provides by law that the President, a court, or the head of an executive department may designate an officer or employee to perform the function or duties of a specified office temporarily; or (2) Congress designates by law a particular officer or employee to temporarily serve; or (3) the President exercises his recess appointment power pursuant to Article II, sec. 2, cl. 3 of the Constitution. Section 3347(b) expressly negates the DOJ position that the statutory vesting of general agency authority in the head of any agency and allowing the agency head to delegate or reassign those vested duties and responsibilities to other agency officers or employees thereby provides an alternative to the Act's otherwise exclusive means of temporarily filling vacant positions. Section 3348 provides that if an officer or employee is not temporarily serving in accordance with Sections 3345, 3346 and 3347, the office must remain vacant; but if it is an office other than the head of an agency, the head of the agency may perform the duties and functions of that office. Thus, if the President submits no nomination for an office during the 210-day period from the date of the commencement of a vacancy, the options available under the Act can no longer be utilized. Or, if the options provided under the Act are exhausted, only the nomination process or a recess appointment are available to the President. Further, if an action is taken by a person who is not qualified to act because he has not met the requirements of Sections 3345, 3346 or 3347, such actions are deemed by Section 3348(d)(1) as of no force or effect and may not be ratified in the future, except by an act of Congress. See Section 3348(d)(2). Section 3348 effectively overrules the contrary rulings and indications of the Doolin case. Section 3349 directs the Comptroller General of the United States to monitor executive administration of the Act. The head of every executive agency must notify the Comptroller General of each covered vacancy as soon as it occurs, the name of the acting officer serving in the vacant position, the name of the presidential nominee for the vacant position, and the date of any rejection, withdrawal or return of a nomination. If the Comptroller General determines that a person is serving longer than the 210 day limitation and its applicable exceptions, he is to report his determination of that fact to the specified House and Senate Committees, the President, and the Office of Personnel Management. Special provision is made for vacancies that occur during the transition to a new administration after a presidential election. Under Section 3349a, for any vacancy that exists in the 60-day period after inauguration day, the 210-day limitation period begins either 90 days after inauguration day or 90 days after the date which the vacancy occurs. The new Act does not apply to statutory provisions that authorize an officeholder to continue to serve in office after the expiration of the term for which the person was appointed or until a successor is appointed or a specified period of time has expired, i.e. , so-called "holdover" provisions. Section 3349b. The Act also does not apply to advice and consent officers on boards, commissions or similar entities that are composed of multiple members and govern independent establishments or government corporations; the commissioners of the Federal Energy Regulatory Commission; members of the Surface Transportation Board; or Article I judges. Section 3349c. Section 3349d provides that written notification by the President to the Senate that a nomination will be submitted to the Senate after a recess or an adjournment of more than 15 days is deemed to be a nomination for the purposes of Sections 3345 through 3349c of the Act if the notification contains the name of the nominee and the office to which he is to be nominated. But if the nomination is not actually submitted within two days after the end of such recess or adjournment, the nomination will be treated as withdrawn for the purposes of Sections 3345 through 3349c. This provision would appear to be an encouragement to the President not to utilize his recess appointment power. The Act is effective on November 20, 1998, and will apply to any vacancy occurring after the effective date. But the time limitations of Section 3346 apply to any office that is vacant on the effective date as if the office became vacant on that date. Finally, a nomination for a vacant office submitted after the effective date will be considered the first nomination for that office even if that person had been previously nominated for that office. The Federal Vacancies Reform Act of 1998, Pub. L. 105-277, Division C, Title I, Section 151, to be codified at 5 U.S.C. 3345-3349d SEC. 151. FEDERAL VACANCIES AND APPOINTMENTS. (a) SHORT TITLE.-This section may be cited as the " Federal Vacancies Reform Act of 1998 " . (b) IN GENERAL.-Chapter 33 of title 5, United States Code, is amended by striking sections 3345 through 3349 and inserting the following: " §3345. Acting officer " (a) If an officer of an Executive agency (including the Executive Office of the President, and other than the General Accounting Office) whose appointment to office is required to be made by the President, by and with the advice and consent of the Senate, dies, resigns, or is otherwise unable to perform the functions and duties of the office- " (1) the first assistant to the office of such officer shall perform the functions and duties of the office temporarily in an acting capacity subject to the time limitations of section 3346; " (2) notwithstanding paragraph (1), the President (and only the President) may direct a person who serves in an office for which appointment is required to be made by the President, by and with the advice and consent of the Senate, to perform the functions and duties of the vacant office temporarily in an acting capacity subject to the time limitations of section 3346; or " (3) notwithstanding paragraph (1), the President (and only the President) may direct an officer or employee of such Executive agency to perform the functions and duties of the vacant office temporarily in an acting capacity, subject to the time limitations of section 3346, if- " (A) during the 365-day period preceding the date of death, resignation, or beginning of inability to serve of the applicable officer, the officer or employee served in a position in such agency for not less than 90 days; and " (B) the rate of pay for the position described under subparagraph (A) is equal to or greater than the minimum rate of pay payable for a position at GS-15 of the General Schedule. " (b)(1) Notwithstanding subsection (a)(1), a person may not serve as an acting officer for an office under this section, if- " (A) during the 365-day period preceding the date of the death, resignation, or beginning of inability to serve, such person- " (i) did not serve in the position of first assistant to the office of such officer; or " (ii) served in the position offirst assistant to the office of such officer for less than 90 days; and " (B) the President submits a nomination of such person to the Senate for appointment to such office. " (2) Paragraph (1) shall not apply to any person if " (A) such person is servtng as the first assistant to the office of an officer described under subsection (a); " (B) the office of such first assistant is an office for which appointment is required to be made by the President, by and with the advice and consent of the Senate; and " (C) the Senate has approved the appointment of such person to such office. " (c)(1) Notwithstandtng subsection (a)(1), the President (and only the President) may direct an officer who is nominated by the President for reappointment for an additional term to the same office in an Executive department without a break in service, to continue to serve in that office subject to the time limitations in section 3346, until such time as the Senate has acted to confirm or reject the nomination, notwithstanding adjournment sine die. " (2) For purposes of this section and sections 3346, 3347, 3348, 3349, 3349a, and 3349d, the expiration of a term of office is an inability to perform the functions and duties of such office. " §3346. Time limitation " (a) Exrept in the case of a vacancy caused by sickness, the person serving as an acting officer as described under section 3345 may serve in the office- " (1) for no longer than 210 days beginning on the date the vacancy occurs; or " (2) subject to subsection (b), once a first or second nomination for the office is submitted to the Senate, from the date of such nomination for the period that the nomination is pending in the Senate. " (b) (1) If the first nomination for the office is rejected by the Senate, withdrawn, or returned to the President by the Senate, the person may continue to serve as the acting officer for no more than 210 days after the date of such rejection, withdrawal, or return. " (2) Notwithstanding paragraph (1), if a second nomination for the office is submitted to the Senate after the rejection, withdrawal, or return of the first nomination, the person serving as the acting officer may continue to serve- " (A) until the second nomination is confirmed; or " (B) for no more than 210 days after the second nomination is rejected, withdrawn, or returned. " (c) If a vacancy occurs during an adjournment of the Congress sine die, the 210-day period under subsection (a) shall begin on the date that the Senate first reconvenes. " §3347 Exclusivity " (a) Sections 3345 and 3346 are the exclusive means for temporarily authorizing an acting official to perform the functions and duties of any office of an Executive agency (including the Executive Office of the President, and other than the General Accounting Office,) for which appointment is required to be made by the President, by and with the advice and consent of the Senate, unless- " (1) a statutory provision expressly- " (A) authorizes the President, a court, or the head of an Executive department to designate an officer or employee to perform the functions and duties of a specified office temp orarily in an acting capacity; or " (B) designates an officer or employee to perform the functions and duties of a specified office temporarily in an acting capacity; or " (2) the President makes an appointment to fill a vacancy in such office during the recess of the Senate pursuant to clause 3 of section 2 of article II of the United States Constitution. " (b) Any statutory provision providing general authority to the head of an Executive agency (including the Executive Office of the President, and other than the General Accounting Office) to delegate duties statutorily vested in that agency head to, or to reassign duties among, officers or employees of such Executive agency, is not a statutory provision to which subsection (a)(2) applies. " §3348. Vacant office " (a) In this section- " (1) the term ' action ' includes any agency action as defined under section 551(13); and " (2) the term ' function or duty ' means any function or duty of the applicable office that- " (A) (i) is established by statute; and " (ii) is required by statute to be performed by the applicable officer (and only that officer); or " (B)(i)(I) is established by regulation; and " (II) is required by such regulation to be performed by the applicable officer (and only that officer); and " (ii) includes a function or duty to which clause (i) (I) and (II) applies, and the applicable regulation is in effect at any time during the 180-day period preceding the date on which the vacancy occurs. " (b) Unless an officer or employee is performing the functions and duties in accordance with sections 3345, 3346, and 3347, if an officer of an Executive agency (including the Executive Office of the President, and other than the General Accounting Office) whose appointment to office is required to be made by the President, by and with the advice and consent of the Senate, dies, resigns, or is otherwise unable to perform the functions and duties of the Office- " (1) the, office shall remain vacant; and " (2) in the case of an office other than the office of the head of an Executive agency (including the Ex ecutive Office of the President, and other than the General Accounting Office), only the head of such Executive agency may perform any function or duty of such office. " (c) If the last day of any 210-day period under section 3346 is a day on which the Senate is not in session, the second day the Senate is next in session and receiving nominations shall be deemed to be the last day of such period. " (d) (1) An action taken by any person who is not acting under section 3345, 3346, or 3347, or as provided by subsection (b), in the performance of any function or duty of a vacant office to which this section and sections 3346, 3347, 3349, 3349a, 3349b, and 3349c apply shall have no force or effect. " (2) An action that has no force or effect under paragraph (1) may not be ratified. " (e) This section shall not apply to- " (1) the General Counsel of the National Labor Relations Board; " (2) the General Counsel of the Federal Labor Relations Authority; " (3) any Inspector General appointed by the President, by and with the advice and consent of the Senate; " (4) any Chief Financial Officer appointed by the President, by and with the advice and consent of the Senate; or " (5) an office of an Executive agency (including the Executive Office of the President, and other than the General Accounting office) if a statutory provision expressly prohibits the head of the Executive agency from performing the functions and duties of such office. " §3349. Reporting of vacancies " (a) The head of each Executive agency (including the Executive Office of the President, and other than the Gen eral Accounting office) shall submit to the Comptroller General of the United States and to each House of Congress- " (1) notification of a vacancy in an office to which this section and sections 3345, 3346, 3347, 3348, 3349a, 3349b, 3349c, and 3349d apply and the date such vacancy occurred immediately upon the occurrence of the vacancy; " (2) the name of any person serving in an acting capacity and the date such service began imme diately upon the designation, " (3) the name of any person nominated to the Senate to fill the vacancy and the date such nomination is submitted immediately upon the submission of the nomination; and " (4) " the date of a rejection, withdrawal, or return of any nomination immediately upon such rejection, withdrawal, or return. " (b) If the Comptroller General of the United States makes a determination that an officer is serving longer than the 210-day period including the applicable exceptions to such period under section 3346 or section 3349a, the Comptroller General shall report such determination immediately to— " (1) the Committee on Governmental Affairs of the Senate; " (2) the Committee on Government Reform and Oversight of the House of Representatives; " (3) the Committees on Appropriations of the Senate and House of Representatives; " (4) the appropriate committees of jurisdiction of the Senate and House of Representatives; " (5) the President; and " (6) the Office of Personnel Management. " §3349a. Presidential inaugural transitions " (a) In this section, the term ' transitional inauguration day ' means the date on which any person swears or affirms the oath of office as President, if such person is not the President on the date preceding the date of swearing or affirming such oath of office. " (b) With respect to any vacancy that exists during the 60-day period beginning on a transitional inauguration day, the 210-day period under section 3346 or 3348 shall be deemed to begin on the later of the date occur ring— " (1) 90 days after such transitional inauguration day; or " (2) 90 days after the date on which the vacancy occurs. " §3349b. Holdover provisions " Sections 3345 through 3349a shall not be construed to affect any statute that authorizes a person to continue to serve in any office- " (1) after the expiration of the term for which such person is appointed; and " (2) until a successor is appointed or a specified period of time has expired. "' §3349c. Exclusion of certain officers " Sections 3345 through 3349b shall not apply to- " (1) any member who is appointed by the President, by and with the advice and consent of the Senate to any board, commission, or similar entity that- " (A) is composed of multiple members; and " (B) governs an independent establishment or Government corporation; " (2) any commissioner of the Federal Energy Regulatory Commission; " (3) any member of the Surface Transportation Board; or " (4) any judge appointed by the President, by and with the advice and consent of the Senate, to a court constituted under article I of the United States Constitution. " §3349d. Notification of intent to nominate during certain recesses or adjournments " (a) The submission to the Senate, during a recess or adjournment of the Senate in excess of 15 days, of a written notification by the President of the President ' s intention to submit a nomination after the recess or adjournment shall be considered a nomination for purposes of sections 3345 through 3349c if such notification contains the name of the proposed nominee and the office for which the person is nominated. " (b) If the President does not submit a nomination of the person named under subsection (a) within 2 days after the end of such recess or adjournment, effective after such second day the notification considered a nomination under subsection (a) shall be treated as a withdrawn nomination for purposes of sections 3345 through 3349c. (c) TECHNICAL AND CONFORMING AMENDMENT (1) TABLE OF SECTIONS.-The table of sections for chapter 33 of title 5, United States Code, is amended by striking the matter relating to subchapter III and inserting the following: " SUBCHAPTER III-DETAILS, VACANCIES, AND APPOINTMENTS " 3341. Details; within Executive or military departments. " [3342. Repealed.] " 3343. Details; to international organization. " 3344. Details; administrative law judges. " 3345. Acting officer. " 3346. Time limitation. " 3347. Exclusivity. " 3348. Vacant office. " 3349. Reporting of vacancies. " 3349a. Presidential inaugural transitions. " 3349b. Holdover provisions relating to certain independent establishments. " 3349c. Exclusion of certain officers. " 3349d. Notification of intent to nominate during certain recesses or adjournments. (2) SUBCHAPTER HEADING.-The subchapter heading for subchapter III of chapter 33 of title 5, United States Code, is amended to read as follows: " SUBCHAPTER III-DETAILS, VACANCIES, AND APPOINTMENTS " . (d) EFFECTIVE DA TE AND APPLICATION - (1) EFFECTIVE DATE.-Subject to paragraph (2), this section and the amendments made by this section shall take effect 30 days after the date of enactment of this section. (2) APPLICATION.- (A) IN GENERAL.-This section shall apply to any office that becomes vacant after the effective date of this section. (B) IMMEDIATE APPLICATION OF TIME LIMITATION.-Notwithstanding subparagraph (A), for any office vacant on the effective date of this section, the time limitations under section 3346 of title 5, United States Code (as amended by this section) shall apply to such office. Such time limitations shall apply as though such office first became vacant on the effective date of this section. (C) CERTAIN NOMINATIONS.-If the President submits to the Senate the nomination of any person after the effective date of this section for an office for which such person had been nominated before such date, the next nomination of such person after such date shall be considered a first nomination of such person to that office for purposes of sections 3345 through 3349 and section 3349d of title 5, United States Code (as amended by this section). | Since at least 1973, the Justice Department (DOJ) has taken the position that any executive department or agency whose authorizing legislation vests all powers and functions of the agency in its head and allows the head to delegate such powers and functions to subordinates in her discretion, does not have to comply with the Vacancies Act, which limits the time during which advice and consent positions may be filled by temporary designees before a nomination is forwarded to the Senate. All executive departments have such provisions. As a consequence, during 1998 some 20% of the 320 advice and consent positions in the departments were being filled by temporary designees, most of whom had served beyond the 120-day limitation period of the Act without presidential submissions of nominations. The designation by the Attorney General of an acting Assistant Attorney General for Civil Rights in December 1997 in apparent contravention of the Vacancies Act precipitated congressional hearings and the introduction of legislation in both Houses to remedy the perceived noncompliance. Also, a federal appeals court ruling in March 1998 narrowly construing the Vacancies Act further piqued congressional concerns. On July 15, 1998, the Senate Governmental Affairs Committee reported S. 2176, the Federal Vacancies Reform Act. Although the bill failed to survive a cloture vote on the floor, a compromise version was included in the FY 1999 Omnibus Consolidated and Emergency Supplemental Appropriations Act, which became law on October 21, 1998 (P.L. 105-277). The new Vacancies Act rejects the DOJ position and makes it the exclusive vehicle for temporarily filling vacant advice and consent positions and provides substantial incentives for the President to send forth timely nominations for Senate consideration. |
The Runaway and Homeless Youth program is the largest targeted federal program that provides assistance to youth under age 23 who are homeless or have run a way. The program was established by the Runaway Youth Act as Title III of the Juvenile Justice and Delinquency Prevention Act of 1974 (JJDPA; P.L. 93-415 ), and has since been amended nine times. Amendments to the act in 1977 ( P.L. 95-115 ) renamed the act the Runaway and Homeless Youth Act, which was expanded to include homeless youth. The act was most recently authorized, from FY2009 through FY2013, by the Reconnecting Homeless Youth Act of 2008 ( P.L. 110-378 ). As currently enacted, the program includes three components: the Basic Center program (BCP), which provides short-term services for youth under age 18; the Transitional Living program (TLP), which provides housing and supports for youth ages 16 through 22; and the Street Outreach program (SOP)—referred to in statute as the Sexual Abuse Prevention program—which serves youth living on the streets who are unstably housed. FY2015 appropriations for the program totaled $114.1 million. The House Committee on Education and the Workforce and the Senate Judiciary Committee have exercised jurisdiction over the RHY program. Legislation has been introduced in the 114 th Congress to reauthorize the Runaway and Homeless Youth Act. This report provides background on the federal response to runaway and homeless youth (RHY), including steps taken by federal agencies to end youth homelessness. Following this discussion is an overview of issues that may be relevant if Congress takes up reauthorization of the act. These issues are grouped as follows: demographic and other data on runaway and homeless youth; effectiveness of programs that serve this population; efforts to connect RHY with their families; access to and funding for the program; supports for vulnerable RHY populations, including youth who are lesbian, gay, bisexual, transgendered, or questioning (LGBTQ); those who have been victims of sex trafficking or are at risk for sex trafficking; and those who have other risk factors; and interaction between the RHY system and child welfare and juvenile justice systems. The Appendix provides an overview of accountability standards that have been drafted as part of a proposed rule for the Runaway and Homeless Youth program. The report is a companion to CRS Report RL33785, Runaway and Homeless Youth: Demographics and Programs , which provides detailed information about the program. Since at least the Great Depression, the federal government has responded to the needs of youth who were homeless or transient in some capacity. Depression-era programs for vulnerable youth focused on providing employment services, primarily through the Civilian Conservation Corps program; employment centers; and aid in the form of housing and basic provisions. Separately, the Social Security Act of 1935 (P.L. 74-231), as originally enacted, authorized indefinite funding for states to establish and expand services under the Child Welfare Services program "for the protection and care of homeless, dependent, and neglected children, and children in danger of becoming delinquent." This law and others addressed youth running away from home; however, they did not focus on providing services, or did so on a limited basis. The Runaway Youth Act, enacted in 1974, was the first law to authorize dedicated funding to runaway youth. As currently enacted, the three programs under the Runaway and Homeless Youth program—the Basic Center program, Transitional Living program, and Street Outreach program—target distinct but overlapping populations and serve youth in different settings. Each of these programs competitively awards grants to nonprofit organizations. The BCP is available to youth under age 18 and provides short-term shelter and other assistance to both youth and their families. BCP grants are awarded by a formula that distributes funding based on child population in each state and territory. The TLP provides assistance to youth ages 16 through 21 with longer-term residential and other services. The SOP engages runaway and homeless youth who live on or frequent the streets by providing counseling and referrals. See Figure 1 for further detail. The Runaway and Homeless Youth program also supports a toll- free hotline so that runaways can learn about services in their communities; grants for services in rural communities; research and evaluations; and training and technical assistance. The program is administered by the Family and Youth Services Bureau (FYSB) in the U.S. Department of Health and Human Services' (HHS) Administration for Children and Families (ACF). The Reconnecting Homeless Youth Act of 2008 ( P.L. 110-378 ) most recently reauthorized the Runway and Homeless Youth program through FY2013 (September 30, 2013). The law amended multiple provisions including those that address funding for the program, requirements for grantees that receive BCP and TLP grants, and accountability of programs and activities authorized under the Runaway and Homeless Youth Act. Notably, P.L. 110-378 required HHS to promulgate regulations that specify performance standards for public and nonprofit entities that receive BCP, TLP, and SOP grants. (See the Appendix for an overview of standards that have been proposed by HHS.) The law further required HHS to periodically submit to Congress an incidence and prevalence study of runaway and homeless youth, as well as the characteristics of a representative sample of these youth. HHS must consult with the U.S. Interagency Council on Homelessness (USICH) in developing the study. The law also directed the Government Accountability Office (GAO) to evaluate the process by which organizations apply for BCP, TLP, and SOP, including HHS's response to these applicants. Congress and the Obama Administration have taken steps in recent years to address preventing and ending youth homelessness. Two notable efforts include an HHS report to Congress on ending youth homelessness and a strategy put into place by the U.S. Interagency Council on Homelessness to end youth homelessness by 2020. The 2003 reauthorization of the Runaway and Homeless Youth Act ( P.L. 93-415 ) required HHS, in consultation with USICH, to prepare a report to Congress on promising strategies to end youth homelessness. HHS submitted the report to Congress in 2007. It explained that there was little information in the research literature about the effectiveness of interventions for homeless youth, and that the few studies on interventions were not based on rigorous experimental or quasi- experimental research designs. For this reason, the report incorporated information about interventions in related fields for high-risk youth, including family interventions to prevent child abuse and neglect, interventions to reduce juvenile violence, and interventions that support successful transitions from juvenile detention and foster care. Based on these approaches, the report described the ways in which providers and others can intervene in the lives of homeless youth. The report acknowledged that solutions to prevent and ameliorate youth homelessness will not be easily accomplished, and that no single approach exists to solve its problems; however, the report emphasizes that certain policy options may prevent and end youth homelessness. These options include (1) providing targeted education and support services to high-risk families with youth who may become homeless; (2) providing enhanced services to support youth as they transition from the juvenile justice and foster care systems because these youth are particularly vulnerable to becoming homeless; (3) providing a continuum of services, including "gateway" services for youth who are newly homeless to long-term supportive housing programs for youth who may not have the option to live with their families; and (4) helping to coordinate programs and services for youth who are homeless or are at-risk of becoming homeless. The report cites USICH as a coordinating body that can assist in these efforts. USICH and other federal agencies have since taken steps to address youth homelessness overall. In addition to authorizing multiple programs to address homelessness, the 1987 Stewart B. McKinney Homeless Assistance Act ( P.L. 100-77 ) also established USICH. The HEARTH Act, enacted in 2009 as part of the Helping Families Save Their Homes Act ( P.L. 111-22 ), charged USICH with developing a National Strategic Plan to End Homelessness. In June 2010, USICH released this plan, entitled Opening Doors . The plan sets out four goals: (1) ending chronic homelessness by 2015; (2) preventing and ending homelessness among veterans by 2015; (3) preventing and ending homelessness for families, youth, and children by 2020; and (4) setting a path to ending all types of homelessness. In September 2012, USICH amended Opening Doors to specifically address strategies for improving the educational outcomes for children and youth and assisting unaccompanied homeless youth. The strategies for preventing and ending youth homelessness include (1) obtaining more comprehensive information on the scope of youth homelessness; (2) building an evidence base of the most effective interventions for different subsets of youth; and (3) improving access to emergency assistance, housing, and supports for historically underserved groups of youth, including those with histories in the child welfare system, LGBTQ youth, pregnant or parenting youth, and youth with mental health needs. In February 2013, an interagency working group to end youth homelessness developed a guiding document for ending youth homelessness by 2020. Known as the Framework to End Youth Homelessness , the document outlines a data strategy (to collect better data on the number and characteristics of youth experiencing homelessness) and a capacity strategy (to strengthen and coordinate the capacity of federal, state, and local systems to work toward ending youth homelessness). These strategies are outlined and discussed further in the following two sections. The framework specifies activities in each of these areas that can begin immediately, activities that will require new resources, and longer-term activities that build on earlier efforts and may require new resources and/or new legislative authority. Through these activities, USICH ultimately intends to improve outcomes for youth in four areas: stable housing, permanent connections, education or employment options, and socio-emotional well-being. The remainder of this report discusses issues that may be relevant if Congress considers reauthorization of the Runaway and Homeless Youth Act. These issues include (1) estimates and demographic information on homeless and runaway youth; (2) program and youth outcomes; (3) funding for the Runaway and Homeless Youth program; and (4) serving vulnerable populations. This section provides background on federal efforts to estimate the number and characteristics of youth who are homeless and/or have runaway. As Congress considers reauthorization of the Runaway and Homeless program, it may wish to (1) determine if HHS's efforts (underway with USICH) are adequate in addressing the data reporting provisions that are specified in the Runaway and Homeless Youth Act; (2) determine whether the act provides adequate direction to HHS about its role in carrying out data collection efforts in coordination with the U.S. Department of Housing and Urban Development (HUD), which administers multiple programs for homeless individuals; and (3) the extent to which funding should be appropriated through new funding or by reallocating funds, such as through existing funding within the Runaway and Homeless Youth program, for the studies required by the law and/or new activities to improve data collection. Estimates of the number of youth who are homeless or runaways and their demographic characteristics are not necessarily straightforward. The accuracy of estimates depends on how counts take place, and may depend on the capacity of researchers and communities to conduct counts and use statistical sampling methods. Estimates also depend on which definitions of homelessness and runaway are used. Some research includes only selected runaway and homeless youth populations (homeless youth; runaway youth; or unaccompanied youth, which encompasses both runaway and homeless youth). Further, studies on the number and characteristics of runaway and homeless youth are dated. Concerns over the lack of data are not new. For instance, testimony in the 110 th Congress suggested that a lack of data impairs policy making and that a comprehensive study is needed on estimates of runaway and homeless youth. Congress subsequently passed the Reconnecting Homeless Youth Act of 2008 ( P.L. 110-378 ), which, in part, addressed concerns about data on runaway and homeless youth. It added a new section to the Runaway and Homeless Youth Act that requires HHS, in consultation with USICH, to prepare a report to Congress that includes estimates of the incidence and prevalence of the runaway and homeless youth population ages 13 to 26. The act also directed HHS to assess the characteristics of these youth. In addition, HHS is required to conduct a survey of and direct interviews with a representative sample of homeless youth ages 13 to 26 to determine (1) past and current socioeconomic characteristics; (2) barriers to obtaining housing and other services; and (3) other information HHS determines useful, in consultation with states and other entities concerned with youth homelessness. The 2008 act does not specify the methodology for carrying out the studies, except to say that HHS should make the estimate based on the best quantitative and qualitative social science research methods available. The law specifically authorized such sums as may be necessary for the study for FY2009 through FY2013. As mentioned, the USICH framework for ending youth homelessness includes a data strategy for collecting information about homeless youth specifically. This strategy has four components: (1) developing better strategies for counting youth in point-in-time (PIT) counts of homelessness; (2) coordinating federal data systems that collect information on youth experiencing homelessness and their receipt of services; (3) launching a national study on the prevalence and characteristics of youth homelessness; and (4) using this national study to make periodic estimates of youth homelessness over time. USICH has articulated that better data on youth homelessness can help social service agencies and other stakeholders advocate for the appropriate resources to support youth experiencing homelessness and allow social agencies to tailor resources to the specific needs of youth. These components are discussed in the following sections. USICH and its federal partners are working with communities to develop better estimates of youth experiencing homelessness through what are known as point-in-time (PIT) counts. HUD requires Continuums of Care (CoC)—typically cities, counties, or combinations of both that organize and deliver housing and services for homeless individuals in each community—to collect information in each community on the number and characteristics of individuals and families experiencing homelessness on a single day in January (during the last 10 days) in at least every other year (odd calendar years). PIT counts differ from HUD's Homeless Management Information Systems (HMIS), which include data on homeless individuals collected by homeless service providers that receive HUD funding. These providers report the data to their local CoC and these data are used to derive national estimates of homelessness over a one-year period. USICH and other federal agencies are increasingly using data from the PIT counts as a source to track trends and progress in eliminating homelessness. HUD requires communities to collect information on unaccompanied youth under age 18. This includes youth on their own, youth who are parents and their children, adolescent siblings, and other groups composed of only youth. Since 2013, HUD has required that PIT counts include unsheltered youth. Youth under age 25 who meet the definition of homeless under the McKinney-Vento Act (the major act that authorizes homelessness programs) are included in the count. This encompasses sheltered youth in runaway and homeless youth programs (including those that may not be funded under the federal program). Also since 2013, CoCs have been required to specifically identify the number of youth ages 18 or 18 to 24. Previously, these youth were included in a larger category of young adults ages 18 to 30. In addition, CoCs are required to count younger youth in a larger category of children under age 18. PIT counts can capture information on youth who interact with RHY or other homeless service providers, as well as those who do not (i.e., sheltered and unsheltered youth). These counts do not provide a confident estimate of youth experiencing homelessness across the country. Counting sheltered and unsheltered unaccompanied youth is a challenge because they often do not use homeless residential services or develop relationships with local homeless services providers who can ensure that each youth is counted. Further, unsheltered youth may congregate in different places and at different times than other homeless individuals, and thus may not be brought to the attention of enumerators who conduct the PIT counts. In response to these concerns, HUD has provided specific guidance on counting youth who are unsheltered. HUD recommends that CoCs coordinate with multiple entities—RHY service providers, homeless liaisons for local education agencies (i.e., school districts), and selected social service organizations—to assist with a comprehensive count of children and youth. HUD also encourages communities to recruit currently or formerly homeless youth to assist with the count, and to hold "magnet events" that include food and other appropriate incentives to draw in youth who typically do not use shelters and services. In addition, CoCs are encouraged to survey locations during multiple times throughout the day of the count and use social media to raise awareness and outreach. This guidance has been informed by an initiative, known as Youth Count!, to improve data collection on youth as part of PIT counts. With philanthropic support, USICH (and its partner agencies) provided technical assistance to nine communities to improve data collection on homeless youth as part of the 2013 PIT. The initiative was intended to aid the nine communities in developing and implementing strategies to reach unaccompanied youth experiencing homelessness and document lessons learned. The CoC agency was the lead entity for the Youth Count! in each of the nine communities. The agency partnered with other stakeholders, including homeless youth service providers, to implement the count. The Runaway and Homeless Youth Act directs HHS, as appropriate, to consult with HUD to ensure coordination of programs and services for homeless youth. As Congress considers reauthorization of the act, it may want to determine the extent to which the act should specify the role of HHS and RHY grantees in participating in HUD's point-in-time counts. HHS and HUD have taken steps to coordinate the data collection system for the Runaway and Homeless Youth program—known as NEO-RHYMIS (National Extranet Optimized Runaway and Homeless Youth Management Information System)—with HMIS. Until FY2015, data on youth served in the BCP and TLP, and the number of contacts made in the SOP, were collected from grantees via NEO-RHYMIS twice during the fiscal year. Specifically, the data system collected information on the basic demographics of the youth, the services they received, and the status of the youth (i.e., expected living situation, physical and mental health, and family dynamics, etc.) upon exiting the programs. RHY grantees are now required to report to HMIS. HMIS is a locally-administered data system used to record and analyze client, service, and housing data for individuals and families who are homeless or at risk of homelessness in a given community. Service providers report the data to their local CoCs. HUD uses data from a sample of participating HMIS jurisdictions to derive a national-level estimate of the number of individuals who are homeless over a one-year period. This estimate is included in HUD's Annual Homelessness Assessment Report (AHAR), which provides Congress with detailed data on individuals and households experiencing homelessness across the country each year. In April 2013, HUD issued a notice to change data elements within HMIS, including data on youth who have run away and/or are homeless. In May 2014, HUD and HHS (along with the Department of Veterans Affairs) released the 2014 HMIS Data Dictionary and 2014 HMIS Data Manual, which revise the HMIS data standards. These new standards went into effect on October 1, 2014. They are intended to provide guidance for HMIS vendors and administrators to collect HMIS data in a way that meets the data submissions requirements of each applicable federal program, including the Runaway and Homeless Youth program. The HMIS standards include the data collection questions that are in NEO-RHYMIS, along with new data elements. For example, new elements include information on income and sources of income (for TLP and RHY demonstration projects); health insurance status (all RHY programs); whether the youth has specified disabilities (all programs); whether the young person is at risk for or is a victim of commercial sexual exploitation (all RHY programs); whether family reunification was achieved (all RHY programs except SOP); information about the youth's employment status at entry and exit (all RHY programs except SOP); the types of programs to which the youth was referred (all programs); and the extent of transitional, exit, and aftercare plans for youth (all programs except SOP). It also specifies new categories for the issues identified by the youth and program staff (for BCP and TLP), and revises categories for types of referrals (for BCP and TLP) and whether youth completed the program (for all programs except SOP). RHY grantees were required to begin reporting to HMIS by April 15, 2015. They must create an export file through HMIS, and submit the data to HHS twice each fiscal year. According to HHS, the department informed grantees about the initiative through a series of speaking engagements and workshops conducted at national homelessness conferences. HHS also conducted listening sessions in which grantees had the opportunity to provide feedback about the initiative. Also according to HHS, approximately half of Runaway and Homeless Youth program grantees that were surveyed by the department's technical assistance provider are HUD grantees, and therefore these grantees enter data on the youth they serve into both information systems. Merging the two systems may help to better assess the size and nature of homelessness among youth, while reducing the burden of Runaway and Homeless Youth grantees that input data into both systems. The Runaway and Homeless Youth Act specifies that BCP and TLP providers are required to submit to HHS information about the number and characteristics of the youth they serve. As part of reauthorization of the act, Congress might consider whether the act should include additional direction on the participation of HHS and grantees in the new data collection process. The Federal Framework to End Youth Homelessness includes a strategy to design and implement a national study to estimate the number, needs, and characteristics of youth experiencing homelessness. The study is to include "coordinated approaches, such as building on an existing nationally-representative household survey and an enhanced national youth strategy for the HUD PIT count." UISCH and its federal partners intend to estimate the prevalence and characteristics of youth experiencing homelessness over time, also pending available funds. These plans appear to be consistent with the requirements in the Runaway and Homeless Youth Act for a national incidence and prevalence study of youth. HHS has requested funds for the study as part of the budget request for FY2014 ($3 million), FY2015 ($2 million), and FY2016 ($2 million). HHS has also been developing a sampling methodology that will help inform the design of this study. No funds have been appropriated for this purpose. Legislation in the 114 th Congress ( S. 262 and S.Amdt. 290 and S.Amdt. 1127 to S. 178 ) would authorize $2 million for the study for each of FY2016 through FY2020 (the current authorization is such sums as necessary). The National Network for Youth (NN4Y), a nonprofit organization representing the interests of RHY providers, and its partners recommend requiring that the study collect specific additional data that are not already specified in the law. Such data could incorporate information on trafficking victimization; whether youth identify as LGBT; pregnancy and parenting; and current or past involvement in either or both the child welfare system and juvenile/criminal justice system. S. 262 includes similar requirements, except that it would not specify data collection on LGBT status. It would also require collection of data on youth beginning at age 12 rather than 13 as in current law. Further, the bill would require HHS to collect data on barriers to youth receiving mental health services and education and job training. A separate data collection effort—Voices of Youth Count—is underway by researchers with Chapin Hall Center for Children at the University of Chicago and its partners. It seeks to capture the number of unaccompanied homeless and runaway youth ages 14 to 24 who are not living with a parent. The project involves a literature review; interviewing and surveying youth and those around them, examining the effectiveness of resources for this population; and conducting quantitative analysis to arrive at estimates. Youth most often cite family conflict as the major reason for their homelessness or episodes of running away. A literature review of youth experiencing homelessness suggests that a youth's relationship with a step-parent, sexual activity, sexual orientation, pregnancy, school problems, and alcohol and drug use were strong predictors of family discord. Among youth in the Runaway and Homeless Youth program, most cite family dynamics as a major concern when exiting the program. In FY2014, over 27,000 (out of 32,000) youth exiting the BCP and approximately 2,000 (out of approximately 3,000) youth exiting the TLP cited this concern (it was the most frequently cited issue for BCP youth and the second most frequently cited issue for TLP youth). The 2007 HHS report to Congress on strategies to end youth homelessness emphasized the importance of family relationships. It said that "to address the risk factors that lead to youth leaving and staying away from their homes, intervention approaches must emphasize strategies to strengthen and support families. Families, whether immediate or extended, are resources for homeless youth and should be actively involved in adolescents' transition to independence and adulthood." The Runaway and Homeless Youth Act specifies that the BCP is intended to provide services as an alternative to involving youth who are runaways and/or homeless in the child welfare system (and other specified systems). The act requires BCP grantees to develop "adequate plans for contacting the parents or other relatives of the youth and ensuring the safe return of the youth according to the best interests of the youth." In addition, BCP grantees are directed to provide "individual, family, and group counseling, as appropriate … and may include home-based services for families with youth at risk of separation from the family." Most (69%) of youth exiting the BCP in FY2014 return to their parents' house. In addition, 15% to 17% of youth served by BCP grantees receive preventive services that can include mediation and family and individual counseling. According to HHS, most of those young people remain at home and do not stay at the center. The statute does not address family support and reunification for the TLP and SOP. This may be due to the relatively younger age of youth served in the BCP and their living situations upon exiting. The TLP provides longer-term support to youth ages 16 to 21. Fewer than one out of five (15%) of youth in FY2014 went on to live with their parent(s) upon exiting the program. The SOP provides services to youth who live on the street, and presumably many of these youth have limited or no contact with their parents (HHS does not collect information on these youth). The regulations to accompany the Runaway and Homeless Youth Act specify that all grantees should ensure they have "plans for meeting the best interests of the youth involving, when possible, both the youth and the family" and that such plans include contacts with family within 24 hours (and not more than 72 hours) after the youth's admission into the program. In addition, HHS's proposed regulations for the program emphasize the importance of permanent connections for young people in programs funded under the Runaway and Homeless Youth Act. The extent to which all providers with Runaway and Homeless Youth Act funds, or even BCP- funded programs, provide family interventions has not been fully examined. According to the 2007 HHS report to Congress, "shelters that place a strong emphasis on stabilizing youth and reunification with families or other appropriate long-term placements are critical in preventing prolonged episodes of homelessness among this population. Providers report that younger youth and those experiencing their first episode of homelessness are more likely to reconcile with families, if early intervention is available." A 2007 report, developed for a federal symposium on homelessness, emphasized that more attention should be paid to prevention and intervention strategies that focus on youth. The report goes on to say that such strategies could involve improving communication, developing conflict resolution skills, and increasing understanding of adolescent development. The National Alliance to End Homelessness, an organization that seeks to prevent and end homelessness, defines family intervention along a spectrum that involves strategies such as family reunification, family connection, family finding, and aftercare services. Examples of these strategies can include support groups for parents and parenting skills classes. Some interventions have been assessed, though not necessarily through rigorous evaluation or specifically for youth who have run away or are homeless. One such approach is multisystemic therapy (MST) in which families are provided with intensive, home-based services facilitated by a therapist who empowers parents to better manage their adolescent's behavior and also coordinates services and supports for the family. Randomized controlled trials have shown that MST can reduce antisocial behavior; however, again, these evaluations have not focused on the RHY population in particular. Another promising model—used by a runaway and homeless youth provider, Project Safe, in Washington—provides phone consultation, support groups or workshops, and a resource library to parents or caretakers. The goal is to prevent teen homelessness and promote healthier family functioning. Outcome data from these interventions showed a significant decrease in the parental perception of the youth needing to leave the home. Further, some intervention models focus on families separated because their teens identify as LGBT. These models draw on findings that seek to strengthen families by informing them of the negative impacts and risks that "rejecting" behaviors can have on their child. Reauthorization of the Runaway and Homeless Youth Act may provide an opportunity to examine the role of youth connection to their families. For example, the National Network for Youth has suggested that the act could extend family intervention and reconnection services to TLP participants when safe and appropriate. Legislation introduced in the 114 th Congress ( H.R. 1779 , S. 262 , and S.Amdt. 290 to S. 178 ) would add that BCP providers may implement services for assessing family engagement in supporting the youth and reunifying them with their families, and providing services to family members or (if appropriate) individuals identified as family by the youth. In addition, it would require that TLP applicants agree to provide counseling to youth who are homeless and to encourage, if appropriate, counseling that involves parents, legal guardians, or individuals that the youth identifies as family. This section first describes how HHS currently assesses whether grantees receiving Runaway and Homeless Youth program funds are meeting the needs of youth who have run away and/or are homeless, and how HHS determines whether the Runaway and Homeless Youth program is effective overall. It then discusses the research literature on interventions for this population and the potential role of the Runaway and Homeless Youth Act in testing interventions. The Family and Youth Services Bureau (FYSB) evaluates each grantee through the Runaway and Homeless Youth Monitoring System. Staff from regional Administration for Children and Families (ACF) offices and other grant recipients (known as peer reviewers) conduct an onsite review of the program, which involves interviewing grantee staff, reviewing case files and other agency documents, and conducting entry and exit conferences. The monitoring team then prepares a written report that identifies the strengths of the program and areas that require corrective action. The protocols used to conduct the onsite review generally follow the BCP Performance Standards, and are adapted for the TLP and SOP. The performance standards relate to how well the needs of youth who have run away and/or are homeless and their families are being met, and not the outcomes of services provided. Nine of these standards address service components (e.g., outreach, individual intake process, and recreational programs, etc.) and six focus on administrative functions or activities (e.g., staffing and staff development, reporting, and individual client files, etc.). On April 14, 2014, HHS issued a notice of proposed rulemaking (NPRM) that seeks to implement new performance standards and other requirements for Runaway and Homeless Youth program grantees. These proposed performance standards are outlined in the Appendix . For example, BCP and TLP grantees would be required to maintain at 90% or higher the proportion of youth who exit to safe and appropriate settings. Separately, BCP and TLP grantees collectively are expected to meet certain outcomes. This is distinct from the performance standards and onsite review for determining whether individual grantees are meeting the needs of youth and families. Through FY2014, grantees were required to report outcome data through the NEO-RHYMIS reporting system, which included multiple data elements. HHS used the NEO-RHYMIS data to calculate four outcome measures in particular for the entire program: Maintain the proportion of youth who are prevented from running away as a result of BCP non-shelter, preventive services. The FY2014 target was 96% and the result was 97.7%. Increase the proportion of youth living in safe and appropriate settings after exiting TLP services. The FY2014 target was 86% and the result was 87.8%. Increase the percentage of youth who complete the TLP by graduating or who leave ahead of schedule based upon an opportunity. The FY2014 target was 60% and the result was 61.8%. Increase the percentage of TLP youth participants who are engaged in community service and service learning activities while in the program. The FY2014 target was 37.6% and the result was 36.7%. As discussed in the 2007 HHS report to Congress and other research, multiple interventions have been developed to assist youth who have run away and/or are homeless, but they have not been evaluated to determine whether they are effective. Researchers have pointed out that closing this gap in research "will require methodologically sound studies that include control (or at least comparison) groups in experimental (or at least quasi-experimental) research designs." To this end, efforts are underway at HHS to learn more about the long-term outcomes of youth who are served by the TLP using a rigorous research design. HHS has contracted with Abt Associates, a policy research organization, to conduct an evaluation of the TLP at select grantee sites. The study seeks to describe the outcomes of youth who participate in the program and to isolate and describe promising practices and other factors that may contribute to their successes or challenges. The study is examining delivery approaches, youth demographics, socio-emotional wellness, and life experiences. The study also includes an impact evaluation, with youth randomly assigned to the treatment (i.e., entry into TLP) and control groups to determine whether the TLP leads to different impacts for enrolled youth than for those who did not enroll. The evaluation is expected to conclude in FY2017. Separately, HHS and other federal agencies are moving ahead with disseminating an intervention model that draws on evidence-based tools and practices for assisting youth who are homeless. This model is the main component of the capacity building strategy that is part of USICH's Framework to End Youth Homelessness (outlined in Figure 2 ) . The intervention model emphasizes that providers should use valid and reliable screening and assessment tools to understand each youth's strengths and needs. It also specifies that intervention strategies should be based on scientific evidence for improving outcomes, provide culturally appropriate supports that account for the specific characteristics and needs of the youth, and emphasize settings and relationships where young people can heal and thrive. The framework envisions using federal and other resources to put the intervention model into practice and evaluate which approaches are most effective. Federal agencies would then disseminate and scale-up screening and assessment tools and effective interventions. Since the model was disseminated, FYSB has modified requirements for Runaway and Homeless Youth grantees to help ensure their efforts align with the model. For example, FYSB has begun to require that grantees use appropriate screening and assessment tools to determine whether young people entering programs have a history of trauma and other issues. In addition, organizations applying for funding under the Runaway and Homeless Youth program have recently been required to ensure that case planning takes into account the youth risk and protective factors and their goals. Further, FYSB has provided training and technical assistance on specific practices that have some effectiveness, and has enhanced efforts to monitor the performance of grantees. The Runaway and Homeless Youth Act currently authorizes HHS to make grants to carry out research and evaluation, and requires that in making such grants, HHS gives priority to certain types of projects. One type of project appears to be most germane to examining effectiveness of a program—"providing programs, including innovative programs, that assist youth in obtaining and maintaining safe and stable housing, and which may include programs with supportive services that continue after the youth complete the remainder of the programs." The reauthorization process could involve examining the role of evaluations, such as whether the law should place greater emphasis on testing promising intervention models or whether HHS might provide technical assistance to individual grantees about conducting more rigorous evaluations of their programs. The reauthorization process might also involve examining the goals of the TLP in particular because of the program's outcomes. Notably, approximately one-third (35.3%) of youth completed the TLP in FY2014. The remaining two-thirds did not complete the program: 26.5% did not complete the program because of other opportunities, 15.3% did not complete the program and had no other plans, and 22.9% were expelled or involuntarily discharged from the program. A related issue that may be of interest to Congress is youth access to the Runaway and Homeless Youth Act programs. Estimates of youth who have run away or are homeless exceed 1 million, and the program provides services to just a fraction of these youth. In recent years, the BCP has served approximately 32,000 to 52,000 youth annually and the TLP has served 3,000 to 4,400 youth annually. In a January 2014 analysis, HHS provided estimates for the number of beds available at HHS-funded BCP and TLP grantees. The analysis estimated that in FY2012, there were an average of 10 beds per BCP grantee, for a total of 3,102 beds across all grantees; and that in FY2013, there were 11 beds per TLP grantee, for a total of 1,635 beds across all grantees. The estimated total number of beds for these two programs was 4,737. The number of youth served does not correlate with the number of beds, as youth in both programs generally stay less than three weeks (for the BCP) and less than six months (for the TLP). Table 1 shows the number of youth who were turned away from the BCP and TLP due to a lack of bed space from FY2007 through FY2014. Overall, between 7,000 and 11,000 young people were turned away each year from the BCP and TLP—with the greatest number of youth turned away in FY2010. Data for the SOP are collected only on the number of contacts that organizations made with youth, and not the actual number of youth served. Advocates assert that funding is needed for the Runaway and Homeless Youth program to meet the needs of this population. They have recommended that funding be increased to $300 million. Table 2 shows appropriation levels for the major components of the program from FY2011 through FY2015. Figure 3 shows the amount of funding appropriated for each of FY2001 through FY2014 in nominal dollars and FY2014 dollars (real dollars). FY2014 is the most recent year for which the Current Price Index (CPI) is available to examine these trends. In real dollars, funding ranged from a high of about $110 million in FY2013 to a low of $114 million in FY2014. On a related point, providers of services to youth who have run away or are experiencing homelessness may have limited access to funding from the major program through which HUD supports homeless services providers, known as the Continuum of Care (CoC) program. Funds for the CoC program are made available to local communities, which are also called Continuums of Care. Nearly every community in the country has become part of a CoC, with more than 400 CoCs, including those in the territories, covering most of the country. Homeless youth providers, including RHY providers, compete for CoC funding. Local communities establish CoC advisory boards made up of representatives from local government agencies, service providers, community members, and formerly homeless individuals who meet to establish local priorities and strategies to address homelessness in their communities. The CoC plan that results from this process is meant to contain elements that address the continuum of needs of homeless persons: prevention of homelessness, emergency shelter, transitional housing, permanent housing, and supportive services provided at all stages of housing. HUD distributes these funds through an annual competition. Funds for a CoC can be awarded based on a preliminary need amount (which is based on a formula) or on the CoC's Annual Renewal Demand (ARD) amount, whichever is higher. Due to lower funding levels in recent years, all CoCs have been limited to the ARD amount even if the preliminary need amount is higher. Project applicants serving individuals who are homeless in a community (e.g., nonprofit organizations, units of government, etc.) submit a project application that is subsequently submitted by the CoC lead entity, otherwise known as the collaborative applicant. HUD issues an annual notice of funding that sets the criteria for the type of projects and priorities that will be funded in a given year. CoC program funds may be used to serve youth who are defined as homeless under the HUD definition of homelessness. The funding announcement for FY2015 is the second (after the FY2013-FY2014 announcement) to specify that CoCs may score points in the application process in relation to serving youth. As part of the FY2015 competition, HUD included a priority for addressing youth homelessness as part of the CoC program competition. Specifically, the announcement notes that "CoCs should understand the unique needs of homeless youth and should be reaching out to youth-serving organizations to help them fully participate in the CoC.... When evaluating the performance of youth programs, CoCs should take into account the specific challenges faced by homeless youth." In addition, 15 points are available that can be awarded for addressing youth homelessness, including to CoCs that (1) have strategies for addressing the unique needs of unaccompanied homeless youth and the existence of a proven strategy that addresses homeless youth trafficking and other forms of exploitation; (2) demonstrate an increase in the number of unaccompanied homeless youth (up to age 24) served who were residing on the streets or in places not meant for human habitation prior to ending a project for homeless individuals; (3) demonstrate a plan to increase funding for unaccompanied homeless youth programs; (4) describe how they collaborate with local education authorities and school districts to assist in identifying individuals and families who become or remain homeless and informing them of eligibility of services; and (5) demonstrate the extent to which youth service providers and education providers and CoC representatives have participated in each other's meetings over the past 12 months (including how the CoC collaborates with the McKinney-Vento local education liaisons and state education coordinators under the McKinney-Vento Education for Homeless Children and Youths program). The majority of CoC program funds are used to renew existing grants. However, even if a CoC has very few or planned projects to respond to youth experiencing homelessness, providers may still be able to access funds. The funding process allows CoCs to reallocate funds from an existing project to a new one if they decide that a new project would be more beneficial than an existing one. The FY2015 round of CoC funding allowed CoCs to reallocate funding to Permanent Supportive Housing or Rapid Re-Housing projects for homeless youth, among other specified populations. In addition, CoCs may qualify for additional funds to create new permanent supportive housing projects to serve unaccompanied youth who come directly from the streets, in addition to other populations. HUD has otherwise encouraged CoCs to partner with Runaway and Homeless Youth program grantees. In guidance to HUD grantees, HUD emphasized the need for such coordination: "Homeless youth are more multi-jurisdictional than any other homeless population and may interact with adults from educational, child welfare, juvenile justice, and/or homelessness systems. It is therefore critical that CoCs collaborate with schools, child welfare agencies, juvenile justice systems, and, if applicable, projects funded under HHS' Runaway and Homeless Youth Program." Some leaders in the runaway and homeless youth community have suggested the ways that RHY providers can play a more active role in the CoC process even if they are not competing for funds, such as by reading and rating the local applications for CoC funding each year. These stakeholders assert that such participation can help providers understand the CoC's priorities and the extent to which youth are served. They posit that RHY providers could work together closely to improve the chances that youth services will be funded in the CoC: "One or two strong, collaborative or multi-agency endorsed applications to [the] CoC can have a much greater chance at winning a funding award than many competing applications from a variety of youth providers." Stakeholders have further suggested that RHY providers could collaborate with homeless service providers who work with young adults under age 25 that compete for CoC funding, such as by providing targeted services to this population or contracting to train their staff about the needs of this population. The preamble to the proposed regulations for the program, issued in April 2014, notes that HHS strongly encourages grantees to collaborate with their local CoC, with the goal of ending youth homelessness. The National Alliance to End Homelessness, an organization representing the interest of groups devoted to ending homelessness, has articulated that HHS should explicitly encourage and incentivize this coordination by including it as a factor that is assessed as part of the grant review process for the Runaway and Homeless Youth program. Certain groups of youth are vulnerable to running away or becoming homeless. These include lesbian, gay, bisexual, transgendered, or questioning (LGBTQ) youth; those involved in foster care and the juvenile justice system; and youth who are sex trafficked. These groups of youth are not mutually exclusive, and have many of the same underlying issues—stemming, in part, from a lack of family support—that can contribute to their becoming homeless. The amendment to Opening Doors in 2012 emphasized the need for supporting these groups in particular. Policymakers could consider the role of the Runaway and Homeless Youth Act in strengthening assistance to these vulnerable populations and ensuring that RHY providers are equipped to address their sometimes unique circumstances. LGBTQ youth appear to be overrepresented in the homeless population, often due to being forced out of their homes when they come out to their families about their sexuality. In five studies of unaccompanied youth in mid-size and large cities, between 20% and 40% of respondents identified as gay or lesbian. In addition, a nationwide survey of 354 organizations serving youth who were homeless in 2011 and 2012 found that LGBTQ youth make up about 40% of their clients. The survey further found that nearly half (46%) of youth who identified as LGBTQ ran away because of family rejection of sexual orientation or gender identity. The survey also found that 40% of providers did not provide services that address the most commonly cited factor that contributes to their LGBTQ clients' homelessness—family rejection. Many providers who were surveyed stated that they had a "great deal of experience" working with LGBT youth, but some did not. Providers identified a range of issues that were barriers in improving their efforts to prevent or address LGBTQ youth homelessness, including lack of funding (32% to 36%, depending on the funding source); difficulty in identifying the population (20%); the fact that serving these youth is not central to their mission (14%); and a lack of information and training on LGBTG youth (9%). Efforts are underway at FYSB to assist this population by awarding funding under a three-year cooperative agreement in September 2013 to build the capacity of TLPs in serving LGBTQ youth. The grant seeks to develop information about serving the LGBTQ youth population experiencing homelessness, such as through efforts to identify innovative intervention strategies, determining culturally appropriate screening and assessment tools, and better understanding the needs of LGBTQ youth served by RHY providers. In addition, HHS's proposed regulations for the program specify that grantees must provide training that is sensitive to "complex social identities" of youth, including their gender identity and expression and sexual orientation. The Runaway and Homeless Youth Act does not specifically address LGBTQ youth issues. Congress may consider whether reauthorization of the act should include such provisions and whether current efforts are adequate. For example, some stakeholders have identified concerns that the act does not require grantees to adopt nondiscrimination policies to protect the well-being of LGBTQ youth, or explicitly require training expressly targeted at these youth. In 2009, the American Bar Association (ABA) and the National Network for Youth (NN4Y) developed a model state statute that seeks to ensure that homeless youth service providers adopt inclusive, nondiscrimination policies for LGBTQ youth. The model provides guidance on adopting nondiscrimination policies, including on the basis of gender identity and expression. Recent research has also suggested that HHS could provide more extensive training and technical assistance on meeting the needs of LGBTQ youth. A 2014 study funded by HHS examined the strategies of four grantees receiving BCP, TLP, and/or SOP funding for identifying and serving LGBTQ youth. The study identified that RHY providers would likely benefit from "specification, dissemination, and evaluation of models for serving LGBTQ youth effectively." The report also specified that technical assistance or training on LGBTQ issues would help agencies in areas without access to local LGBTQ resources, or establishing a forum for providers to share information. The ABA/NN4Y model state statute and other publications outline the types of training topics that could be covered by runaway and homeless youth providers in serving LGBTQ youth, such as approaches to working with families of LGBTQ youth and how to communicate sensitively with youth about sexuality, sexual orientation, and gender identity. Legislation introduced in the 114 th Congress ( H.R. 1779 and S.Amdt. 290 to S. 178 ) would amend the Runaway and Homeless Youth Act to include a statement of nondiscrimination on the basis of sexual orientation and gender identity or expression (and other characteristics). Both would allow an exception if sex segregation or sex-specific programming would be necessary to operate the program, except that the grantees would be required to provide comparable services to individuals who cannot be provided with such programming. Runaway youth are particularly vulnerable to becoming victims of sex trafficking and other forms of sexual exploitation. Runaways may be perceived as easy targets for traffickers because they often cannot go home and have few resources. A federally funded study found that approximately 1.7 million youth under age 18 had run away from home or were forced to leave their homes at some point in 1999. While away from home, an estimated 38,600 (2.2%) of these youth were sexually assaulted, were in the company of someone known to be sexually abusive, or were engaged in sexual activity in exchange for money, drugs, food, or shelter. The Dallas Police Department also found a strong correlation between sex trafficking and runaway status: the more times a child runs away, the greater the likelihood that he or she will be victimized. Other research, including studies examining prostitution in Boston, Chicago, and San Francisco, has found that the majority of prostituted women were runaways. Shelter and services for trafficked victims who are transitioning from "the life" of prostitution appear to be available on a limited basis. As background for a 2012 colloquium on supports for child victims of sex trafficking, a working group surveyed organizations that provide residential and other services to victims. Over 50 organizations responded to the survey, and together they reported having the capacity to provide specialized services for 1,684 child victims and shelter for 226 child victims. Given that the number of child victims is believed to be much higher, the shelter and services that are available may only reach a fraction of children needing supports. In 2012, the President's Interagency Task Force on trafficking (established by the Trafficking Victims Protection Act) coordinated a strategic plan on services for victims in the United States. The plan specified that runaway and homeless youth providers are part of a broader response to sex trafficking that involves multiple sectors and organizations. (Some runaway and homeless youth providers have long served youth who are victims of sexual exploitation. Amendments to the Runaway and Homeless Youth Act in 1994 ( P.L. 103-322 ) first specified a role for providers in responding to youth sexual exploitation. These amendments created the Grants for Prevention of Sexual Abuse and Exploitation program, which is now referred to in law as the Sexual Abuse Prevention program and commonly called the Street Outreach program (SOP). As currently enacted, the program seeks to provide street-based services to youth "who have been subjected to, or are at risk of being subjected to, sexual abuse, prostitution, or sexual exploitation." In addition, BCP and TLP providers can often offer immediate support to youth without some of the same barriers of other residential options. For example, they have the ability to accept youth in the middle of the night and can offer longer-term placements to boys and transgendered youth who might otherwise have difficulty finding places to stay. Nonetheless, the capacity for runaway and homeless youth agencies to respond to the needs of sex trafficking victims is believed to be limited. These settings are often not equipped to provide intensive services for victims or recognize the trauma they have experienced. They also often have time restrictions imposed by funding sources on the length of stay, which, given their unique needs, makes serving victims of sex trafficking difficult. RHY providers and other providers may not recognize the signs of sex trafficking. Even if providers do recognize these signs, youth may choose to leave, given that shelter providers are required to report suspected abuse and neglect, including sexual exploitation. The federal strategic plan calls for greater supports for RHY and other social service providers in aiding victims of trafficking. The plan articulates that these providers "need training and support to expand their screening protocols to identify those who are trafficking victims and to provide appropriate services and referrals." The plan also lays out action steps that HHS can take to prepare RHY providers in responding. HHS is currently working on such efforts. With support from HHS/ACF, four Runaway and Homeless Youth program grantees have collaborated with the FBI on its Innocence Lost initiative to recover victims of child sex trafficking. These grantees developed a set of standards for working with victims of trafficking that have been used to provide training and technical assistance to grantees. Separately, HHS/ACF awarded FY2015 funding for three cooperative agreements to implement demonstration projects to provide coordinated case management and direct victim assistance to domestic victims of a "severe form of trafficking in persons." Case management can include service plan development, counseling, monitoring and developing services, monitoring and evaluating client progress, and ensuring clients' rights are protected. Direct victim assistance involves the development of individualized service plans that are tailored to meet the victims' needs. Whether Congress wishes to address sex trafficking in the Runaway and Homeless Youth Act may depend on how it envisions the role of providers in responding. For example, if it envisions a broader role, it could specify that BCP and TLP providers can or should provide shelter to sexually trafficked youth, or require the programs to coordinate with other entities in the community to respond. Some stakeholders have suggested that the term "prostitute" should be struck from the authorizing language for the SOP, and replaced with a term reflecting that youth are forced or coerced into providing sexual acts. This is consistent with federal trafficking laws that treat children involved in commercial sex acts as victims. The Justice for Victims of Trafficking Act ( P.L. 114-22 ), enacted in May 2015, expands on the types of research and other projects that HHS should prioritize under staff training on runaway and homeless youth issues. The training areas also now include (1) the behavioral and emotional effects of severe forms of trafficking and sex trafficking, (2) responding to youth showing effects of such trafficking victimization, and (3) agency-wide strategies for working with runaway and homeless youth who have been sexually victimized, including victims of sex trafficking. P.L. 114-22 also specified that in addition to serving runaway and homeless youth, and street youth, the Street Outreach Program is to serve youth who have been subjected to, or are at risk of being subjected to, severe forms of trafficking in persons or sex trafficking. The law separately enables funding to be created from a newly created Department of Justice block grant under the Trafficking Victims Protection Act (TVPA) to deter domestic child human trafficking. Funding may be used for the salaries and associated expenses of retired federal law enforcement officers who assist law enforcement in finding homeless and runaway youth, including salaries and associated expenses for these officers. Similarly, pending legislation to reauthorize the Runaway and Homeless Youth Act ( H.R. 1779 and S. 262 ) would make multiple amendments to the law to address trafficking. For example, they would require BCP and TLP applicants to develop "an adequate plan" for runaway and/or homeless youth who are victims of trafficking in persons or sexually exploited, and require applicants to annually report to HHS on the number of youth served who are victims of a severe form of trafficking in persons (as defined under TVPA) or sexual exploitation. Youth experiencing homelessness appear to be at elevated risk for a variety of negative outcomes, including problems in school, mental health and behavior disorders, and engaging in high-risk behaviors such as drug use, risky sexual behavior, and criminal activity. Some TLP providers may not want to admit "hard-to-serve" youth because they lack the specialized services and supports to serve this population. Stakeholders have asserted that this can amount to providers serving only those youth who have the fewest needs and therefore can more readily transition to school, work, or other productive pathways. In comments to HHS about the proposed rule, the National Network for Youth (on behalf of the organizations they represent) raised concerns about the 90% rate that was set for safe and appropriate exits from the BCP and TLP. They suggested that 80% of BCP and 60% of TLP exits should be to safe and appropriate settings because "if the outcome measure is set too high, programs would be dissuaded from serving extremely high-risk runaway and homeless youth.... These programs often have wait lists because the need for services is larger than the capacity of existing programs (due to limited resources) and many programs could choose to serve the lower-risk runaway and homeless youth in order to increase their likelihood of meeting the proposed (unrealistic) outcome measures." The Runaway and Homeless Youth Act specifies that services provided by BCP grantees are intended to be an alternative to involving runaway and homeless youth in the law enforcement, child welfare, and juvenile justice systems. Still, some of these youth are served by Runaway and Homeless Youth program providers while involved with foster care or juvenile justice or upon leaving those systems, and runaway and homeless youth advocates have raised concerns that Runaway and Homeless Youth program programs receive "little to no funding or recognition" for doing so. Some stakeholders have raised concerns that these other systems do not fully address the needs of some young people, who are then served by the runaway and homeless youth system. As noted in the 2007 HHS report to Congress, youth transitioning from the juvenile justice and foster care systems are particularly vulnerable to becoming homeless. In recent years, about 7% of youth in the BCP reported having spent some time in foster care and 6% of youth had been in the juvenile justice system at some point in their lives. About 20% of TLP youth have spent time in foster care and nearly 10% have been in the care of the juvenile justice system at some time in their lives. In addition, youth who run away often have a history of involvement in the foster care system. On the last day of FY2012, states reported that almost 5,000 foster children (1% of all foster children) had a current placement of "runaway." A study of youth in Illinois who ran away from foster care between 1993 and 2003 found that the average likelihood of an individual running away from foster care placements increased over this time period. Research on youth who emancipate from foster care suggests a nexus between foster care involvement and later episodes of homelessness. Estimates of homeless youth who are reported as having been in foster care range from 21% to 53%. In an often-cited study of youth who had emancipated from foster care in three states, over one-third had experienced homelessness between the time they left care and age 26. The research literature has similarly documented a connection among juveniles and young adults released from secure detention or correction facilities and becoming homeless, although the data on this population are not as reliable. Some studies have found that homeless adults had high rates of prior incarceration, including while they were juveniles. Further, research has identified a number of challenges that youth are likely to confront when reentering the community, including problems with family and living arrangements. Young people who are homeless also have relatively high levels of involvement with the juvenile justice system. The National Network for Youth has articulated that given scarce resources, RHY providers should receive greater financial support on behalf of the youth they serve from these systems. In its April 2014 proposed regulations for the Runaway and Homeless Youth Program, HHS provides guidance on coordinating services for these other populations. For example, the rule would add provisions that grantees are not required to provide services that substitute for those provided by juvenile justice, child welfare, or other systems that are legally responsible to youth who are under their supervision. As discussed in the preamble to the proposed rule, the purposes of these provisions is to provide a clear demarcation between services that are the legal and financial responsibility of other programs, and services that are the responsibility of the Runaway and Homeless Youth Program. Because the availability of federal funds varies among programs, and where Federal funds are available the matching rates usually vary, other State and local agencies have financial incentive to blur these lines. We strongly encourage grantees to take steps [to] prevent other programs from displacing their costs on these programs while also providing continuous service to youth. Policymakers might consider the extent to which the act should reflect language that is similar to the regulations, or whether RHY providers should coordinate with child welfare and juvenile justice agencies. Current child welfare policies address youth who have run away and/or are homeless. The Child Abuse Prevention and Treatment Act (CAPTA) directs states that receive CAPTA state grant funds to prevent and respond to child abuse to certify that CAPTA-funded programs and training address the unique needs of unaccompanied homeless youth, including access to enrollment and support services. In addition, CAPTA community-based grants allow funds to be used for resources, opportunities, and prevention services for these youth. Separately, HHS is providing child welfare funding for grants to develop and implement interventions for youth who have a history of child welfare involvement and are at-risk of homelessness. Grantees can use these funds to test an intervention model that will help young people in or aging out of care make a successful transition at home, at work, in school, in the community, and in adulthood. These outcomes are consistent with the goals of USICH's Framework to End Youth Homelessness . The Reconnecting Homeless Youth Act of 2008 required that within one year after its enactment (i.e., October 8, 2009), HHS issue rules that specify performance standards for public and nonprofit entities that receive BCP, TLP, and SOP grants. In developing the regulations, HHS was to consult with stakeholders in the runaway and homeless youth policy community. The law further required that HHS integrate the performance standards into the grantmaking, monitoring, and evaluations processes for the BCP, TLP, and SOP. On April 14, 2014, HHS issued a notice of proposed rulemaking (NPRM) that seeks to implement new performance standards and other requirements for grantees receiving funds under the Runaway and Homeless Youth program. According to the NPRM, FYSB undertook a process for consulting with a wide range of stakeholders about the performance standards. The proposed rule includes 10 proposed performance standards, which are outlined in Table A-1 . The NPRM also specifies that the grantmaking process will give priority to providers that (in past years) have demonstrated high performance under these standards. | The Runaway and Homeless Youth program is authorized by the Runaway and Homeless Youth Act, and funds organizations throughout the country to provide services to youth who have run away and/or experience homelessness. The program, which is administered by the U.S. Department of Health and Human Services (HHS), includes three components: (1) the Basic Center program (BCP), which provides outreach, temporary shelter, and counseling for up to 21 days to youth under age 18 who have run away or are homeless; (2) the Transitional Living program (TLP), which supports residential services and services to youth ages 16 through 21 for up to 18 months; and (3) the Street Outreach program (SOP), which provides street-based outreach and education—including treatment and referrals—for runaway and homeless youth who have been subjected to sexual abuse and exploitation or are otherwise unstably housed. Funding authorization for the programs expired on September 30, 2013. The federal government, led by an independent agency known as the U.S. Interagency Council on Homelessness (USICH), has developed a plan for ending youth homelessness. In 2010, USICH released Opening Doors, which included goals of ending chronic homelessness and homelessness among youth and other specified populations. An amendment to the plan in 2012 specifically introduced the Federal Framework to End Youth Homelessness, which includes improved data collection on these youth and developing and testing effective intervention models. This plan is consistent with the 2008 reauthorization of the Runaway and Homeless Youth program, which directed HHS to estimate the number of youth who have run away or are homeless and to assess the characteristics of these youth. Congress may wish to determine whether actions taken by HHS and its partners are addressing the data requirements in the law. Related to this, little is known about the outcomes of youth who participate in programs funded under the act, though efforts are underway by non-governmental research organizations to further study this population. Congress may also be interested in the extent to which the Runaway and Homeless Youth program should more actively engage the families of runaway and homeless youth. Family conflict is a primary reason why youth leave home or are forced to leave home. The Runaway and Homeless Youth Act addresses family relationships primarily through the BCP. Some providers have models for helping build stronger connections between youth and their families. Another issue that may be of interest is demand. The programs serve a small fraction of the overall number of youth believed to be runaway or homeless, and the number of youth turned away from the BCP and TLP due to a lack of capacity has ranged from about 9,000 to 11,000 annually. Advocates assert that additional funding is needed to serve more youth, particularly because other federal funding sources for homeless service are believed to be limited. For example, the Continuum of Care (CoC) program directs homeless service providers to coordinate with runaway and homeless youth providers; however, CoC funding may not be available to some Runaway and Homeless Youth program grantees that are already not CoC funded. Finally, runaway and homeless youth tend to have multiple challenges. Congress may consider the role that the Runaway and Homeless Youth Act could play in meeting the specific needs of youth who identify as lesbian, gay, bisexual, transgendered, or questioning (LGBTQ); youth who are sex trafficked; and youth who are or were engaged in foster care or the juvenile justice system. For example, recent research on LGBTQ youth suggests that some RHY providers have difficulty identifying this population and could benefit from technical assistance for serving them effectively. In addition, runaway and homeless youth appear to be vulnerable to sex trafficking and some have a history of such victimization. The act could be amended to ensure that training and technical assistance is available to RHY providers to assist particular groups of youth. |
The Obama Administration released its FY2016 budget request on February 2, 2015. It requested $93.7 billion for the Department of Transportation (DOT), $22 billion (31%) more than DOT received in FY2015. This request reflected the Administration's proposal for reauthorizing the federal surface transportation program and restructuring accounts and funding sources in several DOT sub-agencies. Around 75% of DOT's funding is mandatory budgetary authority, and the Administration's request maintained this split, with $24 billion of the request coming from discretionary budgetary authority—$6 billion (33%) more than provided in FY2015. DOT's discretionary budget allocation is shared with the Department of Housing and Urban Development, as the allocation is given to the Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations bill. The discretionary funding allocation given to the House THUD subcommittee for FY2016 was $55.27 billion, $1.5 billion (3%) higher than the enacted FY2015 funding; most of that increase would cover a decline in offsetting receipts to HUD accounts in FY2016. With other changes in offsets recommended by the House Appropriations Committee, the net increase in discretionary funding is $25 million, and the committee recommended a $25 million reduction in mandatory funding, so there is no net change in actual funding in the committee-recommended House THUD bill from FY2015. The Senate THUD allocation was $55.646 billion, $376 million more than the House level. There is little prospect for significantly increasing DOT's overall funding. The Bipartisan Budget Act of 2015 ( P.L. 114-74 ) was signed into law on November 2, 2015, increasing the overall FY2016 discretionary budget authority for nondefense accounts by $25 billion. That increase could be divided among 12 appropriations bills; the amount of the increase that will be made available for transportation, if any, is not yet known. And while the House and Senate are currently negotiating the differences between their versions of surface transportation authorization legislation ( H.R. 22 ), the FY2016 funding levels provided in both the House and Senate bills are not significantly higher than the FY2015 levels. DOT's funding arrangements are unusual compared to those of most other federal agencies. Most of DOT's funding comes from trust funds rather than the general fund of the Treasury and most of DOT's funding is mandatory rather than discretionary. Also, most of DOT's funding is passed through to state and local governments through formula grants. Most of DOT's annual funding comes from two large trust funds: the Highway Trust Fund and the Airport and Airway Trust Fund (see Table 1 ). The scale of DOT's annual funding coming from these funds is not entirely obvious in DOT budget tables; for while virtually all of the funding from the Highway Trust Fund is in the form of contract authority (which is a form of mandatory budget authority), most of the funding from the Airport and Airway Trust Fund is in the form of discretionary budget authority and so is mingled with the discretionary budget authority provided from the general fund of the Treasury. For most federal agencies, discretionary funding is close to, if not the same as, their total funding. But roughly three-fourths of DOT's funding is mandatory budget authority derived from trust funds (contract authority), rather than discretionary budget authority. Table 2 shows the breakdown between the discretionary and mandatory funding in DOT's budget. See CRS Report R43420, Surface Transportation Program Reauthorization Issues for Congress , by [author name scrubbed] et al. Approximately 80% of DOT's funding is distributed to states, local authorities, and Amtrak in the form of grants (see Table 3 ). Of DOT's largest sub-agencies, only the Federal Aviation Administration, which is responsible for the operation of the air traffic control system and employs roughly 83% of DOT's 56,252 employees, largely as air traffic controllers, has a budget whose primary expenditure is not making grants. Since most of DOT funding comes from trust funds whose revenues typically come from taxes, the periodic reauthorizations of the taxes supporting these trust funds, and the apportionment of the budget authority from those trust funds to DOT programs, are a significant aspect of DOT funding. The current authorizations for both the federal aviation and surface transportation programs are scheduled to expire during FY2016. Reauthorization of these programs may affect both their structure and their funding levels. See CRS Report R43420, Surface Transportation Program Reauthorization Issues for Congress , by [author name scrubbed] et al. and CRS Report R43858, Issues in the Reauthorization of the Federal Aviation Administration (FAA) , by [author name scrubbed] and [author name scrubbed] for more information. DOT's nonemergency annual funding peaked in FY2010 at $82.7 billion (in constant 2015 dollars) and has been declining since (see Figure 1 ). Starting in FY2013, it has received less funding each year, in real terms, than it received in FY2006. On November 10, 2015, the House and Senate went to conference to resolve their differences on H.R. 22 , legislation to reauthorize surface transportation programs, which would set funding levels for surface transportation programs for FY2016 and subsequent years. Congress passed a revised budget agreement ( P.L. 114-74 ) on October 30, 2015, which increased the amount of budget authority available for nondefense accounts for FY2016 by $24.6 billion. Depending on how this additional funding is divided among nondefense accounts, this may allow appropriators to increase funding for transportation programs. Table 4 presents a selected account-by-account summary of FY2016 appropriations for DOT, compared to FY2015. Roughly three-fourths of DOT's budget is mandatory budget authority (contract authority) derived from the Highway Trust Fund. The authorizations for that funding were scheduled to expire at the end of FY2014, but have been extended. The Highway Trust Fund was projected to fall below the level needed to make timely payments to grantees during FY2015, but Congress transferred $8 billion to the trust fund by means of spending offsets in July 2015 ( P.L. 114-41 ) in order to maintain the fund's solvency. Overall, the FY2016 budget request totals $93.7 billion in new budget resources for DOT. The requested funding is $22 billion more than that enacted for FY2015. The Administration request reflected its surface transportation reauthorization proposal, which called for significant increases in funding for highways, transit, and intercity rail. Transportation authorization is outside the jurisdiction of the appropriations committees, but since most of DOT's appropriations come from the Highway Trust Fund, the status of the fund is a key concern. Virtually all federal highway funding, and most federal transit funding, comes from the Highway Trust Fund, whose revenues come largely from the federal motor fuels excise tax ("gas tax"). For several years, expenditures from the fund have exceeded revenues; for example, in FY2015, revenues are projected to be approximately $39 billion, while authorized outlays are projected to be approximately $52 billion. Congress transferred more than $62 billion, mostly from the general fund of the Treasury, to the Highway Trust Fund during the period FY2008-FY2015 to keep the trust fund solvent. One reason for the shortfall in the fund is that the federal gas tax has not been raised since 1993. The tax is a fixed amount assessed per gallon of fuel sold, not a percentage of the cost of the fuel sold: whether a gallon of gas costs $1 or $4, the highway trust fund receives 18.3 cents for each gallon of gasoline and 24.3 cents for each gallon of diesel. Meanwhile, the value of the gas tax has been diminished by inflation (which has reduced the purchasing power of the revenue raised by the tax) and increasing automobile fuel efficiency (which reduces growth in gas sales as more efficient vehicles are able to travel farther on a gallon of fuel). The Congressional Budget Office (CBO) has forecast that gasoline consumption will be relatively flat through 2024, as continued increases in the fuel efficiency of the U.S. passenger fleet are projected to offset increases in the number of miles driven. Consequently, CBO expects highway trust fund revenues of $37 billion to $38 billion annually from FY2014 to FY2024, well short of the current $53 billion annual level of authorized expenditures from the fund. The Transportation Investments Generating Economic Recovery (TIGER) grant program originated in the American Recovery and Reinvestment Act ( P.L. 111-5 ), where it was referred to as "national infrastructure investment" (as it has been in subsequent appropriations acts). It is a discretionary grant program intended to address two criticisms of the current structure of federal transportation funding: that virtually all of the funding is distributed to state and local governments, which select projects based on their individual priorities, making it difficult to fund projects that have national or regional impacts but whose costs fall largely on one or two states; and that federal transportation funding is divided according to mode of transportation, making it difficult for major projects in different modes to compete on the basis of comparative benefit. The TIGER program provides grants to projects of national, regional, or metropolitan area significance in various modes on a competitive basis, with recipients selected by U.S. DOT. Although the program is, by description, intended to fund projects of national, regional, and metropolitan area significance, in practice its funding has gone more toward projects of regional and metropolitan area significance. In large part this is a function of congressional intent, as Congress has directed that the funds be distributed equitably across geographic areas, between rural and urban areas, and among transportation modes, and has set relatively low maximum ($15 million) and minimum ($1 million for rural projects) grant limits. Congress has continued to support the TIGER program through annual DOT appropriations. There have been seven rounds of TIGER grants (from ARRA funding and from FY2010-FY2015 annual appropriations). After the restructuring of DOT programs in the 2012 surface transportation reauthorization, the TIGER program is virtually the only remaining discretionary grant program for surface transportation other than the Federal Transit Administration's Capital Investment Grant program (popularly referred to as New Starts), discussed below. It is heavily oversubscribed; for example, DOT announced that it received a total of $10.1 billion in applications for the $500 million available for FY2015 grants. The U.S. Government Accountability Office (GAO) has reported that, while DOT has selection criteria for the TIGER grant program, it has sometimes awarded grants to lower-ranked projects while bypassing higher-ranked projects without explaining why it did so, raising questions about the integrity of the selection process. DOT has responded that its project rankings are based on transportation-related criteria (e.g., safety, economic competitiveness), but that it must sometimes select lower-ranking projects over higher-ranking ones to comply with other selection criteria established by Congress, such as geographic balance and a balance between rural and urban awards. There has also been criticism that TIGER grants go disproportionately to urban areas compared to rural areas. However, for several years Congress has directed that at least 20% of TIGER funding should go to projects in rural areas. According to the 2010 Census, 19% of the U.S. population lives in rural areas. As Table 5 illustrates, the TIGER grant appropriation process has followed a pattern for several years: the Administration requests as much as or more than Congress has previously provided; the House zeroes out the program or proposes a large cut; the Senate proposes an amount similar to the previously enacted figure; and the final enacted amount is similar to the previously enacted amount. In addition to the reduced funding, the House-passed bill would reduce the federal matching share for TIGER grants from 80% to 50% (though it could go higher for projects in rural areas). The Senate-reported bill keeps the matching share at 80% (or more, in the case of rural areas), and directs that at least 30% of funding go to projects in rural areas. The EAS program seeks to preserve commercial air service to small communities by subsidizing service that would otherwise be unprofitable. The cost of the program in real terms has doubled since FY2008, in part because route reductions by airlines resulted in new communities being added to the program. Congress made changes to the program in 2012, including allowing no new entrants, capping the per-passenger subsidy for a community at $1,000, limiting communities less than 210 miles from a hub airport to a maximum average subsidy per passenger of $200, and allowing smaller, less expensive planes to be used for communities with few daily passengers. Supporters of the EAS program contend that preserving airline service to small communities was a commitment Congress made when it deregulated airline service in 1978, anticipating that airlines would reduce or eliminate service to many communities that were too small to make such service economically viable. Supporters also contend that subsidizing air service to smaller communities promotes economic development in rural areas. Critics of the program note that the subsidy cost per passenger is relatively high, that many of the airports in the program have very few passengers, and that some of the airports receiving EAS subsidies are little more than an hour's drive from major airports. In addition to the annual discretionary appropriation for the program, there is a mandatory annual authorization, $108.4 million in FY2016, financed by overflight fees collected from commercial airlines by FAA. These overflight fees apply to international flights that fly over, but do not land in, the United States. The fees are to be reasonably related to the costs of providing air traffic services to such flights. As Table 7 shows, the Administration requested $175 million for the EAS program in FY2016, in addition to $108 million in mandatory funding for a total of $283 million. The House bill would provide $155 million in discretionary funding and $263 million overall, the same amounts as in FY2015. The Senate-reported bill would provide a total of $283 million, the requested amount. On May 12, 2015, an Amtrak passenger train derailed in Philadelphia; 8 passengers died and over 200 were injured. The incident is still being investigated, but preliminary findings indicate that the derailment resulted from the train traveling at nearly twice the speed prescribed for that section of track. National Transportation Safety Board officials have stated that the incident could have been prevented if positive train control technology had been operating on that section of track. In 2008, Congress directed railroads to install positive train control (PTC) on certain segments of the national rail network (including the segment where this incident occurred) by the end of 2015. Amtrak had installed the necessary equipment but had not yet put it into operation. It is unclear whether greater federal funding for Amtrak would have led positive train control to be implemented earlier on this section of track. Freight railroads have reportedly spent billions of dollars thus far to meet this requirement, but most of the track required to have PTC installed will not be in compliance by the end of 2015; Congress extended the deadline to the end of 2018—with an option for individual railroads to extend to 2020 with Federal Railroad Administration (FRA) approval—in October 2015. Congress provided $50 million in FY2010 for grants to railroads to help cover the expenses of installing PTC. The Administration's FY2016 budget request included $875 million for the cost of positive train control implementation on commuter railroad routes; neither the House-passed nor Senate-reported bill included funding specifically for this purpose, though the Senate-reported bill recommends $50 million for rail safety grant programs. H.Rept. 114-129 directs the Administrator of FRA to require all states to prepare railroad-highway grade crossing safety action plans identifying specific solutions to improve safety at high-risk crossings. Currently only the 10 states that had the highest number of grade crossing collisions during the period 2006-2008 are required to have such plans. S.Rept. 114-75 notes that the committee's recommendations included an increase of $1.9 million to improve passenger rail safety (by hiring staff to develop and implement passenger rail risk reduction system safety programs, and additional inspectors) and $10 million for grants to states for highway-rail grade crossing safety, plus an additional $1 million to reduce grade crossing incidents and improve pedestrian safety. Reflecting the Administration's surface transportation reauthorization proposal, the budget proposed a total of $4.8 billion for a new National High Performance Rail System program within FRA, consisting of two grant programs: $2.45 billion for a Current Passenger Rail Service grant program (which would primarily fund maintenance and improvement of existing intercity passenger rail service, i.e., Amtrak) and $2.325 billion for a Rail Service Improvement grant program (which would fund new intercity passenger rail projects as well as some improvements to freight rail). The funding would come from a new transportation trust fund rather than discretionary funding. The Administration made a similar proposal in FY2014 and FY2015. Funding provided in H.R. 2577 follows the existing FRA structure, taking the form of grants to Amtrak. The Senate-reported bill does recommend rescinding $17 million in unobligated balances and making that funding available for improvements to the Northeast Corridor. The 111 th Congress (2009-2010) provided $10.5 billion for DOT's high-speed and intercity passenger rail grant program, beginning with $8 billion in the American Recovery and Reinvestment Act of 2009. Since then, Congress has provided no additional funding and in FY2011 rescinded $400 million of the unobligated portion of the $10.5 billion already appropriated. This program has provided funding mainly to develop intercity passenger rail service with top speeds of 90 or 110 miles per hour. One state, California, is actively pursuing development of a high-speed rail line that would provide dedicated tracks for passenger trains traveling at speeds greater than 150 miles per hour. California has received $3.6 billion in federal funding for this project, but the total cost of constructing the line is estimated at more than $70 billion, and the prospects for financing the full project are uncertain. The Administration proposal for a new Current Passenger Rail Service account would almost double the amount Congress provided Amtrak in FY2015. Amtrak submits a grant request to Congress each year, separate from the Administration's budget request. Amtrak requested $2.0 billion for FY2016, $450 million less than the Administration's request for Amtrak. Amtrak's request used different categories than the Administration budget, making a comparison difficult. The House-passed bill would provide $1.148 billion for Amtrak for FY2016, 17% below the FY2015 amount. The Senate-reported bill recommended $1.39 billion for Amtrak, the same amount as in FY2015. Table 8 shows the amount of funding provided for Amtrak grants in FY2015 and the amounts requested and proposed for FY2016. Amtrak's operating grant request totals $732 million, reflecting projected operating losses of its state-supported routes and long-distance routes. It projects a $367-million operating profit on the Northeast Corridor (NEC), but plans to apply that toward capital investment on the corridor, the capital needs of which are far greater than can be covered by its operating profits. Because Amtrak's budget request applies that operating revenue to its capital needs and also requests $556 million for matching grants to states for contributions to NEC infrastructure per PRIIA Section 212, which would offset a portion of Amtrak's capital needs, comparing Amtrak's budget request to the funding proposed in the House bill can be confusing; a more direct comparison is shown in Table 9 . The majority of FTA's almost $11-billion funding is funneled to state and local transit agencies through several formula programs. The largest transit discretionary grant program is the Capital Investment Grants program (commonly referred to as the New Starts and Small Starts program). It funds new fixed-guideway transit lines and extensions to existing lines. Before 2012, the program had two components, New Starts and Small Starts, based on project cost. The New Starts component funds capital projects with total costs over $250 million that are seeking more than $75 million in federal funding, and the Small Starts component funds capital projects with total costs under $250 million that are seeking less than $75 million in federal funding. In the transit program reauthorization enacted in 2012, Congress added a third component, Core Capacity. This component funds expansions to existing fixed-guideway systems that are at or near capacity. The Capital Investment Grants program provides funding to large projects over a period of years. Much of the funding for this program each year is committed to existing New Starts projects with multi-year grant funding agreements. FTA reports that its existing grant agreements will require $1.25 billion in New Starts funding in FY2016. For FY2016, the Administration requested $3.25 billion for the program, $1.13 billion (53%) more than the $2.12 billion provided in FY2015. The House-passed bill would provide $1.92 billion, roughly $200 million (9%) less than the FY2015 level. According to the committee, that amount would fully fund all projects with existing grant agreements and would provide $250 million for projects expected to sign a full funding grant agreement during FY2016, plus $353 million for nine Small Starts projects included in the Administration request. The Senate-reported bill recommends $1.585 billion, 25% ($535 million) below the FY2015 level. The federal share for New Starts projects, by statute, can be up to 80%. Since FY2002, DOT appropriations have included a provision directing FTA not to sign any full funding grant agreements that provide a federal share of more than 60%. The House-passed bill lowers the maximum federal share to 50%. The Senate-reported bill does not lower the share, but directs FTA to give priority to projects requesting a lower federal share. Critics of lowering the federal share provided for New Starts projects note that the federal share for highway projects is typically 80% and in some cases is higher. They contend that, by providing a lower share of federal funding (and thus requiring a higher share of local funding), this provision makes highway projects relatively more attractive for communities considering how to address transportation problems. Advocates of this provision note that the demand for New Starts funding greatly exceeds the amount available, so requiring a higher local match allows FTA to support more projects with the available funding. They also assert that requiring a higher local match likely encourages communities to estimate the costs and benefits of proposed transit projects more carefully, reducing the risk of subsequent cost overruns. The Passenger Rail Investment and Improvement Act of 2008 authorized $1.5 billion over 10 years in grants to the Washington Metropolitan Area Transit Authority (WMATA) for preventive maintenance and capital grants, to be matched by funding from WMATA's three jurisdictions: the District of Columbia and the states of Maryland and Virginia. Under this agreement, Congress has provided $150 million in each of the past six years to WMATA. WMATA faces a number of difficulties. It is dealing with a backlog of maintenance needs due to inadequate maintenance investment years ago; it has experienced several fatal incidents, most recently in January of this year, that have raised questions about the safety culture of the agency; and an investigation that found numerous instances of mismanagement of federal funding has led FTA to restrict WMATA's use of federal funds. An FTA audit of WMATA's safety practices in 2015 produced many recommendations for change, and in October 2015 FTA assumed oversight of WMATA's safety compliance practices from the Tri-State Oversight Commission, the agency created by the governments of the District of Columbia, Maryland, and Virginia to oversee WMATA safety performance. Richard Sarles, WMATA's general manager since January 2011, retired in January 2015 (he had announced his retirement date in September 2014), and a new manager was not appointed until November 2015 after other candidates chosen by the Board backed out. For FY2016, the House-passed H.R. 2577 would provide $100 million, $50 million less than in previous years. The House Committee on Appropriations had initially recommended $75 million, and in the committee report accompanying H.R. 2577 , the committee noted that if it sees evidence that WMATA is addressing its safety and financial issues, the committee would reevaluate its funding recommendation. During committee markup, an amendment was approved adding $25 million to the WMATA funding. The Senate Committee on Appropriations recommended $150 million, the same amount as in previous years. Both the House-passed and Senate-reported bills would increase the length of trucks permitted on the Interstate System and National Network by amending 49 U.S.C. Section 31111(b)(1)(A) to increase the maximum length of twin trailers from 28 feet to 33 feet. DOT has published technical reports as part of a comprehensive truck size and weight limits study mandated by Congress. In the reports the department found that this particular configuration—a tractor unit towing twin 33-foot trailers—caused increased damage to road surface and increased costs for bridge maintenance, while reducing enforcement costs and truck vehicle miles traveled (since fewer trucks would be needed for the same amount of cargo). Its safety impacts could not be estimated because such configurations are not currently in use (other than in limited use on one route in one state). Some trucking industry interests support the increased length on the grounds of improved productivity; it would enable a driver to haul a larger load. Both the House-passed and the Senate-reported bills continue a provision from the FY2015 THUD act that suspends portions of commercial driver hours-of-service rules pending a study of their costs and benefits. These rules were imposed by the Federal Motor Carrier Safety Administration in June 2013. Drivers are required to take at least 34 hours off duty, covering two consecutive 1 a.m.-5 a.m. periods, after working for 60 hours in a seven-day period (or 70 hours in an eight-day period). And drivers are only allowed to take this 34-hour "restart" once in a 168-hour (seven-day) span. If drivers work for less than 60 hours in a week, they do not have to take the 34-hour restart; for example, if a driver worked eight hours every day, for a total of 56 hours in a seven-day period, that driver could continue to work every day without taking a 34-hour rest period. The purpose of the 2013 change in the hours-of-service rules was to promote highway safety by reducing the risk of driver fatigue. Under the previous rules, drivers had to take a 34-hour restart period after working for 60 hours in a seven-day period (or 70 hours in an eight-day period). But drivers could start this rest period at any time, and could take more than one such rest period per week. Thus a driver was able to work the maximum permitted time per day (14 hours) and take the 34-hour restart after five days, and then, after a rest period of as little as one night and two daytime periods, work 14 hours a day for another five consecutive days. FMCSA asserted that this schedule allowed a driver to work up to 82 hours over a seven-day period, which it judged to be insufficient to prevent the driver being fatigued while driving. By limiting the use of the 34-hour restart to once in a seven-day (168-hour) period, FMCSA sought to limit drivers to a maximum of 70 hours of work in any seven-day span. And by requiring that the 34-hour restart period cover two 1 a.m.-5 a.m. periods, the current rule allows drivers to get more sleep during the 1 a.m.-5 a.m. period, when studies indicate that sleep is most restorative (compared to sleeping during other times of the day). The provision in Section 132 of the House bill prohibits enforcement of the new requirement, returning the requirement to what it was prior to June 2013, unless the study required by Section 133 of Division K of P.L. 113-235 (the FY2015 THUD act) finds that commercial drivers operating under the new restart provisions showed "statistically significant improvement in all outcomes related to safety, operator fatigue, driver health and longevity, and work schedules." This is slightly different than the original standard in P.L. 113-235 , which looked for whether the study showed a "greater net benefit for the operational, safety, health and fatigue impacts of the restart provisions." The provision in the Senate-reported bill (§134) is similar to this original standard, looking for "statistically significant net safety benefits." FMCSA published a cost-benefit analysis in the final rule that implemented the change, which found that the change was cost-beneficial, but critics of the change said that the impacts were greater than FMCSA had estimated. | On February 2, 2015, the Obama Administration proposed a $93.7 billion budget for the Department of Transportation (DOT) for FY2016. That is about $22 billion (31%) more than was provided in FY2015. The budget request for DOT reflected the Administration's call for significant increases in funding for highway, transit, and rail programs. Neither the surface transportation reauthorization legislation (H.R. 22) that the House and Senate are currently negotiating nor the DOT appropriations bill as passed by the House or reported out by the Senate Committee on Appropriations (H.R. 2577) would increase transportation funding on the scale requested by the Administration. The annual appropriations for DOT are combined with those for the Department of Housing and Urban Development in the Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations bill. The House has passed H.R. 2577, which would provide FY2016 appropriations for THUD. The House-passed version of H.R. 2577 would provide $70.6 billion for DOT, $1 billion less than DOT received in FY2015 (after rescissions are subtracted from the FY2015 total, the difference is reduced to $646 million) and $23 billion less than the Administration request. The House-passed bill cuts funding for Amtrak by $242 million (17%) from its FY2015 level, to $1.148 billion, less than half the amount requested by the Administration. The House Appropriations Committee marked up the bill one day after an Amtrak passenger train derailed in Philadelphia, which raised the profile of the cuts to Amtrak funding. The House-passed bill also includes significant cuts to the TIGER discretionary grant program and the transit New Starts program. For TIGER, the bill would provide $100 million, an 80% reduction from the $500 million provided in FY2015 and $1.15 billion below the Administration request. For New Starts, it would provide $1.9 billion, a 9% reduction from the $2.1 billion provided in FY2015 and $1.3 billion below the Administration request. These three programs account for most of the bill's cut in transportation funding from the FY2015 level. The Senate Committee on Appropriations reported a version of H.R. 2577 providing $71.3 billion for DOT, a reduction of $368 million from the FY2015 level (after rescissions are subtracted from the FY2015 total, the difference is reduced to $17 million) and $22 billion less than the Administration request. The committee recommended funding the TIGER grant program and Amtrak at their FY2015 levels. It recommended a 25% ($535 million) cut to the New Starts transit grant program, the major change in the recommended FY2016 levels from FY2015 levels. On November 18, 2015, the Senate Committee on Appropriations released a substitute amendment to H.R. 2577 that would increase DOT discretionary funding by $690 million, reflecting the Balanced Budget Act of 2015 (which increased the amount of budget authority for FY2016). Specifically, the substitute amendment would change the following accounts: Under the Office of the Secretary, the National Infrastructure Investment (TIGER) grant account would change from $500 million to $600 million. The Federal Aviation Administration Facilities & Equipment account would change from $2.6 billion to $2.855 billion. The Federal Transit Administration Capital Investment grant (New Starts) account would change from $1.585 billion to $1.896 billion. The Maritime Administration account would change from $373 million to $397 million. The remainder of this report has not been updated to reflect the substitute amendment. |
T he Posse Comitatus Act, enacted in 1878 and now codified at 18 U.S.C. § 1385, is perhaps the most tangible expression of an American tradition, born in England and developed in the early years of our nation, that rebels against military involvement in civilian affairs. The Declaration of Independence listed among our grievances against Great Britain that the King had "kept among us, in times of peace, Standing Armies without the consent of our legislatures," had "affected to render the Military independent of and superior to the civil power." The Articles of Confederation addressed the threat of military intrusion into civilian affairs by demanding that the armed forces assembled during peacetime be no more numerous than absolutely necessary for the common defense, and by entrusting control to civil authorities within the states. The Constitution continued the theme. It provided that a civilian, the President, should be the Commander in Chief of the Army and Navy of the United States and that civilian authorities, the Congress, should be solely empowered to raise and support Armies, provide and maintain a Navy, and make rules for their government and regulation. The Bill of Rights limited the quartering of troops in private homes, U.S. Const. Amend. III, and noted 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," U.S. Const. Amend. II. The Constitution, on the other hand, explicitly permitted the Congress to provide for calling out the militia to execute the laws, suppress insurrection, and repel invasion, U.S. Const. Art. I, § 8, cl.16. Soon after Congress was first assembled under the Constitution, it authorized the President to call out the militia, initially to protect the frontier against "hostile incursions of the Indians," and subsequently in cases of invasion, insurrection, or obstruction of the laws, in aid of a state government or where federal law met resistance. These authorities were used to put down the "Whiskey Rebellion" and other armed resistance to the revenue laws, labor strikes and race riots, and bands of desperados in the territories. Congress in some cases specifically authorized the use of the armed forces to execute civilian laws in cases that did not amount to insurrection, including enforcement of embargoes and the neutrality laws. The President's authority to call upon the state militia to aid in putting down insurrections is reminiscent of the authority enjoyed by the sheriff at common law to call upon the posse comitatus. In the beginning, the two were comparable but unrelated. Even though Congress empowered the President to call out the militia to overcome obstructions to law enforcement, it continued to vest the federal equivalent of the sheriff, the federal marshal, with the power to call forth the posse comitatus in performance of his duties. In addition, Congress sometimes authorized recourse to the posse comitatus for the enforcement of particular statutes. Under the Fugitive Slave Act, for instance, owners whose slaves had escaped to another state were entitled to an arrest warrant for the slaves and to have the warrant executed by federal marshals. The marshals in turn might "summon and call to their aid the bystanders, or posse comitatus of the proper county ... [and] all good citizens [were] commanded to aid and assist in the prompt and efficient execution of this law, whenever their services may be required, as aforesaid, for that purpose," 9 Stat. 462, 463 (1850). Attorney General Caleb Cushing declared that the "bystanders" contemplated by the Fugitive Slave Act might include members of a state militia even when not in federal service, and they did encompass members of the armed forces by virtue of their duties as citizens as part of the posse comitatus. Following the Civil War, the use of federal troops to execute the laws, particularly in the states that had been part of the Confederacy, continued even after all other political restrictions had been lifted. In response, Congress passed the Posse Comitatus Act as part of an Army appropriations bill in 1878. With the exception of a reference to the Air Force, it has remained essentially unchanged ever since, although Congress has authorized a substantial number of exceptions and has buttressed the act with an additional proscription against use of the armed forces to make arrests or conduct searches and seizures. While the terrorist attacks of September 11, 2001 led some to call for a reexamination of the role of the military in domestic law enforcement, Congress, in establishing the Department of Homeland Security, expressed its sense reaffirming the continued importance and applicability of the Posse Comitatus Act. 6 U.S.C. § 466. The Posse Comitatus Act does not apply "in cases and under circumstances expressly authorized by the Constitution," 18 U.S.C. § 1385. It has been observed that the Constitution contains no provision expressly authorizing the use of the military to execute the law, that the exception was included as part of a face-saving compromise, and that consequently it should be ignored. The older commentaries suggest that the word "expressly" must be ignored, for otherwise in their view the Posse Comitatus Act is a constitutionally impermissible effort to limit the powers of the President. The regulations covering the use of the armed forces during civil disturbances do not go quite that far, but they do assert two constitutionally based exceptions—sudden emergencies and protection of federal property. 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. The Posse Comitatus Act does not apply where Congress has expressly authorized use of the military to execute the law. Congress has done so in three ways: (1) by giving a branch of the armed forces civilian law enforcement authority; (2) by establishing general rules for certain types of assistance; and (3) by addressing individual cases and circumstances with more narrowly crafted legislation. Thus it has vested the Coast Guard, a branch of the armed forces, with broad law enforcement responsibilities. Second, over the years it has passed a fairly extensive array of particularized statutes, like those permitting the President to call out the armed forces in times of insurrection and domestic violence, 10 U.S.C. §§ 251-255. Finally, it has enacted general legislation authorizing the armed forces to share information and equipment with civilian law enforcement agencies, 10 U.S.C. §§ 271-284. These last general statutes were crafted to resolve questions raised by the so-called Wounded Knee cases (see below). The legislation contains both explicit grants of authority and restrictions on the use of that authority for military assistance to the police—federal, state and local—particularly in the form of information and equipment, 10 U.S.C. §§ 271-284. Section 271 specifically authorizes the armed forces to share information acquired during military operations and in fact encourages the armed forces to plan their activities with an eye to the production of incidental civilian benefits. The section allows the use of military undercover agents and the collection of intelligence concerning civilian activities only where there is a nexus to an underlying military purpose. Under §§ 272 through 274, military equipment and facilities may be made available to civilian authorities; members of the armed forces may train civilian police on the operation and maintenance of equipment and may provide them with expert advice; and military personnel may be employed to maintain and operate the equipment supplied. The authority granted in §§ 271-284 is subject to three general caveats. It may not be used in any way that could undermine the military capability of the United States; the civilian beneficiaries of military aid must pay for the assistance; and, under § 275, the Secretary of Defense must issue regulations to ensure that the authority of §§ 271 to 284 does not result in use of the armed forces to make arrests or conduct searches and seizures solely for the benefit of civilian law enforcement. The armed forces, when in performance of their military responsibilities, are beyond the reach of the Posse Comitatus Act and its statutory and regulatory supplements. Neither the act nor its legislative history resolves the question of whether the act prohibits the Army from performing its military duties in a manner which affords incidental benefits to civilian law enforcement officers. The courts and commentators believe that it does not. As long as the primary purpose of an activity is to address a military purpose, the activity need not be abandoned simply because it also assists civilian law enforcement efforts. The act is limited to "willful" misuse of the Army or Air Force. The Senate version of the original Act would have limited proscription to "willful and knowing" violations, 7 Cong. Rec. 4302 (1878); the House version had no limitation, 7 Cong. Rec. 4181 (1878). The compromise that emerged from conference opted to forbid only willful violations, but nothing in the legislative history explains what the limitation means. It seems unlikely that a court would convict for anything less than a deliberate disregard of the law's requirements. When has the Army or Air Force been used "to execute the laws"? Existing case law and commentary indicate that "execution of the law" in violation of the Posse Comitatus Act occurs when (1) the armed forces perform tasks ordinarily assigned not to them, but to an organ of civilian government; or (2) the armed forces perform tasks assigned to them solely for purposes of civilian government. While inquiries may surface in other contexts, such as the use of the armed forces to fight forest fires or to provide assistance in the case of other natural disasters, Posse Comitatus Act questions arise most often when the armed forces assist civilian police. In this context, the tests used by most contemporary courts to determine whether military forces have been used improperly as police forces in violation of the Posse Comitatus Act were developed out of disturbances in 1973 at Wounded Knee on the Pine Ridge Indian Reservation in South Dakota and inquire whether: (1) civilian law enforcement officials made a direct active use of military investigators to execute the law; (2) the use of the military pervaded the activities of the civilian officials; or (3) the military was used so as to subject citizens to the exercise of military power which was regulatory, prescriptive, or compulsory in nature. The Posse Comitatus Act proscribes use of the Army or the Air Force to execute the law. It says nothing about the Navy, the Marine Corps, the Coast Guard, or the National Guard. The courts have generally held that the Posse Comitatus Act by itself does not apply to the Navy or the Marine Corps. They maintain, however, that those forces are covered by similarly confining administrative and legislative supplements, which appear in the Department of Defense (DOD) Instruction implementing the legislation authorizing military assistance to civilian agencies. The Posse Comitatus Act likewise says nothing about the Coast Guard. The Coast Guard is a branch of the armed forces, located within the Department of Homeland Security, 14 U.S.C. § 1 (as amended), but relocated within the Navy in time of war or upon the order of the President, 14 U.S.C. § 3. The act will not apply to the Coast Guard while it remains part of the Department of Homeland Security. While part of the Navy, it is subject to the orders of the Secretary of the Navy, 14 U.S.C. § 3, and consequently to any generally applicable directives or instructions issued under the Department of Defense or the Navy. As a practical matter, however, the Coast Guard is statutorily authorized to perform law enforcement functions, 14 U.S.C. § 2. Even while part of the Navy, its law enforcement activities would come within the statutory exception to the posse comitatus restrictions, and the restrictions applicable to components of the Department of Defense would only apply to activities beyond those authorized. The act is silent as to what constitutes "part" of the Army or Air Force for purposes of proscription. There is little commentary or case law to resolve questions concerning the coverage of the National Guard, the Civil Air Patrol, civilian employees of the armed forces, or regular members of the armed forces while off duty. Strictly speaking, the Posse Comitatus Act predates the National Guard only in name, for the Guard "is the modern Militia reserved to the States by Art. I, § 8, cls.15, 16, of the Constitution," which has become "an organized force, capable of being assimilated with ease into the regular military establishment of the United States," Maryland v. United States , 381 U.S. 41, 46 (1965). There seems every reason to consider the National Guard part of the Army or Air Force, for purposes of the Posse Comitatus Act, when in federal service. When not in federal service, historical reflection might suggest that it is likewise covered. Recall that it was the state militia, called to the aid of the marshal enforcing the Fugitive Slave Act, which triggered Attorney General Cushing's famous opinion. The Posse Comitatus Act's reference to "posse comitatus or otherwise" is meant to abrogate the assertion derived from Cushing's opinion that troops could be used to execute the law as long as they were acting as citizens and not soldiers when they did so. On the other hand, the National Guard is creature of both state and federal law, a condition which as the militia it has enjoyed since the days of the Articles of Confederation. Courts have held that members of the National Guard when not in federal service are not covered by the Posse Comitatus Act. Similarly, the DOD Instruction is only applicable to members of the National Guard when they are in federal service. The historical perspective fares little better on the question of whether the Posse Comitatus Act extends to soldiers who assist civilian law enforcement officials in a manner which any other citizen would be permitted to provide assistance, particularly if they do so while off duty. Congress passed the act in response to cases where members of the military had been used based on their civic obligations to respond to the call as the posse comitatus. The debate in the Senate, however, suggests that the act was not intended to strip service members of all civilian rights and obligations. The more recent decisions have focused on the nature of the assistance provided and whether it is incidental to action taken primarily for a military purpose. Some have questioned whether civilian employees of the armed forces should come within the proscription of the act, but most, frequently without comment, seem to consider them "part" of the armed forces for purposes of the Posse Comitatus Act. The current DOD instruction expressly includes civilian employees "under the direct command and control of a military officer" within its Posse Comitatus Act policy restrictions. The Posse Comitatus Act contains no expression of extraterritorial application, but it seems unlikely that it was meant to apply beyond the confines of the United States, its territories and possessions. Congress enacted it in response to problems occurring within the United States and its territories, problems associated with the American political process, and policies and actions that promoted military usurpation of civilian law enforcement responsibilities over Americans. Congress does appear to have intended the authority and restrictions contained in 10 U.S.C. §§ 271-284 to apply both in the United States and beyond its borders. The Posse Comitatus Act is a criminal statute under which there has apparently been only a couple of prosecutions. It has been invoked with varying degrees of success, however, to challenge the jurisdiction of the courts; as a defense in criminal prosecutions for other offenses; as a ground for the suppression of evidence; as the grounds for, or a defense against, civil liability; and as a means to enjoin proposed actions by the military. Allegations that the Posse Comitatus Act has been violated are made most often by defendants seeking to exclude related testimony or physical evidence, but most cases note the absence of an exclusionary rule, often avoiding unnecessary analysis of the scope of the act and whether a violation has occurred. While courts have repeated dicta from one case suggesting that an exclusionary rule might be necessary for deterrence purposes where "widespread or repeated violations" are at issue, such a case does not appear to have presented itself. Defendants have found the act helpful in prosecutions where the government must establish the lawfulness of its conduct as one of the elements of the offense. Several defendants at Wounded Knee persuaded the court that evidence of possible violations precluded their convictions for obstructing law enforcement officials "lawfully engaged" in the performance of their duties. On the other hand, defendants appear to have had no success persuading the courts to dismiss their prosecutions on the basis that military involvement in their investigation or arrest violated the act, even in cases where the court agrees a violation has occurred. The Eighth Circuit has declared that a violation of the act might constitute an unreasonable search and seizure for purposes of the Fourth Amendment, giving rise to a Bivens cause of action, under which aggrieved persons can bring a case against offending federal officers or employees for violations of constitutional rights. A Posse Comitatus Act violation, however, also provides the government with a defense to a claim under the Federal Tort Claims Act (FTCA) since the government is not liable under the FTCA for injuries inflicted by federal officers or employees acting outside the scope of their authority. It appears that plaintiffs asserting violations against state or local law enforcement officers also face an uphill battle, where the lack of precedent for such liability seems to lead to qualified immunity on the part of law enforcement officers. The most significant impact of the Posse Comitatus Act is attributable to compliance by the armed forces. As administrative adoption of the act for the Navy and Marines demonstrates, the military has a long-standing practice of avoiding involvement in civilian affairs which it believes are contrary to the act, and which date back to military acceptance of civilian authority since the founding of the Republic. | The Posse Comitatus Act states that "Whoever, except in cases and under circumstances expressly authorized by the Constitution or Act of Congress, willfully uses any part of the Army or the Air Force as a posse comitatus or otherwise to execute the laws shall be fined under this title or imprisoned not more than two years, or both." 18 U.S.C. § 1385. It reflects an American tradition that bridles at military involvement in civilian affairs. Congress, however, has approved a number of instances where extraordinary circumstances warrant a departure from the general rule, particularly in cases where the armed forces provide civilian assistance without becoming directly involved in civilian law enforcement. However, a number of statutes, including the Insurrection Act, permit the military directly to execute federal law or provide assistance to states in the throes of insurrection where state officials are unable to execute the law. Three tests have developed to determine when the Posse Comitatus Act is violated. Courts examine whether: (1) civilian law enforcement officials made a direct active use of military investigators to execute the law; (2) the use of the military pervaded the activities of the civilian officials; or (3) the military was used so as to subject citizens to the exercise of military power which was regulatory, prescriptive, or compulsory in nature. The Act has apparently been used for only a couple of prosecutions, and it is more frequently invoked collaterally as a usually unsuccessful means to avoid jurisdiction or exclude evidence acquired with the assistance of the military. Less frequently, plaintiffs have sought relief in the form of civil damages for an alleged violation. The Posse Comitatus Act does not apply where the Constitution expressly authorizes the use of the armed forces to execute the laws in such a role. Although the Constitution does not seem to provide such an express exception, military doctrine permits military commanders to exercise emergency authority and to take action to protect federal property. Although the Posse Comitatus Act applies on its terms only to the Army and Air Force, Department of Defense regulations governing military assistance to civil authorities limit the roles of all of the armed services, including civilian personnel, to prevent their direct involvement in law enforcement activities. The National Guard is covered by the act only when acting in federal service. The most significant impact of the Posse Comitatus Act is attributable to compliance by the armed forces. As administrative adoption of the act for the Navy and Marines demonstrates, the military has a long-standing practice of avoiding involvement in civilian affairs which it believes are contrary to the Act. This is an abridged version of CRS Report R42659, The Posse Comitatus Act and Related Matters: The Use of the Military to Execute Civilian Law, in which the authorities for the statements made here may be found. |
The DRA continues the TANF block grant created in the 1996 welfare reform law through FY2010. In general, TANF funding levels, rules for use of funds, and program requirements continue unchanged through FY2010. With respect to funding, there are some exceptions: Supplemental grants paid to 17 states that have met criteria of low historic grants per poor person or high rates of population growth are continued at current levels only through FY2008. TANF bonuses totaling $300 million to states are repealed. The DRA established new project and demonstration grants for promoting healthy marriages ($100 million per year) and "responsible fatherhood" ($50 million per year). The DRA makes some significant changes to TANF work participation. These changes require most states to engage more of their caseloads in activities and/or reduce cash assistance caseloads from FY2005 levels. As originally enacted and also under DRA, TANF sets minimum work participation standards that a state must meet or be penalized by a reduction in its block grant. The standards are performance measures computed in the aggregate for each state, which require that a specified percentage of families with an adult or minor head of household receiving assistance be considered engaged in specified activities for a minimum number of hours. A state must meet two standards each year: 50% of all families with an adult recipient or minor head-of-household recipient must have a work participant; and (2) 90% of two-parent families must meet participation rules. However, the 1996 welfare reform law included a caseload reduction credit , which provided that the standards were reduced one percentage point for each 1% decline in the assistance caseload that had occurred since FY1995. States were not given credit for caseload declines that resulted from eligibility changes that had occurred since FY1995, the year before enactment of the federal welfare reform law ( P.L. 104-193 ). After the federal and state welfare reforms of the mid-1990s, many states had large declines in their cash assistance caseloads. Though the rate of caseload decline varied among the states, most states received fairly substantial caseload reduction credits which reduced their effective (after-credit) TANF work participation standards well below 50%. In FY2004, caseload reduction credits were large enough to reduce to 0% the effective (after-credit) work participation standard for 18 states. The DRA revises the caseload reduction credit, so that states will receive credit only for future caseload reductions. Effective in FY2007, states will only receive credit for caseload reductions that occur from FY2005 forward. The FY2007 credit will be based on caseload declines (if any) that occur from FY2005 to FY2006; the FY2008 credit will be based on caseload declines that occur from FY2005 to FY2007 and so on. As under prior law, states are not given credit for caseload declines that occur because of eligibility changes that occurred from the base year for measuring caseload changes; the base year will be FY2005 under the DRA. The TANF program was created in 1996 by consolidating three programs that provided matching grants to states, with the federal government funding approximately 55% of expenditures made in these predecessor programs. TANF requires states to meet a maintenance of effort (MOE) requirement, which is to spend, from their own funds, at least 75% of what they had spent in FY1994. State spending to meet the MOE need not be in the TANF program, but must be for needy families with children and for the same types of activities allowed under state TANF programs. Under the 1996 law, most TANF requirements, including the work participation standards, did not apply to families receiving assistance under separate state programs (SSPs): programs with expenditures countable toward the MOE but designated by the states as outside the TANF program. States used SSPs to, among other things, assist two-parent families, which freed them from the 90% standard applicable to that part of the caseload; operate "Parents as Scholars" programs for recipients attending college; and assist special populations such as families with a disabled member, permitting them to be exempted from work requirements without negatively affecting participation rates. The DRA requires that states count families in SSPs in determining their work participation rates. The major impact of this change is that states will have to meet a 90% standard for the two-parent portion of its caseload. This change will also subject special populations to the TANF work participation standards and, together with the HHS regulations defining TANF work activities, affect states' ability to allow recipients to attend college without negatively affecting work participation rates. Though the 1996 welfare reform law established TANF participation standards, minimum hours requirements, and a list of 12 categories of activities that count toward meeting the standards, much of the detail in operating and enforcing these standards was left to the states. The DRA required HHS to issue regulations to "ensure consistent measurement of work participation rates" by further defining TANF work activities beyond the current statutory list; requiring uniform methods for reporting hours of work; and determining the circumstances in which parents must be included in the work participation rate calculation. The HHS regulations were issued in interim, final form on June 29, 2006. Table 1 , at the end of this report, shows the specific work activities that may be included in each of the 12 federal statutory categories, as defined by HHS. These definitions prohibit states from counting participation in a four-year college degree program as vocational educational training. They also provide that activities such as substance abuse and mental health counseling may be counted as a "job readiness activity," countable together with job search for up to six weeks (12 weeks under some circumstances) in a fiscal year. Additionally, the HHS regulations also include requirements that activities be "supervised," many on a daily basis. The DRA requires states to have procedures to verify recipients' work participation, which identify who is subject to or excluded from work standards, how recipients' activities represent countable TANF work activities, and how reported hours of work are verified. HHS regulations require states to submit a description of these procedures in a state work verification plan. Preliminary work verification plans were due to HHS on September 30, 2006; final plans are due on September 30, 2007. Under the 1996 welfare reform law, all child-only TANF families (families where there are no adult recipients) were excluded from the work participation calculation. The DRA required that the HHS regulations specify the types of families with parent caretakers that should be included in or excluded from the participation rate. HHS regulations specifically exclude from the participation rate immigrant parents who are ineligible for assistance (with citizen children eligible for assistance). It allows states to make a case-by-case determination of whether to include in the participation rate a parent receiving Supplemental Security Income (SSI). Other nonrecipient parents must be included in the participation rate, particularly affecting parents removed from the assistance unit because of a time limit or sanction. These regulations do not affect the status of non-recipient, nonparent caretakers, such as grandparents, aunts, and uncles caring for children, who are exempt from the work participation standards. The regulations also allow states to exclude parents caring for a disabled family member from the participation rate calculation. From FY2002 through FY2005, mandatory child care funding for the Child Care and Development Block Grant has been set at $2.717 billion per year. The DRA increases mandatory child care funding to $2.917 billion per year for FY2006 through FY2010, an increase from current levels of $200 million per year or $1 billion over five years. The DRA establishes new categorical grants within TANF for healthy marriage promotion and responsible fatherhood initiatives. As originally enacted and continuing under DRA, TANF law allows states to use block grant and MOE funds for activities to further any TANF purpose, including promotion of the formation and maintenance of two-parent families. However, state expenditures in this category have generally been small. The healthy marriage promotion initiative is funded at approximately $100 million per year, to be spent through grants awarded by the Secretary of HHS to support research and demonstration projects by public or private entities; and technical assistance provided to states, Indian tribes and tribal organizations, and other entities. The activities supported by the healthy marriage promotion initiatives are programs to promote marriage to the general population, such as public advertising campaigns on the value of marriage and education in high schools on the value of marriage; education on "social skills" (e.g. marriage education, marriage skills, conflict resolution, and relationship skills) for engaged couples, those interested in marriage, or married couples; and programs that reduce the financial disincentive to marry, if combined with educational or other marriage promotion activities. The DRA requires applicants for marriage promotion grants to ensure that participation in such activities is voluntary and that domestic violence concerns be addressed, including through consultation with experts on domestic violence. Additionally, the DRA makes available up to $50 million per year for responsible fatherhood initiatives. These initiatives will be funded through competitive grants made by HHS to states, territories, Indian tribes and tribal organizations, and public and nonprofit community organizations (including religious organizations). Responsible fatherhood initiatives are defined as including activities to promote marriage; teach parenting skills through counseling, mentoring, mediation, and dissemination of information; support employment and job training services, and develop and promote media campaigns and a national clearinghouse focused on responsible fatherhood. (See CRS Report RL31025, Fatherhood Initiatives: Connecting Fathers to Their Children , by [author name scrubbed] for more on these initiatives.) | The Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) includes a scaled-back version of welfare reauthorization. More extensive versions were considered during the preceding four-year debate. (See CRS Report RL33418, Welfare Reauthorization in the 109 th Congress: An Overview , by [author name scrubbed], [author name scrubbed], and [author name scrubbed] for details.) The DRA extends funding at current levels for basic state grants under the Temporary Assistance for Needy Families (TANF) block grant through Fiscal Year (FY) 2010. It requires most states to either raise participation in work activities among families receiving cash welfare from TANF or further reduce the cash assistance rolls. DRA also required the Department of Health and Human Services (HHS) to issue regulations to define activities countable toward work participation standards and set rules for state enforcement and verification of participation in activities. These regulation were published on June 29, 2006. The DRA also extends Child Care and Development Fund (CCDF) mandatory funding through FY2010, increasing mandatory child care funding by $200 million per year from previous levels (a total increase of $1 billion over five years). The DRA further establishes $100 million per year in TANF research and technical assistance funds for "healthy marriage promotion" initiatives and $50 million per year for "responsible fatherhood initiatives." This report will not be updated. |
Three important themes support an understanding of public health and medical preparedness and response. First, preparedness and response are different. At each level of government, they involve different leadership roles, legal authorities, organizational structures, and funding mechanisms. Generally, during an incident, certain conditions must be met before a jurisdiction can implement response activities, or access funds reserved for that purpose. Second, states, rather than the federal government, are the seats of authority and responsibility for the oversight of both health care and emergency management. For example, state laws generally authorize governors to order and enforce the evacuation of residents in emergency situations. Except under extraordinary circumstances, the federal government generally does not dictate the conduct of health care or emergency management activities to state or local officials, or to health care providers. Finally, while most public health functions are inherently governmental, the nation's health care system is, in contrast, primarily private and for-profit. Providers and facilities operate in an increasingly competitive marketplace in which emergency planning is not always seen as a necessary expense. When there is a catastrophe in the United States, state and local governments take the lead in response activities. State and local legal authorities are the principal means to support these activities. When the resources of states and localities are overwhelmed, the President can provide certain additional assets and personnel to aid stricken communities, and can provide funding to individuals and to government and not-for-profit entities to assist them in response and recovery. This assistance is provided under the authority of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act), upon a presidential declaration of an emergency (a lower level of assistance) or a major disaster (a higher level of assistance). Recent incidents—the September 11 and anthrax attacks of 2001, and several major hurricanes—have shown the limitations of existing funding mechanisms in supporting public health and medical incident response. First, it is not clear that Stafford Act major disaster assistance is available for the response to infectious disease threats, whether intentional (i.e., bioterrorism) or natural (e.g., pandemic influenza, or "flu"). Second, the Secretary of Health and Human Services (HHS) has authority under the Public Health Service Act (PHS Act) to draw upon a special fund to support departmental activities in response to unanticipated public health emergencies, but there is at present no money in the fund. Finally, there is no existing comprehensive mechanism to provide federal assistance for uninsured or uncompensated individual health care costs that may be incurred as a result of a natural disaster or terrorist incident, though there is not general agreement that such assistance should be a federal responsibility. This report focuses on incident response activities (versus preparedness activities) and examines (1) the statutory authorities and coordinating mechanisms of the President (acting through the Secretary of Homeland Security) and the Secretary of HHS in providing routine assistance, and in providing assistance pursuant to emergency or major disaster declarations and/or public health emergency determinations; (2) mechanisms to assure a coordinated federal response to public health and medical emergencies, and overlaps or gaps in agency responsibilities; and (3) existing mechanisms, potential gaps, and proposals to fund the costs of a response to public health and medical emergencies. A listing of federal public health emergency authorities is provided in the Appendix . This report will be updated as needed. For more information on aspects of public health and medical preparedness and response in general, and in the context of specific disasters or threats, see the following CRS Reports: CRS Report R40159, Public Health and Medical Preparedness and Response: Issues in the 111th Congress ; CRS Report RL33589, The Pandemic and All-Hazards Preparedness Act (P.L. 109-417): Provisions and Changes to Preexisting Law ; CRS Report RL33927, Selected Federal Compensation Programs for Physical Injury or Death ; CRS Report RL31719, An Overview of the U.S. Public Health System in the Context of Emergency Preparedness ; CRS Report RL33096, 2005 Gulf Coast Hurricanes: The Public Health and Medical Response ; CRS Report RL33083, Hurricane Katrina: Medicaid Issues ; CRS Report RL33738, Gulf Coast Hurricanes: Addressing Survivors' Mental Health and Substance Abuse Treatment Needs ; CRS Report RL33145, Pandemic Influenza: Domestic Preparedness Efforts ; and CRS Report RL34190, Pandemic Influenza: An Analysis of State Preparedness and Response Plans . A major disaster declaration issued pursuant to the Stafford Act authorizes the President to provide a variety of types of assistance to eligible entities. A major disaster declaration must meet three tests— definition, need, and action . The statute defines a major disaster as follows: ...any natural catastrophe (including any hurricane, tornado, storm, high water, winddriven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, or drought), or, regardless of cause, any fire, flood, or explosion, in any part of the United States, which in the determination of the President causes damage of sufficient severity and magnitude to warrant major disaster assistance under this chapter to supplement the efforts and available resources of States, local governments, and disaster relief organizations in alleviating the damage, loss, hardship, or suffering caused thereby. Second, the incident must result in damages significant enough to exceed the resources and capabilities not only of the affected local governments, but the state as well. The requirement is set forth as follows: All requests for a declaration by the President that a major disaster exists shall be made by the Governor of the affected State. Such a request shall be based on a finding that the disaster is of such severity and magnitude that effective response is beyond the capabilities of the State and the affected local governments and that Federal assistance is necessary. Third, the state must implement its authorities, dedicate sufficient resources, and commit to meet its share of the costs, as follows: As part of such request, and as a prerequisite to major disaster assistance under this chapter, the Governor shall take appropriate response action under State law and direct execution of the State's emergency plan. The Governor shall furnish information on the nature and amount of State and local resources which have been or will be committed to alleviating the results of the disaster, and shall certify that, for the current disaster, State and local government obligations and expenditures (of which State commitments must be a significant proportion) will comply with all applicable cost-sharing requirements of this chapter. Based on the request of a Governor under this section, the President may declare under this chapter that a major disaster or emergency exists. By comparison with a major disaster declaration, considerably less assistance is authorized under an emergency declaration. However, the Stafford Act gives the President considerably broader discretion in issuing an emergency declaration. First, the definition of "emergency" does not include the specific causal events listed in the definition of "major disaster." The President instead may determine whether circumstances are sufficiently dire for the affected state to call for an emergency declaration. Also, of importance to a flu pandemic or other public health threat, the protection of public health is to be considered by the President, as seen in the following: "Emergency" means any occasion or instance for which, in the determination of the President, Federal assistance is needed to supplement State and local efforts and capabilities to save lives and to protect property and public health and safety, or to lessen or avert the threat of a catastrophe in any part of the United States. As with the major disaster authority, an emergency declaration must meet tests pertaining to need and action . However, as with the definition of "emergency," the President is granted a wider degree of discretion. While governors requesting assistance must take certain required actions, they do not have to identify that state and local resources have been committed. They must, however, identify the type and extent of federal aid required. Also, the President has discretion to act in the absence of a gubernatorial request if the emergency creates a condition that primarily or solely constitutes a federal responsibility. The Stafford Act procedure for an emergency declaration follows: (a) Request and declaration. All requests for a declaration by the President that an emergency exists shall be made by the Governor of the affected State. Such a request shall be based on a finding that the situation is of such severity and magnitude that effective response is beyond the capabilities of the State and the affected local governments and that Federal assistance is necessary. As a part of such request, and as a prerequisite to emergency assistance under this chapter, the Governor shall take appropriate action under State law and direct execution of the State's emergency plan. The Governor shall furnish information describing the State and local efforts and resources which have been or will be used to alleviate the emergency, and will define the type and extent of Federal aid required. Based upon such Governor's request, the President may declare that an emergency exists. (b) Certain emergencies involving Federal primary responsibility. The President may exercise any authority vested in him by Section 5192 of this Title or Section 5193 of this Title with respect to an emergency when he determines that an emergency exists for which the primary responsibility for response rests with the United States because the emergency involves a subject area for which, under the Constitution or laws of the United States, the United States exercises exclusive or preeminent responsibility and authority. In determining whether or not such an emergency exists, the President shall consult the Governor of any affected State, if practicable. The President's determination may be made without regard to subsection (a) of this section. The emergency declaration authority in the Stafford Act has previously been used by a President to respond specifically to a public health threat. In the fall of 2000, President Clinton issued emergency declarations for New York and New Jersey to help the states contain the threatened spread of the West Nile virus. With some exceptions, state and local governments, rather than the federal government, are the seats of responsibility and authority for public health activities, both in general, and in response to public health and medical emergencies. As with catastrophes in general, the federal government may provide various forms of assistance to state and local governments, non-profit entities, families, and others, in response to public health threats. In response to public health threats, the Secretary of HHS can provide a considerable degree of assistance to states, upon their request, through the Secretary's standing (i.e., non-emergency) authorities. There is neither a defined threshold, nor a requirement to demonstrate need, as with the Stafford Act. For example, simply upon the request of a State Health Official, and without the involvement of the President, the Centers for Disease Control and Prevention (CDC) can provide financial and technical assistance to states for outbreak investigation and disease control activities. These activities are carried out under the Secretary's general authority to assist states, pursuant to Sections 311 and 317 of the PHS Act, among others. There are a number of authorities in the PHS Act that allow the Secretary of HHS to take certain actions in the face of a "public health emergency." That term is defined in different ways, or in some cases is not defined. The principal such authority is in Section 319 of the PHS Act, which grants the Secretary of HHS broad authority to determine that a public health emergency exists. Pursuant to such a determination, the Secretary may waive certain administrative requirements, provide additional forms of assistance, and take certain other actions to expand federal aid to state and local governments, not-for-profit entities, and others. The Secretary must provide written notice of such determinations to the Congress within 48 hours, but is not required to publish notice of such determinations in the Federal Register . The Secretary's authority to determine that a public health emergency exists is as follows: If the Secretary determines, after consultation with such public health officials as may be necessary, that—(1) a disease or disorder presents a public health emergency; or (2) a public health emergency, including significant outbreaks of infectious diseases or bioterrorist attacks, otherwise exists, the Secretary may take such action as may be appropriate to respond to the public health emergency, including making grants, providing awards for expenses, and entering into contracts and conducting and supporting investigations into the cause, treatment, or prevention of a disease or disorder as described in paragraphs (1) and (2). Making such a determination enables the Secretary to take three types of actions that can be especially useful for incident response. First, such a determination authorizes the Secretary to draw from a special emergency fund. (The fund does not currently have any monies available, however. See the subsequent section " The Public Health Emergency Fund .") Second, it enables the Secretary to implement an authority in the Federal Food, Drug, and Cosmetic Act—the so-called Emergency Use Authorization—allowing for the use of unapproved medical treatments and tests, under specified conditions, if needed during an incident. Third, if there is a concurrent declaration pursuant to the Stafford Act or the National Emergencies Act, the Secretary is authorized to waive a number of administrative requirements, principally involving reimbursement through the Medicare and Medicaid programs, that can be useful if patients must be relocated due to damage to or inaccessibility of health care facilities. Among other things, these waivers allow beneficiaries to receive services despite having lost their documentation of eligibility, and allow providers to provide services in alternate temporary facilities. A listing of these and other federal public health emergency authorities is provided in the Appendix . Although the waivers described above can streamline access to care for individuals who have health insurance, they do not provide coverage for individuals who do not. Bills introduced in the 110 th Congress ( H.R. 6569 / S. 3312 ) would authorize the Secretary of HHS, pursuant to a Section 319 public health emergency determination, to use the PHEF to provide temporary emergency health care coverage for uninsured or underinsured individuals affected by the emergency. The proposals would require the Secretary to consider, in making such a determination, the extent to which the situation has or is likely to overwhelm health care providers in the affected area, and the potential financial burdens those providers may face as a result. A concurrent declaration under the Stafford Act would not be required to enable this authority. The emergency authorities of the Secretary of HHS are not strictly comparable to authorities in the Stafford Act. Stafford Act major disaster assistance is intended to assist states and individuals with needs that exceed the scope of assistance routinely provided by federal agencies, and is often triggered by large-scale infrastructure damage. In contrast, the response to public health emergencies (such as infectious disease outbreaks) often involves extensions of routine program activities, such as technical assistance for epidemiologic and laboratory investigation, workforce assistance, or the provision of special drugs or tests. Table 1 lists public health emergency determination made pursuant to Section 319 of the PHS Act since 2000. These determinations are less common than are disaster or emergency declarations made pursuant to the Stafford Act. Two factors may explain this. First, as noted above, the Secretary of HHS has standing (non-emergency) authority to render many forms of aid to state and local governments and others, without the need to make such a determination. Second, although making such a determination authorizes the Secretary to draw from a Public Health Emergency Fund (PHEF), the fund has not had a balance in it for many years. Consequently, none of the determinations issued since 2000 had the effect of mobilizing any additional funds beyond what would otherwise have been available. It is possible that if funds were available to the Secretary of HHS in the PHEF, it could influence the Secretary's decision to make a public health emergency determination, or the pressures put upon the Secretary to do so. Given that, Congress may consider whether the degree of discretion afforded to the HHS Secretary in making such a determination, and the accompanying reporting requirements, are appropriate. Disaster and emergency authorities pursuant to the Stafford Act are generally independent of public health emergency authorities. Only one provision in current law—allowing for the waiver of a number of HHS statutory, regulatory and program requirements, discussed above—requires a concurrent Section 319 public health emergency determination, and a declaration pursuant to either the Stafford Act or the National Emergencies Act. When multiple declarations are in effect as a result of a specific incident, it can pose a greater challenge for officials in understanding the scope and interaction of their response authorities. Pursuant to congressional mandate, the Department of Homeland Security (DHS) released the National Response Plan (NRP) in December 2004 to establish a comprehensive framework for the coordination of federal resources under specified emergency conditions. In January 2008, the NRP was replaced by the National Response Framework (NRF), following a lengthy stakeholder engagement intended, among other things, to capture lessons learned from the flawed response to Hurricane Katrina. The NRF is under the overall coordination of the Secretary of Homeland Security, and its implementation is delegated to the Federal Emergency Management Agency (FEMA). It sets forth the responsibilities and roles of federal agencies; identifies tasks to be performed by specified federal officials; and includes annexes with details on support resources and mechanisms that are integral to its implementation. It is not a source of new authority for incident response. While it may be used to guide response activities that flow from Stafford Act declarations, it is not a source of funding for these activities. It is applicable to incidents whether or not they have led to a Stafford Act declaration. Finally, it is intended to be a national coordinating blueprint, describing and integrating roles for state, local, territorial and tribal governments and the private sector, as well as federal agencies. In addition to the NRF, which guides a coordinated national all-hazards response (i.e., to a variety of incidents), numerous federal and other planning documents that are specific for the response to a flu pandemic have been published. Selected planning documents are listed below. Unless otherwise noted, they can be found on a government-wide pandemic flu website managed by HHS. The National Strategy for Pandemic Influenza, November 2005: outlines general responsibilities of individuals, industry, state and local governments, and the federal government in preparing for and responding to a pandemic. National Strategy for Pandemic Influenza, Implementation Plan, May 2006: assigns more than 300 preparedness and response tasks to departments and agencies across the federal government; includes measures of progress and timelines for implementation; provides initial guidance for state, local, and tribal entities, businesses, schools and universities, communities, and non-governmental organizations on the development of institutional plans; provides initial preparedness guidance for individuals and families. The HHS Pandemic Influenza Plan, November 2005: provides guidance to national, state and local policy makers and health departments, outlining key roles and responsibilities during a pandemic and specifying preparedness needs and opportunities. This plan emphasizes specific preparedness efforts in the public health and health care sectors. The HHS Pandemic Influenza Implementation Plan, Part I, November 2006: discusses department-wide activities: disease surveillance; public health interventions; medical response; vaccines, antiviral drugs, diagnostic tests, and personal protective equipment (PPE); communications; and state and local preparedness. Department of Defense Implementation Plan for Pandemic Influenza, August 2006: provides policy and guidance for the following priorities: (1) force health protection and readiness; (2) the continuity of essential functions and services; (3) Defense support to civil authorities (i.e., federal, state, and local governments); (4) effective communications; and (5) support to international partners. VA Pandemic Influenza Plan , March 2006: provides policy and instructions for Department of Veterans Affairs (VA) in protecting its staff and the veterans it serves, maintaining operations, cooperating with other organizations, and communicating with stakeholders. Pandemic Influenza Preparedness, Response, and Recovery Guide for Critical Infrastructure and Key Resources , September 2006: provides business planners with guidance to assure continuity during a pandemic for facilities comprising critical infrastructure sectors (e.g., energy and telecommunications) and key resources (e.g., dams and nuclear power plants). State pandemic plans: All states were required to develop and submit specific plans for pandemic flu preparedness, as a requirement of grants provided by HHS. Each of the pandemic influenza plans listed above was written with the premise that the NRP would have been applicable to guide a coordinated federal response to a flu pandemic. The NRF, which was published subsequently, similarly notes that it could serve as the blueprint for a coordinated national response to this incident. As noted earlier, the NRF serves as a coordinating mechanism, but does not confer additional authorities or serve as a source of funding for response activities. When a Stafford Act emergency or major disaster is declared, the Disaster Relief Fund may be used to pay for authorized response activities and assistance. There is precedent for a Stafford emergency declaration in response to an infectious disease threat: as noted earlier, emergency declarations pursuant to the Stafford Act were made in response to West Nile virus in 2000. However, there is no relevant precedent regarding whether Stafford Act major disaster assistance could be provided in response to a flu pandemic. FEMA has in the past, in the context of the national TOPOFF exercises, interpreted intentional biological incidents as ineligible for major disaster assistance pursuant to the Stafford Act. However, the view of the George W. Bush Administration was that the President's authority to declare a major disaster pursuant to the Stafford Act could be applied to a flu pandemic, and in 2007, FEMA issued a Disaster Assistance Policy regarding major disaster assistance that may be provided in response to this threat. The matter of the applicability of a Stafford Act declaration to a flu pandemic is important for two reasons. First, the level of funding that may be available to support federal activities, and provide assistance to state and local governments and individuals, is substantially greater following a major disaster declaration than it is following an emergency declaration. Second, the federal leadership structure for incident response may be different depending on whether the incident results in a Stafford Act declaration (of either type), or is a "non-Stafford" incident. The Stafford Act requires the President, upon making an emergency or major disaster declaration, to appoint a Federal Coordinating Officer (FCO) to operate in the affected region. This individual has historically reported to the head of FEMA, who in turn reports to the President and assumes overall operational control of the federal government's incident response. The NRF, and the NRP before it, also established the role of Principal Federal Official (PFO), a different individual who reports directly to the Secretary of Homeland Security during an incident response. Confusion about the respective roles and authorities of these individuals was identified following Hurricane Katrina, and has remained a matter of concern to Congress. It is reported that in December 2006, the Secretary of Homeland Security predesignated, in the event of a response to a flu pandemic, one national and five regional FCOs, and one national and five regional PFOs. The respective roles of these individuals—all of whom would presumably be involved in response activities if a Stafford Act declaration were made—have not been clarified in any publicly available pandemic planning documents. It is widely agreed that emergency assistance under the Stafford Act could be provided by the President in the event of a flu pandemic, although questions remain as to whether major disaster assistance would be available. A legal analysis of the question, conducted by CRS, suggests that this issue was not addressed by Congress when it drafted the current definition of a major disaster, and that neither inclusion nor exclusion of a flu pandemic from major disaster assistance is explicitly required by the current statutory language. In the 109 th Congress, Section 210 of S. 3721 would have made any outbreak of infectious disease explicitly eligible for major disaster assistance, but it was not enacted. The Hurricane Katrina response, and planning for a flu pandemic, each demonstrate the scope of public health and medical activities needed in response to a large-scale catastrophe. A successful public health response would involve such activities as monitoring and assurance of the safety of food and water, prevention of injury, control of infectious diseases, and a host of other activities, which are primarily carried out by government and private not-for-profit entities. A successful medical response would perhaps be more complicated, requiring the coordination of numerous activities and services, and involving federal, state or local government agencies, and private for-profit and not-for-profit entities. These elements are (1) patients, who may require rescue or medical evacuation; (2) a treatment facility, which may be an existing hospital, or a field tent with cots; (3) a competent health care workforce; (4) appropriate medical equipment and non-perishable medical supplies; (5) appropriate drugs, vaccines, tests and other perishable medical supplies; (6) a system of medical records; and (7) a health care financing mechanism. According to the NRF (and the earlier NRP), the Secretary of HHS is tasked with coordinating Emergency Support Function 8 (ESF-8), the NRF annex that addresses the public health and medical response to incidents. (ESF-8 is one of 15 ESFs in the NRF. Other annexes include public safety, energy supplies, and transportation, for example.) ESFs are coordinating mechanisms, not funding mechanisms. The response to a flu pandemic is likely to involve ESF-8 primarily, and public health and medical needs could be substantial. A flu pandemic would not likely impose the mass dislocations and destruction of health care infrastructure that can result from major hurricanes. But, as a pandemic would affect all areas of the nation nearly simultaneously, responders could not necessarily count on the state-to-state mutual aid that is often critical in disaster response. And planners note that a severe pandemic could still constitute a multi-sector incident. Staffing shortages and supply chain disruptions could disrupt services, and possibly affect the integrity of infrastructure, in the transportation, public works, and energy sectors, among others, engaging ESFs for those sectors in the response as well. The Secretary of HHS is responsible for coordinating the following response activities under ESF-8, and may request assistance from 14 designated support agencies and the American Red Cross as needed: assessment of public health and medical needs; health surveillance; medical care personnel; health/medical/veterinary equipment and supplies; patient evacuation; patient care; safety and security of human and veterinary drugs and medical devices, and human biologics; blood and blood products; food safety and security; agriculture safety and security; all-hazard public health and medical consultation, technical assistance and support; behavioral health care; public health and medical information; vector control (e.g., control of disease-carrying insects and rodents); potable water, wastewater and solid waste disposal; mass fatality management, victim identification and decontaminating remains; and veterinary medical support. Depending on the incident, HHS may need other agencies to carry out certain of their ESF activities (e.g., public safety, road clearing, and power restoration) before some ESF-8 activities could begin. Some specific concerns resulting from overlaps or gaps in defined ESF duties are discussed below. In the response to Hurricane Katrina, it became apparent that federal responsibility to coordinate certain support activities was not clear in the existing ESF assignments in the NRP. The NRF has addressed some of these concerns, left others unclear, and possibly raised some new concerns. Some had questioned whether the NRP clearly defined federal ESF-8 leadership, or whether the respective roles of the Secretaries of Homeland Security and HHS could conflict during a response. Some, including congressional investigators, felt this conflict was evidenced during the response to Hurricane Katrina. Others were concerned that the respective roles were insufficiently clear to guide a coordinated response to a flu pandemic. In October 2006, the President signed P.L. 109 - 295 , the Post-Katrina Emergency Management Reform Act of 2006 (called the Post-Katrina Act or PKA, in DHS appropriations for FY2007), which reauthorized and reorganized programs in FEMA. Among other things, the law also codified the position of Chief Medical Officer (CMO) at DHS, the individual who coordinates all departmental activities regarding medical and public health aspects of disasters. The Post-Katrina Act provided that the CMO "shall have the primary responsibility within the Department for medical issues related to natural disasters, acts of terrorism, and other man-made disasters." (Emphasis added.) Subsequently, in December 2006, the President signed P.L. 109 - 417 , the Pandemic and All-Hazards Preparedness Act, which provided that "The Secretary of Health and Human Services shall lead all Federal public health and medical response to public health emergencies and incidents covered by the National Response Plan.... " (Emphasis added.) The Government Accountability Office (GAO) has recommended, in the context of pandemic flu planning, that the two departments (DHS and HHS) conduct rigorous testing, training and exercises to ensure that these roles are clearly defined. Responsibility for the health and safety of disaster response workers was a matter of concern in the NRP, and remains so in the NRF. GAO found that OSHA's efforts during the response to Hurricane Katrina were hampered by confusion about the agency's role, and noted in particular that disagreements between FEMA and OSHA regarding OSHA's role delayed FEMA's authorization of mission assignments to fund OSHA's response activities. Some Members of Congress and others sought to have worker health and safety elevated to an Emergency Support Function in the NRF, which would give OSHA more autonomy in commencing its response activities. Instead, the NRF contains a revised Worker Safety and Health Support Annex. Following Hurricane Katrina, the 109 th Congress enacted the SAFE Port Act ( P.L. 109 - 347 ). One of its provisions authorizes the President, acting through the Secretary of HHS and pursuant to a major disaster declaration under the Stafford Act, to establish medical monitoring programs, if needed, to track the health status of individuals (not limited to responders) who may experience hazardous exposures as a result of the disaster. The authority has not yet been implemented. According to GAO, as of May 2008, HHS had not articulated a plan for doing so. Federal agency responsibilities and funding mechanisms are not clear without such a plan. For example, within HHS, at least three components—the ASPR, as well as the Agency for Toxic Substances and Disease Registry and the National Institute for Occupational Safety and Health, both in CDC—have relevant authorities and responsibilities that overlap. Also, as noted above, a major disaster typically triggers federal coordinating mechanisms laid out in the NRF, which places OSHA in the lead in assuring responder health and safety. In 2008, GAO recommended that HHS develop plans to register all responders during a disaster, as part of a comprehensive departmental plan to assure responder health during and after disasters. GAO said that such a plan should also include a means to implement medical monitoring programs, or to assist states and localities in doing so. To meet the intent of the SAFE Port Act, such a plan must also address affected individuals who are not responders. Although both the NRP and the NRF address mass fatality management, the NRP did not, and the NRF does not, clearly delegate responsibility for the retrieval of human remains in mass fatality events. HHS is responsible for the ESF-8 function of coordinating federal assistance to identify victims and determine causes of death. Federal Disaster Mortuary Assistance Teams (DMORTs) comprise medical examiners, pathologists, dental technicians and other medical personnel. These teams are not skilled in the safe retrieval of remains from hazardous sites such as waterways or collapsed buildings. Other responders, including Urban Search and Rescue teams and the U.S. Coast Guard, are trained to work safely in such dangerous conditions, but their mission is to rescue the living, not recover the dead. The matter of mass fatality management is of considerable concern in planning for a flu pandemic, and this gap could be problematic during such an incident. At times the distinction between ESF-6 and ESF-8 may be blurred. Emergency Support Function 6 (ESF-6), Mass Care , under the leadership of FEMA, lays out the coordination of emergency shelter, feeding, and related activities for affected populations. As was evident in the response to Hurricane Katrina, the ESF functions overlapped when evacuees in Red Cross shelters required medical care, or when large numbers of hospital patients evacuated to ESF-8 field hospitals required food and water. The revised ESF-6 and ESF-8 annexes accompanying the NRF provide substantially more detail regarding the coordination of these functions than did the corresponding NRP annexes. Also, this problem was reportedly considered by FEMA, HHS, and the American Red Cross in their reviews of the hurricane response, and in their subsequent preparedness planning. HHS assets and personnel were deployed extensively for the evacuation and care of individuals with special needs before and during Hurricanes Gustav and Ike in the fall of 2008. In the NRF, as with the NRP, leadership for the federal coordination of mental and behavioral health services following a disaster appears to be split between ESF-6 and ESF-8. "Crisis counseling" is among the responsibilities delegated in ESF-6, while federal coordination of "behavioral health care"—including assessing mental health and substance abuse needs, and providing disaster mental health training for workers—is delegated in ESF-8. Hence, federal leadership for disaster mental health in the NRF is delegated to both FEMA and to HHS. (When the disaster involves terrorism or other forms of violence, the Department of Justice may also be a key federal partner. ) Finally, the NRF resolves a gap in the NRP regarding federal responsibility for pets during disasters. Often people are reluctant or unwilling to abandon pets, and will remain at home in contravention to an evacuation order if they cannot take pets with them. In the Post-Katrina Act and the Pets Evacuation and Transportation Standards Act of 2006 ( P.L. 109 - 308 ), the 109 th Congress required DHS, in developing standards for state and local emergency plans, to account for the needs of individuals with household pets and service animals before, during, and after a major disaster or emergency, in particular with regard to evacuation planning and planning for the needs of individuals with disabilities. In addition, the President is authorized to make Stafford Act assistance available to states and localities to carry out pet rescue and sheltering activities in the immediate response to a major disaster. Neither act addressed federal leadership for the needs of pets in disasters, but this is addressed in the NRF. FEMA, when coordinating federal efforts to provide human sheltering services per ESF-6 (Mass Care), is to ensure that the needs of pets can also be accommodated. (This is often referred to as "co-sheltering.") USDA's Animal and Plant Health Inspection Service, per ESF-11 (Agriculture and Natural Resources), is to ensure that the sheltering needs of the pets are met. In 2007, FEMA issued a policy directive regarding eligible costs related to pet evacuations and sheltering, for which state and local governments would be reimbursed. Hurricane Katrina was the greatest test of ESF-8 since the establishment of DHS and the publication of the NRP. A variety of public health and medical activities were undertaken in the hurricane response. The costs of these activities were borne by agencies at the federal, state and local levels, not-for-profit groups, businesses, health care providers, insurers, families, and individuals. Private insurance covered some of the property damage, health care, and other costs resulting from the disaster. Congress provided additional assistance through emergency appropriations to cover expanded federal agency activities and a portion of uninsured health care costs. Some other costs, such as those to rebuild the devastated health care infrastructure in New Orleans, have not been fully met at this time, either through existing assistance mechanisms or mechanisms developed since the storm. The response to Hurricane Katrina, and ongoing pandemic flu preparedness efforts, each offer a glimpse of the complexity of the challenge, and the adequacy of existing mechanisms to fund the costs of an ESF-8 response. Activities undertaken pursuant to the Stafford Act are funded through appropriations to the Disaster Relief Fund (DRF), administered by FEMA. Federal assistance supported by the DRF is used by states, localities, and certain non-profit organizations to provide mass feeding and shelter, restore damaged or destroyed facilities, clear debris, and aid individuals and families with uninsured needs, among other activities. Federal agencies also receive mission assignments from FEMA to provide assistance pursuant to the NRF, and are reimbursed through funds appropriated to the DRF. Through mission assignments, the DRF supported a variety of federal public health activities in the response to Hurricane Katrina, including activities to assure the safety of food and water, monitor population health status (including mental health), control infectious diseases and mosquitoes, and evaluate potential health threats associated with chemical releases. However, the DRF is not generally available to pay or reimburse the costs of health care for affected individuals, though it may pay such costs to a limited extent. (See "Federal Assistance for Disaster-Related Health Care Costs," below.) In 1983, Congress established authority for a no-year Public Health Emergency Fund (PHEF) to be available to the HHS Secretary. In 2000, Congress reauthorized the fund, clarifying that it could only be used when the Secretary had made a determination of a public health emergency, pursuant to Section 319 of the PHS Act, as follows: (1) In general. There is established in the Treasury a fund to be designated as the "Public Health Emergency Fund" to be made available to the Secretary without fiscal year limitation to carry out subsection (a) only if a public health emergency has been declared by the Secretary under such subsection. There is authorized to be appropriated to the Fund such sums as may be necessary. (2) Report. Not later than 90 days after the end of each fiscal year, the Secretary shall prepare and submit to the Committee on Health, Education, Labor, and Pensions and the Committee on Appropriations of the Senate and the Committee on Commerce and the Committee on Appropriations of the House of Representatives a report describing—(A) the expenditures made from the Public Health Emergency Fund in such fiscal year; and (B) each public health emergency for which the expenditures were made and the activities undertaken with respect to each emergency which was conducted or supported by expenditures from the Fund. Between 1988 and 2000, the fund was authorized for annual appropriations sufficient to have a balance of $45 million at the beginning of each fiscal year. Despite this prior authorization of annual appropriations, the fund received appropriations only in response to a few public health threats (e.g., the emergence of hantavirus in the Southwest in 1993-1994), but did not receive an appropriation for its intended use as a reserve fund for unanticipated events. The fund has not received an appropriation since it was explicitly linked to the public health emergency authority in the PHS Act in 2000. As a result, the fund was not available for the response to public health emergency determinations made subsequently. (See Table 1 for a listing.) In 2002, Congress reauthorized the National Disaster Medical System (NDMS) in language suggesting that the emergency fund could be used to support additional activities of the HHS Secretary, including NDMS deployments, as follows: ... For the purpose of providing for the Assistant Secretary for Public Health Emergency Preparedness and the operations of the National Disaster Medical System, other than purposes for which amounts in the Public Health Emergency Fund under Section 319 are available, there are authorized to be appropriated such sums as may be necessary for each of the fiscal years 2002 through 2006. Depending on the availability of funds, this mechanism could be used to fund NDMS deployments that were ineligible for Stafford Act assistance. Legislation introduced in the 110 th Congress ( H.R. 6569 / S. 3312 ) proposed to authorize the HHS Secretary, when he or she has made a Section 319 public health emergency determination, to use the PHEF to provide temporary emergency health care coverage for uninsured individuals affected by the emergency. (For more information, see the subsequent section "Health Care Financing Proposals for Future Emergencies.") These bills were not enacted. The Public Health and Social Services Emergency Fund (PHSSEF) is an account at HHS that has been used to provide annual or emergency supplemental appropriations for one-time or short-term public health activities in a variety of agencies and offices. Providing funding to the PHSSEF, which does not have an explicit authority in law, separates these amounts from an agency's annual "base" funding. Recent activities funded through the PHSSEF include preparedness activities for a flu pandemic, one-time purchases for the Strategic National Stockpile (SNS), and grants for state public health and hospital preparedness. Amounts appropriated to the PHSSEF may or may not be designated as emergency spending. Because the PHSSEF has been used only to fund certain planned activities, it is not a reserve fund for unanticipated events. In FY2006, Congress appropriated certain amounts that had previously been provided through the PHSSEF directly to the various agencies overseeing the programs. These included funding for the SNS and grants for upgrading state and local public health capacity, amounts now appropriated in CDC's "Terrorism and Public Health Preparedness" budget line, and grants to states for hospital preparedness, previously administered by the Health Resources and Services Administration (HRSA, an agency in HHS), and transferred to the HHS Assistant Secretary for Preparedness and Response (ASPR) in the Pandemic and All-Hazards Preparedness Act. In response to the widespread destruction caused by Hurricane Katrina, the 109 th Congress enacted two FY2005 emergency supplemental appropriations bills ( P.L. 109 - 61 and P.L. 109 - 62 ), which together provided $62.3 billion for emergency response and recovery needs. The FY2006 appropriations legislation for the Department of Defense ( P.L. 109 - 148 ) subsequently reallocated $23.4 billion in funds appropriated in the two emergency supplemental statutes, and an additional amount from a government-wide rescission, primarily to pay for the restoration of damaged federal facilities. In June 2006, Congress provided an additional $6 billion to the DRF in P.L. 109 - 234 , the Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Hurricane Recovery, 2006. A portion of supplemental appropriations to the DRF supported federal ESF-8 response activities. FEMA reports to Congress on expenditures for mission assignments to both HHS, and separately to CDC, for the responses to Hurricanes Katrina, Rita and Wilma. A number of HHS agencies in addition to CDC were involved in the response to the hurricanes, and their activities, when requested by FEMA, were presumably reimbursed through the DRF. There were likely many other HHS activities carried out in response to the hurricanes that would not fall within the scope of activities that are reimbursable by the DRF pursuant to the Stafford Act. For example, on September 16, 2005, CDC issued guidance to state grantees permitting them to redirect funds from a number of grant programs to their hurricane relief efforts as needed. According to CDC, funds could be used for alternate activities within the state, or to support state-to-state mutual aid pursuant to the Emergency Management Assistance Compact (EMAC). States were permitted to redirect funds from the following federal grant programs: infectious diseases (including immunization, sexually transmitted disease prevention, tuberculosis, West Nile virus, hepatitis, HIV, emerging infections and laboratory programs); environmental health; injury prevention; and terrorism and emergency preparedness. CDC noted at the time that "No supplemental appropriations have been provided to CDC for Katrina relief, so any existing CDC funds used for relief will reduce the overall amount available to work non-relief grant issues." Information regarding the overall amount of funds that may have been redirected by HHS agencies to support Hurricane Katrina response activities, and, for those expenditures that were not reimbursable by the DRF, whether there were alternate mechanisms to "backfill" the accounts, is not publicly available. Besides what was reimbursed from the DRF or mobilized through redirection of its own departmental funds, HHS received very little in direct supplemental appropriations for its response to Hurricane Katrina, namely $8 million to CDC for mosquito abatement and other pest control activities, and $4 million to HRSA to re-establish communications capability in health departments, community health centers, major medical centers, and other entities that would continue to provide health care in areas affected by Hurricane Katrina. When Stafford major disaster assistance is available, it can be invaluable in supporting public health response activities under ESF-8. Typically, these activities are inherently governmental, and are generally reimbursable from the DRF. But even when a Stafford major disaster declaration applies, it is limited in meeting the uninsured or uncompensated costs of health care for disaster victims, or in reimbursing institutions and providers who may have provided care without compensation. There is no federal assistance program designed purposefully to cover the uninsured or uncompensated costs of individual health care that may be needed as a consequence of a disaster. In a typical year, there are dozens of Stafford Act major disaster declarations (most resulting from weather-related events), potentially affecting millions of people. Given that some U.S. uninsured health care needs go unmet under normal circumstances, there is not consensus that the costs of health care for these disaster victims should be a federal responsibility. However, policy debates following two recent disasters, and concerns about pandemic flu, suggest that some Members of Congress and others are interested in exploring possible mechanisms to provide such assistance, at least in certain situations. Following Hurricane Katrina, Congress provided $2.1 billion through the Medicaid program to assist states in providing for the health care needs of Katrina evacuees for five months following the storm. The storm's victims continue to report physical and mental health problems and difficulties in accessing health care in disproportionate numbers, however. Persistent problems such as these may linger beyond the duration of assistance programs that may be available to disaster victims. Although there is not consensus that the costs of health care for disaster victims should be borne by the federal government, there has nonetheless been considerable discussion about the needs of victims of the terrorist attack of September 11, 2001, and whether terrorism should place upon the federal government a different responsibility for its victims than for victims of non-terrorist disasters. Several federal assistance mechanisms are available to provide limited coverage for the costs of health care services that are rendered during, or required as a result of, a catastrophe. These programs provide a patchwork of coverage that in some cases fails to optimally match services with need (e.g., the Crisis Counseling Program), or in other cases fails to meet the magnitude of need (e.g., the FEMA Individuals and Households program). Furthermore, these programs are not generally coordinated with each other at the federal level, though programs that support state activities to finance or deliver health care services may be coordinated at that level. These programs include: Services provided by the National Disaster Medical System (NDMS) or other federalized employees while carrying out mission assignments requested by FEMA, pursuant to a Stafford Act declaration, may be reimbursed by the DRF, though efforts may be made to seek reimbursement from patients' insurers when possible. Assistance may be provided under both major disaster and emergency declarations that involve the provision of health and safety measures and the reduction of threats to public health and safety. The FEMA Individuals and Households Program (IHP) provides, pursuant to a Stafford Act declaration and reimbursed from the DRF, cash assistance that may be used for uninsured medical expenses. Recipients might have to use the funds to meet other needs concurrently, such as rent and other costs of living. The amount available is the same for an individual or a household, and is capped in statute, with an annual adjustment based on the Consumer Price Index. The maximum amount available for Hurricane Katrina relief was $26,200, and the current ceiling (for FY2009) is $30,300. Certain medications and supplies may be provided to patients from pre-paid stockpiles for which reimbursement is not expected. Examples include supplies used in first aid stations or distributed to states from the CDC's Strategic National Stockpile. Agencies' costs may be reimbursed from the DRF if the incident resulted in a Stafford Act declaration. The Stafford Act authorizes the President, pursuant to a major disaster declaration, to provide financial assistance to state and qualified tribal mental health agencies for professional counseling services, or training of disaster workers, to relieve disaster victims' mental health problems caused or aggravated by the disaster or its aftermath. FEMA and the Substance Abuse and Mental Health Services Administration (SAMHSA) in HHS jointly administer the Crisis Counseling Assistance and Training Program (CCP). Costs are reimbursed from the DRF. Public Health Service agencies in HHS may provide support to states and other entities through existing non-emergency mechanisms to assist in managing surges in health care needs for specific populations. In some cases, agencies have received supplemental appropriations to support these activities. Examples include SAMHSA Emergency Response Grants (SERG) to states, territories, and federally recognized tribal authorities for crisis mental health and substance abuse services, and expanded federal support, including personnel, for health centers in disaster-affected areas. Certain federal compensation programs may cover some or all health care costs for certain disaster victims, although these programs generally flow from the individual's employment status rather than from their status as disaster victims. Such programs include workers' compensation programs for federal workers whose injuries are related to employment, and benefits for federal, state, and local public safety officers (including police officers and firefighters) who are killed or permanently disabled while performing their duties. For victims of disasters resulting from terrorism, certain forms of assistance to crime victims may be available to help defray health care costs. Within two weeks of the terrorist attack on the World Trade Center (WTC) in New York City, Congress established the September 11 th Victim Compensation Fund (VCF). The program provided compensation for physical injury or death, from any cause, that resulted from an individual's presence at the sites at the time of the crashes or in their immediate aftermath. The deadline for filing a claim was December 22, 2003. Thousands of responders worked on the site in a rescue, recovery, and cleanup operation that lasted more than a year. Many responders and some residents in the area are experiencing, many years later, various respiratory, psychological, gastrointestinal and other problems felt to be related to their exposures at the site. Physical hazards to which these individuals were potentially exposed include asbestos and other particulates, heavy metals, volatile organic compounds, and dioxin. Congress provided funding to the CDC to establish the World Trade Center Health Registry, an effort to identify and periodically survey people who were exposed at the site or in the general vicinity, to track their health status over a 20-year period. In addition, several medical monitoring programs were established to develop and deliver initial, and sometimes follow-up, health examinations to groups of individuals potentially at risk of future illness. While recruitment for both activities continues, the monitoring programs have identified a number of people with serious health problems presumably related to their WTC exposures, some of whom have died. Congress has provided intermittent appropriations to support the costs of medical treatment for some of these individuals, through treatment programs established after the terrorist attack. The VCF is not available to assist individuals whose symptoms arose after the fund's closing date. Routine sources of health care coverage may also elude these individuals. Some may have lost employer-based health insurance coverage, if they have become too sick to work. For some with health insurance, the plan may not cover needed prescription drugs or specialty care, or coverage may be denied if an insurer asserts that an illness is work-related and should be covered by workers' compensation. Some workers, such as volunteers or immigrants, may lack workers' compensation coverage. Others who have this coverage may still find that employers and insurers contest their claims on the basis that an illness is not work-related. Congressional interest in this issue has focused on matters of short- and long-term financing and accountability for the registry, monitoring, and treatment programs, and whether or how financial responsibility for the long-term needs of affected individuals should be shared, if at all, among the federal government, local governments, private insurers, and others. H.R. 847 , introduced in the 111 th Congress, would establish programs to pay health care or other costs for workers and others who may be ill as a result of their exposures following the WTC incident. Hurricane Katrina was the largest mass casualty incident in recent times. Many of the storm's victims were dislocated to different states, separated from their documentation of health insurance, or both. Others lost employer-based health insurance due to the destruction or closure of businesses. In many cases, care was rendered without definitive financing mechanisms, while federal, state and private entities worked to retrofit these mechanisms in the disaster's aftermath. In response, HHS expanded a number of existing programs to assist state and local agencies, health care providers and the storms' victims with a variety of health and public health needs. Information regarding the overall cost of these expansions is not publicly available. In 2002, Congress gave the Secretary of HHS authority to waive certain administrative requirements for provider participation in Medicare, Medicaid and the State Children's Health Insurance Program (SCHIP) when there are in effect, concurrently, a Stafford Act declaration and a determination of public health emergency pursuant to Section 319 of the PHS Act. This authority was exercised in a number of affected and host states following Hurricane Katrina. While this authority may improve access to health care services in affected areas, it does not directly address the financing of these services. A significant challenge following Hurricane Katrina involved setting up or re-establishing health care financing mechanisms for displaced individuals. Ultimately, the Medicaid program became the mechanism by which affected and host states financed certain health care costs that were not compensated through other public or private insurance sources. After several months of debate, Congress provided, in the Deficit Reduction Act of 2005, authority and funding to cover, for certain states through January 31, 2006, the Medicaid and SCHIP matching requirements for individuals enrolled in these programs, and the total cost of uncompensated care for the uninsured, for eligible individuals who had been displaced from declared major disaster areas. Congress provided up to $2 billion for these activities. This was in addition to $100 million provided earlier in supplemental appropriations to NDMS to cover expenses related to the hurricane response. (Through an interagency agreement, most of the $100 million was transferred from FEMA to the HHS Centers for Medicare and Medicaid Services (CMS), which administered the funding. ) According to HHS, as a result of this mechanism, eight states were able to reimburse providers that incurred uncompensated care costs as a result of serving an estimated 325,000 evacuees, and 32 states were able to provide continuity of coverage for up to five months for displaced low-income individuals by temporarily enrolling them in a host state's Medicaid program through a simplified enrollment process. Individuals, institutions, providers, and others affected by Hurricane Katrina continue to face challenges that are beyond the scope of the nation's disaster assistance mechanisms. The storm's victims continue to report physical and mental health problems and difficulties in accessing health care in disproportionate numbers, however, and the New Orleans area continues to struggle with rebuilding its health care infrastructure. Although a severe flu pandemic may constitute a national catastrophe, requiring a robust ESF-8 public health and medical response, funding needs may not be readily addressed through existing assistance mechanisms pursuant to the Stafford Act (to the extent that they apply), and could outstrip existing government and private resources. While the need for public health and medical services could be considerable, extensive damage to public or private infrastructure is not anticipated. Costs associated with workforce surge capacity (e.g., overtime pay) and consumption of certain supplies (e.g., for public health laboratory tests) could increase substantially. Presuming a surge of patients in the health care system, non-urgent procedures (which are often more lucrative) could be postponed for weeks or months at a time. This has raised questions regarding whether there would be shifts in overall revenue to providers for services rendered during a pandemic, and how such shifts could affect providers and insurers. Finally, given that millions of Americans lack health insurance, the cost of providing health care services during a pandemic is of concern to many. Some are concerned that disease control efforts could suffer if some subgroups of the population were unwilling, because of their insurance status or for other reasons, to seek care or otherwise interact with disease control authorities during a pandemic. In March 2007, FEMA issued a Disaster Assistance Policy for pandemic flu, outlining, among other types of assistance, the types of health care services that would be reimbursable through the Disaster Relief Fund (DRF), presuming that a Stafford Act declaration were made. Assistance would be provided to eligible entities (including state and local government agencies) to support a number of ESF-8 activities, including establishing temporary medical facilities, public communication, and mass fatality management. With respect to the costs of medical care provided to individuals, the policy states that the following services may be eligible for reimbursement, for a period of time to be determined by the Secretary of Homeland Security or his or her designee: "Emergency medical care (non-deferrable medical treatment of disaster victims in a shelter or temporary medical facility and related medical facility services and supplies, including emergency medical transport, X-rays, laboratory and pathology services, and machine diagnostic tests.... )" Neither "emergency medical care" nor "non-deferrable medical treatment" are defined. Given the potential for there to be many casualties of a flu pandemic who require extended critical medical care, the extent to which the DRF could be tapped to support the costs of such care is not entirely clear. As previously noted, following Hurricane Katrina, Congress provided $2.1 billion to states to cover the states' usual share of Medicaid and SCHIP costs for storm victims for a defined time period, and the cost of uncompensated care for the uninsured. This assistance mechanism required legislative action and took nearly six months to enact, in the absence of a pre-existing mechanism to provide such federal assistance. Whether this could serve as a model for federal assistance during a flu pandemic is unclear. An important element of the discussion regarding the Katrina assistance was the desire to help both states that had been directly affected, and states that had assumed fiscal liability by accepting evacuees. While the element of victim displacement would not likely be seen during a pandemic, Congress may nonetheless debate the merits of expanding federal assistance for health care costs during a flu pandemic, and the model developed following Hurricane Katrina may serve as a useful starting point for discussion. Legislation introduced in the 110 th Congress ( H.R. 6569 / S. 3312 ) proposed requiring the Secretary to establish a program to provide temporary emergency health care coverage for uninsured or underinsured individuals affected by public health emergencies. The Secretary would be authorized to provide such coverage when he or she has determined there to be a public health emergency pursuant to Section 319 of the PHS Act, after considering the extent to which the situation may overwhelm health care providers in the affected area, and the potential financial burdens those providers may face as a result. The program would apply certain administrative approaches used in other federal health care programs (e.g., Medicare payment rates), but would be financed solely through appropriations to the Public Health Emergency Fund. The proposals would authorize the appropriation of $7 million for each fiscal year, beginning with FY2009, for program planning, and for an outreach and education campaign for providers and the public about the potential availability of this assistance in a public health emergency. The proposals would also require that if the Secretary activates the program of emergency health care coverage, he or she shall also establish a program for medical monitoring and reporting on the health care needs of the affected population over time. These proposals were not enacted. Both the Secretaries of Homeland Security and HHS have statutory authority to provide additional assistance to state and local governments, and others, in response to catastrophes. Following Hurricane Katrina, Congress defined in statute the roles of the two Secretaries with respect to the public health and medical response to catastrophes. Numerous aspects of these relationships are yet to be sorted out, through specific planning, exercises, and other approaches. In carrying out the federal response to public health and medical emergencies and disasters, the Secretary of HHS has broad authority and considerable discretion in providing assistance, but lacks a sound funding source to support the response to these unanticipated events. In contrast, the President, acting pursuant to the Stafford Act, has, in the Disaster Relief Fund (DRF), a ready source of funds to support an immediate response to emergencies and disasters. Stafford Act assistance is, however, not especially well-tailored for the response to public health and medical threats. Indeed, some of these threats (e.g., bioterrorism) may not even trigger Stafford Act major disaster assistance. Broad Authority in Section 319 of the PHS Act The Secretary of HHS has broad authority to determine that a public health emergency exists. Congress reauthorized this authority in 2000, as follows: If the Secretary determines, after consultation with such public health officials as may be necessary, that—(1) a disease or disorder presents a public health emergency; or (2) a public health emergency, including significant outbreaks of infectious diseases or bioterrorist attacks, otherwise exists, the Secretary may take such action as may be appropriate to respond to the public health emergency, including making grants, providing awards for expenses, and entering into contracts and conducting and supporting investigations into the cause, treatment, or prevention of a disease or disorder as described in paragraphs (1) and (2). This authority, found in Section 319 of the PHS Act and codified at 42 U.S.C. § 247d, is the basis for much, but not all of, the Secretary's authority to waive or streamline administrative requirements and certain statutory requirements, and to take certain other actions, when needed, to prepare for or respond to non-routine threats to public health. See Table 1 for a listing of public health emergency determinations made pursuant to this authority since 2000. Also in 2000, Congress reauthorized a no-year public health emergency fund that is available to the HHS Secretary for use during a public health emergency, determined pursuant to the authority above, as follows: There is established in the Treasury a fund to be designated as the 'Public Health Emergency Fund' to be made available to the Secretary without fiscal year limitation to carry out subsection (a) only if a public health emergency has been declared by the Secretary under such subsection. There is authorized to be appropriated to the Fund such sums as may be necessary. ... Not later than 90 days after the end of each fiscal year, the Secretary shall prepare and submit to the Committee on Health, Education, Labor, and Pensions and the Committee on Appropriations of the Senate and the Committee on Commerce and the Committee on Appropriations of the House of Representatives a report describing—(A) the expenditures made from the Public Health Emergency Fund in such fiscal year; and (B) each public health emergency for which the expenditures were made and the activities undertaken with respect to each emergency which was conducted or supported by expenditures from the Fund. Subsequent to the 2000 reauthorization, Congress expanded or clarified the Section 319 emergency authority, as follows: Duration of emergency, notification of Congress: "Any such determination of a public health emergency terminates upon the Secretary declaring that the emergency no longer exists, or upon the expiration of the 90-day period beginning on the date on which the determination is made by the Secretary, whichever occurs first. Determinations that terminate under the preceding sentence may be renewed by the Secretary (on the basis of the same or additional facts), and the preceding sentence applies to each such renewal. Not later than 48 hours after making a determination under this subsection of a public health emergency (including a renewal), the Secretary shall submit to the Congress written notification of the determination." Data submittal and reporting deadlines: "In any case in which the Secretary determines that, wholly or partially as a result of a public health emergency that has been determined pursuant to subsection (a), individuals or public or private entities are unable to comply with deadlines for the submission to the Secretary of data or reports required under any law administered by the Secretary, the Secretary may, notwithstanding any other provision of law, grant such extensions of such deadlines as the circumstances reasonably require, and may waive, wholly or partially, any sanctions otherwise applicable to such failure to comply. Before or promptly after granting such an extension or waiver, the Secretary shall notify the Congress of such action and publish in the Federal Register a notice of the extension or waiver." Requirement for notification: During the period in which the Secretary of HHS has determined the existence of a public health emergency under 42 U.S.C. § 247d, the Secretary "shall keep relevant agencies, including the Department of Homeland Security, the Department of Justice, and the Federal Bureau of Investigation, fully and currently informed." Emergency use of countermeasures: The Secretary may declare an emergency justifying expedited use of certain medical countermeasures on the basis of: (1) a determination by the Secretary of Homeland Security that there is a domestic emergency, or a significant potential for a domestic emergency; or (2) on the basis of a determination by the Secretary of Defense that there is a military emergency, or a significant potential for a military emergency; or (3) on the basis of a "determination by the Secretary of a public health emergency under Section 247d of Title 42 that affects, or has a significant potential to affect, national security, and that involves a specified biological, chemical, radiological, or nuclear agent or agents, or a specified disease or condition that may be attributable to such agent or agents." This provision in the Federal Food, Drug and Cosmetic Act is referred to as the Emergency Use Authorization . Waiver of certain requirements: In order to assure "that sufficient health care items and services are available to meet the needs of individuals in ... (an emergency, and) ... that health care providers ... that furnish such items and services in good faith, but that are unable to comply with one or more requirements ... may be reimbursed for such items and services and exempted from sanctions for such noncompliance, absent any determination of fraud or abuse," the Secretary may modify or waive certain statutory or regulatory requirements following a determination of public health emergency pursuant to 42 U.S.C. § 247d and an emergency or disaster declaration by the President pursuant to the National Emergencies Act (50 U.S.C. § 1601 et seq .) or the Stafford Act (42 U.S.C. § 5121 et seq .). Requirements that may be waived or modified pursuant to this section include (1) conditions of participation and certain other requirements in the Medicare, Medicaid and SCHIP programs; (2) federal requirements for state licensure of health professionals; (3) certain provisions of the Emergency Medical Treatment and Active Labor Act of 1985 (EMTALA); (4) certain sanctions prohibiting physician self-referral (so-called "Stark" provisions); (5) modification, but not waiver, of deadlines and timetables for performance of required activities; (6) limitations on certain payments for health care items and services furnished to individuals enrolled in a Medicare + Choice plan; and (7) sanctions and penalties that arise from noncompliance with certain patient privacy requirements of the Health Insurance Portability and Accountability Act of 1996. Alternate Medicare drug reimbursement method: In situations where a public health emergency has been determined to exist under 42 U.S.C. § 247d, and "there is a documented inability to access drugs and biologicals," the Secretary may, under certain circumstances, use an alternative methodology for determining payments of certain drugs under the Medicare program. Deployment of the Public Health Service Commissioned Corps: The Secretary may deploy officers in the Commissioned Corps of the U.S. Public Health Service to respond to an "urgent or emergency public health care need," as determined by the Secretary, arising as the result of (1) a national emergency declared by the President under the National Emergencies Act (50 U.S.C. § 1601 et seq. ); (2) an emergency or major disaster declared by the President under the Stafford Act (42 U.S.C. § 5121 et seq .); (3) a public health emergency declared by the Secretary pursuant to 42 U.S.C. § 247d; or (4) any emergency that, in the judgment of the Secretary, is appropriate for the deployment of members of the Corps. Other Public Health Emergency Authorities of the HHS Secretary The following is a list of statutory authorities or requirements of the Secretary or others within HHS to take certain additional actions during public health emergencies that are not explicitly defined or linked to an emergency determination pursuant to Section 319 authority. In some cases these actions flow from federal emergency or major disaster declarations pursuant to the Stafford Act. In other cases reference is made to a situation of public health emergency, but such emergency is not defined. Assistance to states: Pursuant to Section 311 of the Public Health Service Act, the Secretary of HHS has broad authority to assist state and local governments in their disease control efforts, upon their request, as follows: "The Secretary may, at the request of the appropriate State or local authority, extend temporary (not in excess of six months) assistance to States or localities in meeting health emergencies of such a nature as to warrant Federal assistance. The Secretary may require such reimbursement of the United States for assistance provided under this paragraph as he may determine to be reasonable under the circumstances. Any reimbursement so paid shall be credited to the applicable appropriation for the Service for the year in which such reimbursement is received." The term "health emergencies" is not defined in this context, but this authority underpins a variety of unanticipated activities which are undertaken each year such as CDC's deployment of Epidemic Intelligence Service officers to assist states affected by an ongoing mumps outbreak. National Health Security Strategy: "Preparedness and response regarding public health emergencies: Beginning in 2009 and every four years thereafter, the Secretary shall prepare and submit to the relevant committees of Congress a coordinated strategy (to be known as the National Health Security Strategy) and any revisions thereof, and an accompanying implementation plan for public health emergency preparedness and response. Such National Health Security Strategy shall identify the process for achieving the preparedness goals described in subsection (b) and shall be consistent with the National Preparedness Goal, the National Incident Management System, and the National Response Plan developed pursuant to section 502(6) of the Homeland Security Act of 2002 [6 U.S.C. § 314(6)], or any successor plan." HHS exemption from " Select Agent " regulation: The Secretary maintains regulatory control over certain biological agents and toxins which have the potential to pose a severe threat to public health and safety. The Secretary may temporarily exempt a person from the regulatory requirements of this section if "the Secretary determines that such exemption is necessary to provide for the timely participation of the person in a response to a domestic or foreign public health emergency (whether determined under Section 247d(a) of this Title or otherwise )." (Emphasis added). USDA exemption from " Select Agent " regulation: The Secretary, after granting an exemption under 42 U.S.C. § 262a(g) (relating to regulation of certain biological agents and toxins) pursuant to "a finding that there is a public health emergency" may request the Secretary of Agriculture to "temporarily exempt a person from the applicability of the requirements of this section with respect to an overlap agent or toxin, in whole or in part, to provide for the timely participation of the person in a response to the public health emergency." Activation of NDMS: The Secretary may activate the National Disaster Medical System (NDMS) to "provide health services, health-related social services, other appropriate human services, and appropriate auxiliary services to respond to the needs of victims of a public health emergency ( whether or not determined to be a public health emergency under Section 247d of this Title)" (emphasis added). Authority for the Strategic National Stockpile: "The Secretary, in coordination with the Secretary of Homeland Security, shall maintain a stockpile or stockpiles of drugs, vaccines and other biological products, medical devices, and other supplies in such numbers, types, and amounts as are determined by the Secretary to be appropriate and practicable, taking into account other available sources, to provide for the emergency health security of the United States, including the emergency health security of children and other vulnerable populations, in the event of a bioterrorist attack or other public health emergency." Authority for the Emergency System for Advance Registration of Volunteer Health Professionals (ESAR-VHP): "Not later than 12 months after the date of enactment of the Pandemic and All-Hazards Preparedness Act, the Secretary shall link existing State verification systems to maintain a single national interoperable network of systems, each system being maintained by a State or group of States, for the purpose of verifying the credentials and licenses of health care professionals who volunteer to provide health services during a public health emergency." "Public health emergency" is not defined. Federal quarantine authority: The Secretary has the authority to "make and enforce such regulations as in his judgment are necessary to prevent the introduction, transmission, or spread of communicable diseases from foreign countries into the States or possessions, or from one State or possession into any other State or possession." These regulations may "provide for the apprehension and examination of any individual reasonably believed to be infected with a communicable disease in a qualifying stage." The term "qualifying stage" means that the disease is "in a communicable stage" or is "in a precommunicable stage, if the disease would be likely to cause a public health emergency if transmitted to other individuals." Authority for the administration of smallpox countermeasures: The Secretary may issue a declaration "concluding that an actual or potential bioterrorist incident or other actual or potential public health emergency makes advisable the administration of" certain countermeasures against smallpox for Public Health Service employees. Liability protection for certain countermeasures: If the Secretary "makes a determination that a disease or other health condition or other threat to health constitutes a public health emergency, or that there is a credible risk that the disease, condition, or threat may in the future constitute such an emergency, the Secretary may make a declaration, through publication in the Federal Register, recommending, under conditions as the Secretary may specify, the manufacture, testing, development, distribution, administration, or use of one of more covered countermeasures.... " Liability protection is provided for certain persons with respect to claims resulting from the administration of covered countermeasures following a declaration of a public health emergency under this authority. Disaster relief for aging services organizations: The Assistant Secretary for Aging, in HHS, "may provide reimbursements to any State (or to any tribal organization receiving a grant under Title VI [42 U.S.C. §§ 3057 et seq .]), upon application for such reimbursement, for funds such State makes available to area agencies on aging in such State (or funds used by such tribal organization) for the delivery of supportive services (and related supplies) during any major disaster declared by the President in accordance with the Robert T. Stafford Disaster Relief and Emergency Assistance Act." Authority to expedite research: If the Secretary "determines, after consultation with the Director of NIH, the Commissioner of the Food and Drug Administration, or the Director of the Centers for Disease Control and Prevention, that a disease or disorder constitutes a public health emergency, the Secretary, acting through the Director of NIH," shall expedite certain review procedures for applications for research grants on diseases relevant to the disease or disorder involved in the emergency and take other specified administrative measures to assist relevant grants or contracts. (NIH is the National Institutes of Health.) Fisheries management: The Secretary of Commerce may take certain measures relating to the national fishery management program in case of an emergency. If the emergency is a public health emergency, then the Secretary of HHS is to "concur" with the "emergency regulation or interim measure promulgated" by the Secretary of Commerce. ATSDR assistance for exposure to toxic substances: The Administrator of the Agency for Toxic Substances and Disease Registry (ATSDR, an agency within HHS) shall, "in cases of public health emergencies caused or believed to be caused by exposure to toxic substances, provide medical care and testing to exposed individuals." Mosquito-borne diseases: The Secretary has enhanced budget authority for the response to public health emergencies related to mosquito-borne diseases as follows: "In the case of any control programs carried out in response to a mosquito-borne disease that constitutes a public health emergency, the authorization of appropriations (in this provision) is in addition to applicable authorizations of appropriations under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002." Additional Public Health Emergency Authorities The following are public health emergency authorities of individuals other than the HHS Secretary. Authority of the Attending Physician to Congress: "The Attending Physician to Congress shall have the authority and responsibility for overseeing and coordinating the use of medical assets in response to a bioterrorism event and other medical contingencies or public health emergencies occurring within the Capitol Buildings or the United States Capitol Grounds. This shall include the authority to enact quarantine and to declare death. These actions will be carried out in close cooperation and communication with the Commissioner of Public Health, Chief Medical Examiner, and other Public Health Officials of the District of Columbia government." Health and medical monitoring following a disaster : The President, acting through the Secretary of HHS, is authorized to carry out a program for the coordination, protection, assessment, monitoring, and study of the health and safety of individuals (including but not limited to responders) who may have had hazardous exposures as a result of a disaster declared pursuant to the Stafford Act (42 U.S.C. § 5121 et seq .). If the President carries out such a program, it must be commenced in a timely manner to ensure the highest level of public health protection and effective monitoring. Crisis counseling assistance and training during a disaster: "The President is authorized to provide professional counseling services, including financial assistance to State or local agencies or private mental health organizations to provide such services or training of disaster workers, to victims of major disasters in order to relieve mental health problems caused or aggravated by such major disaster or its aftermath." This provision in the Stafford Act is jointly administered by the Federal Emergency Management Agency (FEMA), and the Substance Abuse and Mental Health Services Administration in HHS. Authority of the Secretary of DHS to deploy the Strategic National Stockpile: "The [DHS] Secretary [Secretary's responsibilities] ... shall include ... coordinating other Federal response resources, including requiring deployment of the Strategic National Stockpile, in the event of a terrorist attack or major disaster.... " Authority of the Secretary of Veterans Affairs to provide care: The Secretary of Veterans Affairs is authorized to furnish hospital care and medical services to individuals, including non-veterans, affected by (1) a major disaster or emergency declared by the President under Stafford Act (42 U.S.C. § 5121 et seq. ) or (2) a disaster or emergency in which NDMS is activated. Notification during potential public health emergencies: "In cases involving, or potentially involving, a public health emergency, but in which no determination of an emergency by the Secretary of Health and Human Services under Section 319(a) of the Public Health Service Act (42 U.S.C. 247d(a)), has been made, all relevant agencies, including the Department of Homeland Security, the Department of Justice, and the Federal Bureau of Investigation, shall keep the Secretary of Health and Human Services and the Director of the Centers for Disease Control and Prevention fully and currently informed." Methodology The above listing of federal public health emergency authorities was developed by reviewing the results of a search of the U.S. Code for the terms "public health emergency," "health threat," or "disaster," or for citations to the public health emergency authority at 42 U.S.C. § 247d. Not included in the listing are references to the suspension of certain routine activities in the event of a disaster, requirements for disaster planning in health care facilities, or other provisions not directly related to the declaration or determination of a federal public health emergency or the activities authorized or required when such a declaration or determination is made. | When there is a catastrophe in the United States, state and local governments lead response activities, invoking state and local legal authorities to support them. When state and local response capabilities are overwhelmed, the President, acting through the Secretary of Homeland Security, can provide assistance to stricken communities, individuals, governments, and not-for-profit groups to assist in response and recovery. Aid is provided under the authority of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act) upon a presidential declaration. The Secretary of Health and Human Services (HHS) also has both standing and emergency authorities in the Public Health Service Act, by which he or she can provide assistance in response to public health and medical emergencies. At this time, however, the Secretary of HHS has limited means to finance activities that are ineligible, for whatever reason, for Stafford Act assistance. The flawed response to Hurricane Katrina, and preparedness efforts for an influenza ("flu") pandemic, have each raised concerns about federal response mechanisms for incidents that result in overwhelming public health and medical needs. These concerns include the delegation of responsibilities among different federal departments, and whether critical conflicts or gaps exist in these relationships. In particular, there are some concerns about federal leadership and delegations of responsibility as laid out in the National Response Framework (NRF), published by the Department of Homeland Security. There is no federal assistance program designed purposefully to cover the uninsured or uncompensated costs of individual health care that may be needed as a consequence of a disaster. While there is not consensus that this should be a federal responsibility, Congress has provided such assistance to victims of some specific disasters in the past. For example, following Hurricane Katrina, Congress provided short-term assistance to host states, through the Medicaid program, to cover a portion of the uninsured health care costs of eligible evacuees. Congress has provided funding—and some have proposed establishing statutory authority—to cover certain uninsured health care costs for responders and others who are having health problems related to exposures at the World Trade Center site in New York City after the 2001 terrorist attack. Also, legislation introduced in the 110th Congress proposed to grant the Secretary of HHS the authority to use a special fund to provide temporary emergency health care coverage for uninsured individuals affected by future public health emergencies. This report examines, with respect to public health and medical incidents, (1) the authorities and coordinating mechanisms of the President and the Secretary of HHS in providing routine assistance, and assistance pursuant to the Stafford Act and/or the Public Health Service Act; (2) mechanisms to assure a coordinated federal response to these incidents, and overlaps or gaps in agency responsibilities; and (3) existing mechanisms, potential gaps, and proposals to fund the costs of a response to public health and medical incidents. A listing of federal public health emergency authorities is provided in the Appendix. This report will be updated as needed. |
Member voting is perhaps the most important activity of any legislature—determining the fate of bills, resolutions, amendments, and other matters. With record votes, legislators and their parties put themselves on the public record for or against specific questions. The action of voting in the House of Representatives appears to be a straightforward process, but it is an activity steeped in parliamentary complexity. Rules, precedents, and practices govern voting in the House and the Committee of the Whole House on the state of the Union (hereafter, the Committee of the Whole). Largely, voting procedures in the House and the Committee of the Whole have evolved to become similar since the Legislative Reorganization Act of 1970 (LRA). The first purpose of this report is to discuss the two momentous changes in record voting procedures that the House included in the LRA and to analyze the evolution of rules, precedents, and practices on record voting procedures since that time. The conduct of record votes in the House, moreover, has demonstrated a need for flexibility on some occasions and generated controversy on others. The Standards of Official Conduct Committee and the House Administration Committee as well as a select committee have been called on formally or informally to investigate some controversies. The second purpose of this report is to discuss how the House has adapted to exigencies in conducting record votes, and to analyze the occasion and resolution of controversies that have arisen. The House in the 110 th Congress adopted a rules change that sought to terminate record votes in a manner that allowed all Members to vote but did not purposely reverse "an already-established outcome." Yet, a vote taken on August 2, 2007, resulted in the House establishing a select committee to investigate the termination of that vote. The third purpose of this report is to identify options and mechanisms available to the House if it wishes to address some of the rules, precedents, practices, exigencies, and controversies that have defined voting procedures. The different forms of voting available in the House and the Committee of the Whole—voice, division, and record —and the procedures for obtaining these votes are succinctly explained in Appendix B . The constitutional provisions and rules of the 110 th Congress pertinent to voting, and the Speaker's policy in the 110 th Congress on voting by electronic device, appear in Appendix A . Points of order and parliamentary inquiries pertinent to voting in the 110 th Congress, through May 2008, appear in Appendices C and D , respectively. (The parliamentarian's notes in the Constitution, Jefferson ' s Manual and Rules of the House of Representatives of the United States regularly cite practices and actions that established precedent, in addition to citing rulings on points of order and responses to parliamentary inquiries. This document is published early in the first session of each Congress, to incorporate rules changes and to update the parliamentarian's notes.) This report is divided by first-level headings into sections. The sections are divided into parts. Cross references within the report will therefore refer to another section or to another part. On the eve of two momentous changes to House rules concerning voting, the features of voting that these changes overturned might seem shocking to Members and staff today. Prior to enactment of the LRA, record votes in the House were conducted by an oral, alphabetical call of the roll and the hand recording of Members' positions. In addition, record votes were not permitted in the Committee of the Whole, the form in which the House normally operates to debate and vote on amendments to measures before the House itself votes on passage. The House Administration Committee in the 91 st Congress (1969-1971) was studying the potential of an electronic voting system, but H.R. 17654, the LRA as reported by the Rules Committee, did not include a provision dealing with an automated voting system. The House nonetheless amended H.R. 17654 to authorize the development of an electronic voting system to record votes. On the second matter—no record votes in the Committee of the Whole—the House through its history had continued to follow ancient British practice: [The Committee of the Whole] originated in the time of the Stuarts, when taxation arrayed the Crown against the Commons, and suspicion made the Speaker a tale-bearer to the King. To avoid the Chair's espionage[,] the Commons met in secret, elected a chairman in whom it had confidence, and[,] without fear of the King[,] freely exchanged its views respecting supplies. The informality of its procedure survived the occasion for secrecy [in the House of Representatives].... By rule and practice, the Committee of the Whole House continues today to use a separate set of procedures from those of the House. Before the LRA's enactment, however, the forms of votes available in the Committee of the Whole were voice, division, and "teller." The House rule in the 91 st Congress on voting, which continued largely intact from the First Congress, stated: [The Speaker]...shall put questions in this form, to wit: "As many as are in favor (as the question may be), say Aye;" and after the affirmative voice is expressed, "As many as are opposed, say No;" if he doubts, or a division is called for, the House shall divide; those in the affirmative of the question shall first rise from their seats, and then those in the negative; if he still doubts, or a count is required by at least one-fifth of a quorum, he shall name one from each side of the question to tell the Members in the affirmative and negative; which being reported, he shall rise and state the decision. "Tell" here was used to mean "count" or "enumerate." As explained by one Member in debate on the LRA, the teller vote was conceived "as a method of voting the will of the people while escaping the wrath of a powerful and vengeful monarch....We [kept the rule] because we said it helped expedite the often slow legislative process." H.R. 17654, the LRA as reported by the Rules Committee, also did not include a provision on record votes in the Committee of the Whole. During committee markup, an amendment to allow such votes failed on a 6-6 vote. The House nonetheless amended H.R. 17654 to authorize "recorded teller votes." As noted, H.R. 17654, the LRA as reported by the Rules Committee, the committee of jurisdiction, did not include a provision pertaining to an automated voting system in the House. The chair of the special subcommittee of the House Rules Committee that had drafted the bill explained during floor debate: Because of the work the Committee on House Administration was doing...your subcommittee felt that it probably was inappropriate, and not timely at the time, to actually attempt to amend the rules to make provision for electronic voting.... Other Members were skeptical of the explanation, however, with one Member noting that "the Members of the [subcommittee] who have spoken [earlier] have all seemed to be against the idea." Support in the House to replace oral roll-call voting with automated voting was nonetheless considerable. On July 27, 1970, Representative Robert McClory offered an amendment to H.R. 17654 to allow the use of an electronic voting system to record votes, and to authorize spending for such a system. The amendment provided: ...(a) Rule XV of the Rules of the House of Representatives is amended by adding at the end thereof the following new clause: "5. In lieu of the calling of the names of Members in the manner provided for under the preceding provision of this rule, upon any roll call or quorum call, the names of such Members voting or present may be recorded through the use of appropriate electronic equipment. In any such case, the Clerk shall enter in the Journal and publish in the Congressional Record, in alphabetical order in each category, a list of the names of those Members recorded as voting in the affirmative and those Members recorded as voting in the negative, or a list of the names of those Members voting present, as the case may be, as if their names had been called in the manner provided for under such preceding provision." (b) The contingent fund of the House of Representatives shall be available to provide the electronic equipment necessary to carry out the purpose of the amendment made by subsection (a). Republican Representative McClory and bipartisan proponents argued for the efficiency that an electronic voting system would bring to the House: an oral roll-call vote typically consumed more than 30 minutes, while a vote using an automated system was anticipated to require half that much time. Advocates also noted that oral roll calls consumed too much time as the House work load increased, and that changes in the LRA could further increase the number of roll-call votes. Some Members, having served in state legislatures, offered their experiences with automated systems as testament to the efficiency to be gained. One Member recalled an investigation of "ghost voting" the previous year and the recommendation from the Standards of Official Conduct Committee for a new voting system. No one spoke against automated voting during debate on the McClory amendment. Several Members commented on the use of "may" rather than "shall" in the wording of the amendment—"the names of...Members... may be recorded through the use of appropriate electronic equipment." (Emphasis added.) Representative McClory responded to a question on the word choice as follows: The word "may" is in there so that the House through its organized committees can proceed to complete its work and so that we can record votes in that way. However, under my amendment it would not be necessary to record votes and roll calls electronically, nor would we necessarily record all votes in that way. These are questions to be determined at a later time when details of the system are worked out. This argument satisfied members of the House Administration Committee, the panel with jurisdiction over an automated voting system. Members skeptical of the House implementing an electronic voting system, in the absence of a specific directive, supported an amendment to the McClory amendment. Representative Robert L. Leggett's amendment, among other things, set a specific commencement date for an electronic voting system. Mr. Leggett ultimately withdrew his amendment following remarks by Representative Joe D. Waggonner Jr., chair of the House Administration Committee's Special Subcommittee on Electrical and Mechanical Office Equipment. Mr. Waggonner explained the status of the subcommittee's work and indicated that recommendations on an electronic voting system would be made in the current Congress. The McClory amendment was agreed to by voice vote in the Committee of the Whole, and enacted when President Richard M. Nixon signed the LRA into law. As also noted, H.R. 17654, the LRA as reported by the Rules Committee, the committee of jurisdiction, did not include a provision to allow recorded votes in the Committee of the Whole. House rules and precedents allowed only voice, division, and teller votes in the Committee of the Whole. When the Committee of the Whole took a vote by tellers, the chairman of the Committee of the Whole "if he still doubts [after a division vote], or a count is required by at least one-fifth of a quorum,...shall name one or more from each side of the question to tell the Members in the affirmative and negative; which being reported he shall rise and state the decision." Members passed in front of the appropriate teller and were counted, and only the numbers for and against a question were announced by the chair and reported in the Congressional Record . By the 91 st Congress, teller votes had become controversial. There was growing sentiment inside and outside of the House that Members used the Committee of the Whole's secrecy to escape accountability for votes, and that at least some controversial or well-publicized amendments that failed in the Committee of the Whole would have been agreed to had there been recorded votes. Since the precedents of the House generally allowed a recorded vote in the House only on first-degree amendments agreed to in the Committee of the Whole—a practice that continues today—the precedents afforded virtually no opportunity for a recorded vote on an amendment that failed. To expose Members' positions on amendments voted on by tellers, citizens took seats in the House visitors' gallery, trying to see which Members stood in each line for and against an amendment. Individuals who opposed the Vietnam War, for example, sat in the visitors' gallery and attempted to see how individual Members voted on war-related amendments, and then reported whom they observed. Such observations were prone to error. These citizens were referred to as gallery "watchers" or "observers." In the 91 st Congress, votes on issues widely covered in the media and widely discussed in the electorate—the invasion of Cambodia, the anti-ballistic missile (ABM), and the supersonic transport plane (SST)—were decided by teller votes on amendments in the Committee of the Whole. During the Rules Committee's markup of H.R. 17654, Democratic Representative Thomas P. "Tip" O'Neill Jr. proposed an amendment to allow "recorded teller votes," or "tellers with clerks," in the Committee of the Whole. It failed on a 6-6 vote. On July 27, 1970, Representatives O'Neill and Charles S. Gubser, a leading Republican proponent of allowing more recorded votes, offered a floor amendment to H.R. 17654 to add the following language to Rule I, cl. 5: If before tellers are named any Member requests tellers with clerks and that request is supported by at least one-fifth of a quorum, the names of those voting on each side of the question shall be entered in the Journal. Members shall have not less than twelve minutes from the naming of tellers with clerks to be counted. In support of the amendment, Representative O'Neill argued: There should be no one among us who is not willing to go on record on the vital issues of the day. There should be no one among us who is unwilling to go to his constituency on this record—his true record, based on the important votes in the Committee of the Whole. Other Members argued that the change would increase not only accountability of the House and its individual Members but also decrease Member absenteeism—a problem evident from the low numbers counted on various teller votes—since Members would not want to miss recorded votes. Some noted that unrecorded teller votes were of importance when Congress met for just a few months, but that this justification had disappeared with the development of essentially a year-round Congress and the emergence of the "highly complex relationship between the people and their government." Members did not speak against recorded teller votes during debate on the O'Neill-Gubser amendment. The recorded teller amendment was agreed to by voice vote in the Committee of the Whole, and enacted when President Nixon signed the LRA into law. This section of the report, on the evolution of House rules, precedents, and practices, related to record voting procedures since the 1970 LRA, is divided into broad topics, such as Obtaining a Vote or Allowing Late-Arriving Members to Vote/Changing an Outcome. Normally, a paragraph briefly explaining rules, precedents, or key changes since 1970 begins a topic. A topic may be further divided so that the reader may easily find a topic's constituent parts. The changes to House rules examined in this section of the report were contained in the rules packages adopted at the beginning of new Congresses and in resolutions agreed to during various Congresses, beginning with the 92 nd Congress (1971-1973). The precedents and practices examined are based on the Congressional Record references in the parliamentarian's notes in the editions of Constitution, Jefferson ' s Manual, and Rules of the House of Representatives for each Congress (referred to hereafter as the House Rules and Manual ), from the 92 nd Congress through the current Congress. The focus of this section of the report is rules, precedents, and practices specifically related to record voting procedures in the House and the Committee of the Whole. This section draws principally from editions of the House Rules and Manual, as follows: sections 76 through 80, which explicate precedents related to the constitutional provision on the yeas and nays (art. I, § 5, cl. 3); Rule I, cl. 6 (Rule 1, cl. 5, before recodification in the 106 th Congress (1999-2001)), on the Speaker putting a question; Rule III (Rule VIII), pertaining to Members, Delegates, and the Resident Commissioner; Rule XVIII, cl. 6 (Rule XXIII, cl. 2), on quorums and voting in the Committee of the Whole; and Rule XX (Rule I, cl. 5, and Rule XV), on quorums and voting in the House. Even within these rules and the parliamentarian's notes on them, however, some topics are examined introductorily or not at all in this report. Quorum in the House or the Committee of the Whole is a subject covered introductorily, for example, through footnotes explaining rules changes that restricted opportunities to obtain a quorum call. The precedence of the motion to adjourn is an example of a subject that is not examined. There are a few subjects that are covered introductorily, however, such as the motion to recommit, that do not relate specifically to record voting procedures. They are included since a rules change increased the opportunities of Members to obtain a record vote. The explanations in this report of precedents and practices cited in the parliamentarian's notes normally indicate whether a procedural determination occurred in the House or the Committee of the Whole. It is important to keep in mind, nonetheless, that the rules of the House generally apply to the Committee of the Whole. Rule XVIII, cl. 12, provides: "The Rules of the House are the rules of the Committee of the Whole House on the state of the Union so far as applicable." The reader should also keep in mind that the Rules Committee may report a special rule that, if agreed to by the House, may temporarily change or adapt House rules as they pertain to a specific piece of legislation. For the reader's convenience, Table 1 cross references House rules before and after recodification in the 106 th Congress (1999-2001). The Speaker or chairman of the Committee of the Whole first puts a question to a voice vote. A Member on occasion may demand a division vote following a voice vote. Most often, however, a Member might seek a record vote on a question, demanding the yeas-and-nays in the House or a recorded vote in the House or the Committee of the Whole. The forms of voting and the methods for obtaining a vote are described in Appendix B . For House approval of some questions, a supermajority is required. Every week when it is in session, the House typically considers a number of measures under a procedure called suspension of the rules, for which a House rule requires two-thirds of Members voting, a quorum being present, to adopt the motion to suspend the rules and pass a measure. The Constitution requires a two-thirds vote to override a presidential veto or to approve a constitutional amendment for submission to the states. Interestingly, passage of a resolution to amend the Constitution does not "necessarily" require a yea-and-nay vote, but the yeas-and-nays are required to pass a bill over the President's veto. Rules, precedents, and practices related to votes requiring a supermajority are not generally included in this report. Many rules, precedents, and practices of the House related to voting are long-standing. Rule I, cl. 6, on the form of a question, for example, has existed since the First Congress. Precedents long predate the time frame of this report that the "constitutional right of a Member to demand the yeas and nays may not be overruled as dilatory" or that the Speaker may not refuse to put a question that is in order. Since the LRA of 1970, the House has adopted rules, and its presiding officers—sometimes supported by the House's membership on a vote related to an appeal of a chair's ruling—have acted to develop its precedents and practices on voting. In some instances a rules change or action by the presiding officer has narrowed the opportunities for obtaining a vote, such as the changes pertaining to the Speaker's approval of the Journal or resolving the House into the Committee of the Whole. These changes have tended to curtail procedural votes. In other instances a rules change or action by the presiding officer has broadened the opportunities for obtaining a vote, such as the change to Rule XIII, cl. 6 prohibiting, except in one circumstance, the Rules Committee from reporting a special rule disallowing a motion to recommit, with or without instructions. For the convenience of the reader, this part of this section is divided into two subparts, the House and the Committee of the Whole. Changes to Rule XX (or its predecessor rules before recodification, Rule I, cl. 5 and Rule XV) appear in the House subpart. Changes to Rule XVIII (or its predecessor rule before recodification, Rule XXIII) appear in the Committee of the Whole subpart of this part. Precedents and practices were placed in the House or Committee of the Whole subparts based on where they occurred. Recall, nonetheless, that Rule XVIII, cl. 12 (Rule XXIII, cl. 9 before recodification) states: "The Rules of the House are the rules of the Committee of the Whole House on the state of the Union so far as applicable." Two rules changes of procedural consequence in the House part of this section were made in the 104 th Congress. One change made automatic a yea-and-nay vote on final passage of certain appropriations, tax, and budget measures. Another prohibited the Rules Committee from reporting a special rule disallowing a motion to recommit, with or without instructions. Approval of the Journal . The LRA of 1970 contained an amendment to Rule I, cl. 1 pertaining to the Speaker's approval of the Journal , replacing the requirement for reading the Journal unless dispensed with by unanimous consent. The change allowed the Speaker to approve the Journal and in his discretion to order its reading. The change also authorized a motion that the Journal be read. Presence or Absence of a Quorum . In the 97 th Congress (1981-1983), the Speaker anticipated that a Member would object to a vote on the ground that a quorum was not present (under Rule XV, cl. 4), and make a point of order that a quorum was not present. Speaker Thomas P. "Tip" O'Neill Jr. stated that he had counted the House and that a quorum was present. He established under the rule that he was not required to state what was the actual count. The yeas and nays were refused. Prior to a vote in the 98 th Congress (1983-1985) on the Speaker's approval of the Journal, a Speaker pro tempore announced that the electronic voting system was inoperable. A Member had caused a recorded vote to be ordered by objecting to the voice vote on the ground that a quorum was not present. In parliamentary inquiries after the record voting had begun, a Member asked whether the vote could be vacated by unanimous consent so that another voice vote could be taken. The Speaker pro tempore stated that business by unanimous consent could not be transacted once the absence of a quorum had been disclosed. A second Member asked whether the vote could be delayed. The Speaker pro tempore stated that it was not possible to postpone a vote once commenced and since the absence of a quorum had been announced by the presiding officer. Speaker ' s Count in Support of the Yeas and Nays . On a demand for the yeas and nays in the 101 st Congress (1989-1991), a Speaker pro tempore counted to ascertain whether one-fifth of the Members present supported the demand. As Members continued to arrive on the floor, the Speaker pro tempore continued to count them as well, both to determine the number of Members present and the number supporting the demand. The Speaker pro tempore ultimately determined that an insufficient number of Members had risen in support of the demand. Voice Vote Precedes Record Vote . The Speaker inserted in the Congressional Record in the 102 nd Congress (1991-1993) a statement that he was "in error" in ordering the yeas and nays without first putting the question by voice vote on two roll-call votes. The Speaker indicated that the House, however, had implicitly granted unanimous consent for the vote to be taken by the yeas and nays. Timely Demand for Record Vote . Also in the 102 nd Congress, a Speaker pro tempore announced, after a voice vote on agreeing to a resolution, that the noes appeared to have it. A Member demanded the yeas and nays. However, another Member raised a point of order that the demand was not timely. The colloquy was then as follows: The Speaker pro tempore. Yes, the gentleman from Massachusetts...was on his feet. Mr. Thomas of California. Mr. Speaker, the whole House was on its feet for 5 minutes. The Speaker pro tempore. The gentleman was on his feet requesting recognition, and the House was not in order. The Speaker pro tempore then ordered the yeas and nays. The parliamentarian's notes comment: The yeas and nays may be demanded...even after the announcement of the vote if the House has not passed to other business...and if the Member seeking the yeas and nays is on his feet and seeking recognition for that purpose when the Chair announces the result of the voice vote.... Automatic Vote on Final Passage . A vote on final passage of certain legislation was made automatic by a rules change adopted for the 104 th Congress (1995-1997), organized by the newly elected Republican majority. In adopting its rules, the House amended Rule XV to add a new clause 7, to provide: The yeas and nays shall be considered as ordered when the Speaker puts the question on final passage or adoption of any bill, joint resolution, or conference report making general appropriations or increasing Federal income tax rates, or on final adoption of any concurrent resolution on the budget or conference report thereon. Motion to Recommit . Another rules change adopted in the 104 th Congress protected the minority's right to offer a motion to recommit with instructions. The rules change amended Rule XI, cl. 4(b). This paragraph had provided in part: ...nor shall [the Committee on Rules] report any rule or order which would prevent the motion to recommit from being made as provided in clause 4 of rule XVI. The amendment added language after the words "rule XVI," as follows: [,] including a motion to recommit with instructions to report back an amendment otherwise in order (if offered by the minority leader or a designee), except with respect to a Senate bill or resolution for which the text of a House-passed measure has been substituted. While not specifically addressed to obtaining a vote, the added language restricted the authority of the Rules Committee and expanded the rights of the minority leader and the minority party. As a consequence, the minority, if it wished, could obtain one substantive vote on a measure, other than on final passage, even if the House considered a measure under a special rule that limited or foreclosed amendments. An exception in the rules change, however, was allowed in the instance where the House substituted the text of a House-passed measure for the text in a Senate bill or resolution. This restriction on the authority of the Rules Committee vis-à-vis a motion to recommit with instructions had been long sought by Republican Members. Beginning in 1934 with the House's sustaining on appeal a ruling of the Speaker, a special rule reported by the Rules Committee could limit the motion to recommit. The parliamentarian's notes to Rule XI, cl. 4(b) in the 104 th Congress House Rules and Manual explained: From 1934 until the amendment of clause 4(b) in the 104 th Congress..., it was consistently held that the Committee on Rules could recommend a special order that limited, but did not totally prohibit, a motion to recommit pending passage of a bill or joint resolution, as by precluding the motion from containing instructions relating to specified amendments...; or by omitting to preserve the availability of amendatory instructions in the case that the bill is entirely rewritten by the adoption of a substitute made in order as original text...; or by expressly allowing only a simple ("straight") motion to recommit (without instructions).... The change to House rules was not debated when the House considered its rules for the 104 th Congress. In the rules analysis inserted in the Congressional Record by Representative Gerald B.H. Solomon, who subsequently became chair of the Rules Committee, there was the following explanation: It is the intent of this rule to restore the original purpose of clause 4(b) when it was adopted in 1909 to give the minority a final opportunity to offer an amendment of its choosing in a motion to recommit prior to the final passage of a bill. Vote by Yeas and Nays if Vote by Electronic Device . In adopting its rules for the 105 th Congress (1997-1999), the House amended Rule I, cl. 5(a) to add a sentence on the status of a vote taken by electronic device pursuant to this paragraph: "A recorded vote taken pursuant to this paragraph shall be considered a vote by the yeas and nays." The purpose for this change was explained as avoiding "a possible second vote on the same question if someone should demand the Yeas and Nays." One of the most consequential procedural changes of the LRA of 1970 was to allow record votes in the Committee of the Whole. When the change took effect, 20 Members were required to support a request for a recorded vote. In the 96 th Congress (1979-1981), a rules change increased this number to 25 (where it stands today). Number Required for Record Vote . In the 93 rd Congress (1973-1975), the House Rules Committee reported a resolution ( H.Res. 998 ) containing several rules changes. One change proposed to increase from 20 the number of Members supporting a request for a recorded vote in the Committee of the Whole in a specific circumstance. The provision of the resolution stated: Sec. 3. Clause 2 of rule XXIII of the Rules of the House of Representatives is amended— ...(2) by adding at the end of such clause the following new paragraph: (b) In the Committee of the Whole, the Chair shall order a recorded vote on the request supported by at least twenty Members, except that support of at least forty Members shall be required to obtain a recorded vote whenever the Chair, on request of any Member at the time the recorded vote is requested, determines that more than two hundred Members are present." The committee of jurisdiction, the Rules Committee, had considered options ranging from leaving the number supporting a request for a recorded vote in the Committee of the Whole at 20 to increasing it to as high a number as 44. The committee reported the resolution providing that, if 200 or more Members were present when a vote was requested—twice the quorum for the Committee of the Whole—then the number of Members required to support the request for a recorded vote would also be doubled, to 40 from 20. If fewer than 200 Members were present, the existing requirement of 20 Members supporting the request would operate. When H.Res. 998 was considered on the House floor, Representative H.R. Gross offered an amendment to strike this section. The section and Mr. Gross's amendment consumed nearly all of the time set aside to consider the resolution. House Rules Committee members of both parties generally supported the provision as a reasonable compromise to curtail recorded votes from being used in the Committee of the Whole as a part of "frivolous and dilatory tactics." In explanation, Representative B.F. Sisk, a Rules Committee member who had chaired an ad hoc subcommittee to examine proposed rules changes, cited the amending process on an energy bill that occurred in December 1973: a group of Members numbering slightly more than 20 impeded House proceedings by offering consecutive amendments and obtaining roll-call votes on them. Under the parliamentary conditions prevailing for considering that measure, the amendments could be offered but not debated. Members opposed to the proposed change argued that it would return votes on important amendments in the Committee of the Whole to the secrecy that existed before recorded teller votes were allowed. Representative Robert E. Bauman argued: I think the 20-Member rule is a valuable right of the minority, any minority. When many Members seek to avoid a rollcall vote on a hot issue, such as a congressional pay raise, at least 20 Members can force a rollcall....Under this new proposal I predict what will happen; a quorum will be established and then the Chair will require 40 Members to get a vote on any given issue, and we will never get a rollcall if it is on a very unpopular matter.... After agreeing 252-147 to the Gross amendment, the House agreed to the resolution as amended. However, a change included in the rules adopted by the House for the 96 th Congress (1979-1981) increased the number of Members needed to support a request for a recorded vote in the Committee of the Whole. The number was increased to 25 from 20 with the addition of a new paragraph (b) to Rule XXIII, cl. 2. Together with new restrictions on quorum calls incorporated into clause 2, the change was justified as a means to "expedite the voting procedures in the Committee of the Whole...." Demand for Record Vote vis- à -vis Division Vote or Quorum . In the 94 th Congress (1975-1977), during the counting of a division vote, the chairman of the Committee of the Whole responded to a Member demanding a recorded vote, "The Chair is counting, and a division vote in progress cannot be interrupted by a demand for a recorded vote." Later in the 94 th Congress, a demand for a recorded vote was refused. The demand was made a second time, and a chairman of the Committee of the Whole stated that a recorded vote had been refused. In response to a parliamentary inquiry, the chairman explained, "A recorded vote had already been refused, and it is not possible on the same amendment to have a second request for a recorded vote." In that same Congress, a chairman of the Committee of the Whole ruled that the chair's count in support of a recorded vote was not subject to appeal. In the 95 th Congress (1977-1979), after the result of a division vote was announced, a Member made a point of order that a quorum was not present. A chair sustained the point of order, and, under procedures in place at that time requiring the committee to rise in the absence of a quorum, Members recorded their presence by electronic device in the House. The committee resumed its sitting, and a recorded vote was demanded and ordered. The parliamentarian's notes to Rule XXIII, cl. 2 explained: While an "automatic" roll call (under Rule XV, cl. 4) is not in order in the Committee of the Whole, a point of order of no quorum may intervene between the announcement of a division vote result and prior to transaction of further business, and a demand for a recorded vote following the quorum call is not thereby precluded. A ruling by the chair in the 96 th Congress further defined the relationship between a point of order that a quorum was not present and a request for a recorded vote. A chair ruled that a request for a recorded vote on an amendment, which had been denied, could not be renewed although the absence of a quorum was disclosed immediately following the refusal. However, a different sequence of events resulted in a different outcome in the 97 th Congress (1981-1983). Before a chairman of the Committee of the Whole completed counting to determine if a sufficient number of Members supported a request for a recorded vote, a Member made a point of order that a quorum was not present. The chair ruled that the count was "inoperative," directed Members to record their presence by electronic device for a quorum call, vacated further proceedings under the call once a quorum was present, and finally stated that the pending business was the demand for a recorded vote. The request for a recorded vote remained pending under this sequence. Dispense with Reading an Amendment . In adopting rules for the 97 th Congress (1981-1983), the House amended Rule XXIII, cl. 5 to add a new paragraph (b) to allow a nondebatable motion to dispense with the reading of an amendment in the Committee of the Whole if the amendment had been printed in the bill as reported by a committee or had been printed in the Congressional Record . Appeal the Ruling of the Chair . In the 101 st Congress (1989-1991), a chairman of the Committee of the Whole sustained a point of order against an amendment offered to a general appropriations bill, ruling that the amendment constituted legislation. The amendment's proponent, Representative Tom Ridge, appealed the ruling of the chair. In response to a parliamentary inquiry, the chair stated that he would put the question in the same form that it would be put in the House: "Shall the decision of the Chair stand as the judgment of the Committee?" He responded to another inquiry that the consequence of the chair's decision not being sustained would be that the amendment would be debatable on its merits under the five-minute rule. Majority Leader Richard A. Gephardt demanded a recorded vote, and the decision of the chair was sustained. Withdraw Demand for Record Vote . During the 105 th Congress (1997-1999), a chairman of the Committee of the Whole entertained a unanimous consent request, which the House granted, to allow a Member to withdraw a demand for a recorded vote. Timely Demand for Record Vote . Members seeking recorded votes in the Committee of the Whole made untimely demands on two occasions in the 109 th Congress (2005-2007). In the first session, a Member demanded a recorded vote after a chairman announced the result of a voice vote and that the next amendment was now in order. The chairman informed the Member that the request was not timely. In the second session, in the words of the parliamentarian's notes in the House Rules and Manual, a "considerable time ha[d] elapsed" between the chairman's announcement of the result of a voice vote and a Member's demand for a recorded vote. The chairman informed the Member that the request was not timely. If a major procedural change of the LRA of 1970 was to allow record votes in the Committee of the Whole, thus increasing the opportunities to obtain a record vote, another important change to House rules since then has been to allow votes to be postponed and clustered and to allow voting time on clustered votes after the first 15-minute vote to be reduced to five minutes or even two minutes. In several Congresses, the House added to the list of questions that could be postponed and clustered and on which voting times could be reduced. Such changes benefitted Members by increasing predictability in the House's schedule and by allowing debate on measures to occur at different times or even on different days from votes on those measures. Voting could also take less time away from processing legislation since debate on one or multiple measures would not be interrupted. The Speaker was first authorized in House rules to postpone and cluster votes in the 93 rd Congress (1973-1975) on motions to suspend the rules. The Speaker was first authorized in House rules to reduce voting time to five minutes in the 96 th Congress (1979-1981). The House Rules Committee in the 93 rd Congress (1973-1975) reported a resolution ( H.Res. 998 ) containing several rules changes. One provision of this resolution allowed recorded votes on measures considered pursuant to a motion to suspend the rules to be postponed and clustered. The provision added a new paragraph to Rule XXVII, cl. 3: (b)(1) On any legislative day (other than during the last six days of a session) on which the Speaker is authorized to entertain motions to suspend the rules and pass bills or resolutions, he may announce to the House, in his discretion, before entertaining the first such motion, that he will postpone further proceedings on each of such motions on which a recorded vote or the yeas and nays is ordered or on which the vote is objected to under clause 4 of Rule XV, until all of such motions on that legislative day have been entertained and any debate thereon concluded, with the question having been put and determined on each such motion on which the taking of the vote will not be postponed. (2) When the last of all motions on that legislative day to suspend the rules and pass bills or resolutions has been entertained and any debate thereon concluded, with the question put and determined on each such motion on which further proceedings were not postponed, the Speaker shall put the question on each motion, on which further proceedings were postponed, in the order in which that motion was entertained. (3) At any time after the vote on the question has been taken on the first motion on which the Speaker has postponed further proceedings under this paragraph, the Speaker may, in his discretion, reduce to not less than five minutes the period of time within which a recorded vote on the question may be taken on any or all of the additional motions on which the Speaker has postponed further proceedings under this paragraph. (4) If the House adjourns before the question is put and determined on all motions on which further proceedings were postponed under this paragraph, then, on the next following legislative day on which the Speaker is authorized to entertain motions to suspend the rules and pass bills and resolutions, the first order of legislative business after the call of bills and resolutions on the Private Calendar as provided in clause 6 or Rule XXIV shall be the disposition of all such motions, previously undisposed of, in the order in which those motions were entertained. The proposed change generated little discussion during debate on H.Res. 998 , although it institutionalized two departures from common practice in allowing votes to be postponed and clustered and in allowing the time for voting to be reduced to five minutes, subject to certain conditions but at the discretion of the presiding officer. Members of the Rules Committee defended the provision as one that would save Members' time and allow them to do other important work without frequent interruptions. Some Members expressed concern over the potential loss of Members' attention to the substance of legislation considered under suspension of the rules procedures. On a day when suspension motions were in order, Speaker Carl Albert announced, before recognizing any Member to move to suspend the rules, he would ...postpone further proceedings today on each motion to suspend the rules on which a recorded vote or the yeas and nays are ordered, or on which the vote is objected to under clause 4 or rule XV. After all motions to suspend the rules have been entertained and debated, and after those motions to be determined by "nonrecord" votes have been disposed of, the Chair will then put the question on each motion on which the further proceedings were postponed. After debate concluded on all motions to suspend the rules and several motions had been determined by "nonrecord" votes, the Speaker said, ...Pursuant to clause 3, rule XXVII, the Chair will now put the question on each motion, on which further proceedings were postponed, in the order in which that motion was entertained. Votes will be taken in the following order: S.J.Res. 40 (de novo). S. 3373 (de novo). H.R. 13595 (de novo). S. 2844, by the yeas and nays. The Chair will reduce to 5 minutes the time for any electronic votes after the first such vote in this series. The questions on which further proceedings were postponed were put de novo ("anew" or "a second time") if objection to the vote was made under Rule XV, cl. 4. After the first vote, a 15-minute vote, and the announcement of the result, the Speaker informed the House: Pursuant to the provisions of clause 3(b)(3), rule XXVII, the Chair announces he will reduce to a minimum of 5 minutes the period of time within which a vote by electronic device may be taken on all the additional motions to suspend the rule on which the Chair has postponed further proceedings. In the 95 th Congress (1977-1979), the House adopted rules to authorize the Speaker in his discretion to postpone and cluster votes on the previous question and adoption of resolutions reported by the Rules Committee. Before consideration of a resolution, the Speaker would announce his intention to postpone further proceedings (for recorded votes) on the resolutions considered that day, and to put the questions in the order in which the resolutions were considered. He was also authorized to reduce to five minutes the duration of votes after the first 15-minute vote. If the House adjourned without completing votes on the resolutions, votes on the resolutions were, subject to several conditions, the first order of legislative business the next day. This rules change was not substantively debated. In the 96 th Congress (1979-1980), the House adopted new rules installing procedures to postpone and cluster votes to pass bills and resolutions and agree to conference reports, including allowing the time for votes in a cluster to be reduced to five minutes after the first vote. Procedures could be invoked at the discretion of the Speaker. The addition to Rule I, cl. 5 provided: (b)(1) On any legislative day whenever a recorded vote or the yeas and nays are ordered on the question of passing bills or resolutions or agreeing to conference reports, or when a vote is objected to under clause 4 of Rule XV on the question of passing bills or resolutions or agreeing to conference reports, the Speaker may, in his discretion, postpone further proceedings on each such question to a designated time or place in the legislative schedule on that legislative day or within two legislation days. (2) At the time designated by the Speaker for further consideration of proceedings postponed under subparagraph (1), the Speaker shall put each question on which further proceedings were postponed, in the order in which that question was considered. (3) At any time after the vote has been taken on the first question on which the Speaker has postponed further proceedings under this paragraph, the Speaker may, in his discretion, reduce to not less than five minutes the period of time within which a rollcall vote by electronic device on the question may be taken without any intervening business on any or all of the additional questions on which the Speaker has postponed further proceedings under this paragraph. (4) If the House adjourns before all of the questions on which further proceedings were postponed under this paragraph have been put and determined, then, on the next following legislative day the unfinished business shall be the disposition of all such questions, previously undisposed of, in the order in which the questions were considered. The House also made three changes related to voting in other procedural situations. First, the House amended Rule XV, cl. 5, pertaining to voting by electronic device, to allow the Speaker in his discretion to reduce to five minutes a vote on passage of a bill or resolution or adoption of a conference report following a 15-minute recorded vote on a motion to recommit. Second, the House amended Rule XXIII, cl. 2, relating to a quorum in the Committee of the Whole, to allow the chairman to reduce to five minutes the duration of a vote following a regular quorum call. Third, the House amended Rule XXVII, dealing with suspension of the rules, to allow the Speaker to postpone votes on motions to suspend the rules until the next legislative day. Majority Leader Jim Wright explained the intent of the changes as follows: ...I must conclude that most of the Members, both Democratic and Republican, would approve any such system that would save them from the repeated harassment and inconvenience [of dilatory tactics] to which the entire membership have been subjected by one or two dissident or disgruntled Members who want all the others to have to come over here and be recorded on a matter frequently—frequently in which there are two or three objections at the most. During past Congresses...almost one-third of the entire time of this House was consumed in rollcall votes and quorum calls. Now surely that is an excessive use of the time of the Members.... Minority Members, however, argued against concentrating more power in the hands of the Speaker and forsaking legislative deliberation in the name of legislative efficiency. Minority Whip Robert H. Michel argued: ...the clustering of votes at the end of the day or on the following day may expedite the business of this House, but that practice certainly will not lead to better legislation. It will actually encourage absenteeism...and will tend to inhibit open debate and discussion. In the 97 th Congress (1981-1983), the House adopted rules that consolidated in Rule I, cl. 5(b) the Speaker's authority to postpone votes. The changes moved there the authority contained in Rule XI, cl. 4(e), related to reports from the Rules Committee, and in Rule XXVII, cl. 3(b), related to motions to suspend the rules. Rule I, cl. 5(b)(1) was reorganized, with amendments, as follows: (b)(1) On any legislative day whenever a recorded vote is ordered or the yeas and nays are ordered, or a vote is objected to under clause 4 of Rule XV on any of the following questions, the Speaker may, in his discretion, postpone further proceedings on each such question to a designated time or place in the legislative schedule on that legislative day or within two legislative days: (A) the question of passing bills; (B) the question of adopting resolutions; (C) the question of ordering the previous question on privileged resolutions reported from the Committee on Rules; (D) the question of agreeing to conference reports; and (E) the question of agreeing to motions to suspend the rules. Precedents were established in the 98 th Congress (1983-1985) that allowed the Speaker to reschedule, within the limits of the rule, postponed votes from a time previously designated; to cluster together both votes to suspend the rules on which votes were postponed and votes on final passage; to cluster together and in the order they were considered the previous day both votes to suspend the rules on which votes were postponed and on final passage; and to cluster votes from a preceding day following a recorded vote on the current day, but to reduce the time for voting on the first clustered vote to five minutes only by unanimous consent. A precedent was also established that the Speaker could entertain a unanimous consent request, while putting questions on postponed votes on motions to suspend the rules, to allow consideration of a Senate measure similar to a House measure just passed. After Representative Parren J. Mitchell obtained unanimous consent to take a Senate measure from the Speaker's table and move to its immediate consideration, Mr. Mitchell moved to strike all after the enacting clause in the Senate bill and insert the provisions of the just-passed House bill. In responding to a parliamentary inquiry, the Speaker pro tempore stated that the unanimous consent request was in order. The motion was then agreed to by voice vote. A response to a parliamentary inquiry in the 99 th Congress (1985-1987) explained that unanimous consent was required to postpone a vote on a motion to instruct conferees, which was not at that time listed in Rule I, cl. 5(b)(1). Also in the 99 th Congress, the Speaker declined to recognize a Member to request unanimous consent to reduce to five minutes the first vote in a series of votes. The Speaker indicated that he did not believe that Members who were not then in the House chamber would have sufficient time to arrive in the chamber. In the 100 th Congress (1987-1989), in the course of voting on a series of postponed votes on motions to suspend the rules, the Speaker pro tempore entertained a unanimous consent request to reduce to two minutes the time for subsequent votes, after the next five-minute vote. No objection was made. In the 101 st Congress (1989-1991), the House addressed the question of postponing votes on certain motions to instruct conferees. In adopting its rules for that Congress, the House amended Rule I, cl. 5(b)(1) to allow the Speaker to postpone further proceedings on the question of agreeing to motions to instruct conferees after 20 calendar days in conference, under the same conditions applicable to the other questions listed. It added one proviso, however, that the "question shall not be put if the conference report on that measure has been filed in the House." The House also amended Rule XV, cl. 5 to allow the Speaker to reduce to five minutes so-called separate votes on amendments reported to the House by the Committee of the Whole. If the Committee of the Whole reported amendments to a measure, and Members demanded separate votes in the House on more than one of the amendments reported, the vote on the first amendment would be a 15-minute vote. The Speaker could reduce to five minutes the time for voting on any subsequent amendment. In the 102 nd Congress (1991-1993), the House amended its rules to add a new paragraph (c) to Rule XXIII, cl. 2 to authorize the chairman of the Committee of the Whole to reduce to "not less than five minutes" the time to vote on clustered amendments after the first 15-minute vote. In adopting rules for the 103 rd Congress (1993-1995), the House reorganized Rule XV, cl. 5 so that a new paragraph (a) continued to make the electronic voting system the customary method of conducting a roll call or a quorum call and to allow Members a minimum of 15 minutes to vote. A new paragraph (b) continued the existing provisions to allow the presiding officer to reduce subsequent votes to five minutes after the first 15-minute vote. The House also adopted a rules change to provide a process in Rule IX for considering and voting on questions of privileges of the House. If such a resolution was offered from the floor by the majority leader or minority leader, or reported from committee, the resolution would have precedence over other questions except a motion to adjourn. If offered by a Member other than the majority leader or minority leader, the Speaker could designate a time within two legislative days, at which time the resolution will have precedence over questions other than a motion to adjourn. When the Republican majority organized the House in the 104 th Congress (1995-1997), the House amended Rule I, cl. 5(b)(1) to reorder the list of questions on which the Speaker could postpone further proceedings, and to add to this list a vote to move the previous question on questions listed in this subparagraph (except a motion to suspend the rules). Another rules change to Rule XV, cl. 5(b) allowed the Speaker to reduce to five minutes a roll-call vote occurring after a 15-minute vote on a motion to recommit. In adopting its rules for the 105 th Congress (1997-1999), the House added to the list of votes that could be postponed. It amended Rule I, cl. 5(b) to include certain questions occurring during the consideration of bills called from the Corrections Calendar (Rule XIII, cl. 4)—agreeing to an amendment, ordering the previous question on a motion to recommit, and agreeing to a motion to recommit. A Speaker pro tempore in the 102 nd Congress (1991-1993) established a precedent on clustering votes that amplified the Speaker's discretion. The Speaker pro tempore designated separate times for votes on postponed questions. In the 103 rd Congress (1993-1995), a Speaker pro tempore established the precedent that it was not necessary for the Speaker to announce his intention to postpone votes at the beginning of consideration of a motion to suspend the rules. The parliamentarian's notes indicated that it is "customarily the courtesy" to make such an announcement, but that the Speaker "may postpone further proceedings after a record vote is ordered or an objection is raised under clause 4 of rule XV...." In the 104 th Congress (1995-1997), on two occasions in one day, Members moved to reconsider the vote by which the previous question was ordered. Other Members then moved to table these motions, and the House voted to table. In each case, the Speaker pro tempore ordered a recorded vote on the underlying measure. He also announced that the vote would be a five-minute vote, establishing a precedent that the tabling motion did not constitute intervening business preventing the presiding officer from reducing to five minutes the length of the vote. In the 105 th Congress, the House adjourned, without having voted, on the second legislative day after the postponement of votes on motions to suspend the rules. By unanimous consent, the questions were postponed to the next meeting of the House. The parliamentarian's notes indicated that the questions remained "the unfinished business on the next legislative day." In the changes agreed to in adopting rules for the 106 th Congress (1999-2001), the House added authority for the Speaker to postpone a vote on the original motion to instruct conferees. As described earlier, the House in the 101 st Congress allowed the Speaker to postpone further proceedings on the question of agreeing to motions to instruct conferees after 20 calendar days in conference. Since the House in adopting its rules for the 106 th Congress also recodified its rules, authority to postpone proceedings formerly codified as Rule I, cl. 5(b) was now codified as Rule XX, cl. 8. The House also allowed the Speaker to reduce to five minutes a vote on a "question incidental thereto" a record vote on a motion to recommit a bill, resolution, or conference report, and on passage or adoption, under the provisions of the rule on five-minute votes. Under recodification, authority to conduct five-minute votes formerly found at Rule XV, cl. 5(b) was codified as Rule XX, cl. 9. The House added a new paragraph (g) to Rule XVIII, cl. 6 in the 107 th Congress (2001-2003) to authorize the chairman of the Committee of the Whole to postpone a request for a recorded vote on any amendment and to resume proceedings at any time. The chairman was also authorized to reduce to five minutes votes taken on a series of questions after a 15-minute vote. Paragraph (f) of this clause already allowed a chairman to conduct five-minute votes on series of pending amendments, but neither it nor precedents allowed a chairman to postpone votes without authorization by the House. Rather, special rules typically authorized a chairman to cluster requests for recorded votes. The Speaker's authority to conduct five-minute votes was further perfected in the 108 th Congress (2003-2005) to simplify the rule and to make it applicable to any question arising "without intervening business" after another vote. As amended, Rule XX, cl. 9 now read: The Speaker may reduce to five minutes the minimum time for electronic voting on any question arising without intervening business after an electronic vote on another question if notice of possible five-minute voting for a given series of votes was issued before the preceding electronic vote. The Speaker was authorized by a rules change in the 109 th Congress (2005-2007) to postpone votes on agreeing to a motion to reconsider, tabling a motion to reconsider, and agreeing in the House to an amendment reported from the Committee of the Whole. During the 109 th Congress, the majority leader gave notice during a series of votes in the Committee of the Whole that he would ask unanimous consent when the committee rose that a vote on a motion to recommit be a five-minute vote. The Speaker pro tempore allowed the subsequent unanimous consent request, and no Member objected. In the 110 th Congress (2007-2009), the majority leader gave notice during a series of votes in the Committee of the Whole that he would ask unanimous consent when the committee rose that the first vote in a series in the House be a five-minute vote. After the committee rose, the majority leader made this request along with further unanimous consent requests related to voting. He asked authority for the presiding officer that the first vote in a series on both the bill under consideration and on the next bill to be considered be a 15-minute vote in the Committee of the Whole; the first vote in the House on either of these bills be a five-minute vote; and subsequent votes in a series in either the Committee of the Whole or the House be two-minute votes. In agreeing to H.Res. 5 on January 22, 1971, the House adopted rules for the new, 92 nd Congress (1971-1973), including "all applicable provisions of...the Legislative Reorganization Act of 1970...." The amendment to House Rule I added the provision on recorded teller votes: If before tellers are named any Member requests tellers with clerks and that request is supported by at least one-fifth of a quorum, the names of those voting on each side of the question and the names of those not voting shall be recorded by clerks or by electronic device, and shall be entered in the Journal. Members shall have not less than twelve minutes from the naming of tellers with clerks to be counted. The importance of recorded teller votes was short-lived. They were a voting procedure that allowed the Committee of the Whole to take recorded votes pending the deployment of an electronic voting system. Once the electronic voting system was operating, by rule and choice it became the customary method of taking record votes. The first recorded teller vote was taken March 3, 1971, on an amendment to a bill to increase the debt ceiling, pursuant to procedures for recorded teller votes that Speaker Albert had announced in February. Under direction from the chair, the clerk read the statement on these procedures to the Committee of the Whole before the vote commenced. Members filled in their name, state, and district on what are called ballot or well cards—green cards for "aye," red cards for "no," and amber cards for "present," which were available on a table in the well of the House chamber. The chair of the Committee of the Whole appointed tellers. Two Members, one from each party, and a clerk with a wooden ballot box took their place at the rear of the chamber to collect the green "aye" cards, and two other Members, one from each party, and a clerk with a wooden ballot box took their place at the rear of the chamber to collect the red "no" cards. Twelve minutes after the chair had directed the tellers and clerks to take their places, 391 Members had voted, and the amendment was defeated, 180-211. The roll was tabulated overnight, and the names of Members voting "aye" and "no" were printed in Congressional Record for March 3. Two changes were made in 1972, to take effect in 1973, related to recorded tellers. First, the House discontinued the role of Members in conducting teller votes, leaving the conduct of the vote to clerks only. Second, tellers did not need to be ordered before a Member could request a recorded teller vote. Rather, a Member could directly request a recorded teller vote. In the 103 rd Congress (1993-1995), the House repealed the general provision for demanding a vote by tellers in Rule I, cl. 5(a). The opportunity for a recorded teller vote remained. As already noted, in agreeing to H.Res. 5 on January 22, 1971, the House adopted rules for the new, 92 nd Congress (1971-1973), including "all applicable provisions of...the Legislative Reorganization Act of 1970...." The amendment to House Rule XV added a new clause 5. This new clause allowed, but did not require, a roll call or a quorum call to be recorded by electronic device. An electronic voting system, however, was not implemented until the 93 rd Congress (1973-1975). Just prior to the electronic voting system becoming operational, the House adopted additional rules changes to make voting by electronic device the customary form of conducting record votes and quorum calls. In addition, Speakers beginning with Speaker Albert and continuing through Speaker Nancy Pelosi have made policy announcements regarding voting by electronic device. A principal challenge that Speakers since Speaker Thomas S. Foley have attempted to meet has been to take advantage of the efficiency of the electronic voting system. A vote could presumably be conducted in little more than 15 minutes, but some Members might not arrive to vote until some time after all other Members had voted. Closely related to this challenge has been the matter of Members changing their votes. The policies of Speaker Albert and Speaker O'Neill on changing votes are still followed. This part of this section should be read with the parts on " Allowing Late-Arriving Members to Vote/Changing an Outcome " and " Members Changing Their Vote ." During the 92 nd Congress, in anticipation of inauguration of the new electronic voting system in the next Congress, the House on October 13, 1972, agreed to H.Res. 1123, changing Rules I, VIII, XV, and XXIII, to make voting by electronic device the customary method for conducting a roll call or quorum call and to make conforming changes in related rules clauses. H.Res. 1123 amended Rule I, cl. 5 to replace the two sentences, quoted in the immediate preceding part, Recorded Teller Votes. The amendment provided: However, if any Member requests a recorded vote and that request is supported by at least one-fifth of a quorum, such vote shall be taken by electronic device, unless the Speaker in his discretion orders clerks to tell the names of those voting on each side of the question, and such names shall be recorded by electronic device or by clerks, as the case may be, and shall be entered in the Journal, together with the names of those not voting. Members shall not have less than fifteen minutes to be counted from the ordering of the recorded vote or the ordering of clerks to tell the vote. The importance of this change was to make voting by electronic device the customary method of taking recorded votes in the House and the Committee of the Whole. It also increased the time to vote to a minimum of 15 minutes from a minimum of 12 minutes, the time beginning "from the ordering of the recorded vote or the ordering of clerks to tell the vote." As explained by Representative H. Allen Smith, the ranking Republican member of the Rules Committee: The intent is that a request for a recorded vote shall be in order before or after a voice vote, a division vote or a teller vote. If a Member requests a recorded vote and is supported by one-fifth of a quorum, the vote will be taken by electronic device. A Member may no longer demand a vote by tellers with clerks. However, once a recorded vote is ordered, the Speaker in his discretion may order a recorded vote with clerks. House Administration Committee Chair Wayne L. Hays, whose committee had jurisdiction over the design and installation of the electronic voting system, also explained that Members not carrying a card to insert into a voting machine in order to vote would still be able to cast a vote. He stated that a Member could go to the Speaker's dais and obtain a "red or green or amber ballot [card], just like we do now for a [recorded] teller vote." After the Member completed the ballot, a clerk would enter the Member's vote in the electronic voting system and the vote would be displayed in the chamber with the votes of other Members. The House also changed Rule VIII, cl. 2 related to the announcement of pairs. The existing rule provided that pairs be announced after the second call of the roll. With voting by electronic device, there would not be a call of the roll as anticipated by the clause. H.Res. 1123 changed the rule so that pairs would be announced immediately before the presiding officer's announcement of the result of a vote. (See " Pairs ," below, in this section.) With regard to Rule XV, "On Calls of the Roll and House," H.Res. 1123 made the first four clauses of Rule XV subject to clause 5 of Rule XV. As already explained, this clause had been added by enactment of the Legislative Reorganization Act of 1970 and approval of H.Res. 5 at the beginning of the 92 nd Congress. H.Res. 1123 amended clause 5 as follows: 5. Unless, in his discretion, the Speaker orders the calling of the names of Members in the manner provided for under the preceding provisions of this rule, upon any roll call or quorum call the names of such Members voting or present shall be recorded by electronic device. In any such case, the Clerk shall enter in the Journal and publish in the Congressional Record, in alphabetical order in each category, a list of the names of those Members recorded as voting in the affirmative, of those Members recorded as voting in the negative, and of those Members answering present, as the case may be, as if their names had been called in the manner provided for under such preceding provisions. Members shall have not less than fifteen minutes from the ordering of the roll call or quorum call to have their vote or presence recorded. Like the change to Rule I, cl. 5, this clause made voting by electronic device the customary system for conducting a recorded vote or a quorum call, and applied a 15-minute minimum time period to quorum calls as well as roll calls. The change also left it to the discretion of the Speaker whether to invoke a different, authorized manner of conducting a recorded vote or quorum call. Another change made by H.Res. 1123 altered Rule XXIII, cl. 2 to direct that a quorum call in the Committee of the Whole be conducted by electronic device "under clause 5 of Rule XV," unless the chair of the Committee of the Whole invoked another procedure authorized under Rule XV. The change conformed the quorum clause of this House rule governing the Committee of the Whole to Rule XV, as amended. During debate, Members anticipated some of the problems and potential uses that could arise with use of an electronic voting system as designed by the House Administration Committee. Representative Margaret M. Heckler asked about the confusion of the same or similar last names, which House Administration Committee Chairman Hays indicated was an issue still being worked on before the electronic voting system's use began. Delegate Walter E. Fauntroy asked about Members using voting cards to vote on behalf of other Members, to which Rules Committee member Sisk responded, "Members of the Congress work on their own honor....it gets down to a matter of the integrity of each Member." Rules Committee member John B. Anderson asked about the availability of printouts (reports) showing various voting patterns. Chairman Hays indicated that could be done in the future. Representative John M. Ashbrook made a related observation in a colloquy with Chairman Hays: Mr. Hays:...Mr. Speaker, someone facetiously asked me a minute ago if we would have a system for retrieval of Members who voted and rushed out of the Chamber before the respective leadership on either side can latch onto them. I can say to the gentleman there is no plan for such a retrieval system. Mr. Ashbrook:...I think what is going to happen is that we are going to see the passage of one of the most time-honored traditions around this House. That is the system of putting pressure on Members to change their votes in the well. I think we have to be aware of the fact that a Member can vote and instantly leave the Chamber. I just asked the gentleman from Ohio [Mr. Hays] whether something can be done to equip the leadership with the proper tools, maybe a tracking device. Mr. Hays: That is really a leadership problem. It will be possible for Members to come into the back of the room and vote and go on their way. Mr. Ashbrook: That might help our processes. Representative Barber B. Conable Jr. stated that the current system discouraged Members from changing their votes, since the changes were reported. He asked whether the new system would lead to "strategic maneuvering" on close votes to allow a party's leadership to cloak from the other side "where the votes are." Chairman Hays acknowledged the possibility and suggested several potential responses, including programming changes and having Members announce changes in the well of the House that would then be recorded. Mr. Conable also asked about the recording of Members' transactions with the electronic voting system. Chairman Hays responded that "all actions," including changed votes, would be recorded, but that only a Member's final vote would be reported. Representative John F. Seiberling asked whether Members' names could be displayed so that Democrats' names were closest to the Democratic side of the chamber and Republicans' names were closest to the Republican side of the aisle. Chairman Hays indicated that it was indeed possible, but that it would be up to the Rules Committee and the House to make the decision to use a system different from the alphabetization of the House membership. Representative Richard C. White inquired about procedures related to a vote by division. Chairman Hays responded that a Member dissatisfied with the result of a division vote could ask for a recorded teller vote. Representative Melvin Price, who had chaired the Standards of Official Conduct Committee investigation into ghost voting in the 90 th and 91 st Congresses, counseled his colleagues as the last speaker in debate. Although Mr. Price supported the electronic voting system as a "giant stride toward greater efficiency and enlarged confidence in the work of the House," he admonished his colleagues: ...I must caution my colleagues that the installation of this system opens other doors, which are not necessarily desirable. There is always the possibility the new system could be abused or misused. For example, it could lead to the practice of "ghost voting," such as happened recently in the State government of Pennsylvania where votes were cast for members of the general assembly who were not on the floor or, in one instance, even the country. I urge my colleagues to support this improvement in House procedure, but emphasize we must guard against any misuse of the new system which could tend to destroy the credibility of Congress in the eyes of the public. On January 3, 1973, Speaker Albert announced that there would be a delay in implementing the electronic voting system, noting the need to prepare voting cards for each Representative, referred to at that time as "personalized Vote-ID Cards." The Speaker directed that the forms of roll call and quorum call used previously continue in the 93 rd Congress until further notice. On January 15, the Speaker announced his policy on electronic voting, and stated that the electronic voting system would be operational January 23. In his policy statement, the Speaker announced: how the electronic voting system operated, and what information would be available on the consoles at the party tables; how Members were to use their Vote-ID Cards at the voting stations to cast, change, or check their votes or to register their presence on a quorum call; that the presiding officer would instruct Members to "record their presence or votes by means of the electronic device," and that this instruction would initiate a 15-minute voting period, with time on the summary displays decreasing to 0:00 minutes from 15:00 minutes; that Members could cast, change, or check their votes until the presiding officer "declare[d] the vote to be closed and announce[d] the final result"; that voting stations would remain open until the presiding officer "declare[d] the vote to be closed and announce[d] the final result," at which time the voting stations would be closed and the summary panel would indicate "FINAL"; how a Member without his or her Vote-ID Card could vote by picking up in a cloakroom or the well a green ("yea"), red ("no"), or amber ("present") ballot card, filling in his or her name, state, and district, and handing the card to the tally clerk, who would then enter the Member's vote and deactivate use of the Member's Vote-ID Card on that vote; how a Member may pair (see Pairs, below); and that the presiding officer in his or her discretion would determine that recorded votes or quorum calls be taken by another procedure than electronic device. The electronic voting system was first used January 23, 1973, when House Administration Chairman Hays made a point of order that a quorum was not present and moved a call of the House. The call of the House was ordered, and Members' presence was recorded by electronic device. Presiding officers in the 93 rd Congress (1973-1975) established a number of practices and precedents related to the electronic voting system. On March 7, 1973, the Speaker announced that the electronic voting system was "not operable," and that until further notice votes and quorum calls would be "taken by standby procedures." Two months later, knowing that the electronic voting system was not operating when a point of order against a vote was made, the Speaker directed the clerk to call the roll for the vote in lieu of taking the vote by electronic device. (Instances of failures in the electronic voting system in 1973 appear in Table 2 , below.) On June 6, 1973, a call of the House was ordered to establish a quorum. While Members were responding to the call, a Member demanded regular order. The Speaker responded: The regular order is the establishment of a quorum and the rule provides a minimum of 15 minutes for Members to respond. Clause 5 of rule XV states that Members have "not less than 15 minutes to have their presence recorded." Since this clause was also incorporated by reference in Rule XXIII, pertaining to the Committee of the Whole, chairman of the Committee of the Whole established the same precedent in ruling on a point of order on July 17, 1974. Representative Robert E. Bauman made a point of order that fewer than 100 Members had responded to a quorum call (a "notice quorum") at the expiration of 15 minutes and that a "regular quorum call must then be called...." After the Member's further explanation, the chairman stated: The Chair understands the rule, and clause 5, rule XV provides a minimum, not a maximum, of 15 minutes for Members to respond on any quorum call. The Chair can exercise his discretion to continue the quorum call if the Chair desires to do so. Finally, the Speaker established one more precedent concerning voting by electronic device. Despite Members' explanations that their votes had been wrongly recorded by the electronic voting system, Speaker Albert ruled that the presiding officer was without authority to entertain a unanimous consent agreement to make a correction. The statements appeared in the Congressional Record . For the reader's convenience, this subpart is divided topically. Recapitulation . In the 94 th Congress (1975-1977), following a Member's demand for the recapitulation of a vote, Speaker Albert stated, "Under the rules, a recapitulation of an electronic vote is not in order." Later in the same Congress, in the course of the Speaker announcing new procedures for a Member to change his or her vote, Representative Bauman, made a parliamentary inquiry whether a recapitulation of the vote would now be in order since it would be "beneficial" in close votes. The Speaker responded: ...there is no change in the ruling. That is not the reason why the prior ruling was made. The names of the Members will still appear on the panel and Members can verify their changed votes without a recapitulation. That was the basis for the original ruling, that all names, whether they are by Members inserting their voting cards or voting from the well, will appear on the voting panel for verification. In the 97 th Congress (1981-1983), the Speaker allowed a correction to a vote taken by electronic device, which had resulted from an error in identifying the signature on a voting card. Constitutionality . A Member made a parliamentary inquiry in the 99 th Congress (1985-1986) concerning the constitutionality and authority under House rules of conducting votes by electronic device. He asserted that the Constitution and House rules required that "Members of Congress, when casting their vote, do so wholly in public so that the Member's vote is in fact known to the public at the time he or she casts that vote." The Speaker responded, The Constitution requires that the yeas and nays be spread upon the Journal, and that is what the rules of the House have always guaranteed, both prior to and subsequent to electronic voting. Consequently, the Chair believes that the proper method is being used and that there are precedents therefor. Following this exchange, the same Member objected to the voice vote on the ground that a quorum was not present, and the Speaker ordered the vote to be taken by electronic device. Having been notified that the display panels were not working but that the voting stations were operational, the Speaker exercised his discretion to continue using the electronic voting system, and suggested that Members verify their vote by re-inserting their voting cards in the same or a different voting station. The voting stations then failed, and the Speaker initiated voting by the standby procedures of Rule XV. Malfunction of the Electronic Voting System . In the 100 th Congress (1987-1989), the electronic voting system malfunctioned. The chairman of the Committee of the Whole vacated a recorded vote on an amendment, and ordered the clerk to call the roll pursuant to Rule XV, cl. 1. After the chairman announced the result of the vote, he stated: The Chair will announce that prior to the next vote Members will be advised whether or not the electronic voting system is operating. The technicians are working on the system and hopefully by the time we complete debate on the next amendment the system will be operational. When the next vote was taken, the electronic voting system was used. Malfunctions of the voting system are examined in the next section, Issues Related to Record Voting Since 1970: Inoperative Electronic Voting System . Speakers ' Policies on Voting by Electronic Device . In the 94 th Congress (1975-1977) and 95 th Congress (1977-1979), the Speakers announced policies related to Members changing their vote when voting by electronic device. These policies are described in the part below, Members Changing Their Vote. During the 1980s, Speakers routinized the custom of announcing policies on aspects of the legislative process on the day, or in the first days, of a new Congress's convening. When the 102 nd Congress (1991-1993) convened, the Speaker pro tempore, in behalf of Speaker, announced eight policies, including one on the conduct of votes by electronic device. The policy on voting was as follows: As Members are aware, clause 5 of rule XV provides that "Members shall have not less than 15 minutes from the ordering of the rollcall or quorum call to have their vote or presence recorded." While the rule obviously states a minimum, rather than maximum, time requirement for electronic votes, and while no occupant of the chair would attempt to prevent a Member who is in the Chamber at the expiration of that time from casting his or her vote, the Chair has noticed that in the past session inordinate delays in concluding electronic votes or quorum calls would occur when Members would notify the Chair through the Cloakrooms that they were on their way to the Chamber from a variety of locations. The Chair would encourage all Members to depart for the Chamber promptly upon the appropriate bell and light signal, since there is no guarantee that Members can rely upon telephoned notice to the Cloakrooms in order to have votes held open. As indicated by his remarks on this subject on October 13, 1990, the minority leader joins the Chair in urging all Members to help avoid the unnecessary loss of time in conducting the business of the House. The Speaker continued this policy in the 103 rd Congress (1993-1995), with the addition of a proscription: ...the Speaker is advising the Cloakrooms that they should not forward to the Chair individual requests to hold open a vote by electronic device, but should simply apprise inquiring Members of the time remaining on the voting clock. When the new Republican majority organized the House in the 104 th Congress (1995-1997), Speaker Newt Gingrich placed increased emphasis on conducting votes within a 15-minute time frame. The new policy provided, in part: ...The Chair encourages all Members to depart for the chamber promptly upon the appropriate bell and light signal. As in recent Congresses, the cloakrooms should not forward to the Chair requests to hold a vote by electronic device, but should simply apprise inquiring Members of the time remaining on the voting clock. Although no occupant of the Chair would prevent a Member who is in the well of the chamber before the announcement of the result from casting his or her vote, each occupant of the Chair will have the full support of the Speaker in striving to close each electronic vote at the earliest opportunity. Members should not rely on signals relayed from outside the chamber to assume that votes will be held open until they arrive in the chamber. The two substantive departures from Speaker Foley's policy were, first, that Members in the well, not simply in the chamber, would not be prevented from voting, and, second, the Speaker would support the presiding officer in "striving to close" a vote at "the earliest opportunity." In addition, in his address to the House upon his election as Speaker, Speaker Gingrich mentioned the importance of schedules, referring to a bipartisan task force on the family that had been established earlier. The task force had recommended limiting votes to 17 minutes. The Speaker stated, I hope all of my colleagues are paying attention because we are in fact going to work very hard to have 17 minute votes and it is over. So, leave on the first bell, not the second bell. Speaker Gingrich's policy was put to the test in a dispute over a vote on June 21, 1995, as explained in the next part, Allowing Late-Arriving Members to Vote/Changing an Outcome, and also in the section below, Issues Related to Voting since 1970: Members Attempting to Vote . Illuminating Display Boards Other than when a Vote Is Being Conducted . In the 105 th Congress (1997-1999), a Member asked unanimous consent to have the display boards showing all the Members to be turned on in order to have a list of Members. The Speaker pro tempore stated that such a request was not in order. This subpart concludes the evolution of rules and precedents related to the electronic voting system following the recodification of House rules in the 106 th Congress. (See Table 1 ) Recodification and Amendment of Rules . The House adopted a recodification of its rules in adopting rules for the 106 th Congress (1999-2001). Rules provisions formerly found in Rule XV and other rules related to voting and quorums were recodified in a new Rule XX. The House also added a new provision, clause 2(b), to Rule XX, as follows: When the electronic voting system is inoperable or is not used, the Speaker or Chairman may direct the Clerk to conduct a record vote or quorum call as provided in clause 3 or 4 [of Rule XX]. The parliamentarian's notes in the House Rules and Manual stated that this new provision was added as a "cross reference" to backup procedures found in clauses 3 and 4 of Rule XX, and to "clarify the Chair's discretion to choose either backup procedure." Malfunction of Electronic Voting System . A Speaker pro tempore vacated a vote in the 106 th Congress (1999-2001) when the electronic voting system malfunctioned and the clerk was unable to certify to the Speaker pro tempore the accuracy of the vote. A series of parliamentary inquiries by a Member displayed the specific issues and precedents that led the Speaker pro tempore to seek to announce a result based on the vote by electronic device before vacating the vote. The clerk was ultimately directed to call the roll. Some of the exchange was as follows: The Speaker pro tempore. ...The Speaker has the discretion, in the event of a malfunction of the electronic voting system, to, one, continue to utilize the electronic voting system, even though the electronic display panels are inoperative, where the voting stations continue in proper operation and Members are able to verify their votes; or, number two, to utilize a backup voting procedure, such as calling the roll.... Mr. Dingell: ...Could the Chair inform the Chamber what the Clerk has done to assure that the vote is reliable and correct? I have great respect for the Clerk, but we have a malfunction in the electronic system. My question is, who do we believe, the malfunctioning electronic system or the Clerk of the House? The Speaker pro tempore. The Clerk has responded to every Member and checked every Member's vote of any Member who has come forward to question the recording of their vote.... The Speaker pro tempore. The chair will further state there have been cases in the past where the displays on the boards before the media gallery have been inoperative, but that the votes recorded by the Clerk have been accurate. There is precedent for relying on the running totals. ...Mr. Dingell. Mr. Speaker, is it the practice of the Chair, then, or would it be the practice of the Chair to inform us of whether the Clerk's certification is 100 percent correct when that process has been completed? The Speaker pro tempore. The House will be informed of the accuracy of the vote, and the Chair just asks Members' indulgence. ...The Speaker pro tempore. The Chair has been informed that the accuracy of the vote cannot be established with 100 percent accuracy. On this occasion, the Chair will direct the Clerk to call the roll to record the yeas and nays, as provided in clause 2(b) of rule XX. Representative Bill Thomas, chairman of the House Administration Committee, addressed the House after the result of the vote was announced to explain the cause of the malfunction (a technical problem compounded by a human error), which resulted in an error in what Members could see on the display board rather than an error in how Members' votes were recorded. The parliamentarian's notes in the House Rules and Manual referred to this event thus: "The question whether the electronic voting system is functioning reliably is in the discretion of the Chair, who may base a judgment on certification by the Clerk." In the 107 th Congress (2001-2003), the electronic voting system failed during a vote, and a Speaker pro tempore held the vote open for nearly 3-1/2 hours. He announced that the votes Members had cast at voting machines and the votes Members had cast by filling out a green, red, or amber ballot card, which the clerks entered into the electronic voting system, would be combined. "Together this will constitute a valid vote." He encouraged Members to fill out a ballot card to verify their vote, and he stated that the vote would be held open until Members who had gone to a memorial service returned and had an opportunity to verify their votes. When the electronic voting system failed twice during the conduct of votes in the 108 th Congress (2003-2005), the presiding officer chose a different path in each instance. On March 25, 2004, a Speaker pro tempore announced to the House, "...that some of the voting stations may have been reset during this vote." The Speaker pro tem continued the vote, requested Members to confirm their vote, and stated that the voting machines would be kept open so that Members would have the opportunity to cast or confirm a vote. Later, on July 13, a chairman of the Committee of the Whole first announced that there were "technical difficulties," and that Members should confirm their vote "from the well." He then announced that Members should stop voting since the electronic voting system was "inoperable and the clerk has no way of tallying the votes." He stated that the clerk was attempting to reboot the system and, if that occurred, Members would need to "cast their votes a second time." The chairman finally announced a new vote on the same question, The Chair is advised that the electronic voting system has been restarted, and the electronic vote will be conducted anew, a totally fresh start. Members must recast their votes even if they previously cast votes under the earlier, defective electronic vote. The bells will be rung to indicate a 15-minute vote on the...amendment.... These occurrences of electronic voting system malfunction are examined in the section below, Issues Related to Voting since 1970: Inoperative Electronic Voting System , and Inoperative Display Boards . By the 102 nd Congress (1991-1993), leaders and Members were frustrated by the duration of some votes. The electronic voting system had promised efficiency in the conduct of record votes and quorum calls, but Members often lagged in getting to the floor and recording or changing their votes. A practice grew up whereby Members would alert their cloakroom of their future arrival on the floor. The presiding officer could then continue to hold open a vote until the Members appeared and voted. In the 102 nd Congress, Speaker Foley announced a policy to attempt to close votes shortly after the 15-minute minimum time to vote. Speaker Gingrich tightened the policy, which has been continued by subsequent Speakers. A different issue has arisen on other occasions, where votes have been held open for a period of time well past 15 minutes. Minority Members, in particular, whether the Democrats or the Republicans organized the House, have complained over certain of these events. The 110 th Congress made an attempt to provide the presiding officer with guidance in the form of a new House rule to prevent votes from being held open "for the sole purpose of reversing the outcome" of a vote. Prior to the 91 st Congress (1969-1971), a Member was not allowed to vote after the clerk had called the roll and then called the names of Members not voting a second time. House Rule XV, cl. 1 provided, in part, at that time: ...and after the roll has been once called, the Clerk shall call in their alphabetical order the names of those not voting; and thereafter the Speaker shall not entertain a request to record a vote or announce a pair.... However, under certain conditions, a Member was nonetheless allowed to vote after his or her name had been called twice. In notes on Rule XV, cl. 1, the parliamentarian explained: A Member who has failed to respond when his name was called may not as a constitutional right demand that his vote be recorded before the announcement of the result.... But when a Member declares that he was listening when his name should have been called and failed to hear it, he is permitted to record his vote.... In order to qualify to vote the Member must have been within the Hall...and listening...when his name was called, and it is the duty of the Speaker to qualify a Member asking to vote at the end of the roll, but it is for the Member and not the Speaker to determine whether he was in the Hall and listening when his name was called, and unless he answer categorically in the affirmative he may not vote.... With the approval of H.Res. 7 on January 3, 1969, the House amended Rule XV, cl. 1. The phrase disallowing the Speaker from recording a vote after a Member's name had been called twice was replaced as follows: ...and after the roll has been once called, the Clerk shall call in their alphabetical order the names of those not voting. Members appearing after the second call, but before the result is announced, may vote or announce a pair. Therefore, "Members appearing after their names are called but before the announcement of the result may vote or announce a pair." Following the change in House rules to allow recorded teller votes, effective in the 92 nd Congress (1971-1973), Speaker Albert announced a policy to explain how a late-arriving Member could vote. The Speaker stated that, after the second teller had reported the "noes" on a vote, Members who arrived within the allotted time—which under the rule must be at least 12 minutes from the naming of tellers with clerks—will be permitted to fill in the card, be counted, and recorded.... The Chair will then announce the vote, but not before the expiration of at least 12 minutes from the naming of tellers with clerks, nor until the chair ascertains that no further Members are present who desire to be recorded. The Speaker also explained how a Member could vote present: "Immediately after the Chair has announced the vote and before any further business is conducted, Members wishing to be recorded as "present" will announce their presence to the Chair." In the course of House debate in the 92 nd Congress on H.Res. 1123, inaugurating voting by electronic device, House Administration Committee Chairman Hays explained the relationship between the electronic voting system and Members' opportunity to vote: When [the electronic voting system's clock] comes to zero, the Speaker will bang down his gavel and will say, "All time has expired," or "Are there any Members in the Chamber who desire to vote?" It is just like we do it now on a teller vote. If there are any who desire to vote, he will give them a minute or two more to do so, and then he will lock the machine out, and that is the end of it. On January 15, 1973, as noted above, Speaker Albert announced his policy on electronic voting, and stated that the electronic voting system would be operative eight days later. In his policy statement, the Speaker announced that, when the time to vote had reached "0:00," vote stations would remain open "until the Chair declares the vote to be closed and announces the final result." He added that vote stations would be closed at this point to the "acceptance of further votes." During the 93 rd Congress (1973-1975), following inauguration of voting by electronic device, presiding officers established practices and precedents related to the electronic voting system and affecting the duration of a vote. While Members were responding to a quorum call (an example mentioned earlier), a Member demanded regular order. The Speaker responded: The regular order is the establishment of a quorum and the rule provides a minimum of 15 minutes for Members to respond. Clause 5 of rule XV states that Members have "not less than 15 minutes to have their presence recorded." Since this clause was also incorporated by reference in Rule XXIII, cl. 2 pertaining to the Committee of the Whole, a chairman of the Committee of the Whole, as mentioned earlier, established the same precedent in ruling on a point of order that fewer than 100 Members had responded to a quorum call. The chairman stated: The Chair understands the rule, and clause 5, rule XV provides a minimum, not a maximum, of 15 minutes for Members to respond on any quorum call. The Chair can exercise his discretion to continue the quorum call if the Chair desires to do so. In the 94 th Congress (1975-1977), Speaker Albert announced a procedure that affected Members seeking to vote after the 15-minute voting period. He stated that the voting machines would be turned off and that Members who had not yet voted could continue to vote but only by submitting a ballot card. While the purpose of turning off the voting machines was principally aimed at Members wishing to change a vote (as explained in the next part, Members Changing Their Vote), any late-arriving Member who had not yet voted was also affected. In the 96 th Congress (1979-1981), a Member made a point of order after a Speaker pro tempore stated that all time had expired. One or more Members apparently had not voted or had not yet changed their vote. Representative John M. Ashbrook cited precedents that a Member who failed to vote could insist that his or her vote be recorded, even if the presiding officer had declared the result of a vote. The Speaker pro tempore responded, "Those precedents apply only to rollcalls preceding the installation of the electronic device and are not a precedent for holding the vote by electronic device open indefinitely." A Member in the 100 th Congress (1987-1989) made a parliamentary inquiry about voting after a Speaker pro tempore announced on a vote, "All time has expired." The Member asked whether, after the announcement, Members could cast votes. The Speaker pro tempore responded, "The Chair will state that the rules of the House state that the rollcall will be open for a minimum of 15 minutes, and that beyond that it is at the discretion of the Chair." A motion to adjourn and a record vote on it followed. Representative Mickey Edwards made a parliamentary inquiry into the length of votes: Mr. Speaker, you have now announced that all time has expired. I am quite familiar with the policy of this Chair. Under the rules of the House could the Parliamentarian instruct us whether under the rules at this point additional votes may be cast now that the Chair has announced that time has expired? Speaker Jim Wright responded that the chair "will state that the rules of the House state that the rollcall will be open for a minimum of 15 minutes, and that beyond that it is at the discretion of the Chair." This specific situation is discussed more below in the section Issues Related to Voting since 1970: Holding Votes Open . Speaker Foley announced a new policy on voting by electronic device in the 102 nd Congress (1991-1993). Regarding late-arriving Members, the Speaker's policy was exhortatory. He indicated that the presiding officer would not "attempt to prevent a Member who is in the Chamber at the expiration of [the minimum 15 minutes] from casting his or her vote...." Rather, the Speaker "would encourage" all Members to leave their locations for the floor "promptly" when the bells were sounded to indicate a vote. The Speaker continued this policy in the 103 rd Congress (1993-1995), but added that he was "advising the Cloakrooms that they should not forward to the Chair individual requests to hold open a vote by electronic device, but should simply apprise inquiring Members of the time remaining on the voting clock." In the 104 th Congress (1995-1997), Speaker Gingrich made a firmer policy announcement. The two substantive departures from Speaker Foley's policy were, first, that Members in the well, not simply in the chamber, would not be prevented from voting, and, second, the Speaker would support the presiding officer in "striving to close" a vote at "the earliest opportunity." He also indicated in remarks to the House following his election as Speaker that the House would attempt to hold votes to a 17-minute duration. Speaker Gingrich's policy was put to the test in a dispute over a vote on June 21, 1995. The ayes and noes stood at 213-214 when the chairman of the Committee of the Whole announced the result of a vote. Two Democratic Members, who reportedly intended to vote "aye," were apparently rushing down the aisles into the well when the chairman announced the result. Pursuant to the Speaker's policy on the duration of votes, this vote had been open for about 17 minutes: the Republican leader the next day said 17 minutes and 10 seconds; two Democratic Members who had been prevented from voting said 16 minutes and 45 seconds; and the Democratic leader said other votes, including the vote following the disputed tally, were held open longer than 17 minutes to accommodate Members. The next day, June 22, Majority Leader Dick Armey stated that, after reviewing the videotape of the vote, "it is quite clear that the Chair...was on solid parliamentary ground when he called the vote...." He said the chairman had already stopped the announcement of the result to allow a Democratic Member to vote, that the well was empty of Members, and that a Republican Member subsequently arrived too late to vote and was unable to do so. Nonetheless, prior to asking unanimous consent in the House to vacate the June 21 vote in the Committee of the Whole and to allow a vote de novo, Mr. Armey explained why he was pursuing this course: ...I know all too well that once the perception of unfairness and arbitrariness has set in, it is difficult to undo regardless of the facts of the matter. ...we should all, in each and every act of conduct, no matter how small, always put the honor and the dignity of this body ahead of the politics or even, for that matter the political subtlety of the moment. Minority Leader Richard A. Gephardt stated that the Democrats' "version of the facts is different" from the majority leader's, but that what the majority leader was seeking to do was "right." He stated that the Members "were in the Chamber, were trying very much to get into the well...." Representative Thomas M. Foglietta, one of the Democratic Members who sought to vote, said that a Member had cried out, "One more vote, one more vote!" as Mr. Foglietta passed him. Since there was no objection to the majority leader's unanimous consent request for a vote de novo in the Committee of the Whole, the Speaker ordered it and then reiterated his policy on voting by electronic device. The House later resolved into the Committee of the Whole and the amendment was agreed to, 220-204. (More information on the dispute over this vote appears below in the section Issues Related to Voting since 1970: Members Attempting to Vote .) At the convening of the 105 th Congress (1997-1999), Speaker Gingrich reiterated his policy. Later in the 105 th Congress, after consultation with the minority leader, the Speaker announced a "reaffirmation" of the policy, stating as well that the presiding officer would seek to close votes "after no more than 17 minutes." The Speaker continued: Although no occupant of the chair will prevent a Member who is visible to the Chair before the announcement of the result from casting or changing his or her vote, each occupant of the chair will have the full support of the Speaker in striving to close each electronic vote at the earliest opportunity. In the 108 th Congress (2003-2005), a vote in the House was held open for approximately three hours. The Congressional Record does not show any parliamentary inquiries occurring during the conduct of the vote, although after the vote Members coupled criticism of the duration of the vote with parliamentary inquiries that ultimately resulted in a record vote on the motion to table the motion to reconsider the vote on agreeing to a conference report. Subsequently, Minority Leader Nancy Pelosi raised a question of the privileges of the House and submitted a resolution that recited certain facts concerning the duration of the vote and House policies and practices and allegations about pressures brought to bear to influence one Member's vote. The resolve clause of the resolution stated: That the House denounces this action in the strongest terms possible, rejects the practice of holding votes open beyond a reasonable period of time for the sole purpose of circumventing the will of the House, and directs the Speaker to take such steps as necessary to prevent any further abuse. The Speaker pro tempore ruled that the resolution constituted a question of the privileges of the House. While after debate the House voted to table the resolution, the parliamentarian's notes cited the Speaker's ruling for its precedential value. This matter is discussed more fully in the section below, Issues Related to Voting since 1970: Exchanging a Vote for a Benefit . When Democrats organized the House after winning the majority in the 110 th Congress (2007-2009), a widely publicized change was made to House Rule XX, cl. 2, the clause that makes voting by electronic device the customary method of voting and that establishes a minimum voting time of 15 minutes. The rules change to this clause added the sentence: A record vote by electronic device shall not be held open for the sole purpose of reversing the outcome of such. In furtherance of this rule, when Speaker Pelosi announced the policies of the chair for the 110 th Congress, she modified the policy on voting by electronic device. One phrase was deleted: "each occupant of the chair will have the full support of the Speaker in striving to close each electronic vote at the earliest opportunity." In its place, Speaker Pelosi announced: "Members will be given a reasonable amount of time in which to accurately record their votes." Parliamentary inquiries early in the 110 th Congress sought to clarify the operation of this new rules provision. One inquiry asked whether the outcome of the vote was the tally when voting time expired after 15 minutes. A Speaker pro tempore stated that 15 minutes was a minimum period and that on the first vote of the day "a longer time may be necessary to complete the vote." In response to a different parliamentary inquiry, a Speaker pro tempore reiterated that 15 minutes was the minimum duration of a vote and that it was the "responsibility of the Chair to see to it that each and every Member...who responds to the vote has a chance to record his or her vote." He said, "After [15 minutes], it is in the discretion of the Chair in order to allow all Members a reasonable opportunity to vote." The Speaker pro tempore specifically addressed the new rules provision as follows: It is true under clause 2(a) of rule XX, a vote by electronic device "shall not be held open for the sole purpose of reversing the outcome of such vote." In conducting a vote by electronic device, the Chair is constrained to differentiate between activity toward the establishment of an outcome on the one hand, and activity that might have as its purpose the reversal of an already-established outcome, on the other. The Chair also must be mindful that, even during a vote by electronic device, Members may vote by card in the well. So long as Members are recording their votes—even after the minimum period prescribed for a given question—the Chair will not close a vote to the disenfranchisement of a district whose representative is trying to vote. The language of this response, concerning the establishment as opposed to the reversal of an outcome, was used again in response to a parliamentary inquiry concerning the prevailing side. The inquiry occurred at a point some time after the minimum 15 minutes for voting. Members subsequently changed their vote, and the other side prevailed. Representative Lynn A. Westmoreland twice raised a point of order based on the new rule. On June 27, 2007, a chairman of the Committee of the Whole responded, "The vote was kept open to do the numerical calculation to see if the votes of the Delegates would change the outcome." On May 8, 2008, Mr. Westmoreland received a more extensive response from a chairman of the Committee of the Whole to his point of order: The Chair has considered whether the new sentence in clause 2(a) of rule XX should be enforceable in real time. The black letter of the rule is not dispositive. It uses the mandatory "shall." It might just as well say "should," inasmuch as it is setting a standard of behavior for presiding officers. For this reason the Chair thinks it more sensible to enforce the rule on collateral bases, as by a question of the privileges of the House. A set of "whereas" clauses in the preamble of a resolution could allege the facts and circumstances tending to indicate a violation more coherently than they could be articulated in argument on a point of order or in debate on an appeal. The resolving clause of a resolution could propose a fitting remedy, rather than requiring the instant selection of a remedy in the face of competing demands for vitiation of the putative result, reversal of the putative result, or admonishment of the presiding officer. The Chair finds that the new sentence in clause 2(a) of rule XX does not establish a point of order having an immediate procedural remedy. Rather than contemplating a ruling from the Chair in real time, the language should be understood to establish a standard of behavior for presiding officers that might be enforced on collateral bases. A number of points of order and parliamentary inquiries in the 110 th Congress related to the new rule appear in Appendices C and D , respectively. The parliamentarian's notes in the House Rules and Manual prior to the use of the electronic voting system explained when Members could change their vote: Before the result of a vote has been finally and conclusively pronounced by the Chair, but not thereafter, a Member may change his vote..., and a Member who has answered"present" may change it to "yea" or "nay".... When voting by electronic device began in 1973, Speaker Albert announced that voting stations would remain open until the presiding officer "declare[d] the vote to be closed and announce[d] the final result," at which time the voting stations would be closed and the summary panel would indicate "FINAL". By the 94 th Congress (1975-1977), the Speaker implemented a new policy, to take effect September 22, 1975, disallowing Members from changing their votes by electronic device. The Speaker explained he had consulted with leadership and others, such as Members serving on the House Administration Committee, but did not explain what had occasioned the change. Press reports noted that the leadership of both parties wished to keep better track of Members' votes and to reduce the number of position changes during a vote. The Speaker announced that, after the 15-minute voting period, he would continue the practice of asking if there were Members wishing to vote. He would then ask if there were Members wishing to change their vote. A Member wishing to change a vote would come to the well of the House, announce the change when his or her name was called, and submit a green ("yea" or "aye"), red ("no"), or amber ("present") ballot card to the tally clerk showing the changed vote. The tally clerk would enter the change in the electronic voting system, and the change would be shown on the display panels. Subsequently, Speaker Albert modified the procedure for Members to change their votes, effective March 22, 1976. He announced that Members would be able, during the first 10 minutes of a vote, to change their vote at the voting stations. To change a vote after the first 10 minutes, a Member would need to go to the well of the House and follow the procedures previously outlined. The Speaker also stated that a Member would need to go to the well to change a vote cast during a five-minute vote. When the 95 th Congress (1977-1979) convened, Speaker O'Neill announced that the voting policies announced by Speaker Albert in the previous Congress would continue in effect, with one change. Speaker O'Neill stated that, effective immediately, Members could change their vote at voting stations throughout a five-minute vote. Once the voting machines were turned off at the completion of the five-minute voting period, a Member wishing to change a vote would need to go to the well and follow procedures for changing a vote. In response to a parliamentary inquiry in the 109 th Congress (2005-2007), a Speaker pro tempore reiterated that, once the electronic voting machines were turned off, a Member must go to the well to change a vote. Rule III, cl. 1 (Rule VIII, cl. 1 before recodification) has its origin in the First Congress. It states: Every Member shall be present within the Hall of the House during its sitting, unless excused or necessarily prevented, and shall vote on each question put, unless he has a direct personal or pecuniary interest in the event of such question. The parliamentarian's notes in the House Rules and Manual have stated throughout the time frame of this report, "It has been found impracticable to enforce the provision requiring every Member to vote...." Leaves of absence—permission formally granted to be absent during proceedings—are normally given for "'official business,' personal illness, illness in the member's family, or military service in wartime." Regarding a "personal or pecuniary interest," the parliamentarian's notes in the House Rules and Manual comment, "The weight of authority also favors the idea that there is no authority in the House to deprive a Member of the right to vote.... ...The Speaker has held that the Member himself and not the Chair should determine this question...." In addition, throughout the time frame of this report, even before the adoption of a specific rule, Members could not vote by proxy in the House. In the 94 th Congress (1975-1977), Speaker Albert recognized Representative Robert E. Bauman for a parliamentary inquiry, which dealt with issues related to voting and a Member's "direct personal or pecuniary interest" under Rule VIII, cl. 1. The inquiry was posited in anticipation of House consideration of the New York City "bailout" legislation ( H.R. 10481 ; P.L. 94-143 ). Representative Bauman asked whether a vote on this legislation, by a Member who personally or whose spouse held a financial interest in New York City such as bonds or pensions, would be a conflict of interest for the Member. The measure to be considered authorized guarantees of the city's obligations. The Speaker divided his response into two parts. In the first part, he referred to precedents, such as a ruling by Speaker Nicholas Longworth, that "the personal interest of Members who belong to the class is not such as to disqualify them from voting." Speaker Albert noted the general nature of the "bailout" legislation: "While it...in its present form would have an immediate effect on only one State, the reported bill comprehends all States and territories." In the second part, Speaker Albert pointed to other precedents indicating that a Member himself must decide what is a disqualifying interest and that the presiding officer lacks "authority to deprive the constitutional right of a Member to vote...." Speaker O'Neill made a similar ruling on a point of order in the 96 th Congress (1979-1981) that a Member named in a resolution to expel him from the House should not vote on questions related to the resolution. The Speaker stated: Because the Chair severely doubts his authority to deprive the constitutional right of a Member to vote, and because of the overwhelming weight of precedent, the Chair holds that each Member should make his or her own determination whether or not a personal or pecuniary interest in a pending matter should cause him to withhold his vote." Also in the 96 th Congress, the Committee on Standards of Official Conduct undertook an investigation of "ghost" voting. Although the Members investigated were not charged, the committee found House rules to be ambiguous and recommended amendment of the rules. (See the section on Issues Related to Voting since 1970: "Ghost" Voting .) In adopting its rules for the 97 th Congress, the House added a new clause 3 to House Rule VIII. The new provision was as follows: 3. (a) A Member may not authorize any other individual to cast his vote or record his presence in the House or Committee of the Whole. (b) No individual other than a Member may cast a vote or record a Member's presence in the House or Committee of the Whole. (c) A Member may not cast a vote for any other Member or record another Member's presence in the House or Committee of the Whole. Following the inauguration of the electronic voting system in the 93 rd Congress, Speaker Albert ruled that the presiding officer was without authority to entertain a unanimous consent agreement to make a correction to the record, despite Members' explanations that their votes had been wrongly recorded by the electronic voting system. The statements nonetheless appeared in the Congressional Record . In the 106 th Congress (1999-2001), the House adopted its rules for the new Congress and thereby deleted the previous rule on pairing in favor of a practice of Members announcing their positions. As explained by Representative David Dreier, Members could place a statement in the Congressional Record showing how they would have voted. If a statement was submitted to the clerk within "1 to 2 hours" of a vote, it would not need to be read, and would appear immediately after the vote. If a statement was submitted later, a Member could ask unanimous consent to have his or her statement appear immediately after the vote. Additional discussion of position announcements appears in the section Issues Relating to Voting since 1970: Members' Personal Explanations on Votes . Pairing was a procedure allowing Members who were absent to voluntarily agree to offset their votes and thus not affect the outcome of a vote. The parties had staff—pairing clerks—who facilitated these agreements. In a general pair, the Members' positions were unknown. In a specific pair, Members had made their position known to a pairing clerk and requested that their position be offset. In the Congressional Record, the Members' positions were noted. In a live pair, one Member was present, voted, then announced that he or she had a live pair with a Member who was absent and withdrew the vote, and stated the two Members' positions. Live pairs were reported in the Congressional Record. Live pairs are permitted in limited circumstances today, as explained below. Two principles worth keeping in mind were that a pair on a vote requiring two-thirds required three Members, two on one side of the question and one on the other, and that there was no recourse in the House to a Member breaking a pair (not following through on a previous commitment to make a pair). The House, in agreeing to H.Res. 1123 on October 13, 1972, changed Rule VIII, cl. 2 related to the announcement of pairs. This clause had directed that pairs be announced after the second call of the roll. With voting by electronic device, there would not be a roll call as anticipated by the clause. H.Res. 1123 changed the rule so that pairs would be announced immediately before the presiding officer's announcement of the result of a vote. On January 15, 1973, Speaker Albert announced in his policies on electronic voting that the practice of not allowing pairs in the Committee of the Whole would continue. He also announced that a Member in the chamber wishing to be paired with a Member not present should record himself as present, and, then, at the "conclusion of the voting period" seek recognition to state his desire to create a pair. In agreeing to H.Res. 5 , adopting rules for the 94 th Congress (1975-1977), the House amended Rule VIII, cl. 2 to allow pairs in the Committee of the Whole as well as the House. In recodifying and amending its rules in the 106 th Congress (1999-2001), the House ended the practice of pairing except for live pairs. The previous rule that allowed pairing, clause 2 of Rule VIII, was deleted. Most House rules related to voting and quorums were recodified in a new Rule XX, and Rule XX, cl. 3 now pertained to the conduct of a record vote or quorum call by call of the roll. A new last sentence to this clause provided: "Members appearing after the second call [of the roll], but before the result is announced, may vote or announce a pair." Representative David Dreier explained the change as follows: The practice of pairing, which involves absent Members arranging with other absent Members on opposite sides of a specific question the ability to stipulate how they would have voted, would be eliminated in favor of the more certain system of putting a statement in the Record as to how the Member would have voted, which appears immediately after the vote. The headings for these statements will read "stated yea" or "stated nay." These statements do not have to be read from the floor if they are submitted in a timely fashion to the clerks, generally 1 to 2 hours after the vote. If a significant time has elapsed since the vote, a Member can ask unanimous consent on the floor that his statement of how he might have voted appear immediately after the vote. In a section-by-section analysis of changes to House rules contained in H.Res. 5 that Mr. Dreier inserted in the Congressional Record, the option of a live pair was explained: 12. Abolishment of pairs other than "live pairs." The practice of pairing, which involves absent Members arranging with other absent Members on opposite sides of a specified question the ability to stipulate how they would have voted, would no longer be permitted. However, "live pairs," which involved an agreement between one Member who is present and voting and another on the opposite side of the question, who is absent, would continue to be permitted. On the advent of voting by electronic device in the House, the parliamentarian's notes in the House Rules and Manual explained the prevailing parliamentary understanding for a Member to correct his or her vote: When a vote actually given fails to be recorded...the Member may, before the approval of the Journal, demand as a matter of right that correction be made....But statements of other Members as to alleged errors in a recorded vote must be very definite and positive to justify the Speaker in ordering a change of the roll.... Within months of the first use of the electronic voting system on January 23, 1973, Members sought to correct their positions on recorded votes. Despite Members' explanations that their votes had been wrongly recorded by the electronic voting system, Speaker Albert ruled that the presiding officer was without authority to entertain a unanimous consent agreement to make a correction. The statements appeared in the Congressional Record . The parliamentarian's notes explained: The Speaker declines to entertain requests to correct the Journal and Record on votes taken by electronic device, based upon the technical accuracy of the electronic system if properly utilized and upon the responsibility of each Member to correctly cast and verify his vote...." In the 97 th Congress (1981-1983), however, the Speaker allowed a correction to a vote taken by electronic device, which had resulted from an error in identifying the signature on a voting card. In the 106 th Congress (1999-2001), a correction was made by unanimous consent to the Journal and the Congressional Record to deal with an apparent anomalous malfunction of the electronic voting system. Representative Lucille Roybal-Allard was absent from the House on June 21, 2000, and had her voting card in her possession. Nonetheless, the voting system recorded a vote for her on one roll call. As explained more fully below (in the section Issues Related to Voting since 1970: Inoperative Display Boards ), the House Administration Committee investigated the operation of the electronic voting system. In obtaining unanimous consent on June 26 to correct the vote, the Speaker pro tempore explained: ...As stated in volume 14, Section 32 of Deschler-Brown Precedents: Since the inception of the electronic system, the Speaker has resisted attempts to permit corrections to the electronic tally after announcement of a vote. This policy is based upon the presumptive reliability of the electronic device and upon the responsibility of each Member to correctly cast and verify his or her vote. Based upon the explanation received from the Chairman of the Committee on House Administration and from the Clerk, the Chair will continue to presume the reliability of the electronic device, so long as the Clerk is able to give that level of assurance which justifies a continuing presumption of its integrity.... This situation is discussed more fully in the section Issues Related to Voting since 1970: Absent, but Displayed as Voting . Additional discussion of position announcements appears in the section Issues Relating to Voting since 1970: Members' Personal Explanations on Votes . In adopting its rules for the 103 rd Congress (1993-1995), the House allowed the Delegates and Resident Commissioner a new power: to vote in the Committee of the Whole. Two changes were made to effect this privilege. First, Rule XII was amended to contain a new clause 2: In a Committee of the Whole House on the state of the Union, the Resident Commissioner to the United States from Puerto Rico and each Delegate to the House shall possess the same powers and privileges as Members of the House. Second, a new paragraph (d) was added to Rule XXIII, cl. 2: Whenever a recorded vote on any question has been decided by a margin within which the votes cast by the Delegates and the Resident Commissioner have been decisive, the Committee of the Whole shall automatically rise and the Speaker shall put that question de novo without intervening debate or other business. Upon the announcement of the vote on that question, the Committee of the Whole shall resume its sitting without intervening motion. During debate on the House rules package, Democratic Members portrayed this change as a matter of fairness and democracy in action, and pointed out the services of citizenship undertaken by residents of the territories, Puerto Rico, and the District of Columbia. They argued that allowing the Delegates and Resident Commissioner to vote in the Committee of the Whole did not flout constitutional requirements since their votes could not affect the outcome of votes in the House. Republican Members' arguments against the change were based on a constitutional objection that only Representatives of states are Members of the House; the matter that the constitutionality of Delegates and the Resident Commissioner voting on committees had not been established; the disparity in population among the territories, Puerto Rico, and the District of Columbia and between the territories and congressional districts; and the return of federal income tax receipts to the territories and Puerto Rico. Some Members also argued that, practically, the votes of the Delegates and Resident Commissioner would be sought to build a majority and, politically, the change reduced the Republicans' election gains by half since the Delegates and Resident Commissioner were all Democrats. During the 103 rd Congress, an amendment was rejected in the Committee of the Whole by a vote of 208-213, with three Delegates and the Resident Commissioner voting and all voting in the negative. After the chairman announced the result, Members made a series of parliamentary inquiries. After stating that the result would have been the same—rejection of the amendment—had the Delegates and Resident Commissioner not voted, a chairman propounded a test of whether their votes would be "decisive" under the rule: "But for the votes of the Delegates, the outcome would have been different." As part of the rules package for the 104 th Congress (1995-1997) that the new Republican majority agreed to, the two provisions described above were deleted from House rules. While some Delegates addressed the change and argued on bases of fairness and democratic principle, no Member argued another side during debate on the House rules package. At the conclusion of the 105 th Congress (1997-1999), District of Columbia Delegate Eleanor Holmes Norton sought to raise the issue of Delegate voting through a privileges of the House resolution ( H.Res. 613 ). In anticipation of a vote on articles of impeachment against President Bill Clinton, Delegate Norton sought a right to vote in the House on "any resolution impeaching the President," relying in part on the Twenty-third Amendment, which provided three electoral votes to the District of Columbia. The Speaker pro tempore allowed Ms. Norton to be heard on the matter of whether her resolution constituted a question of the privileges of the House. She argued for the resolution "to perfect the rights of District residents under the 23 rd amendment," noting that Congress under the Amendment had the authority to enforce it through legislation. The Speaker pro tempore, after citing the law giving a seat but not voting rights to a District of Columbia Delegate and Rule XII confining a Delegate's voting rights to committee, ruled: A question of the privileges of the House may not be invoked to effect a change in the rules or standing orders of the House. Altering the right to vote of a Delegate is tantamount to a change in the rules of the House and is not a proper question of privilege. The parliamentarian's notes to the rules of the 106 th Congress (1999-2001) stated, "At the organization of the House, the Delegates and Resident Commissioner are sworn...; but the Clerk does not put them on the roll...." In the 110 th Congress (2007-2009), a rules change again allowed Delegates and the Resident Commissioner to vote in the Committee of the Whole, with the possibility of an immediate revote in the House where their votes were decisive in the outcome of a question. Rule III, cl. 3 was amended in part to provide: (a) In a Committee of the Whole House on the state of the Union, each Delegate and the Resident Commissioner shall possess the same powers and privileges as Members of the House. ... Rule XVIII, cl. 6 was amended to add a new paragraph: (h) Whenever a recorded vote on any question has been decided by a margin within which the votes cast by the Delegates and the Resident Commissioner have been decisive, the Committee of the Whole shall rise and the Speaker shall put such question de novo without intervening motion. Upon the announcement of the vote on that question, the Committee of the Whole shall resume its sitting without intervening motion. Debate in the House was reminiscent of debate in the 103 rd Congress. Proponents of the change argued on the bases of fairness and democratic principle and emphasized, since a revote in the House would occur if the Delegates' votes were decisive in the Committee of the Whole, the symbolic nature of the voting right extended to the Delegates and Resident Commissioner. Opponents of the rules change argued constitutionality, pointing to representation by states in the House and the solely procedural differences between the House and the Committee of the Whole. Early in the 110 th Congress, responses to parliamentary inquiries interpreted the rules changes. On February 8, 2007, the colloquies excerpted here occurred: The Speaker pro tempore. Rule XVIII contemplates automatic, immediate review in the House of certain recorded votes in the Committee of the Whole. ...Mr. Price of Georgia. Under what circumstances will a separate vote not be allowed? The Speaker pro tempore. The Committee will not automatically rise for such an immediate review in the case where votes cast by Delegates were not decisive. ...Mr. Price of Georgia. When a vote is not decisive, but a question put loses, is there any opportunity for any Member, certified Member of the House, to ask for a separate vote? The Speaker pro tempore. Under clause 6(h) of rule XVIII, immediate review in the House occurs automatically when recorded votes cast by Delegates were decisive, without regard to whether the question was adopted or rejected. In ordinary proceedings of the House on the ultimate report of the Committee of the Whole, the House considers only matters reported to it by the Committee of the Whole, which would not include propositions rejected in Committee. ...Mr. Price of Georgia. Mr. Chairman, since the House is sitting as the Committee of the Whole, are the Delegates and Resident Commissioner permitted to vote on all matters in the Committee of the Whole House? The Chairman. Under clause 3(a) of rule III, the Delegates and Resident Commissioner possess the same powers and privileges as Members in the Committee of the Whole. ...Mr. Price of Georgia. ...on any matter in which the votes of the Delegates are decisive in the vote taken in the Committee of the Whole, that those votes shall be retaken in the full House and that the Delegates and Resident Commissioner shall not be permitted to vote in the full House. Is that correct? The Chairman. On recorded votes, yes, the gentleman is correct. Mr. Price of Georgia. How is the Chair going to determine if the votes of the Delegates and the Resident Commissioner are decisive? The Chairman. The test for determining whether the votes of the Delegates and Resident Commissioner are decisive under 6(h) of rule XVIII is a "but for" test, that is, would the outcome have been different had the Delegates and Resident Commission not voted. The absence of some Members is irrelevant to this determination. ...Mr. Price of Georgia. ...If the Chair determines that the votes of the Delegates and the Resident Commissioner are not decisive, but a Member believes that in fact they are, is it appropriate for a Member to lodge a point of order against the Chair's determination? The Chairman. The Chair's decision on a question of order is not subject to an appeal if the decision is one that falls within the discretionary authority of the Chair ...the Chair's count of the votes of the Delegates and Resident Commissioner is not subject to appeal. ...Mr. Price of Georgia. If the Chair determines that in fact the votes of the Delegates and the Resident Commissioner are not decisive, will the Chair include those numbers when reporting the tally of the vote? The Chairman. The gentleman is correct. ...Mr. Price of Georgia. ...is it correct that the number of individuals allowed to vote in the Committee of the Whole shall be 440, and the number in the full House shall be 435? The Chairman. The gentleman is correct. ...Mr. Price of Georgia. Do the Delegates and the Resident Commissioner count for the purposes of establishing and maintaining a quorum of the Committee of the Whole House? The Chairman. The gentleman is correct. ...Mr. Price of Georgia. If the Delegates and Resident Commissioner are allowed to vote on everything in the Committee of the Whole and they vote on procedural issues that may in fact affect the substantive nature of a bill, and if a procedural vote is lost within a decisive margin, is there a mechanism to have a separate vote in the full House on that procedural vote? The Chairman. Under clause 6(h), an immediate vote in the House is contemplated under those circumstances, given a recorded vote. Mr. Price of Georgia. On that procedural vote? The Chairman. The gentleman is correct. Mr. Blunt. Mr. Chairman, on the vote just taken, the Chair announced the vote as 422-3. Should the Chair not have delineated the vote to properly reflect that the vote was 418-3 of those Representatives representing the several States as specified in the Constitution, and that the vote of those Delegates not representing States was 4-0? The Acting Chairman. No. The Speaker's discretion to vote can be traced to the First Congress. Rule I, cl. 7 today provides: "The Speaker is not required to vote in ordinary legislative proceedings, except when his vote would be decisive or when the House is engaged in voting by ballot." In addition, the parliamentarian's notes in the House Rules and Manual explain: The Speaker may vote to make a tie and so decide a question in the negative, as he may vote to break a tie and decide a question in the affirmative.... The duty of giving a decisive vote may be exercised after the intervention of other business, or after the announcement of the result or on another day, if a correction of the roll shows a condition wherein his vote would be decisive.... In response to a parliamentary inquiry after the Speaker had cast a tie-breaking vote in the 101 st Congress (1989-1991), the Speaker explained that he announced his vote and it was entered into the electronic voting system prior to his announcement of the result. The parliamentarian's notes in the House Rules and Manual explained, "On an electronic vote, the Chair directs the Clerk to record him and verifies that instruction by submitting a vote card...." The parliamentarian's notes in the House Rules and Manual explain: When once begun the roll call may not be interrupted even by a motion to adjourn..., a parliamentary inquiry...except in the discretion of the Chair and related to the call..., a question of personal privilege..., the arrival of the time fixed for another order of business...or for a recess..., or the presentation of a conference report.... However, it is interrupted for the reception of messages and by the arrival of the hour fixed for adjournment sine die.... In the 98 th Congress, a chair of the Committee of the Whole twice recognized a Member for a parliamentary inquiry, following the announcement of a result of a voice vote. In the first instance, he then ordered a recorded vote, indicating that the parliamentary inquiry did not constitute intervening business that prevented a demand for a recorded vote. In the second instance, a recorded vote was refused for lack of support. An interruption of a vote of a very different nature occurred twice in the 109 th Congress (2005-2007). During two different votes, the Speaker in the first instance and a chairman of the Committee of the Whole in the second declared the House in an emergency recess. On each occasion, a plane had entered the restricted air space of the Capitol. Using authority given the Speaker when the House adopted its rules for the 108 th Congress, the presiding officer declared an emergency recess while a vote was being conducted. After the recess, the presiding officer allowed Members an additional 15 minutes to record their votes. Also in the 109 th Congress, Members were sworn in during the conduct of record votes and cast their votes on those record votes. The parliamentarian's notes in the House Rules and Manual explain the purpose of this signal system: "The legislative call system was designed to alert Members to certain occurrences on the floor of the House." The Speaker revised the House's bell and light signals once in the 92 nd Congress, twice in the 93 rd Congress, and once in the 96 th Congress to accommodate changes in House rules affecting voting and quorums. As a consequence of changes in House rules made in the 96 th Congress, the Speaker inserted an extensive explanation of the changes in the Congressional Record, including the summary explanation that would appear on a card to be distributed to the Members, as follows: 1 bell and light—Tellers (not a recorded vote). 1 long bell and light (pause, followed by 3 bells and lights)—signals the start or continuation of a notice quorum call. 1 long bell and light—termination of a notice quorum call. 2 bells and lights—Electronically Recorded Vote. 2 bells and lights (pause, followed by 2 bells and lights)—Manual Roll Call vote (the bells will be sounded again when the Clerk reaches the R's). 2 bells and lights (pause, followed by 5 bells)—first vote under Suspension of the Rules or on clustered votes (2 bells will be rung 5 minutes later)—the first vote will take 15 minutes with successive votes at intervals of not less than 5 minutes. Each successive vote signaled by 5 bells. 3 bells and lights—Quorum call (either initially or after a notice quorum has been converted to a regular quorum). The bells are repeated 5 minutes after the first bell. 3 bells and lights (pause, followed by 3 bells and lights)—Manual Quorum Call (the bells will be sounded again when the Clerk reaches the R's). 3 bells and lights (pause, followed by 5 bells)—Quorum call in Committee of the Whole, which may be followed by a 5 minute recorded vote. 4 bells and lights—Adjournment of the House. 5 bells and lights—five-minute electronically recorded vote. 6 bells and lights—Recess of House. 12 bells—Civil Defense Warning. One parliamentarian's note on the bell and light system is important: Failure of the signal bells to announce a vote does not warrant repetition of the roll call...nor does such a failure permit a Member to be recorded following the conclusion of the call.... Since the electronic voting system's first use on January 23, 1973, it has been utilized for almost all record votes in the House of Representatives. While the electronic voting system has functioned with minimal disruption, it has failed to operate properly on several occasions. The majority of these malfunctions were dealt with procedurally and adapted to flexibly within the rules of the House by the presiding officer. Voting issues can be divided into five categories: inoperative electronic voting system, inoperative display boards, Members' personal explanations of votes, Members attempting to vote, and holding votes open. There have also been four occasions where voting issues were elevated to investigations conducted on three occasions by the Committee on Standards of Official Conduct and on one occasion by the specially created Select Committee to Investigate the Voting Irregularities of August 2, 2007. These investigations are discussed in the section, Investigations Related to Votes and Voting Since 1970 . If the electronic system is not functioning, the presiding officer historically has used one of three options: vacated the results of the electronic vote and directed that the record vote be conducted by call of the roll under Rule XX, cl. 3; continued the vote with special instructions to the Members; or directed a new electronic vote with a new 15-minute voting period. The following events represent instances in which the electronic voting system was inoperative, showing the presiding officer's response. On March 7, 1973, Speaker Albert announced, before any votes were taken that day, that the electronic voting system was inoperative and "until further notice...all votes and quorum calls will be taken by the standby procedures which are provided in the rules." The electronic voting system was operational for votes on March 8, 1973. On December 21, 1973, during Roll Call No. 723, the electronic voting system malfunctioned and repairs could not be finished before the end of the day. The House finished the vote by a call of the roll and combined the votes of those who had voted by electronic device with those who had voted orally. The Chair wishes to announce that the names of all Members who voted by means of electronic device will be included in the list of those voting on this motion so that the Record will clearly reflect the names of all Members who have voted on this matter. The Congressional Record account of the vote reflected only those who had voted yea, nay, or present and not the method of voting. During the first session of the 93 rd Congress, between the incidents of March 7 and December 21, the Committee on House Administration identified, in an unpublished report, five additional instances of failures by the electronic voting system, ranging in duration from one hour to three days. Table 2 lists all instances in the first session when the electronic voting system malfunctioned, the amount of time the electronic voting system was unavailable for voting, and the number of roll-call votes missed, if any. On September 19, 1985, the electronic voting system's display boards malfunctioned as voting began on Roll Call No. 313. Consistent with previous practice, the presiding officer ordered the vote to continue, as the electronic voting system itself was operational. The electronic voting system then failed and the presiding officer ordered the clerk to call the roll. "The Chair has now been informed that the voting stations are not working. The House will revert to a standby procedure. The Clerk will call the roll." On May 4, 1988, during Roll Call No. 99, the electronic voting system malfunctioned. At that time, the presiding officer announced that the vote would be vacated and that the clerk would call the roll. The presiding officer also announced that "Members will be advised whether or not the electronic voting system is operating. The technicians are working on the system and hopefully by the time we complete debate on the next amendment the system will be operational." The electronic voting system was repaired before Roll Call No. 100. On October 3, 1989, the electronic voting system malfunctioned during Roll Call No. 264. The presiding officer vacated the vote and initiated a new vote on the same question: If the Members will bear with the Chair, we have had some problems with the electronic voting machine and the Chair is attempting to decide at this point whether to vacate the previous vote and to begin again, so if the Members will hold for just a moment, the Chair is trying to find out if the machine has been restored. The Chair would like to advise the House that the machine was not working properly. The Clerk is not certain that all the votes were recorded. So it is the intent of the Chair to vacate the vote at this point and to direct a new record vote by electronic device on the previous question on the motion to instruct conferees. The voting machine is now working. So we will begin the voting process again. The Chair is informed that some Members have left the Chamber, so this will be a full 15 minute vote in all fairness to give all Members an opportunity to vote. The next day, Speaker Foley announced that five Members who had voted in the vacated proceedings had not voted on the new vote, and that he had directed the clerk to record those Members' votes: The Chair has an announcement concerning rollcall 264 of October 3, 1989. Two votes by electronic device were conducted on that question. Due to an irregularity in the electronic voting system, the first vote was aborted. The chair vacated that first vote and initiated another 15-minute vote by electronic device. However, five Members who had been recorded on the first, aborted vote were not recorded on the second vote on the same question. The irregularity in the electronic voting system should not prejudice the Members concerned. Therefore, the Chair will direct the Clerk to record the Members concerned on rollcall 264 in conformity with the first, aborted vote and to enter those proceedings in the Journal and Record. On October 6, 1999, a malfunction occurred in the electronic display panel during Roll Call No. 483 and the presiding officer could not obtain verification from the Clerk that the vote would be recorded with 100 percent accuracy. The presiding officer, therefore, vacated the results of the electronic vote and directed that the record vote be taken by call of the roll. Committee on House Administration Chairman Thomas subsequently addressed the House to explain the cause of the problem: There was a Member who had a card, and we all know that these new cards are much better than the old laminated ones but they do go bad. When that Member's name was adjusted on the visual screen, it was placed first, out of order alphabetically, and so when the votes were recorded they skipped one. They did not match up. I want to assure every Member that the computer is far more sophisticated than that. These lights are for visual purposes only. The machine records the vote according to a unique identifier number. Regardless of where a Member might be placed alphabetically the unique number from the card records the vote. On September 14, 2001, the electronic voting system became inoperative during Roll Call No. 341. The presiding officer announced that 1) the vote would be held open until all Members were recorded; 2) the Clerk would retrieve the names of Members already recorded from the electronic display board; 3) the Clerk would combine the names of Members voting electronically and those who signed tally cards to form a valid vote; and 4) the vote would remain open for Members to confirm their vote until all Members had returned from a memorial service at the National Cathedral. On April 9, 2002, during Roll Call No. 80, some voting stations became temporarily inoperative. The presiding officer announced the voting station malfunction and urged "all Members to verify their votes prior to the Chair's announcement of the result." On March 25, 2004, some of the voting stations malfunctioned during Roll Call No. 84. During the vote, a Speaker pro tempore announced: The Chair is advised that some of the voting stations may have been reset during this vote. Members should take care to confirm their vote, and the voting machines will be kept open until Members have a chance to vote and to confirm their vote. On July 13, 2004, the electronic voting system malfunctioned during Roll Call No. 363. The presiding officer made three announcements on the status of the electronic voting system with instructions to the Members on how to proceed. First, the presiding officer announced that the electronic voting system may not be operational and that Members should check their votes before leaving the Chamber. The presiding officer later announced that the electronic voting system was inoperable and that votes should not be cast, even in the well, as the Clerk had no way of tallying votes and that the Clerk was working on "rebooting the voting system, which would require everyone to cast their votes a second time if they have already voted." Finally, the presiding officer announced, "that the electronic voting system has been restarted, and the electronic vote will be conducted anew, a totally fresh start. Members must recast votes under the earlier, defective electronic vote." In the event that the electronic voting system's display boards are inoperative, the Speaker has the option to continue the vote and has recommended that Members check their vote either by reinserting their voting card into another voting station, by looking at one of the leadership computer monitors at the party tables on the House floor, or by confirming their vote with the clerk. Instances of inoperative display boards can be divided into two categories: when the display boards are not functioning but the electronic voting system is fully functional, and when a Member is absent but is displayed as having voted. Since the electronic system was first used in 1973, there have been instances when the display boards in the chamber have malfunctioned. The main display boards are located behind and above the Speaker's dais (over the press gallery), and list each Member's name and his or her vote. In addition, there are display boards beneath the visitors' gallery, to the left and right of the Speaker's dais, that provide the bill number, running vote totals, and time remaining during a roll-call. There are also monitors on the majority and minority leadership tables to track vote totals and to obtain other vote information. The following events represent instances in which the display boards or monitors have malfunctioned and indicate the presiding officer's response. On August 7, 1974, prior to Roll Call No. 457, the presiding officer announced that the Republican monitor, used to track the progress of an electronic vote, was inoperative. "While the Chair could order the vote taken by rollcall, the Chair thinks that both sides can use the Democratic monitor and can alternate in the use of the monitor and save that much time. Therefore, the Chair will ask the Democratic operator and monitor to alternate with the Republican operator and monitor." On June 6, 1977, the presiding officer announced before any recorded votes were taken that the electronic voting system display board of Member's names, as well as the display board with vote totals, were not functioning, but that the voting stations were operational. The presiding officer then directed that all votes be taken by electronic device and that— the Chair has directed all vote monitoring stations to be staffed with personnel so any Member may go to any monitor and verify his or her vote. Members may also verify their votes—as they should on any vote, by reinserting their card at the same or another voting station. On June 21, 1978, prior to any recorded votes, the presiding officer announced that— the board displaying each Member's name behind the Chair and the board displaying the bill number and vote totals to the left and right of the Chair are not working today. However, all voting stations are operating; and the Chair has directed all vote monitoring stations to be staffed with personnel so any Member may go to any monitor and verify his or her vote. On July 18, 1979, prior to any recorded votes, the presiding officer announced that the boards displaying Members names behind the Speaker's dais and the boards displaying the bill number, vote totals, and time remaining on the sides of the chamber were not operational. However, the voting stations were operational and votes would be conducted using the electronic voting system. The presiding officer also directed that "all vote monitoring stations be staffed with personnel so any Member may go to any monitor and verify his or her vote." On September 18, 1985, during Roll Call No. 310, the display board listing Members' names behind the presiding officer was inoperative. In response to a parliamentary inquiry by Representative Trent Lott, the presiding officer stated that the electronic voting system was operational and that Members' votes were being correctly recorded: It is the intention of the Chair to proceed with any further votes, and the Chair is informed that everything is being done to restore the display portion of the votes. The Chair would point out that on the last vote only six Members did not vote, which indicates that the membership has a clear idea of what the procedure is. On February 10, 2000, the panel displaying the names from "Danner" to "Doyle" behind the Chair failed to illuminate when the system was used for Roll Call No. 14. The presiding officer announced that "the Chair has been advised that those votes are indeed being recorded. Those that are in that panel, from Danner to Doyle, should recheck your vote on the electronic voting device, but the Chair is advised those votes are being recorded." On September 19, 2002, during Roll Call No. 402, one of the display panels was inoperative. The presiding officer announced that while the panel was not displaying votes, those Members were being recorded. The presiding officer then reminded Members that they "may verify their vote by checking at the desk or at the voting stations." On September 4, 2003, during Roll Call No. 463 the presiding officer announced that "the wall display for the electronic voting system is not displaying lights in one column. The Chair would ask Members in the fourth column of names to verify their votes at a voting station before the Chair announces the results of the vote." On August 3, 2007, the electronic voting system's display boards were not functioning during a vote that had yet to be assigned a roll-call number. The presiding officer ruled that the vote could continue and that Members could check their votes by reinserting their voting cards. After a number of parliamentary inquiries, Majority Leader Steny H. Hoyer asked for unanimous consent to vacate the vote until the voting machine could be fixed. After discussion, the House gave its consent. In a few instances the electronic system display boards showed a Member who is absent from the chamber as having voted. These situations are different from instances of "ghost voting" that were investigated by the Committee on Standards of Official Conduct in the 96 th Congress (1979-1980) and 100 th Congress (1987-1988). The instances of "ghost voting" are discussed in the section, Investigations Related to Votes and Voting Since 1970 . The following examples are instances of absent Members displayed as voting, showing the presiding officer's response. On November 13, 1979, Representative Frank Thompson, chairman of the Committee on House Administration, announced on the floor that a malfunction in the light next to the name of Representative Patricia Schroeder occurred while she was away from the House of Representatives in Cambodia. I would like to assure the Members that the gentlewoman's name is not being recorded as having voted "aye," "nay," or "present." It is simply a light malfunction caused by a faulty relay. I would like to assure my colleagues that this is the situation. On June 21, 2000, Representative Lucille Roybal-Allard was absent from the House but was shown as having voted on Roll Call No. 305. On June 23, Representative Thomas, chairman of the Committee on House Administration, announced that it was a "statistical anomaly" and not an instance where someone had voted for Representative Roybal-Allard: It is not analogous to any of the situations in the past about the confusion of "I didn't think I voted" or as we found, unfortunately, the potential of someone else using the card. It is a true anomaly. Members might imagine the concerns that the staff and we had about this. It was the fact that a 64-bit string of digital numerals was somehow at a particular terminal read wrong, and ironically the wrong reading coincided with another set that was in fact a card set. Chairman Thomas continued by discussing the steps taken to ensure it was an anomaly and not a problem with the electronic voting system: Since Wednesday, we have tried to re-create the event in terms of dirtying up the cards, playing with the boxes, repeating a process. We have now gone through 500,000 cycles. We will continue as a fallback to cycle this to see if we can re-create the anomaly. It is one of those situations in which you really have to say it is a statistically improbable anomaly, but it occurred. On June 26, Representative Roybal-Allard inserted a personal explanation in the Extension of Remarks of the Congressional Record: Mr. Speaker, due to a family health emergency in Los Angeles, I was not present during the House's consideration of the VA, HUD and Independent Agencies Appropriations bill, last week. However, I was recorded as voting on an amendment to this bill offered by Mr. Collins of Georgia. The mistake was fortunately caught by the diligent staff of the Minority Leader. Nevertheless, Members should be aware that although the digital voting system used by the House of Representatives is very reliable, it is not perfect. I have been assured by both the Chairman of the Committee on House Administration and the Clerk's Office that they are thoroughly investigating the incident and that it does appear to be a true statistical anomaly which is unlikely to occur again. ...Finally, while I was mistakenly recorded as voting "aye" on the amendment, had I been present, I would have voted "nay." Also on June 26, the presiding officer asked unanimous consent that the Congressional Record be corrected to reflect that Representative Roybal-Allard was not present and had not voted during Roll Call No. 305 on June 21, 2000: As stated by the Chairman of the Committee on House Administration on Friday, June 23, 2000, the Clerk has informed the Committee on House Administration of a recent anomaly on a recorded vote. Representative Roybal-Allard was absent on rollcall number 305 on June 21, 2000 and was in possession of her voting card. The Clerk was made aware of the fact that she was recorded on that rollcall, but on no others on that day, but due to the lateness of the hour, could not get confirmation from her by the time the vote was made public that she was absent and in possession of her voting card. Since then, the Clerk has received that confirmation. For that reason and the statistical improbability of the recurrence of that anomaly, the Chair and the Chairman of the Committee on House Administration believe that it is proper to immediately correct the Record and the Journal. As stated in Volume 14, Section 32 of Deschler-Brown Precedents: 'Since the inception of the electronic system, the Speaker has resisted attempts to permit corrections to the electronic tally after announcement of a vote. This policy is based upon the presumptive reliability of electronic device [sic] and upon the responsibility of each Member to correctly cast and verify his or her vote.' Based upon the explanation received from the Chairman of the Committee on House Administration and from the Clerk, the Chair will continue to presume the reliability of the electronic device, so long as the Clerk is able to give that level of assurance which justifies a continuing presumption of its integrity. Without objection, the Chair will permit the immediate correction of the Record and Journal under the unique circumstances certified by the Clerk. Subsequently, on July 10, a correction was inserted in the Congressional Record stating that Representative Roybal-Allard did not vote on Roll Call No. 305: Pursuant to the order of the House of June 26, 2000, the Congressional Record , of June 21, 2000, was ordered corrected to correctly reflect that Representative Roybal-Allard did not vote on rollcall number 305.... The electronic voting system had incorrectly attributed an "aye" vote to Representative Roybal-Allard. Since at least the 29 th Congress (1845-1847), Members have inserted "personal explanations" in the Congressional Record to explain how they would have voted had the Member been present for a roll-call vote. At the time, the Speaker ruled that "[s]uch things are constantly tolerated by unanimous consent." Members use personal explanations to explain how they would have voted following an absence from the House or for Members to state their belief that they were incorrectly recorded during a vote. In both instances, a Member may ask unanimous consent to have a statement appear in the Congressional Record following the vote, or may submit a signed statement through their cloakroom to be printed in the Congressional Record . If the personal explanation is received in the cloakroom the day of the vote, it is inserted in the Congressional Record immediately after the vote. Otherwise, it is placed in the Extension of the Remarks. Absent Members use personal explanations to explain why they were absent from the floor and the position the Member would have taken had he or she been present. The following statements are examples of the vast majority of personal explanations: Mr. Chairman, on rollcall Nos. 136, 137, and 140, I was at a subcommittee on Appropriations hearing. Had I been present, I would have voted "nay" on 137, "nay" on 136, and "yea" on 140. Mr. Speaker, on Tuesday, November 4, I was in Kentucky, tending to official business, and was not present for rollcall votes No. 602 and 603. The votes were on House Concurrent Resolutions 176 and 94, respectively. Had I been present, I would have voted "yea" on both measures. Mr. Speaker, on the legislative day of Friday, November 9, 2007, I was unavoidably detained and was unable to cast a vote on a number of rollcall votes. Had I been present, I would have voted: Rollcall 1077—"nay;" rollcall 1078—"nay;" rollcall 1079—"nay;" rollcall 1080—"yea;" rollcall 1081—"nay." Since the introduction of electronic voting in the 93 rd Congress (1973-1975), Members have used personal explanations to correct a recorded position on a vote when the Member believed the electronic voting system incorrectly recorded his or her position. If a Member believes his or her vote was incorrectly recorded, the Member may use a personal explanation to indicate the Member's position. However, the personal explanation does not change the official record of the vote. It only provides a Member an opportunity to state how the Member intended to vote. The following statements are examples of personal explanations where the electronic voting system allegedly failed to properly record a vote: Mr. Speaker, during today's vote on the rule for the conference report on House Resolution 402, rule No. 53, I inserted my card into the electronic voting device to vote, but the vote did not register. I ask that my vote be recorded immediately following this vote in the Record as a "no" vote. The clerk conducted a check, and verified that my card had been inserted, but when the "no" button was pushed, it did not register. If my vote had been recorded, it would have been "no." Please amend the Record to reflect my "no" vote on this rule. Mr. Speaker, on December 13, I was in Washington D.C. conducting official government business. It was my intention to vote on Rollcall No. 498, H.Res. 314, which would have suspended the rules and allowed suspension bills on Wednesday December 19. However, the electronic voting machine did not properly record my vote. I request that the Congressional Record reflect that had my vote been properly recorded, I would have voted "nay" on Rollcall No. 498. Mr. Speaker, I was present and voting during the series of rollcall votes that included rollcall No. 226, final passage of the FY2007 Homeland Security Appropriations bill. While I believed that I had voted "yea" on the measure, apparently the electronic voting system did not register this vote. I would like to ensure that the record reflect that my vote, had it been recorded, would have been "yea" on rollcall No. 226. Claims of irregularities by the electronic voting system are only a small faction of the total number of personal explanations and mentions of voting clarifications in the Congressional Record . Between the 95 th Congress (1977-1979) and the 109 th Congress (2005-2007), Members inserted at least 9,698 personal explanations into the Congressional Record . Of these personal explanations, the electronic voting system was accused of inaccurately recording votes 60 times (0.62 percent of the 9,698 personal explanations). These instances are listed in Table 3 . Under House Rule III, "Every Member shall be present within the Hall of the House during its sittings, unless excused or necessarily prevented, and shall vote on each question put, unless he has a direct personal or pecuniary interest in the event of such question." In addition, while Speakers beginning in the 102 nd Congress have announced policies to expedite the conduct of votes, these policies and practice have protected the right to vote of Members in the well attempting to vote. In declaring his policy on voting by electronic device, Speaker Gingrich sought to have votes conclude with the announcement of a result as soon as possible after 15 minutes, and said in remarks to the House that he hoped to conclude votes within 17 minutes. In his policy, the Speaker said that a presiding officer would not prevent a Member from voting who "is in the well." Enforcement of the Speaker's policy to expedite the conclusion of votes resulted in a dispute over a vote on June 21, 1995. In the course of votes immediately preceding Roll Call No. 405, Members inquired about the duration of votes on the floor and about votes being taken in committee at the same time votes were being taken on the floor. Some Members, hearing the bells announcing a floor vote, left a committee markup for the floor. After their departure, the committee chair apparently conducted a roll-call vote. A chairman of the Committee of the Whole indicated that Members' priority should be floor votes. He said he had been informed of the committee vote and had waited to close the floor vote until the committee's chairman appeared and voted, taking that as a sign that committee members had had sufficient time to arrive on the floor and vote. After the result of Roll Call No. 405, Minority Whip David E. Bonior used a parliamentary inquiry to say: Mr. Chairman, we had 2 Members in the well with their voting cards out, and the vote was 214 to 213, and the gentleman in the Chair, respectfully I say to him, called the vote while two of our Members were voting. That, Mr. Chairman, is not fair. The presiding officer responded that Mr. Bonior had not made a parliamentary inquiry. The next day, Majority Leader Dick Armey addressed the chamber. Mr. Armey stated that he had reviewed the videotape of the vote and concluded that the presiding officer had acted properly. He then stated: I know all too well that once the perception of unfairness and arbitrariness has set in, it is difficult to undo regardless of the facts of the matter. It is important to this Member that fairness govern this Chamber because this Member spent over a decade attempting to do the people's business under very unfair conditions....It is for that reason I am about to make a unanimous-consent request to revisit the vote on the Fazio amendment.... The House gave unanimous consent to vacate Roll Call No. 405 and re-vote the question when the House next resolved into the Committee of the Whole. In the Committee of the Whole, the chairman announced: When the Committee of the Whole rose on Wednesday, June 21, 1995, amendment No. 5 printed in H.Rept. 104-146 offered by the gentleman from California...had been disposed of. ...Pursuant to the order of the House today, the Chair will now put the question de novo. The question is on the amendment offered by the gentleman from California..., as amended. The amendment was agreed to. Votes using the electronic voting system do not usually conclude with the announcement of a result at the end of the 15-minute minimum time for voting. The announcement of a result, however, often occurs within several minutes. On occasion, votes are held open longer for a well-identified reason, such as the failure of the voting system and the absence of Members at a memorial service on September 14, 2001, which was discussed above. Sometimes, Members can see other Members continuing to arrive on the floor to vote. On other occasions, a reason is not articulated or an ambiguous reason is given. House Rule XX, cl. 2(a), making voting by electronic device the customary method of voting, was amended in the 110 th Congress to add a sentence: "A recorded vote by electronic device shall not be held open for the sole purpose of reversing the outcome of such a vote." On October 29, 1987, while conducting Roll Call No. 392, Speaker Jim Wright asked, "Are there other Members in the Chamber who desire to vote? If there are other Members who desire to vote we will accommodate their vote." The Speaker continued to make similar announcements while holding open the vote. Following one of the presiding officer's announcements, Representative Newt Gingrich used a parliamentary inquiry to ask how a vote could be reopened "once the Speaker has said the vote is closed and all time has expired." The Speaker replied that "the present occupant of the chair and in the Chair's observation other occupants of the chair have permitted Members to vote so long as those Members are in the Chamber and obviously desiring to cast a vote. That is the policy of the Chair." The presiding officer announced that "the yeas are 206, and the nays are 205. The bill is passed." During the conduct of the vote, Representative Mickey Edwards used a parliamentary inquiry to ask: Mr. Speaker, you have now announced that all time has expired. I am quite familiar with the policy of this Chair. Under the rules of the House could the Parliamentarian instruct us whether under the rules at this point additional votes may be cast now that the Chair has announced that time has expired? The Speaker responded that "the rules of the House state that the rollcall will be open for a minimum of 15 minutes, and that beyond that it is at the discretion of the Chair." On November 21, 2003, Roll Call No. 669 was held open beyond the minimum 15 minutes, for a total of approximately three hours. The circumstances surrounding the vote on the conference report on the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 are discussed in the Investigations Related to Votes and Voting Since 1970 section of this report. On March 11, 2008, the House adopted H.Res. 1031 , a special rule deeming H.Res. 895 adopted, which established a House Office of Congressional Ethics. Following debate, Roll Call No. 121 was taken on the previous question on H.Res. 1031 . After the initial 15-minute minimum time to vote, the presiding officer held the vote open for approximately 15 additional minutes. The presiding officer then announced that the previous question was ordered. Representative Roy Blunt used a parliamentary inquiry, referencing Rule XX, cl. 2(a), to ask, "Am I right that the rules of the House read, 'A record vote by electronic device shall not be held open for the sole purpose of reversing the outcome of such vote?'" The presiding officer responded that Representative Blunt was correct and that "[a]n alleged violation of clause 2(a) of Rule XX may give rise to a collateral challenge in the form of a question of the privileges of the House pursuant to Rule IX." The next day, Minority Leader John A. Boehner raised a question of the privileges of the House. Mr. Boehner's resolution sought to denounce the "practices" of holding open votes beyond a "reasonable" period of time, vacate votes on H.Res. 1031 , direct the Committee on Standards of Official Conduct to investigate the Democratic leadership's "violations of House rules," and direct the Select Committee to Investigate the Voting Irregularities of August 2, 2007 to investigate and make recommendations on the previous question vote on H.Res. 1031 . A motion to table the resolution was agreed to. Since the House began using the electronic voting system on January 23, 1973, there have been four instances where voting anomalies were reported to the House and resulted in investigations. The first three instances were investigated by the Committee on Standards of Official Conduct and occurred in 1979, 1987, and 2003. The fourth investigation deals with Roll Call No. 814 taken on August 2, 2007, and has been undertaken by a select committee. "Ghost" voting occurs when one Member votes for another Member on the House floor, in violation of House rules. Since electronic voting began in 1973, there have been two investigations of "ghost" voting allegations. The first investigation occurred during the 96 th Congress (1979-1981) and involved Representatives Morgan Murphy and Tennyson Guyer. The second investigation occurred during the 100 th Congress (1987-1989) and involved Representative Austin Murphy. Both investigations were conduced by the Committee on Standards of Official Conduct. On July 31, 1979, Representative Morgan Murphy inserted a personal explanation into the Congressional Record , indicating that while he was in his district on official business, he had been recorded on six votes and had requested that the Committee on Standards of Official Conduct investigate the matter: Mr. Speaker, yesterday I was holding hearings in the city of Chicago of the Select Committee on Narcotics Abuse and Control for which I had official leave of absence. I was, therefore, surprised to see the Record shows me recorded on votes taken yesterday and I ask unanimous consent that the permanent Record reflect the fact that I was not present and did not vote on Monday, July 30. I also request that the Committee on Standards of Official Conduct look into this mater and, being a member of the Committee on Standards of Official Conduct I will step aside while they look into the matter. On September 20, 1979, the chairman of the Standards of Official Conduct Committee, pursuant to committee rules, designated Representatives John Murtha and Bill Thomas to serve on an investigative subcommittee. In January 1980, the subcommittee was additionally tasked with investigating three votes cast by Representative Tennyson Guyer on May 14, 1979, while he was in his Ohio district. The General Accounting Office (GAO) determined that the "ghost" votes of Representatives Murphy and Guyer were not a result of equipment malfunction. Further, the committee found no evidence that would link either Member to a scheme to vote by proxy. The committee declined to bring charges against the two Members but did note that "[t]his results not from any view that willful and knowing abuse of the Electronic Voting System is not serious misconduct, but rather from ambiguities in the present rules when taken together with the need to rely solely on statistical data, based on assumptions and unaided by other direct evidence of wrongdoing." On June 23, 1987, the Committee on Standards of Official Conduct voted to investigate allegations (among other actions) that Representative Austin Murphy allowed others to vote for him on the floor of the House of Representatives when he was not present. Pursuant to a committee resolution and committee rules, the committee investigated six counts against the Member, three of which directly related to allegations that other Members cast votes on his behalf. The committee held a disciplinary hearing and sustained two of the three voting-related counts. Following the disciplinary hearing, the committee also found that Representative Murphy violated House rules on two of the three non-voting-related counts. The committee sustained count four, which charged that Representative Murphy diverted resources from his district office to his former law firm in violation of 31 U.S.C. § 1301(a) and paragraph 5 of the Code of Ethics of Government Service, as then in effect; dismissed count five, which charged that the Member permitted someone with whom he had a professional or legal relationship to benefit from expenditure of official funds through his district office lease; and sustained charge six that the Member retained an employee who did not perform duties commensurate with pay received. In its report, the Committee on Standards and Ethics recommended a reprimand of Representative Murphy and stated, "The Committee believes that a recommendation of the sanction of reprimand is appropriate for the violations found to have occurred." The House agreed to H.Res. 335 adopting the report by the Committee on Standards of Official Conduct to reprimand Representative Murphy. On December 8, 2003, the Committee on Standards of Official Conduct, pursuant to Committee Rule 18 (a), initiated informal fact finding into allegations linking Representative Nick Smith's support for the conference report on H.R. 1 , the Medicare Prescription Drug, Improvement, and Modernization Act, with support for the congressional candidacy of his son. The investigative subcommittee was established in March 2004 and conducted its investigation until September 2004. After receiving over 1,400 pages of testimony and deposing 17 Members of the House, the committee concluded that— no group, organization, business interest, or corporation of any kind, or any individual affiliated with any such entities, offered $100,000 or any other specific sum of money to support the congressional candidacy of Brad Smith in order to induce Representative Nick Smith to vote in favor of the Medicare Prescription Drug Act. The investigative subcommittee concluded that, while Representative Smith's conduct did not meet the standards of House Rule XXIII, cl. 1, its jurisdiction to formally sanction Representative Smith should not be expanded pursuant to Committee Rule 19 (d). "Such a step—required to obtain a formal sanction under House and Committee rules—is not justified by the circumstances and facts presented, and is outweighed by the interest in bringing this matter to closure." Representative Candice S. Miller and Majority Leader Tom DeLay were also implicated in the course of the investigation. The investigative subcommittee found that Representative Miller's "interaction with Representative Smith can fairly be characterized as a specific and unprovoked threat of retaliation against Representative Smith...." The subcommittee made the following finding concerning Majority Leader DeLay: The Investigative Subcommittee concludes that the interaction between the Majority Leader and Representative Smith, in significant part, precipitated the public allegations by Representative Smith that ultimately led to this inquiry. At the time the offer was made, Representative Smith believed that the endorsement of his son by the Majority Leader, combined with the publicity and substantial financial support for his son's campaign that Representative Smith believed would follow the Majority Leader's endorsement, would greatly assist, if not assure, his son's election... The investigative subcommittee unanimously adopted its report on September 29, 2004. On September 30, the full committee unanimously adopted the report with this statement: By this act of adopting the Investigative Subcommittee's Report, the Committee approved and adopted the findings, conclusions, and recommendations of the Investigative Subcommittee, including the recommendation in the Investigative Subcommittee's Report that the publication of its Report would serve as a public admonishment by the Committee to Representative Nick Smith, Representative Candice Miller, and Representative Tom DeLay regarding their conduct as described in the Report to the House. On August 2, 2007, Representative Jerry Lewis offered a motion to recommit with instructions to H.R. 3161 , the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act of 2008. During the vote on the motion, the Speaker pro tempore first announced that there were 214 yeas and 214 nays and that the motion was not agreed to. The Speaker pro tempore subsequently announced that the vote was 212 yeas and 216 nays and that the motion was not agreed to. Some Members alleged that the Speaker pro tempore's first announcement of the vote was erroneous and that, since the electronic voting display had read "FINAL 215-213," the motion had been agreed to. Immediately after the vote, Majority Leader Hoyer asked unanimous consent that the House vacate the vote. Minority Leader Boehner objected and Majority Leader Hoyer then moved to reconsider Roll Call No. 814. The motion to reconsider was agreed to (Roll Call No. 815). That vote was followed by a voice vote rejection of Representative Lewis's motion to recommit and a record vote on passage of H.R. 3161 . On August 3, Majority Leader Hoyer introduced a resolution directing the Committee on Standards of Official Conduct to review the previous day's events. The resolve clause stated: Resolved , That the Committee on Standards of Official Conduct shall immediately review the regularity of events surrounding the vote on the motion to recommit on H.R. 3161 , which occurred on August 2, 2007, and report back to the House. Mr. Boehner argued against referring the matter to the Committee on Standards of Official Conduct, asked that Mr. Hoyer withdraw his resolution, and proposed that the two leaders work together. Mr. Hoyer received unanimous consent to withdraw the resolution. Later that day, Minority Leader Boehner raised a question of the privileges of the House ( H.Res. 611 ), directing House officers to preserve records related to the vote on the Lewis motion to recommit, establishing a select committee comprising three Members appointed by the Speaker and three Members appointed by the minority leader, authorizing the select committee to investigate "circumstances surrounding the record vote" on the Lewis motion, and requiring the select committee to report recommendations of changes to "rules and procedures of the House necessary to protect the voting rights" of Members. The resolution was agreed to by voice vote. The Select Committee to Investigate the Voting Irregularities of August 2, 2007 met publicly for the first time on September 27, 2007. In that meeting, the committee adopted its rules, adopted an interim report, and heard testimony from the clerk of the House and her staff about the records preserved from the August 2 vote and the duties of the clerk's staff on the Speaker's dais. In addition, in its interim report the Select Committee to Investigate the Voting Irregularities of August 2, 2007 set out four areas of investigation for future hearings. These were: Persons on the Speaker's dais and persons responsible for conducing a vote; Electronic voting system; Duration of a vote; and Sequence of events. To date, the select committee has taken testimony in public hearings on September 27, 2007, from Clerk of the House Lorraine Miller and her staff concerning the duties of individuals on the Speaker's dais; received a walk-through on the House floor on October 18, 2007, of the electronic voting system by the individuals responsible for operation of the system; taken testimony on October 25, 2007, from Parliamentarian Emeritus of the House Charles Johnson and from Chief Tally Clerk Mark O'Sullivan; and taken testimony from Majority Leader Hoyer, Representative Michael R. McNulty (who was presiding during the conduct of Roll Call No. 814), Parliamentarian John V. Sullivan, and representatives from the Office of the Clerk, the Office of the Speaker, the Office of the Minority Leader, and the Office of the Parliamentarian. The final report of the committee is due to the House not later than September 15, 2008. Electronic voting has been in use for 35 years in the House of Representatives. However, Members have been casting votes in other ways for over 200 years. The process for voting has remained relatively unchanged in all that time, and the problems associated with voting have been relatively rare. Nevertheless, no matter how infrequently problems occur, when they do, the ramifications within the chamber can reverberate for days, or even longer. Whether changes to voting procedures are warranted, or even necessary, is open to discussion. Pursuant to H.Res. 611 , the Select Committee to Investigate the Voting Irregularities of August 2, 2007 is authorized to recommend changes to the rules and procedures of the House related to voting. Accordingly, this section discusses possible issues and options related to voting in the House. The options range from making no changes to a complete overhaul in the procedures for conducting votes in the chamber. Some options are explored in detail, while others are presented only as questions to be considered. Further, some options, or variations of those options, may appear under more than one heading. The headings are not listed in an order indicating their importance. If the House chooses to make any changes to its voting protocol, there are several options available to effect such changes. Each may carry its own advantages and disadvantages. House rules are traditionally changed on the opening day of a Congress by adoption of a resolution. The rules of the House in the prior Congress are made the rules of the House for the new Congress with this resolution. The resolution also contains specific changes to those rules effective for the new Congress. The Rules Committee or the parties' leadership often solicit proposals or suggestions for rules changes in the late summer or fall prior to an election. The majority members of the Rules Committee, with input from the majority leadership, consolidate and evaluate the suggestions. Any changes to voting processes could be included in this opening-day rules package. Historically, the rules resolution for a new Congress has most often been numbered either H.Res. 5 or H.Res. 6. The rules package is usually considered for one hour as an indivisible and unamendable entity, although that has not always been the case. It is therefore difficult to change any part of the resolution. The minority party routinely offers an alternative rules package, but that normally fails on a party-line vote. On occasion, House rules are changed by the adoption of a resolution on a day other than opening day. Again, such a resolution would likely be debatable for one hour and amendments would rarely be made in order. House rules changes can also be effected by a so-called "self executing" or "hereby" provision in a related or unrelated special rule. This process would allow the rules change to be made without a vote on the change itself. In addition, although rarely successful, a measure making changes to House rules could be brought up for consideration through the use of a discharge petition, either discharging the measure itself or discharging a special rule making it in order to consider a resolution embodying the rules change. It is possible to effect minor changes in the standing rules by unanimous consent. Congress may enact statutes setting forth rules and procedures to follow when the House considers certain kinds of legislation. Such statutes are enacted pursuant to the rulemaking power of Congress and may be incorporated by reference in the preface of the resolution adopting the rules of the House. Once a statute is enacted, it normally takes enactment of a subsequent statute to change its effect, although both the House and Senate reserve authority to change rules, even those that had been effected through a statute. On opening day, or early in the first session of a new Congress, the Speaker promulgates what have been called "Speaker announcements" or "Speaker's policies." Such announcements are protocols relating to legislative practices that are observed during a Congress. Most of these practices reflect long-standing traditions that have not been raised to the level of inclusion in House rules, but relate to the operation of the chamber and to the legislative process. A standing order is a continuing directive or regulation that has the force of a chamber rule but is not incorporated into the rules. In that respect it is similar to items included in the Speaker's announcements. Standing orders are more frequently used in the Senate, although the House has, on occasion, effected change through their use. The Office of the Clerk of the House, the Office of the Parliamentarian, and the Committee on House Administration, among other entities, have the authority to issue guidance, proclamations, or regulations related to the internal operations of the chamber, including on voting and the voting apparatus. In the 110 th Congress, to use a well-publicized example of an internal change, the clerk of the House altered the process for preparing an enrolled measure for presentation to the President. In addition to the rules and procedures of the House, operations can be changed, albeit informally, through custom and tradition. Examples of such traditions include allowing party leaders time to conduct a colloquy about the work of the upcoming week, the allowance for party leaders to speak without the time being counted against controlled time, and yielding 30 minutes to the minority to debate a special rule. Perhaps the major issue related to voting is: When is it too late for a Member to vote? The Constitution, one Member stated, "enshrines the right of every Member of the House of Representatives to vote on the floor of the House on behalf of the people they were elected to serve." Nevertheless, what does comity require in accommodating an opportunity for a Member to vote? With regard to potential changes to voting procedures, the House could consider enforcing a firm 15-minute voting time. If a 15-minute time for voting was enforced, and the electronic voting system was closed at the end of that time, Members would be unable to continue after 15 minutes to cast or change votes. There could be a single exception to the 15-minute limit in the event the electronic voting system malfunctions. A rules change would be needed to eliminate the "minimum" voting time of 15 minutes and replace it with a fixed voting time of 15 minutes. Closing the electronic voting system at a time certain could eliminate the use of well cards, unless they were retained solely for Members who did not have their personalized electronic voting card. The House could seek to require all votes to be by electronic device. If well cards were eliminated, the House could consider an increase beyond 15 minutes in the time for voting in order to accommodate Members' travel to the House chamber. For example, a strict time limit of 20 minutes could be added to House rules. Alternately, the House could retain the minimum 15-minute time for voting by electronic device and continue the use of well cards, but place a cap on the time for all voting after 15 minutes. A new clock could be activated, for example, to enable Members to vote by electronic device or to use well cards for a period of five additional minutes. Members could continue the current practice for using well cards, but, in the Speaker's policy or through another communication to the Members, it could be strongly recommended or required that Members arrive on the floor to vote within 15 minutes. Majority Leader Steny Hoyer recently made such a statement. Well cards are traditionally kept on the round table in the well, near the official reporter. By keeping them in this location, the table is within the view of television cameras, but Members crowd in this area, possibly blocking the view of the presiding officer and other Speaker's dais personnel. Is this location the appropriate place for the well cards? Would another location be better for Members and for a clearer view by the presiding officer? The sentence on reversing the outcome of a vote in House Rule XX, cl. 2(a) was new in the 110 th Congress, although its intent stemmed from concerns that had existed for some time. Although points of order and parliamentary inquiries have been raised regarding the enforcement of the rule (see Appendices C and D, respectively), there have been questions about its use and its inherent ambiguity. The rule could be repealed, or it could be clarified as to the form of a collateral determination of whether the rule had been violated. Alternatively, a House rule could be drafted to provide a potential point of order when a presiding officer has allowed voting to continue after voting time has expired, or a potential point of order when a Member has not been allowed to vote if the Member is in the well or, alternately, in the chamber. House rules, or Democratic Caucus or Republican Conference rules, could authorize the Speaker's announcements related to voting procedures. Such a provision could formalize a requirement that the Speaker's announcement include information on voting by electronic device and a clarification of what is the well as opposed to what is the chamber and not the well, and could provide guidance to the Speaker on the content of an announcement. The House could clarify the relationship between House rules and the Speaker's policies over what is official policy. A point of order can be made against a violation of House rules, but there is no effective way to remedy violations of policies enunciated by the Speaker. Should there be a way, and if so, what might it be? A meeting of the Select Committee to Investigate the Voting Irregularities of August 2, 2007 was held on the House floor to allow the clerk of the House to explain the electronic voting system. Members of the committee commented that most Members were not aware of all that went into the conduct of a vote. One response to this observation could be to require Members to learn about voting procedures in the chamber generally and the operation of the electronic voting system specifically. The clerk and the parliamentarian, who participated in the select committee's walk-through, could design a training session on the voting system for new Members, and a re-introduction session for returning Members. The training could also include information on the role of each official on the Speaker's dais. Training for Members could be provided during early organization meetings, and a second session could be held within the first several months of a Congress, after Members have had the opportunity to participate in votes. Similarly, the clerk and the parliamentarian could design training sessions for all officials who work on the dais. Considering their interrelated roles, each official could benefit in performance of his or her role from understanding the roles and responsibilities of others on the dais. Further, the clerk and the parliamentarian could consider whether each role or function on the dais should be performed with limited flexibility to ensure that there is uniformity of action regardless of whether the person performing a role is a senior or junior staff member. The clerk, in rotating staff serving on the dais, could also attempt to ensure a mixture of junior and senior staff so that the dais is never occupied by exclusively junior or exclusively senior staff. Training manuals could be prepared for both Members and dais staff. The manuals could include information on the responsibilities of each official on the dais, and information on voting procedures and the electronic voting system. Manuals could be distributed to Members along with other materials provided at the early organization meetings or at another time. Dais personnel could presumably receive manuals prior to the convening of a new Congress. The House could require training for all Members who are asked to preside over the House. Concomitantly, consideration could be given to a clarification of the role of the presiding officer, including how Members are selected by the majority leadership to preside, how a Member presiding carries out the Speaker's role regarding decorum and comportment, and whether the presiding officer's role is "an impartial one." The role of the parliamentarian, moreover, could be made more explicit, for example, whether the parliamentarian should intervene in advising the presiding officer on a parliamentary development on the floor or should await the presiding officer's request for advise. The parliamentarian currently provides Members who preside with a brief overview document of the role of the presiding officer. The document does not specifically address the language to be used, and it does not address issues that might arise. (Presiding officers are provided with cue cards containing the language to use in response to specific developments on the floor.) If asked, the parliamentarian will provide in-person training to individual Members prior to their time in the chair. The training, among other things, could cover what the presiding officer should look and listen for, what the appropriate language to use is, and generally, what the presiding officer's role is in maintaining decorum in the chamber and recognizing Members to speak. Because of the location of the parliamentarian and other officials on or near the rostrum, Members and floor staff often approach the dais to speak with them. It could be decided that the rostrum is to be limited only to Members or selected leadership floor staff. The number, and possibly names, of such staff could be determined by the Speaker and minority leader. Alternately, if a Member or floor staff aide wishes to speak to the parliamentarian, that conversation could be required to occur off the rostrum itself. As already mentioned, training and an operations manual could be provided for dais personnel. The House could consider reinstating the use of "pairs." For much of its history, the House recognized three types of pairs to enable absent Members to have their position noted prior to a vote, or to indicate that their absence would not affect the outcome of a vote. A general pair enabled two Members to be listed without indication of how they would have voted; a specific pair indicated how two absent Members would have voted, with one supporting and one opposing a question, so that had they been present, their votes would have balanced out; and a live pair, which matched two Members, one absent and one voting present. The rules for the 106 th Congress eliminated all but live pairs. A live pair was used in 2003 on the Medicare prescription drug measure. The House could institute an official policy regarding statements on missed votes. For example, there could be a standard time set aside on the floor for Members to deliver a statement, or there could be a section in the Congressional Record, such as at the end of legislative business, where all such statements would appear. On March 6, 2008, a Member asked unanimous consent to make a traditional missed-vote statement. Another Member reserved the right to object, and spoke not about the request but about the legislative priorities of the House. The first Member withdrew her unanimous consent request. The unanimous consent request was successfully renewed later that day. The House might consider allowing such statements to be made by a means other than unanimous consent. The absence of a "tally sheet" is integral to the investigation of the vote on August 2, 2007. The House could require partial preparation of a tally sheet with the appropriate vote number as soon as the bells indicate the start of a vote. A vote could also be deemed final and official only after a tally sheet was completed with the official tally by a clerk and provided to the presiding officer. To distinguish a final tally sheet, a different color could be used for it. If one or more tally sheets are used for a vote, they could all be marked to show their order of preparation and be retained as part of the official record of the vote. Alternately, as the House increasingly uses automated systems, it might be asked whether tally sheets could be abandoned and the display board or a desk monitor be used by the presiding officer. One of the issues raised by the select committee was the appearance of the word "final" on the summary boards in the chamber, and whether the presiding officer used a summary board rather than a tally sheet to determine the vote tally. The House may want to consider when or whether the word "final" should be displayed since it refers to a step in the clerk's termination of a vote rather than the presiding officer's announcement of a result. It also might be worth considering having the presiding officer exercise greater control over both tally sheets and the summary boards. Control could also extend to activating and deactivating the bell and light system. The number of voting stations in the chamber has remained constant since their installation. The number and locations of the stations was determined without actual experience and long ago, at a time when Members were called to the floor throughout the day to vote or to respond to a quorum call. With over 30 years of experience, is the number and location still appropriate? A survey could be conducted regarding the usage of each machine to determine if there should be more or fewer stations, and whether the locations of the voting stations are still appropriate. Both the House Administration Committee and the Standards of Official Conduct Committee have jurisdiction over aspects of voting in the House. This relationship could be clarified so that all Members understand which panel would exercise authority over voting in general, and the particular problems that may arise from it. Relatedly, the House Rules Committee has responsibility over the rules of the House and potential points of order which can be raised against those rules, including those related to voting. The committee's authority could be clarified. Further, it could be determined if the new Office of Congressional Ethics (OCE) would have any role in looking into concerns about possible voting irregularities. The House could require reports, perhaps biennially, from the House Administration Committee or clerk, or both, on the operation of electronic voting system, including but not limited to preparation for, conduct of, and conclusion of daily use of the electronic voting system; use of the voting system by personnel on the Speaker's dais; support for the system and dais personnel during the day behind the scenes; and security, including privileges accorded different staff members; voting in general, specifically information on official absences, points of order raised with respect to voting irregularities, and malfunction of the electronic voting system; and Members making points of personal privilege related to voting irregularities. Each report could be prepared at the end of a Congress, printed as an official document and provided to all Members and dais personnel. The documents could also be provided at training sessions for the new Members. One of the issues the House might consider is whether there is a problem associated with voting that requires action. For example, it is possible that the events of August 2, 2007, are an isolated incident. As such, the House could decide whether there is something really broken that needs to be fixed. It is possible that changes to address one situation might produce unintended consequences at some future date. Appendix A. Constitutional Provisions, House Rules, and Speaker's Policies Related to Voting Constitution Article 1, Section 5, clause 1 (excerpt) ...and a Majority of each shall constitute a Quorum to do Business; but a smaller Number may adjourn from day to day, and may be authorized to compel the Attendance of absent members, in such Manner, and under such Penalties as each House may provide. Article 1, Section 5, clause 3 (excerpt) ...and the Yeas and Nays of the Members of either House on any question shall, at the Desire of one fifth of those Present, be entered on the Journal. Article 1, Section 7, clause 2 (excerpt) ...If after such Reconsideration two thirds of that House shall agree to pass the Bill, it shall be sent together with the Objections, to the other House, by which it shall likewise be reconsidered, and if approved by two thirds of that House, it shall become a Law. But in all such Cases the Votes of both Houses shall be determined by yeas and Nays, and the Names of the Persons voting for and against the Bill shall be entered on the Journal of each House respectively. Article 1, Section 7, clause 3 Every Order, Resolution, or Vote to which the Concurrence of the Senate and House of Representatives may be necessary (except on a question of Adjournment) shall be presented to the President of the United States; and before the Same shall take Effect, shall be approved by him, or being disapproved by him, shall be repassed by two thirds of the Senate and House of Representatives, according to the Rules and Limitations prescribed in the Case of a Bill. Rule I. The Speaker Clause 1 (excerpt) Approval of the Journal ...Having examined and approved the Journal of the last day's proceedings, the Speaker shall announce to the House his approval thereof. The Speaker's approval of the Journal shall be deemed agreed to unless a Member, Delegate, or Resident Commissioner demands a vote thereon. If such a vote is decided in the affirmative, it shall not be subject to a motion to reconsider. If such a vote is decided in the negative, then one motion that the Journal be read shall be privileged, shall be decided without debate, and shall not be subject to a motion to reconsider. Clause 5 (excerpt) Questions of order The Speaker shall decide all questions of order, subject to appeal by a Member, Delegate, or Resident Commissioner. ... Clause 6 Form of a question The Speaker shall rise to put a question but may state it sitting. The Speaker shall put a question in this form: "Those in favor (of the question), say 'Aye.'"; and after the affirmative voice is expressed, "Those opposed, say 'No.'". After a vote by voice under this clause, the Speaker may use such voting procedures as may be invoked under rule XX. Clause 7 Discretion to vote The Speaker is not required to vote in ordinary legislative proceedings, except when his vote would be decisive or when the House is engaged in voting by ballot. Rule II. Other Officers and Officials Clause 1 (excerpt) There shall be elected at the commencement of each Congress, to continue in office until their successors are chosen and qualified, a Clerk, a Sergeant-at-Arms, a Chief Administrative Officer, and a Chaplain. ... Rule III. The Members, Delegates, and Resident Commissioner of Puerto Rico Clause 1 Voting Every Member shall be present within the Hall of the House during its sittings, unless excused or necessarily prevented, and shall vote on each question put, unless he has a direct personal or pecuniary interest in the event of such question. Clause 2 2. (a) A Member may not authorize any other person to cast his vote or record his presence in the House or the Committee of the Whole House on the state of the Union. (b) No other person may cast a Member's vote or record a Member's presence in the House or the Committee of the Whole House on the state of the Union. Clause 3(a) (excerpt) Delegates and the Resident Commissioner In a Committee of the Whole House on the state of the Union, each Delegate and the Resident Commissioner shall possess the same powers and privileges as Members of the House. ... Rule X. Organization of Committees Clause 5(a)(1) (excerpt) Election and membership of standing committees The standing committees specified in clause 1 shall be elected by the House within seven days after the commencement of each Congress.... Clause 5(c)(1) (excerpt) One of the members of each standing committee shall be elected by the House.... Rule XIII. Calendars and Committee Reports Clause 6(a)(1) Privileged reports by the Committee on Rules A report by the Committee on Rules on a rule, joint rule, or the order of business may not be called up for consideration on the same day it is presented to the House except— (1) when so determined by a vote of two-thirds of the Members voting, a quorum being present; Clause 6(c) (c) The Committee on Rules may not report— (1) a rule or order proposing that business under clause 6 of rule XV be set aside by a vote of less than two-thirds of the Members voting, a quorum being present; or (2) a rule or order that would prevent the motion to recommit a bill or joint resolution from being made as provided in clause 2(b) of rule XIX, including a motion to recommit with instructions to report back an amendment otherwise in order, if offered by the Minority Leader or a designee, except with respect to a Senate bill or resolution for which the text of a House-passed measure has been substituted. Rule XIV. Order and Priority of Business Clause 6 All questions relating to the priority of business shall be decided by a majority without debate. Rule XV. Business in Order on Special Days Clause 1(a) (excerpt) Suspensions A rule may not be suspended except by a vote of two-thirds of the Members voting, a quorum being present. ... Clause 5(b)(1) (excerpt) Private Calendar, first and third Tuesdays On the third Tuesday of a month...the Speaker may direct the clerk to call the bills and resolutions on the Private Calendar. ...Two-thirds of the Members voting, a quorum being present, may adopt a motion that the House dispense with the call on this day. Clause 6(a) (excerpt) Calendar Call of Committees, Wednesdays On Wednesday of each week, business shall not be in order before completion of the call of the committees (except as provided by clause 4 of rule XIV) unless two-thirds of the Members voting, a quorum being present, agree to a motion that the House dispense with the call. ... Rule XVI. Motions and Amendments A third reading precedes passage when the Speaker states the question: "Shall the bill [or joint resolution] be engrossed [when applicable] and read a third time?" If that question is decided in the affirmative, then the bill or joint resolution shall be read the final time by title and then the question shall be put on its passage. Rule XVIII. The Committee of the Whole House on the state of the Union Clause 6 Quorum and voting (a) A quorum of a Committee of the Whole House on the state of the Union is 100 Members. The first time that a Committee of the Whole finds itself without a quorum during a day, the Chairman shall invoke the procedure for a quorum call set forth in clause 2 of rule XX, unless he elects to invoke an alternate procedure set forth in clause 3 or clause 4(a) of rule XX. If a quorum appears, the Committee of the Whole shall continue its business. If a quorum does not appear, the Committee of the Whole shall rise, and the Chairman shall report the names of absentees to the House. (b)(1) The Chairman may refuse to entertain a point of order that a quorum is not present during general debate. (2) After a quorum has once been established on a day, the Chairman may entertain a point of order that a quorum is not present only when the Committee of the Whole House on the state of the Union is operating under the five-minute rule and the Chairman has put the pending proposition to a vote. (3) Upon sustaining a point of order that a quorum is not present, the Chairman may announce that, following a regular quorum call under paragraph (a), the minimum time for electronic voting on the pending question shall be five minutes. (c) When ordering a quorum call in the Committee of the Whole House on the state of the Union, the Chairman may announce an intention to declare that a quorum is constituted at any time during the quorum call when he determines that a quorum has appeared. If the Chairman interrupts the quorum call by declaring that a quorum is constituted, proceedings under the quorum call shall be considered as vacated, and the Committee of the Whole shall continue its sitting and resume its business. (d) A quorum is not required in the Committee of the Whole House on the state of the Union for adoption of a motion that the Committee rise. (e) In the Committee of the Whole House on the state of the Union, the Chairman shall order a recorded vote on a request supported by at least 25 Members. (f) In the Committee of the Whole House on the state of the Union, the Chairman may reduce to five minutes the minimum time for electronic voting without any intervening business or debate on any or all pending amendments after a record vote has been taken on the first pending amendment. (g) The Chairman may postpone a request for a recorded vote on any amendment. The Chairman may resume proceedings on a postponed request at any time. The Chairman may reduce to five minutes the minimum time for electronic voting on any postponed question that follows another electronic vote without intervening business, provided that the minimum time for electronic voting on the first in any series of questions shall be 15 minutes. (h) Whenever a recorded vote on any question has been decided by a margin within which the votes cast by the Delegates and the Resident Commissioner have been decisive, the Committee of the Whole shall rise and the Speaker shall put such question de novo without intervening motion. Upon the announcement of the vote on that question, the Committee of the Whole shall resume its sitting without intervening motion. Clause 12 Applicability of Rules of the House The Rules of the House are the rules of the Committee of the Whole House on the state of the Union so far as applicable. Rule XIX. Motions Following the Amendment Stage Clause 2(a) (excerpt) Recommit After the previous question has been ordered on passage or adoption of a measure, or pending a motion to that end, it shall be in order to move that the House recommit (or commit, as the case may be) the measure, with or without instructions, to a standing or select committee. ... Rule XX. Voting and Quorum Calls Clause 1 (a) The House shall divide after the Speaker has put a question to a vote by voice as provided in clause 6 of rule I if the Speaker is in doubt or division is demanded. Those in favor of the question shall first rise from their seats to be counted, and then those opposed. (b) If a Member, Delegate, or Resident Commissioner requests a recorded vote, and that request is supported by at least one-fifth of a quorum, the vote shall be taken by electronic device unless the Speaker invokes another procedure for recording votes provided in this rule. A recorded vote taken in the House under this paragraph shall be considered a vote by the yeas and nays. (c) In case of a tie vote, a question shall be lost. Clause 2 (a) Unless the Speaker directs otherwise, the Clerk shall conduct a record vote or quorum call by electronic device. In such a case the Clerk shall enter on the Journal and publish in the Congressional Record, in alphabetical order in each category, the names of Members recorded as voting in the affirmative, the names of Members recorded as voting in the negative, and the names of Members answering present as if they had been called in the manner provided in clause 3. A record vote by electronic device shall not be held open for the sole purpose of reversing the outcome of such vote. Except as otherwise permitted under clause 8 or 9 of this rule or under clause 6 of rule XVIII, the minimum time for a record vote or quorum call by electronic device shall be 15 minutes. (b) When the electronic voting system is inoperable or is not used, the Speaker or Chairman may direct the Clerk to conduct a record vote or quorum call as provided in clause 3 or 4. Clause 3 The Speaker may direct the Clerk to conduct a record vote or quorum call by call of the roll. In such a case the Clerk shall call the names of Members, alphabetically by surname. When two or more have the same surname, the name of the State (and, if necessary to distinguish among Members from the same State, the given names of the Members) shall be added. After the roll has been called once, the Clerk shall call the names of those not recorded, alphabetically by surname. Members appearing after the second call, but before the result is announced, may vote or announce a pair. Clause 4 (a) The Speaker may direct a record vote or quorum call to be conducted by tellers. In such a case the tellers named by the Speaker shall record the names of the Members voting on each side of the question or record their presence, as the case may be, which the Clerk shall enter on the Journal and publish in the Congressional Record. Absentees shall be noted, but the doors may not be closed except when ordered by the Speaker. The minimum time for a record vote or quorum call by tellers shall be 15 minutes. (b) On the demand of a Member, or at the suggestion of the Speaker, the names of Members sufficient to make a quorum in the Hall of the House who do not vote shall be noted by the Clerk, entered on the Journal, reported to the Speaker with the names of the Members voting, and be counted and announced in determining the presence of a quorum to do business. Clause 5 (a) In the absence of a quorum, a majority comprising at least 15 Members, which may include the Speaker, may compel the attendance of absent Members. (b) Subject to clause 7(b) a majority described in paragraph (a) may order the Sergeant-at-Arms to send officers appointed by him to arrest those Members for whom no sufficient excuse is made and shall secure and retain their attendance. The House shall determine on what condition they shall be discharged. Unless the House otherwise directs, the Members who voluntarily appear shall be admitted immediately to the Hall of the House and shall report their names to the Clerk to be entered on the Journal as present. (c)(1) If the House should be without a quorum due to catastrophic circumstances, then— (A) until there appear in the House a sufficient number of Representatives to constitute a quorum among the whole number of the House, a quorum in the House shall be determined based upon the provisional number of the House; and (B) the provisional number of the House, as of the close of the call of the House described in subparagraph (3)(C), shall be the number of Representatives responding to that call of the House. (2) If a Representative counted in determining the provisional number of the House thereafter ceases to be a Representative, or if a Representative not counted in determining the provisional number of the House thereafter appears in the House, the provisional number of the House shall be adjusted accordingly. (3) For the purposes of subparagraph (1), the House shall be considered to be without a quorum due to catastrophic circumstances if, after a motion under clause 5(a) of rule XX has been disposed of and without intervening adjournment, each of the following occurs in the stated sequence: (A) A call of the House (or a series of calls of the House) is closed after aggregating a period in excess of 72 hours (excluding time the House is in recess) without producing a quorum. (B) The Speaker— (i) with the Majority Leader and the Minority Leader, receives from the Sergeant-at-Arms (or his designee) a catastrophic quorum failure report, as described in subparagraph (4); (ii) consults with the Majority Leader and the Minority Leader on the content of that report; and (iii) announces the content of that report to the House. (C) A further call of the House (or a series of calls of the House) is closed after aggregating a period in excess of 24 hours (excluding time the House is in recess) without producing a quorum. (4)(A) For purposes of subparagraph (3), a catastrophic quorum failure report is a report advising that the inability of the House to establish a quorum is attributable to catastrophic circumstances involving natural disaster, attack, contagion, or similar calamity rendering Representatives incapable of attending the proceedings of the House. (B) Such report shall specify the following: (i) The number of vacancies in the House and the names of former Representatives whose seats are vacant. (ii) The names of Representatives considered incapacitated. (iii) The names of Representatives not incapacitated but otherwise incapable of attending the proceedings of the House. (iv) The names of Representatives unaccounted for. (C) Such report shall be prepared on the basis of the most authoritative information available after consultation with the Attending Physician to the Congress and the Clerk (or their respective designees) and pertinent public health and law enforcement officials. (D) Such report shall be updated every legislative day for the duration of any proceedings under or in reliance on this paragraph. The Speaker shall make such updates available to the House. (5) An announcement by the Speaker under subparagraph (3)(B)(iii) shall not be subject to appeal. (6) Subparagraph (1) does not apply to a proposal to create a vacancy in the representation from any State in respect of a Representative not incapacitated but otherwise incapable of attending the proceedings of the House. (7) For purposes of this paragraph: (A) The term "provisional number of the House" means the number of Representatives upon which a quorum will be computed in the House until Representatives sufficient in number to constitute a quorum among the whole number of the House appear in the House. (B) The term "whole number of the House" means the number of Representatives chosen, sworn, and living whose membership in the House has not been terminated by resignation or by the action of the House. (d) Upon the death, resignation, expulsion, disqualification, removal, or swearing of a Member, the whole number of the House shall be adjusted accordingly. The Speaker shall announce the adjustment to the House. Such an announcement shall not be subject to appeal. In the case of a death, the Speaker may lay before the House such documentation from Federal, State, or local officials as he deems pertinent. Clause 6 (a) When a quorum fails to vote on a question, a quorum is not present, and objection is made for that cause (unless the House shall adjourn)— (1) there shall be a call of the House; (2) the Sergeant-at-Arms shall proceed forthwith to bring in absent Members; and (3) the yeas and nays on the pending question shall at the same time be considered as ordered. (b) The Clerk shall record Members by the yeas and nays on the pending question, using such procedure as the Speaker may invoke under clause 2, 3, or 4. Each Member arrested under this clause shall be brought by the Sergeant-at-Arms before the House, whereupon he shall be noted as present, discharged from arrest, and given an opportunity to vote; and his vote shall be recorded. If those voting on the question and those who are present and decline to vote together make a majority of the House, the Speaker shall declare that a quorum is constituted, and the pending question shall be decided as the requisite majority of those voting shall have determined. Thereupon further proceedings under the call shall be considered as dispensed with. (c) At any time after Members have had the requisite opportunity to respond by the yeas and nays, but before a result has been announced, a motion that the House adjourn shall be in order if seconded by a majority of those present, to be ascertained by actual count by the Speaker. If the House adjourns on such a motion, all proceedings under this clause shall be considered as vacated. Clause 7 (a) The Speaker may not entertain a point of order that a quorum is not present unless a question has been put to a vote. (b) Subject to paragraph (c) the Speaker may recognize a Member, Delegate, or Resident Commissioner to move a call of the House at any time. When a quorum is established pursuant to a call of the House, further proceedings under the call shall be considered as dispensed with unless the Speaker recognizes for a motion to compel attendance of Members under clause 5(b). (c) A call of the House shall not be in order after the previous question is ordered unless the Speaker determines by actual count that a quorum is not present. Clause 8 Postponement of proceedings (a)(1) When a recorded vote is ordered, or the yeas and nays are ordered, or a vote is objected to under clause 6— (A) on any of the questions specified in subparagraph (2), the Speaker may postpone further proceedings to a designated place in the legislative schedule within two additional legislative days; and (B) on the question of agreeing to the Speaker's approval of the Journal, the Speaker may postpone further proceedings to a designated place in the legislative schedule on that legislative day. (2) The questions described in subparagraph (1) are as follows: (A) The question of passing a bill or joint resolution. (B) The question of adopting a resolution or concurrent resolution. (C) The question of agreeing to a motion to instruct managers on the part of the House (except that proceedings may not resume on such a motion under clause 7(c) of rule XXII if the managers have filed a report in the House). (D) The question of agreeing to a conference report. (E) The question of ordering the previous question on a question described in subdivision (A), (B), (C), or (D). (F) The question of agreeing to a motion to suspend the rules. (G) The question of agreeing to a motion to reconsider or the question of agreeing to a motion to lay on the table a motion to reconsider. (H) The question of agreeing to an amendment reported from the Committee of the Whole. (b) At the time designated by the Speaker for further proceedings on questions postponed under paragraph (a), the Speaker shall resume proceedings on each postponed question. (c) The Speaker may reduce to five minutes the minimum time for electronic voting on a question postponed under this clause, or on a question incidental thereto, that follows another electronic vote without intervening business, so long as the minimum time for electronic voting on the first in any series of questions is 15 minutes. (d) If the House adjourns on a legislative day designated for further proceedings on questions postponed under this clause without disposing of such questions, then on the next legislative day the unfinished business is the disposition of such questions. Clause 9 Five-minute votes The Speaker may reduce to five minutes the minimum time for electronic voting on any question arising without intervening business after an electronic vote on another question if notice of possible five-minute voting for a given series of votes was issued before the preceding electronic vote. Clause 10 Automatic yeas and nays The yeas and nays shall be considered as ordered when the Speaker puts the question on passage of a bill or joint resolution, or on adoption of a conference report, making general appropriations, or increasing Federal income tax rates (within the meaning of clause 5 of rule XXI), or on final adoption of a concurrent resolution on the budget or conference report thereon. Clause 11 Ballot votes In a case of ballot for election, a majority of the votes shall be necessary to an election. When there is not such a majority on the first ballot, the process shall be repeated until a majority is obtained. In all balloting blanks shall be rejected, may not be counted in the enumeration of votes, and may not be reported by the tellers. Rule XXI. Restrictions on Certain Bills Passage of tax rate increases A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not be considered as passed or agreed to unless so determined by a vote of not less than three-fifths of the Members voting, a quorum being present. ... Rule XXII. House and Senate Relations Clause 12(a) (excerpt) (1) Subject to subparagraph (2), a meeting of each conference committee shall be open to the public. (2) In open session of the House, a motion that managers on the part of the House be permitted to close to the public a meeting or meetings of their conference committee shall be privileged, shall be decided without debate, and shall be decided by the yeas and nays. Rule XXIII. Code of Official Conduct Clause 10 A Member, Delegate, or Resident Commissioner who has been convicted by a court of record for the commission of a crime for which a sentence of two or more years' imprisonment may be imposed should refrain from participation in the business of each committee of which he is a member, and a Member should refrain from voting on any question at a meeting of the House or of the Committee of the Whole House on the state of the Union, unless or until judicial or executive proceedings result in reinstatement of the presumption of his innocence or until he is reelected to the House after the date of such conviction. Speaker's Policies Following a tradition beginning in the 1980s, Speaker Nancy Pelosi announced policies on certain aspects of the legislative process at the beginning of the new Congress. One policy dealt with voting by electronic device. The Speaker's announced policies for the 110 th Congress appeared in the Congressional Record (daily edition) on January 5, 2007, on pages H59-H61. 6. Conduct of Votes by Electronic Device The Speaker's policy announced on January 4, 1995, with respect to the conduct of electronic votes will continue in the 110 th Congress with modifications as follows. As Members are aware, clause 2(a) of rule XX provides that Members shall have not less than 15 minutes in which to answer an ordinary record vote or quorum call. The rule obviously establishes 15 minutes as a minimum. Still, with the cooperation of the Members, a vote can easily be completed in that time. The events of October 30, 1991, stand out as proof of this point. On that occasion, the House was considering a bill in the Committee of the Whole under a special rule that placed an overall time limit on the amendment process, including the time consumed by record votes. The Chair announced, and then strictly enforced, a policy of closing electronic votes as soon as possible after the guaranteed period of 15 minutes. Members appreciated and cooperated with the Chair's enforcement of the policy on that occasion. The Chair desires that the example of October 30, 1991, be made the regular practice of the House. To that end, the Chair enlists the assistance of all Members in avoiding the unnecessary loss of time in conducting the business of the House. The Chair encourages all Members to depart for the Chamber promptly upon the appropriate bell and light signal. As in recent Congresses, the cloakrooms should not forward to the Chair requests to hold a vote by electronic device, but should simply apprise inquiring Members of the time remaining on the voting clock. Members should not rely on signals relayed from outside the Chamber to assume that votes will be held open until they arrive in the Chamber. Members will be given a reasonable amount of time in which to accurately record their votes. No occupant of the Chair would prevent a Member who is in the Well before the announcement of the result from casting his or her vote. Appendix B. House Voting Procedures: Forms and Requirements [author name scrubbed] Government and Finance Division Voting is among the most public acts of Representatives. Generally, Members try not to miss a vote, because it is an important demonstration to their constituents that they are always on the job. Procedural considerations suffuse voting, and thus it is important to understand the methods of voting in both the House and in the Committee of the Whole, where much of the chamber's business is conducted. In the House there are four ways for lawmakers to obtain a vote in the House. They are voice votes, division votes, yea and nay votes, and recorded votes. Voice Vote. This means that lawmakers call out "yea" or "nay" when a question is first put by the Speaker or Speaker pro tempore. As Rule I, clause 6, states, the Speaker will first say, "Those in favor (of the question), say 'Aye'." Then the Speaker will ask: "Those opposed, say 'No'." A voice vote can be quick and easy, but it is sometimes difficult for the Speaker to determine—based on the volume of each response—whether more lawmakers shouted "aye" compared to those who shouted "no." Division Vote. Rule XX, clause 1(a), states that if the Speaker is uncertain about the outcome of a voice vote, or if a Member demands a division, the House shall divide. "Those in favor of the question shall first rise from their seats to be counted," and then those who are opposed to the proposition shall stand to be counted. This procedure is reasonably accurate and takes only a few minutes, but it does not provide a public record of how each Member voted. Only vote totals (95 for, 65 against, for instance) are announced in this seldom-employed method of voting. Yea and Nay Vote. The Constitution (Article I, Section 5) declares that "the Yeas and Nays of the Members...on any question" shall be obtained "at the Desire of one fifth of those present." Under this provision, it does not matter if a quorum of the House (218 Members) is not present to conduct business—which the Constitution requires—because any Member can say, "Mr. Speaker, on that vote, I demand the yeas and nays." If the demand is supported by one-fifth of those present, the Speaker will say "the yeas and nays" are ordered. There is also an "automatic" yea and nay (or rollcall) vote provided in House Rule XX, clause 6. For example, if it is evident to a lawmaker that a quorum is not present in the chamber, he or she may object to a vote on that ground and, "automatically," a vote will be ordered by the chair. To request an automatic vote, a Member says, "I object to the vote on the ground that a quorum is not present, and I make a point of order that a quorum is not present." The actual vote will then simultaneously determine both issues: the presence of a quorum and the vote on the pending question. Clause 10 of Rule XX also states that the "yeas and nays shall be considered as ordered" on final passage of a limited number of measures or matters, such as concurrent budget resolutions. The Constitution requires that votes to override presidential vetoes shall be determined by the yeas and nays. Recorded Vote. Under Rule XX, clause 1(b), if any Member, Delegate, or Resident Commissioner "requests a recorded vote, and that request is supported by at least one-fifth of a quorum, such vote shall be taken by electronic device." (Yea and nay and recorded votes are all taken by electronic device—employed since 1973—unless the computerized voting system malfunctions; then standby procedures outlined in Rule XX, clause 2(b), are used to conduct the votes.) To obtain a recorded vote, a Member states, "Mr. Speaker, on that I demand a recorded vote." If at least one-fifth of a quorum of 218—or 44 members—stand and support the request, then the recorded vote will be taken by electronic device. Recall that the distinction between recorded votes and the yeas and nays goes to the number of Members required to support each request: one-fifth of those present for the yeas and nays and one-fifth of a quorum (44 of 218) for recorded votes. In the Committee of the Whole. Three methods of voting are available in the Committee of the Whole: voice, division, and recorded. Yea and nay votes are not permitted in the committee, either the constitutional or "automatic" forms. In short, there is only one way to obtain a recorded vote in the committee—where a quorum is 100 Members—and it is outlined in Rule XVIII, clause 6(e). This rule of the House states: the "Chairman shall order a recorded vote on a request supported by at least 25 Members." Thus, any Member may say, "I request a recorded vote," and, if 25 lawmakers (the Member who made the request can be part of the tally, too) rise to be counted by the chair, the recorded vote will occur by electronic device. Alternatively, a lawmaker who plans to request a recorded vote even though few Members are present in the chamber will usually say, "Mr. Chairman, I request a recorded vote and, pending that, I make a point of order that a quorum is not present." Once the chair ascertains that a quorum is not present, there is an immediate quorum call and the Member who requested the recorded vote can ask 24 other colleagues to support his request as they come onto the floor. Length of Time for Voting. Under Rule XX, clause 2(a), the minimum time for a record vote by electronic device is 15 minutes in either the House or the Committee of the Whole. The 15-minute period is the minimum, rather than the maximum, time allowed for the conduct of a recorded vote. The chair has the discretion to hold the vote open longer. A new 110 th rule states that votes are not to be held open for the sole purpose of reversing the outcome of a vote. However, this rule seems difficult to interpret in practice. There are also occasions in the House (see Rule XX, clause 9) when the Speaker has the discretion to reduce the voting time to not less than five minutes. The Speaker also has the authority under Rule XX, clause 8, to postpone and cluster certain votes. Votes in the Committee of the Whole may also be reduced to five minutes, as noted in Rule XVIII, clause 6(f). Appendix C. Points of Order Relating to Voting in the 110 th Congress To compile the list of points of order in the 110 th Congress relating to voting in the House, a search was run using the Legislative Information System for points of order in the Congressional Record . The result was 443 documents that contained "point of order" between January 4, 2007, and May 23, 2008. Each individual document was examined and was again searched using Firefox's search function. Points of order dealing with voting, the date they occurred, the Member who raised the point of order, the Congressional Record (CR) page number, and the colloquy with the presiding officer are displayed in the following table. Appendix D. Parliamentary Inquiries Relating to Voting in the 110 th Congress To compile the list of parliamentary inquiries in the 110 th Congress relating to voting in the House, a search was run using the Legislative Information System for parliamentary inquiries in the Congressional Record . The result was 220 documents that contained "parliamentary inquiry" between January 4, 2007, and May 23, 2008. Each individual document was examined and was again searched using Firefox's search function. Parliamentary inquiries dealing with voting, the date they occurred, the Member who raised the inquiry, the Congressional Record (CR) page number, and the colloquy with the presiding officer are displayed in the following table. | Record voting in the House of Representatives appears to be a straightforward process but is an activity steeped in parliamentary complexity. While this report analyzes the evolution of voting beginning with the Legislative Reorganization Act of 1970 (LRA), some House rules related to voting have existed since the First Congress. The House has had nearly 220 years of experience with voting that manifests itself in precedents relevant today. The LRA contained two major departures related to record voting. First, it authorized development of an electronic voting system. Second, it allowed record votes in the Committee of the Whole House on the state of the Union, the form in which the House usually operates to consider amendments to legislation. Since the LRA's enactment, there have been notable developments in record voting procedures in the House. In general, the House through rules changes and precedents has limited votes that might be viewed as dilatory rather than substantive, and has expanded opportunities for votes that might be viewed as substantive. Changes in rules have also authorized the presiding officer to postpone and cluster votes and to reduce voting time to five minutes; largely ended pairing; and allowed Delegates and the Resident Commissioner to vote in the Committee of the Whole. Policy announcements by the Speaker and rulings by presiding officers have ended the correction of Members' votes; sought to limit the duration of votes; and dictated the manner by which Members may change a vote once cast. Controversies have arisen on occasion. Some were related to the use of the electronic voting system, some to Members being able to cast or change a vote after the 15-minute minimum voting-time had expired. Others were related to a perception that a vote had been "held open" beyond a reasonable amount of time. Only a very few controversies have resulted in an investigation. The Standards of Official Conduct Committee has made three investigations. A select committee is currently investigating the manner by which a vote was ended. Should the House wish to address rules, precedents, or practices, or the sources of particular controversies, it has a number of possible vehicles and potential options. Vehicles include House and party rules, the Speaker's policies, and administrative policies. Changes might be made to the electronic voting system, operations on the Speaker's dais, Members' ability to vote after the 15-minute minimum, and other aspects of voting in the House. Complementary analyses to this report may be found in CRS Report RL34366, Electronic Voting System in the House of Representatives: History and Evolution, by [author name scrubbed], and CRS Report 98-396, Guide to Individuals Seated on the House Dais, by [author name scrubbed]. See also supplementary information at the CRS Congressional Processes website, /analysis/pages/congressionaloperations.aspx. This report will be updated after the Select Committee to Investigate the Voting Irregularities of August 2, 2007 issues its final report. |
It has been said that "conflict is endemic to budgeting." If conflict within Congress or between Congress and the President impedes the timely enactment of annual appropriations acts or continuing resolutions, a government shutdown may occur. Along these lines, several options may present themselves to Congress and the President during high-stakes negotiations over appropriations measures. The options include coming to agreement on regular appropriations acts by October 1, the beginning of a new fiscal year; using one or more interim continuing resolutions (CRs) to extend temporary funding beyond the beginning of a fiscal year, until a point in time when negotiators make final decisions about full-year funding levels; or not agreeing on full-year or interim appropriations acts, resulting in a temporary funding gap and a corresponding shutdown of affected federal government activities. If Congress and the President pursue the second or third options, they may agree on full-year appropriations after the beginning of the fiscal year. These agreements may provide funding through regular appropriations acts—either in stand-alone or omnibus legislation—or, less commonly, through a full-year CR. Congress and the President frequently agree on full-year or interim funding without coming to an impasse. On other occasions, however, Congress and the President may not come to an accommodation in time to prevent a temporary funding gap. If a funding gap begins and funding does not appear likely to resume during the first calendar day of the gap, the federal government generally begins a "shutdown" of affected activities. The criteria for determining which activities are affected are complex, as discussed later in this report. This report discusses the causes of funding gaps and shutdowns of the federal government, processes that are associated with shutdowns, and how agency operations may be affected by shutdowns. The report concludes with a discussion of potential issues for Congress. The federal fiscal year begins on October 1. For agencies and programs that rely on discretionary funding through annual appropriations acts, Congress and the President must enact interim or full-year appropriations by this date if many governmental activities are to continue operating. If interim or full-year appropriations are not enacted into law, the interval in which agency appropriations are not enacted is called a "funding gap." In addition, a funding gap may occur if a CR's interim funding expires and another CR or regular appropriations bill is not enacted immediately thereafter. When a funding gap begins and appears likely to continue a full calendar day or longer, the federal government generally begins a "shutdown" of the affected activities. A funding gap and shutdown are distinct events, however (see Box 1 ). In general, a shutdown implies the furlough of certain personnel and curtailment of agency activities and services. There are multiple exceptions to this general process, however, as this report explains later. Programs that are funded by laws other than annual appropriations acts—such as entitlements like Social Security and other mandatory spending—also may be affected by a funding gap, if program execution relies on activities that receive annually appropriated funding. Funding gaps and government shutdowns have occurred in the past when Congress and the President did not enact regular appropriations bills by the beginning of the fiscal year. They also have occurred when Congress and the President did not come to an agreement on stop-gap funding through a CR. As noted in another CRS report, six relatively lengthy funding gaps occurred from FY1977 to FY1980, ranging from 8 to 17 full days. These funding gaps occurred before the Department of Justice issued legal opinions in 1980 and 1981 about agency activities that may continue during a funding gap. The opinions, which are discussed later in this report, were more restrictive in their implications about allowable activities during a funding gap compared to what agencies had done in the past. After FY1980, funding gaps continued to occur at times, but the durations of funding gaps shortened considerably compared to prior years. From FY1981 to FY1995, nine funding gaps occurred with durations of up to three full days. A significant exception to the trend toward shorter funding gaps occurred in FY1996. Two funding gaps and corresponding shutdowns of affected activities ensued, amounting to five full days during November 1995 and 21 full days during December 1995-January 1996. In the wake of the FY1996 experience, funding gaps did not occur again for over 17 years. Nevertheless, another relatively long funding gap began on October 1, 2013, the first day of FY2014, after funding for FY2013 expired at the end of September. A 16-full-day shutdown of affected activities followed. Subsequently, in FY2018, two brief shutdowns occurred. The two shutdowns illustrate how the time of day when funding resumes may affect choices that are made about when government operations will resume. They also illustrate some challenges related to counting the number of days that correspond to a particular funding gap or shutdown. Notably, they show, in different ways, how a shutdown can occur on a particular day, even in the absence of a funding gap. The first FY2018 shutdown began after a CR expired at the end of the day on Friday, January 19, 2018. A funding gap and shutdown ensued over the weekend. OMB directed agencies to execute plans for an orderly shutdown, and the Office of Personnel Management (OPM) indicated that a lapse in appropriations could affect agency operations with implications for whether employees should report to work on Saturday, January 20, 2018. Funding resumed on Monday, January 22, 2018, through another CR, which technically closed the funding gap for the entire day of Monday. Nevertheless, many federal agencies continued to shut down certain operations and furlough related employees on this weekday, because the CR that resumed funding was enacted during Monday evening, after working hours had already passed. OPM then announced late in the evening on January 22, 2018, that due to enactment of a CR, employees would be expected to return to work on Tuesday, January 23, 2018. The second FY2018 shutdown began after a CR expired at the end of the day on Thursday, February 8, 2018. In the hours after the CR's funding expired, OMB directed agencies to execute their shutdown plans, and OPM indicated that employees might be affected. A few hours later, in the morning of Friday, February 9, 2018, Congress and the President enacted another CR to extend funding. This prompted OMB and OPM to inform employees to come to work on the same day, that morning. From the perspective of prior OMB statements, a funding gap technically did not occur on February 9, 2018. However, given that OMB and OPM issued directions for a shutdown after funding expired, it is possible that some agency operations may have been affected in the few hours between expiration of the previous CR and enactment of the succeeding CR. The Constitution, statutory provisions, court opinions, and Department of Justice (DOJ) opinions provide the legal framework for how funding gaps and shutdowns have occurred in recent decades. Article I, Section 9, Clause 7 of the Constitution states, "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." Federal employees and contractors cannot be paid, for example, if appropriations have not been enacted in the first place. Nevertheless, it would appear to be possible under the Constitution for the government to make contracts or other obligations even if it lacks funds to pay for these commitments. Several provisions of law—which commonly are referred to as the Antideficiency Act—generally prevent this from happening, however. The act, which evolved over time and is located in Title 31 of the U.S. Code , prohibits federal officials from obligating funds before an appropriations measure has been enacted, except as authorized by law. The act also prohibits federal officials from accepting voluntary services or employing personal services exceeding what has been authorized by law. Therefore, the Antideficiency Act generally prohibits agencies from continued operation in the absence of appropriations. Failure to comply with the act may result in criminal sanctions, fines, and administrative discipline including suspension without pay or removal from office. The act makes exceptions to the prohibitions on acceptance of voluntary services and employment of personal services, however, for "emergencies involving the safety of human life or the protection of property." For years leading up to 1980, many federal agencies continued to operate during a funding gap, "minimizing all nonessential operations and obligations, believing that Congress did not intend that agencies close down," while waiting for the enactment of annual appropriations acts or CRs. In 1980 and 1981, however, then-U.S. Attorney General Benjamin R. Civiletti issued two opinions that more strictly interpreted the Antideficiency Act, along with the law's exceptions, in the context of a funding gap. The Attorney General's opinions addressed "the scope of currently existing legal and constitutional authorities for the continuance of government functions during a temporary lapse in appropriations." In brief, the opinions stated that, with some exceptions, the head of an agency could avoid violating the Antideficiency Act only by suspending the agency's operations until the enactment of an appropriation. In the absence of appropriations, exceptions would be allowed only when there is "some reasonable and articulable connection between the function to be performed and the safety of human life or the protection of property." In addition, "there must be some reasonable likelihood that the safety of human life or the protection of property would be compromised, in some degree, by delay in the performance of the function in question." Apart from this broad category of "human life and property" exceptions to the act, the Civiletti opinions identified another category: those exceptions that are "authorized by law." GAO later summarized the 1981 Civiletti opinion as identifying four sub-types of "authorized by law" exceptions: Activities funded with appropriations of budget authority that do not expire at the end of one fiscal year, such as multiple-year and no-year appropriations. These activities may continue when the multiple-year and no-year appropriations still have budget authority that is available for obligation at the time of a funding gap. In addition, agencies that receive most or all of their budget authority for their day-to-day operations through means that are not dependent on annual appropriations acts, such as the U.S. Postal Service, would fall under this exception. Activities authorized by statutes that expressly permit obligations in advance of appropriations, such as contract authority. Activities "authorized by necessary implication from the specific terms of duties that have been imposed on, or of authorities that have been invested in, the agency." The Civiletti opinion illustrated this abstract concept by citing the situation when benefit payments under an entitlement program are funded from other-than-one-year appropriations (i.e., where benefit payments are not subject to a funding gap, because they are authorized by permanent entitlement authority), but the salaries of personnel who administer the program are funded by one-year appropriations (i.e., the salaries are subject to a funding gap). In this situation, the Attorney General offered the view that continued availability of money for benefit payments would necessarily imply that continued administration of the program is authorized by law at some level and therefore excepted from the Antideficiency Act. Obligations "necessarily incident to presidential initiatives undertaken within his constitutional powers," such as the power to grant pardons and reprieves. GAO later expressed the view that this same rationale would apply to legislative branch agencies that incur obligations "necessary to assist the Congress in the performance of its constitutional duties." For its part, the 1980 Civiletti opinion included in the "authorized by law" exception an inference that federal officers may, in the temporary absence of appropriations, exercise authority to incur minimal obligations necessary to closing their agencies in an orderly way. Subsequently, OMB interpreted this exception to fall under the "necessary implication" sub-type of the "authorized by law" exception. In 1990, in response to the 1981 Civiletti opinion, Congress amended 31 U.S.C. §1342 to clarify that "the term 'emergencies involving the safety of human life or the protection of property' does not include ongoing, regular functions of government the suspension of which would not imminently threaten the safety of human life or the protection of property." DOJ's Office of Legal Counsel (OLC) issued a memorandum in 1995 (hereinafter "1995 OLC opinion") that interpreted the effect of the amendment. The 1995 OLC opinion said one aspect of the 1981 Civiletti opinion's description of emergency governmental functions should be modified in light of the amendment (suggesting that the phrase "in some degree" be replaced with "in some significant degree"), but that the 1981 opinion otherwise "continues to be a sound analysis of the legal authorities respecting government operations" during a funding gap. More recently, OMB summarized its interpretation of exceptions to the Antideficiency Act in a series of similar, detailed memoranda. The memoranda were issued to agencies in April and December 2011 (regarding FY2011 and FY2012 annual appropriations, respectively), September 2013 (regarding FY2014 annual appropriations), and January 2018 (regarding FY2018 annual appropriations). Notably, the opinions of OLC and OMB do not permit outlays—such as the issuance of checks, disbursement of cash, or electronic transfer of funds—to liquidate federal obligations for operations that lack appropriated funding during a shutdown. Rather, OLC and OMB have interpreted the Antideficiency Act as including exceptions that provide only the authority to incur obligations that will be paid upon enactment of appropriations in the future. Observers sometimes wish to contrast the effect of a government shutdown, on one hand, with the effect of the federal government reaching its statutory debt limit and not raising it, on the other. The two situations are distinct in terms of their effects on agency operations and on federal government payments to liquidate obligations (see Box 2 ). In the annually revised Circular No. A-1 1 , OMB provides instructions to executive branch agencies on how to prepare for and operate during a funding gap. The circular cites the two Civiletti opinions and the 1995 OLC opinion as background and guidance. The circular also establishes two "policies" regarding the absence of appropriations: a prohibition on incurring obligations unless the obligations are otherwise authorized by law and permission to incur obligations "as necessary for orderly termination of an agency's functions," but prohibition of any disbursement (i.e., payment). The circular also directs agency heads to develop and maintain shutdown plans. These plans sometimes also have been called "contingency plans." Prior to the 2011 revision of Circular No. A-11 , the circular broadly indicated that the plans were to be submitted to OMB when initially prepared and also when revised. The plans themselves were required to contain summary information about the number of employees expected to be on-board before a shutdown and also the number of employees who would be "retained" (i.e., excepted from furlough) during a shutdown. With the August 2011 revision of the circular, however, OMB newly required that these plans contain more detailed information, be updated under certain conditions, and be updated periodically, with a minimum frequency of a four-year schedule starting August 1, 2014. OMB's change in instructions occurred four months after Congress and the President almost came to an impasse, in April 2011, on FY2011 appropriations. After the FY2014 shutdown, OMB's 2014 revision to the circular changed the schedule for updates to shutdown plans. Henceforward, agencies were instructed to submit updated plans to OMB for review with a minimum frequency of every two years, beginning August 1, 2015. Under OMB's instructions from Circular No. A-11 , agency heads are told to use the DOJ opinions and the circular, in consultation with the agencies' general counsels, to "decide what agency activities are excepted or otherwise legally authorized to continue during a lapse in appropriations." Furthermore, these plans are required to address agency actions in two distinct time periods of a shutdown: an initial period of one to five days, which OMB characterized as a "short" lapse, and a second period if a shutdown were to extend further. Among other things, a shutdown plan is required to include a summary of agency activities that will continue and those that will cease; an estimate of the time to complete the shutdown, to the nearest half-day; the number of employees expected to be on-board (i.e., filled positions) before implementation of the plan; and the total number of employees to be retained (i.e., not furloughed), broken out into five categories of exceptions to the Antideficiency Act, including employees (1) who are paid from a resource other than annual appropriations; (2) who are necessary to perform activities expressly authorized by law; (3) who are necessary to perform activities necessarily implied by law; (4) who are necessary to the discharge of the President's constitutional duties and powers; and (5) who are necessary to protect life and property. After providing this information for the agency as a whole, an agency's plan is required to further break out some of the information by "component" (e.g., a bureau-size entity within a department). OMB's circular also instructs agencies to take personnel actions to release employees according to applicable law and OPM regulations. OPM maintains a website with guidance, historical OMB documents, and frequently asked questions about furloughs. In 2018, OMB newly directed agencies to, "in coordination with OMB," notify employees two business days before a potential lapse about their work and pay status under a lapse. In general, the OMB circular refers to employees who are to be furloughed as "released," and employees who will not be furloughed as "excepted" or "retained." More broadly, officials and observers may employ a variety of personnel-related terms in the context of a government shutdown, many of which begin with the letter "e." For discussion of the term "excepted" and other terms that may be used in practice, see Box 3 . Notably, some parts of the federal government may employ a term in a way that is official but different from usage elsewhere. At other times, usage of a term may be colloquial or may suggest meanings that are not intended. Aside from Circular No. A-11 , other OMB documents and guidance from previous funding gaps and shutdowns may provide insights into current and future practices. OPM provides access to previous OMB bulletins and memoranda for reference on its website. Some of these OMB documents also have been reproduced in legislative branch documents. In addition to OMB's annual instructions in Circular No. A-11 , OMB may provide more detailed guidance to agencies in specific situations. These formalized communications typically occur through bulletins or memoranda. The documents may be issued to agencies in at least two ways: through means that are internal to the executive branch and that generally are not readily visible elsewhere (e.g., posting on an OMB-administered website that cannot be readily accessed outside the executive branch), and through publicly visible means (e.g., posting a memorandum on OMB's public website). Documents in the second, publicly visible category may allude to other, non-public guidance. On occasion, Members of Congress have questioned the rationales for how determinations of "excepted" status were made. (See the section of this report that is titled " Quality and Specificity of Agency Planning .") Consequently, it is conceivable that non-public guidance documents might be of interest to Congress in some circumstances. Both of the aforementioned kinds of communications have been in evidence in the context of shutdown planning. For example, in the days leading up to near-impasses on appropriations for FY2011 and FY2012, OMB supplemented its annual Circular No. A-11 instructions with more detailed guidance to agencies. Shortly before FY2011 funding was scheduled to expire in April 2011, OMB instructed agencies through a publicly available memorandum to create or revise shutdown plans and post them on the Internet. In these instructions, OMB said it had earlier been "providing guidance and coordinating the efforts of the Executive Branch to facilitate appropriate contingency planning in accordance with the provisions of the Antideficiency Act." OMB apparently provided the earlier guidance and coordination over a period of time through non-public documents and instructions. For the near-impasses of FY2011 and FY2012, as well as the actual impasses of FY2014 and FY2018, agencies and OMB followed generally the same process of posting new or revised shutdown plans on the Internet. In each instance, OMB posted agencies' plans on the same web page. Many agencies also created their own web pages, which described shutdown procedures and linked to their plans. These resources covered many topics in addition to the information that OMB Circular No. A-11 addressed. Additional topics included shutdown precedents, guidelines, furlough policies, and frequently asked questions. Documents also addressed availability of government services, unemployment compensation for federal employees, union concerns, and information about past shutdowns. For the shutdowns that occurred in FY2014 and FY2018, agencies implemented their plans after OMB instructed them to do so. On September 30, 2013, for example, OMB said in a memorandum that it did not have a clear indication that Congress would act in time for the President to sign a CR before the end of October 1. OMB therefore directed agencies to execute their plans for an "orderly shutdown." OMB provided similar directions for the two FY2018 shutdowns. Effects of a shutdown may occur at various times, including in anticipation of a potential funding gap (e.g., planning), during an actual gap (e.g., furlough and curtailed operations), and afterwards (e.g., addressing backlogs of work). The following sections discuss potential effects of a shutdown from three perspectives: effects on federal officials and employees; examples of excepted activities and personnel; and effects on government operations and services to the public. An immediate shutdown effect is the "shutdown furlough" of certain federal employees—that is, placement of the employees in a temporary, nonduty, nonpay status. Shutdown furloughs are not considered a break in service and are generally creditable for retaining benefits and seniority. With regard to pay, there appears to be no guarantee that employees placed on shutdown furlough would receive pay for the time they are placed on furlough. This may be the case, because if furloughed employees are prohibited from coming to work during a shutdown, the government arguably would not be incurring a legal obligation to pay them. Several considerations, including personnel costs, future productivity, and employee retention, might be weighed when assessing the issue of retroactive pay for furloughed staff. Nevertheless, in historical practice, federal employees who were furloughed under a shutdown generally have received their salaries retroactively as a result of legislation to that effect. For example, a CR provision required that employees who were furloughed during the FY2014 government shutdown be paid retroactively: Employees furloughed as a result of any lapse in appropriations which begins on or about October 1, 2013, shall be compensated at their standard rate of compensation, for the period of such lapse in appropriations, as soon as practicable after such lapse in appropriations ends. In the case of excepted employees, OMB has stated several times in detailed, shutdown-related guidance to agencies that [w]ithout further specific direction or enactment by Congress, all excepted employees are entitled to receive payment for obligations incurred by their agencies for their performance of excepted work during the period of the appropriations lapse. After appropriations are enacted, payroll centers will pay all excepted employees for time worked. In addition, a 1981 memorandum from OMB to the heads of executive departments and agencies included the following statements: It should be made clear that, during a [sic] appropriations hiatus, funds may not be available to permit agency payment of obligations. All personnel performing excepted services, including activities incident to the orderly suspension of agency operations, should be assured that the United States will not contest its legal obligation to make payment for such services, even in the absence of appropriations. Historically, Congress has authorized retroactive pay for excepted employees who work during a government shutdown by ratifying and approving the obligations incurred in anticipation of appropriations. For example, the CR that was enacted following the FY2014 shutdown included the following provision: All obligations incurred in anticipation of the appropriations made and authority granted by this joint resolution for the purposes of maintaining the essential level of activity to protect life and property and bringing about orderly termination of Government functions, and for purposes as otherwise authorized by law, are hereby ratified and approved if otherwise in accord with the provisions of this joint resolution. Congress pursued similar courses of action regarding the two FY2018 shutdowns. The experiences of FY1996 and FY2014 illustrate what may occur with respect to furloughs during a shutdown of relatively long duration. (By contrast, shutdowns of shorter duration may not result in the production of much authoritative information about their effects; see Box 4 . ) Among other things, the experiences of FY1996 and FY2014 show how the extent of furloughs during a funding gap is driven in large part by the number and composition of regular appropriations bills that remain unenacted during that time period. As noted earlier, two separate funding gaps and corresponding shutdowns occurred in FY1996. A graphical depiction of the FY1996 appropriations process, including the two funding gaps, is available in another CRS report. The first shutdown, which lasted five full days between November 13-19, 1995, resulted in the furlough of approximately 800,000 federal employees in agencies funded by 10 of the then-13 regular appropriations bills. The shutdown was caused by the expiration of a CR agreed to on September 30, 1995 ( P.L. 104-31 ), and by President William J. Clinton's veto of a second CR. As of December 15, 1995, four additional regular appropriations acts for FY1996 had been enacted. Therefore, six regular appropriations bills remained unenacted at the start of the second shutdown. The second shutdown lasted 21 full days between December 15, 1995, and January 6, 1996. It was triggered by the expiration of a CR that had been enacted on November 20, 1995 ( P.L. 104-56 ), which funded the government through December 15, 1995. On January 2, 1996, the estimate of furloughed federal employees for the second shutdown was 284,000. Fewer employees and agencies were affected, because some funding bills were enacted during and after the first shutdown and before the second shutdown. In addition, many employees were recalled back to work even in the absence of funding, due to ongoing redeterminations of employees' status as excepted or non-excepted. There were eight CRs from January 6, 1996, until April 26, 1996, when the Omnibus Consolidated Rescissions and Appropriations Act of 1996 ( P.L. 104-134 ) was enacted. This consolidated appropriations act provided budget authority for agencies and programs not covered in the FY1996 annual appropriations acts that had become law earlier. After the second FY1996 shutdown, no shutdowns occurred until over 17 years later, in FY2014. In this case, a funding gap began on October 1, 2013, the first day of FY2014, after funding from the previous fiscal year expired at the end of the day on September 30. At that time, none of the 12 regular appropriations bills for FY2014 had been enacted. On September 30, OMB said in a memorandum that it did not expect a resumption of funding from annual appropriations by the end of the day on October 1. Consequently, OMB instructed the affected agencies to begin the process of ceasing operations and furloughing personnel on October 1. On September 30, however, an automatic continuing resolution (ACR) was enacted to provide funding for a narrow category of activities at the Departments of Defense (DOD) and Homeland Security (DHS). This narrow CR provided funds for FY2014 pay and allowances for certain members of the Armed Forces and supporting contractors and civilian personnel. Full implementation of the law was delayed several days while agencies determined how to interpret and implement its provisions. The experience may be of interest if similar legislation were considered in anticipation of a potential future shutdown (see Box 5 ). Ultimately, the FY2014 shutdown lasted 16 full days, through the end of October 16. The funding gap terminated when the President signed an interim CR in the early morning of Thursday, October 17, 2013 ( P.L. 113-46 ). During the first week of October, information about furloughs occasionally was reported by the news media. Initial reports suggested that 800,000 or more executive branch employees had been furloughed, based on the contents of agency shutdown plans. Three weeks after the shutdown terminated, OMB released a retrospective report. According to OMB, the shutdown resulted in the furlough "roughly 850,000 employees per day" at its peak in the first few days of October, or approximately 40% of the federal civilian workforce. The number decreased during the course of the shutdown due to the implementation of P.L. 113-39 (see Box 5 ). In addition, the total number of furloughs varied over time, due to the net effect of ongoing redeterminations regarding whether an employee's status as excepted or non-excepted should change in response to a change in an agency's circumstances. For the shutdowns of FY1996 and FY2014, OMB did not issue an overall estimate of the number of furloughs across all three branches of the federal government. A look at furlough and pay practices across the three branches, however, may provide further insights into the potential effects of a shutdown on federal officials and employees. Among the three branches of the federal government, the executive branch is the largest in number of personnel and size of budgets. Several types of executive branch officials and employees are not subject to furlough. These include the President, certain presidential appointees, and federal employees deemed "excepted." OPM has described "excepted" employees, who are required to work during a shutdown, as "employees who are funded through annual appropriations who are nonetheless excepted from the furlough because they are performing work that, by law, may continue to be performed during a lapse in appropriations." Nevertheless, excepted employees who are normally paid from annual appropriations would not receive pay for time worked during the shutdown period until funding resumes. With regard to the President's pay, Article II, Section 1 of the Constitution forbids the salary of the President to be reduced while he or she is in office, thus effectively guaranteeing the President of compensation regardless of any shutdown action. During a funding gap, the judiciary would likely be able to continue to operate for a limited time using funds derived from court filings and other fees and from no-year appropriations. For example, in preparation for the FY2014 shutdown, the judiciary estimated that these funds, if used cautiously, could have sustained judiciary activities for approximately 10 working days after an appropriations lapse. In FY2018, the judiciary indicated it could operate without a new appropriation for approximately three weeks by using court fee balances and other available funds. If a lapse in appropriations were to exist after various fee balances like these were exhausted, the judiciary has previously said it would continue in this situation to operate under the terms of the Antideficiency Act, which the judiciary said allows "essential work" to continue during a lapse in appropriations. Such "essential work" includes powers exercised by the judiciary under the Constitution, including activities that support the exercise of Article III judicial powers (i.e., the resolution of cases). Consequently, in the judicial branch, judges would not be subject to furlough, nor would core court staff and probation and pretrial services officers whose service is considered essential to the continued resolution of cases. Each court would be responsible for determining the number of court staff and officers needed to support the exercise of its Article III judicial powers. Such staff performing "essential work" functions would report to work in a non-pay status, while other staff would be furloughed. Protected by a constitutional prohibition against a diminution in their pay, Supreme Court Justices and other Article III judges would continue to be paid during a lapse in appropriations. Also, in the judiciary's view, other judicial officers, such as U.S. magistrate judges and U.S. bankruptcy judges, may continue to be paid as well. According to the Administrative Office of the U.S. Courts, staff performing "essential functions and working in non-pay status should expect to be paid once" Congress enacts an appropriation, while furloughed judicial staff would not receive compensation unless and until Congress expressly authorized it. During the first FY1996 shutdown and the FY2014 shutdown, for example, the House and Senate continued to engage in many aspects of the legislative process. For example, new legislation was introduced, committees held hearings and markups, reports were filed, legislative business on a variety of policy topics was conducted, and nominations were considered in the Senate. The House and Senate Rules, which govern procedure in each chamber, did not formally address a lapse in appropriations or provide alternative procedures that would be specifically applicable during such periods. Due to their constitutional responsibilities and a permanent appropriation for congressional pay, Members of Congress are not subject to furlough. Additionally, Article I, Section 6, of the Constitution states that Members of Congress "shall receive a Compensation for their Services, to be ascertained by Law, and paid out of the Treasury of the United States," and the 27 th Amendment states, "No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened." During a funding gap, pay for congressional employees would not be disbursed if there is no appropriation to fund legislative branch activities. Any decision regarding requirements that a congressional employee continue to work during a government shutdown would appear to fall to his or her employing authority. Activities of legislative branch agencies would likely also be restricted, in consultation with Congress, to activities required to support Congress with its constitutional responsibilities or those necessary to protect life and property. When a funding gap concludes due to the resumption of interim or full-year funding, agencies and employees undertake efforts to resume their normal activities consistent with the funding that the legislation provides. The timing of when funding resumes can have implications for how soon agencies and employees are able to resume full operations, however. The shutdowns of FY2014 and FY1996 provide illustrations of this process. In FY2014, for example, President Barack Obama signed an interim CR to bring the FY2014 shutdown to an end, reportedly shortly after midnight in the morning of Thursday, October 17, 2013. The Administration judged that this timing was early enough to enable a re-opening of the federal government on October 17. Along these lines, OMB issued a memorandum to agencies and reportedly released it to the news media just before 1 a.m. eastern standard time on October 17. In the memorandum, OMB indicated that "[a]ll employees who were on furlough due to the absence of appropriations may now return to work." Separately, OPM posted guidance for executive branch employees on its website at 12:30 a.m. The guidance said employees were "expected to return to work on their next regularly scheduled work day (Thursday, October 17 th for most employees), absent other instructions from their employing agencies." The experience of FY1996 was different. If funding resumes later during a calendar day, there may not be adequate time for an agency or its personnel to resume their activities during the same day. At the conclusion of the first FY1996 shutdown, for example, interim funding was enacted late in the evening on Sunday, November 19, 1995. As a consequence, funding technically was available for operations earlier on that day. In many if not most instances, however, affected agency operations did not restart until the following day, November 20, 1995. In this situation, a five-full-day funding gap may have resulted in a six-day shutdown for affected agencies. Apart from the specific events of FY1996 and FY2014, OPM has addressed this matter generally in prospective guidance to agencies, relating to when furloughed employees may be expected to return to work. If a shutdown were to occur, guidance concerning when furloughed employees should come back to work at the conclusion of the shutdown would have to be tailored to the specific situation. In the absence of such guidance, agencies should apply a rule of reason in requiring employees to return to work as soon as possible, taking into account the disruption in the lives and routines of furloughed employees that a shutdown causes. Previous determinations of excepted activities and personnel would not necessarily hold for any future shutdown. However, past experience may inform future agency and OMB decisions. Perspectives on this topic might be gleaned from documents associated with shutdowns and near-shutdowns from the past. Compared to more recent events, the experience of the FY1996 shutdowns is more difficult to document, because the FY1996 events did not result in wide publication on the Internet of agency shutdown plans. The near-impasses in April and December 2011, by contrast, regarding enactment of FY2011 and FY2012 annual appropriations, resulted in executive branch agencies posting a substantial amount of information on the Internet about their plans for a potential shutdown, including information about excepted and non-excepted personnel and activities. In September 2013, in the context of FY2014 annual appropriations, OMB directed agencies to update these plans and prepare for their potential release. These mostly-updated plans ultimately were posted on websites of agencies and OMB. OMB and agencies have continued to occasionally post updated plans. Looking ahead, any of these plans might provide insight into questions of whether government activities at a specific agency or program, and in a specific situation, would continue or cease, at least according to interpretations of law at the time. More generally, OMB memoranda may provide insights into which activities and personnel might be considered to be excepted. In April and December 2011, then-OMB Director Jacob J. Lew outlined several categories of exceptions to the Antideficiency Act and provided further explanation on how agencies should interpret the categories. Later, then-OMB Director Sylvia M. Burwell provided similar guidance in September 2013, as did OMB Director Mick Mulvaney in January 2018. These documents were primarily conceptual in nature and focused on explaining key principles that apply during a funding gap. Three decades earlier, however, an OMB memorandum of November 17, 1981, from Director David A. Stockman to the heads of executive agencies, identified concrete "examples of excepted activities." The memorandum, which still was in effect for the FY1996 shutdowns and posted online by OPM as a reference for agencies for the FY2014 shutdown, explained: Beginning [on the first day of the appropriations hiatus], agencies may continue activities otherwise authorized by law, those that protect life and property and those necessary to begin phasedown of other activities. Primary examples of activities agencies may continue are those which may be found under applicable statutes to: 1. Provide for the national security, including the conduct of foreign relations essential to the national security or the safety of life and property. 2. Provide for benefit payments and the performance of contract obligations under no-year or multi-year or other funds remaining available for those purposes. 3. Conduct essential activities to the extent that they protect life and property, including: a. Medical care of inpatients and emergency outpatient care; b. Activities essential to ensure continued public health and safety, including safe use of food and drugs and safe use of hazardous materials; c. The continuance of air traffic control and other transportation safety functions and the protection of transport property; d. Border and coastal protection and surveillance; e. Protection of Federal lands, buildings, waterways, equipment and other property owned by the United States; f. Care of prisoners and other persons in the custody of the United States; g. Law enforcement and criminal investigations; h. Emergency and disaster assistance; i. Activities essential to the preservation of the essential elements of the money and banking system of the United States, including borrowing and tax collection activities of the Treasury; j. Activities that ensure production of power and maintenance of the power distribution system; and k. Activities necessary to maintain protection of research property. You should maintain the staff and support services necessary to continue these essential functions. The effects of a shutdown on government operations may be examined through multiple and sometimes overlapping perspectives. In the sections below, this report highlights three: illustrations of program- or policy-related effects from past shutdowns; potential costs associated with a shutdown; and general effects of a shutdown on mandatory spending programs. More detailed discussion of some topics may be found in other CRS products. They discuss the potential effects of a shutdown on government procurement, selected agencies, recipients of federal grants, the economy, and other subjects of potential interest to Congress. Although the effects on the public of any future shutdown would not necessarily reflect past experience, past events may be illustrative of effects that are possible. Several examples follow, below, that were reported by the news media, OMB, and agencies, and in congressional hearings, about the operations and services of federal programs and agencies. The examples focus on the FY1996 and FY2014 shutdowns, in particular. The effects of the two FY1996 funding gaps and shutdowns received extensive attention. Nevertheless, funding gaps occurred for only some of the then-13 regular appropriations bills. Consequently, the shutdowns' effects were limited primarily to agencies and programs that were included in these bills. Several illustrations of the shutdowns' effects on executive branch agencies and programs are highlighted in the bullets below. Health. New patients were not accepted into clinical research at the National Institutes of Health (NIH) clinical center; the Centers for Disease Control and Prevention ceased disease surveillance; and hotline calls to NIH concerning diseases were not answered. Law Enforcement and Public Safety. Delays occurred in the processing of alcohol, tobacco, firearms, and explosives applications by the Bureau of Alcohol, Tobacco, and Firearms; work on more than 3,500 bankruptcy cases reportedly was suspended; cancellation of the recruitment and testing of federal law-enforcement officials reportedly occurred, including the hiring of 400 border patrol agents; and delinquent child-support cases were delayed. Parks, Museums, and Monuments. Closure of 368 National Park Service sites (loss of 7 million visitors) reportedly occurred, with loss of tourism revenues to local communities; and closure of national museums and monuments (reportedly with an estimated loss of 2 million visitors) occurred. Visas and Passports. Approximately 20,000-30,000 applications by foreigners for visas reportedly went unprocessed each day; 200,000 U.S. applications for passports reportedly went unprocessed; and U.S. tourist industries and airlines reportedly sustained millions of dollars in losses. American Veterans. Multiple services were curtailed, ranging from health and welfare to finance and travel. Federal Contractors. Of $18 billion in Washington, DC, area contracts, $3.7 billion (over 20%) reportedly were affected adversely by the funding lapse; the National Institute of Standards and Technology (NIST) was unable to issue a new standard for lights and lamps that was scheduled to be effective January 1, 1996, possibly resulting in delayed product delivery and lost sales; and employees of federal contractors reportedly were furloughed without pay. OMB briefly summarized the effects of the two FY1996 shutdowns in a two-page February 1996 letter and two short attachments. These documents later were included in a congressional hearing print. OMB identified in one three-page attachment what OMB said were "illustrations" of the effects of the shutdowns. The documents also listed agencies and corresponding numbers of employees who were said to be excepted or not excepted from furlough, and provided an overall cost estimate. The FY1996 cost estimate is discussed in the section of this CRS report titled " Potential Costs Associated with a Shutdown ." During the FY1996 government shutdowns, the federal courts generally operated with limited disruption to their personnel. In the absence of appropriated funds, the judiciary used fee revenues and "carryover" funds from prior years to support what it considered its essential function of hearing and deciding cases. Internal judiciary guidelines, according to the official publication of the U.S. courts, recognized the "unique function of the Judiciary" and anticipated that all activities "essential to maintain and support the exercise of the judicial power of the United States during a funding lapse" would continue. The funding lapse, however, did affect some court functions, with some judges entertaining motions for continuances in civil cases and at least one district court announcing it would not start any new civil jury trials. An appellate court, it also was reported, had to reschedule several arguments because government lawyers were unable to attend. During the November 1995 government shutdown, lack of funding resulted in furloughs of most of the staff of the federal judiciary's two support agencies, the Federal Judicial Center and the Administrative Office of the U.S. Courts. During the second shutdown, prior to the judiciary's decision to use fee revenues and carryover funds to continue essential functions, some courts did furlough personnel "on a limited basis." The FY2014 funding gap and corresponding shutdown occurred for all 12 regular appropriations bills. Consequently, the shutdown's effects were extensive for federal government operations. News media reported extensively on how the 16-full-day shutdown affected operations of programs and agencies in the executive branch. At first, many media accounts drew primarily from the shutdown plans that agencies and OMB posted online. As the shutdown continued, national and local outlets typically focused on specific agencies, programs, or experiences of citizens or stakeholders who said they were affected. Agencies themselves often did not report information about the ongoing impact of the shutdown during the 16-day period, however, due to the furlough of relevant staff and non-updating of their websites. After the FY2014 shutdown, some Members of Congress requested assessments of its effects. Three weeks after the shutdown concluded, OMB posted on its website a 27-page report compiling the "impacts and costs" of the FY2014 shutdown. The publication's level of detail stood in marked contrast with the document that OMB produced after the two shutdowns of FY1996, when, as described earlier, OMB generated a three-page paper compiling "illustrations" of the impacts of the two shutdowns. OMB's FY2014 report discussed the impact of the shutdown through five sometimes-overlapping perspectives, in separate sections. The bullets below provide an illustrative sampling of the contents in each section. C osts to the E conomy. 169 According to OMB, these costs included overall macroeconomic effects (the subject of another CRS report) and several kinds of "economic disruption" due to cessation of "government activities the private sector relies on." In the latter category, OMB cited among other things a halt to several kinds of permitting, reviews, and licensing (e.g., 200 applications for a permit to drill for energy resources); suspension of Internal Revenue Service (IRS) income verification used by financial institutions to help determine credit-worthiness of prospective borrowers; a halt to hundreds of federal loans to small businesses; and disrupted tourism and travel by closing national parks. Federal Employee Furloughs. 171 OMB cited payroll costs for "work not performed" by furloughed federal employees as the "largest direct cost" of the FY2014 shutdown. As one way to quantify the furloughs, OMB said that executive branch employees were furloughed for a total of "roughly 6.6 million" employee work days, with "furloughs affecting workers at the vast majority of agencies." An accompanying table broke out this total by executive branch agency, listing 1,600,000 employee furlough days at DOD, 985,000 days at the Department of the Treasury, and a further 4,055,000 days at 33 additional agencies. If these day-based figures were translated into an annual, work-year equivalent, it could be said that the furloughs amounted to over 25,000 employee work years. OMB characterized the impact of the furloughs qualitatively, saying "[e]mployees not on the job could not conduct food, product, and workplace safety inspections; prepare for flu season or monitor other public health issues; process tax refunds or respond to taxpayer questions; or provide numerous other services important to the general public and the economy." Impacts on Programs and Services. 177 In another section of the report, OMB identified shutdown impacts on multiple government programs and services. OMB described the impacts of the shutdown, often in quantitative terms, with 29 bullets that focused on separate policy and programmatic areas. The bullets were grouped in six categories: (1) direct services for veterans, seniors, and other "vulnerable" groups; (2) public health and research; (3) product safety and environmental protection; (4) worker rights and safety; (5) international trade and relations; and (6) other government services. In the sixth category, for example, one bullet said the shutdown suspended the issuance of Social Security cards and, in addition, closed down the E-Verify system for employers to check prospective employees' immigration status. Other Direct Budgetary Costs. 179 Apart from the costs of employee furloughs (discussed in the next section of this CRS report), OMB identified "other direct budgetary costs" that executive branch agencies incurred. These costs included a variety of topics, such as lower revenues (e.g., $7 million in user fees and other revenue not being collected for the National Park Service); a halt to "program integrity" activities (e.g., activities intended to identify noncompliance with tax laws, collect unpaid taxes, and thereby help incentivize voluntary compliance, which OMB characterized as collecting $1 billion per week); interest due on late federal payments; increased costs on federal contracts due to over 10,000 stop work orders; and shutdown-related costs, such as the cost of employee and contractor time that was used to undertake pervasive shutdown-related activities—such as planning, implementation, and re-start activities—that diverted from mission-related work that otherwise would have been performed in the absence of a shutdown. Impacts on the Federal Workforce. 180 In a final section of the report, OMB discussed impacts of the shutdown on the federal workforce apart from those discussed elsewhere. These included federal employees not receiving their full pay during the shutdown (including many employees who legally were required to work) and potential adverse impacts on recruitment and retention of federal employees and contractor personnel. The FY2014 shutdown also affected many federal grant programs that provide funding for state and local governments. State and local governments rely upon federal aid to fund projects and provide services that benefit communities and individuals. During the shutdown, agency contingency plans stated that several grant-related activities would be disrupted. These activities included executing grant agreements, processing payments to grantees, and investigating waste, fraud, and abuse. In the judicial branch, as during the FY1996 government shutdowns, courts generally operated with limited disruption to their personnel. According to internal guidance, the judiciary was prepared to keep the federal courts operating for about two weeks by using non-annually appropriated funds (as it did during the 1995-1996 government shutdowns). In practice, the judicial branch was able to operate on non-annually appropriated funds for the entirety of the FY2014 shutdown. Had that funding been exhausted, the judiciary would have continued operating under the terms of the Antideficiency Act. The funding lapse, however, did affect some court functions. Some civil cases were postponed, in part due to continuance requests from the Department of Justice. Many courts also operated on condensed criminal calendars and reduced building maintenance. The judiciary also advised judges and court unit executives, in the event of a funding lapse, to post information on their individual court websites about what operations would continue during and after the initial two-week period. Across the legislative branch, the impact of the FY2014 shutdown varied. At the outset, the House of Representatives and some legislative branch agencies publicly released official guidance or operational plans. Guidance or plans may vary for any future shutdown, however. There are many potential approaches to assessing the costs of an event, because the concept of "cost" may be defined in multiple ways. (See Box 6 for discussion of potential perspectives on the term.) As a result, it typically is not possible to arrive at a single cost figure or definition that will be of primary interest to all stakeholders. The case of government shutdowns arguably is no exception. An additional complication frequently arises when assessing costs, due to a lack of relevant or readily available data. Nevertheless, in the aftermath of past shutdowns, some efforts have been undertaken to ascertain what the costs of the shutdowns were. After a one-day shutdown in late November 1981, Senator Alan Cranston asked GAO on a quick-turnaround basis to ascertain the costs of paying employees who had been furloughed, as well as "other costs directly or indirectly related to the shutdown." In response to the inquiry, GAO interviewed agency officials and developed a uniform set of questions for agencies. GAO responded to the Senator's inquiry two weeks later, saying "[d]ata on the number of employees furloughed and the costs of implementing a shutdown are neither readily available nor easily obtainable." The agencies' abilities to respond varied considerably, leading GAO to portray limited information in a tabular format. Because agencies took multiple approaches to define what constituted costs, GAO also cautioned against comparing the extent of costs across agencies, concluding "[w]e would not suggest that the figures are any more than indicative of the types of costs incurred" (emphasis added). A similar inquiry about costs and shutdown-related impacts came in the aftermath of the much-longer FY1996 shutdowns. In response, OMB provided an overall cost estimate of "over $1.4 billion" for the two shutdowns. According to earlier testimony from OMB after the first shutdown, a portion of shutdown-related costs corresponded to retroactive pay for furloughed employees. OMB also said that significant additional costs, which then could not be determined, arose from interest payments to third parties required under the Prompt Payment Act and, in addition, additional personnel costs to deal with backlogs of work. Years later, OMB broke down the $1.4 billion figure. OMB said $430 million of the total corresponded to payroll costs from the first FY1996 shutdown (retroactive pay for furloughed employees), $630 million related to similar payroll costs for the second FY1996 shutdown, and $300 million were associated with "other" costs. In this accounting, OMB did not appear to quantify costs in monetary terms corresponding to the three pages of itemized impacts on government services that it earlier had identified in its letter from 1996, such as costs accruing to small businesses that experienced delays in receiving financing from the Small Business Administration. After the FY2014 shutdown, some Members of Congress requested assessments of its costs and impact. As noted earlier, OMB released a 27-page report on the subject three weeks after the shutdown ended. The report characterized all of its contents as focusing on "costs," broken down into five categories: (1) effects on the economy, (2) federal employee furloughs, (3) impacts on programs and services, (4) other budgetary costs, and (5) impacts on the federal workforce. OMB did not attempt to quantify in monetary terms the items that it included in the third and fifth categories, as well as some program-specific items that it included in the first category. For the first category, however, OMB attributed $2 billion to $6 billion in lost domestic economic output to the shutdown. With regard to the second category, OMB estimated that the total cost of retroactive pay due to employees furloughed during the shutdown was "roughly" $2.0 billion, with another $500 million in costs added if "total compensation costs" were calculated (i.e., including benefits). OMB said the $2.0 billion total for the FY2014 shutdown exceeded the total payroll costs corresponding to the two FY1996 shutdowns, which OMB said were $1.65 billion in inflation-adjusted terms. Finally, in the fourth category, OMB estimated budgetary effects of some program- and policy-specific impacts, but OMB did not aggregate them. Programs that are funded by laws other than annual appropriations acts—for example, some entitlement programs—may, or may not, be affected by a funding gap. Specific circumstances appear to be significant. For example, although the funds needed to make payments to beneficiaries may be available automatically pursuant to permanent appropriations, the payments may be processed by employees who are paid with funds provided in annual appropriations acts. In such situations, the question arises whether a mandatory program can continue to function during a funding gap, if appropriations were not enacted to pay salaries of administering employees. As noted earlier in this report, according to the 1981 Civiletti opinion, at least some of these employees would not be subject to furlough, because authority to continue administration of a program could be inferred from Congress's direction that benefit payments continue to be made according to an entitlement formula. That is, obligating funds for the salaries of these personnel would be excepted from the Antideficiency Act's restrictions during a funding gap. However, such a determination would depend upon the absence of contrary legislative history in specific circumstances. Nevertheless, the experience of the Social Security Administration (SSA) during the FY1996 shutdowns illustrates what might happen over a period of time in these situations. The lack of funds for some employees' salaries, for example, may impinge eventually on the processing and payment of new entitlement claims. SSA's administrative history describes how 4,780 employees were allowed to be retained during the initial stages of the first shutdown. The majority of these employees were "in direct service positions to ensure the continuance of benefits to currently enrolled Social Security, SSI and Black Lung beneficiaries." Avoidance of furloughs was possible, because "appropriations were available to fund the program costs of paying benefits, [which] implied authority to incur obligations for the costs necessary to administer those benefits." SSA furloughed its remaining 61,415 employees. Before long, however, SSA and OMB reconsidered. SSA had not retained staff to, among other things, respond to "telephone calls from customers needing a Social Security card to work or who needed to change the address where their check should be mailed for the following month." SSA then advised OMB that the agency would need to retain 49,715 additional employees for direct service work, including the processing of new claims for Social Security benefits. Further adjustments were made during the considerably longer second shutdown in terms of retaining employees, in response to increasing difficulties in administering the agency's entitlement programs. In December 1995, Representative John L. Mica, chairman of the Subcommittee on Civil Service of the House Committee on Government Reform and Oversight, convened a hearing that focused on the first FY1996 shutdown and potential implications for the future. Among other things, then-Chairman Mica raised concerns about the shutdown's planning and execution by agencies and OMB, saying "the execution of the shutdown was, in many instances, disorganized and illogical, at best, and oftentimes chaotic experience." As an example, he cited the "recall of more than 50,000 Social Security personnel [three days into the furlough], raising questions about whether they should have been furloughed in the first place." In addition, then-Ranking Member James P. Moran expressed interest in clarifying the distinction between excepted and non-excepted activities and employees. If similar issues were of current concern, Congress might consider lawmaking and oversight options related to the quality and specificity of agency shutdown planning, including the rationales for excepting employees from furlough. The shutdown plans that agencies publicly released in the wake of negotiations on FY2011 and FY2012 appropriations, in connection with the FY2014 and FY2018 shutdowns, and subsequently might provide a starting point for such attention. If insight were desired into agency decision making processes, Congress might weigh whether to seek access to any OMB guidance documents that were provided to agencies but not posted on the publicly available Internet. OMB's Circular No. A-11 requires executive agencies to submit to OMB "plans for an orderly shutdown in the event of a lapse in appropriations." OMB has required the development and maintenance of these shutdown plans since 1980. Prior to the circular's 2011 revision, the circular broadly indicated that the plans were to be submitted to OMB when initially prepared and also when revised. With the August 2011 revision of the circular, however, OMB newly required that these plans be updated whenever there is a change in the source of funding for an agency program, or "any significant modification, expansion, or reduction in agency program activities." In any case, plans are required to be updated and submitted to OMB with a minimum frequency of once every two years, starting August 1, 2015. The April and December 2011 releases of agency shutdown plans on the Internet—on OMB's website and on agency websites—brought a new level of transparency to agency shutdown planning. However, each release occurred on the final day of funding availability before an interim CR was scheduled to expire, and in the context of negotiations where an impasse seemed to many observers to be a possibility. Before the April 2011 release, it was not clear the extent to which agency shutdown plans ever had been made publicly available or systematically shared with Congress and agency stakeholders for review and feedback. In the context of FY2014 funding, OMB began to post agencies' shutdown plans on its website on September 27, 2013, three days prior to the end of FY2013. For FY2018 funding, OMB began to post links to several updated shutdown plans in December 2017, January 2018, and intermittently thereafter. It remains to be seen over time whether these shutdown plans will remain a permanent fixture of federal agency and OMB websites. Similarly, it is not clear if any updated plans will be made available to Congress and the public, except at a time determined by OMB or a sitting President. If these possibilities were of interest to Congress, Congress could consider the advantages and disadvantages of the status quo versus establishing a statutory structure for how updated plans are posted and updated. On one hand, scrutiny over agency shutdown plans may provide incentives for agencies to improve the quality of the plans, should it become necessary at some point for agencies to execute the plans. Oversight may also inform budget policy debates about the potential impacts of shutdowns. On the other hand, such inquiries may distract agency personnel from other duties and raise sensitive issues regarding what activities and employees should be considered to be excepted from Antideficiency Act restrictions. Several issues and options arise in the context of a federal government shutdown in the administration of federal grants to state and local governments. The scale of these activities is considerable. Federal outlays for grants to state and local governments were $510 billion in FY2013, leading into the early-FY2014 shutdown. A federal government shutdown may cause disruption to, or may result in the cessation of, grant administration activities depending on the following factors: the timing and length of the federal government shutdown; choices made by federal, state, and local officials in anticipation of, or during, a shutdown regarding grant program administration; and statutory changes since the last federal government shutdown that change how a grant program is administered. In anticipation of, or during, a shutdown, Congress and federal, state, and local stakeholders make choices in administering programs. For some programs, these choices may include whether to cover gaps in federal grant funding with state or local funds with uncertainty of reimbursement; furlough grants administration personnel at all levels of government; and involve grants administration personnel in contingency planning. For example, when there is a gap in federal funding for state-administered programs during a federal government shutdown, states must decide whether to fill the gap with state funding to continue program operations or to cease program activities until the federal funding is restored. This decision may be influenced by the level of uncertainty the states face regarding the reimbursement of state funds by the federal government once funding is restored. Congress might consider options for enacting legislation in advance of a shutdown to address whether states would be reimbursed for expenses that would have normally been covered by federal grant outlays but that were delayed due to a government shutdown. In addition, grant administration personnel may play a critical role in evaluating the choices that contribute to the impact of a federal government shutdown. If grant administration personnel are furloughed due to a federal government shutdown, grant program administration activities such as grant agreement execution, payment processing, and investigation of waste, fraud, and abuse, may be interrupted. For example, GAO reported that during the FY2014 shutdown, "[a]ll [National Institutes of Health] and [Federal Transit Administration] grants management officials were furloughed and were generally unavailable to assist grantees." If grant administration personnel are furloughed or not involved in the contingency planning, these activities may not be sufficiently addressed. Congress might consider the role of grant administration personnel when contemplating statutory changes that would affect grant program administration during a shutdown. One previous congressional response to shutdowns has been the enactment of "narrow" continuing resolutions that provide temporary budget authority for only specified programs or activities, as opposed to all of the programs and activities in one or more regular appropriations bills. For example, during the second FY1996 shutdown, a narrow CR was enacted that funded benefits for veterans and certain children and families programs, and that allowed the District of Columbia government to operate. More recently, the Pay Our Military Act was enacted the day before the FY2014 shutdown commenced, to provide funds for certain DOD and DHS activities. Narrow CRs have a number of potential implications in the context of a government shutdown. Proponents of such CRs have argued that they are an important tool to mitigate the effects of a government shutdown by eliminating funding gaps for certain vital government activities. However, others have posited that such CRs unfairly prioritize some programs over others, and that they may reduce the pressure on broader negotiations to end the shutdown. A federal government shutdown could have possible negative security implications, as some entities wishing to take actions harmful to U.S. interests may see the nation as physically, technologically, and politically vulnerable. The Antideficiency Act is silent regarding which specific organizations would be excepted in whole or part from a government shutdown. The act's provisions and historical guidance from OMB, however, suggest that entities that perform a national security function may be allowed to continue many of their operations. Historically, individuals responsible for supporting the nation's global security activities, public safety efforts, and foreign relations pursuits have been excepted from furloughs that accompany a government shutdown. In FY2018, the Trump Administration issued specific guidance that states, "cybersecurity functions are excepted functions as these functions are necessary to avoid imminent threat to Federal property." The actions that are taken in anticipation of a government shutdown may lessen the negative effects of an incident of national security significance occurring during this period. How agencies and OMB prepare for a government shutdown may have short- and long-term consequences if an incident occurs during a period of reduction in government services or soon after a resumption of all government activities. Should federal government organizations traditionally not viewed as an excepted part of the security apparatus be shut down, and subsequently become needed during a crisis or emerging situation, the nation's ability to respond to an incident could be delayed. Such a situation could result in increased risk to the nation and a longer recovery time as services and support activities normally provided to nonfederal entities may not be available when needed. Some security observers may offer concerns that the longer the duration of a government shutdown, the more at-risk the nation becomes as enemies of the United States may seek to exploit perceived vulnerabilities. | When federal agencies and programs lack funding after the expiration of full-year or interim appropriations, the agencies and programs experience a funding gap. If funding does not resume in time to continue government operations, then, under the Antideficiency Act, an agency must cease operations, except in certain situations when law authorizes continued activity. Funding gaps are distinct from shutdowns, and the criteria that flow from the Antideficiency Act for determining which activities are affected by a shutdown are complex. Failure of the President and Congress to reach agreement on full-year or interim funding measures occasionally has caused shutdowns of affected federal government activities. The longest such shutdown lasted 21 full days during FY1996, from December 16, 1995, to January 6, 1996. More recently, a relatively long funding gap commenced on October 1, 2013, the first day of FY2014, after funding for the previous fiscal year expired. Because funding did not resume on October 1, affected agencies began to cease operations and furlough personnel that day. A 16-full-day shutdown ensued, the first to occur in over 17 years. Subsequently, two comparatively brief shutdowns occurred during FY2018, in January and February 2018, respectively. Government shutdowns have necessitated furloughs of several hundred thousand federal employees, required cessation or reduction of many government activities, and affected numerous sectors of the economy. This report discusses causes of shutdowns, including the legal framework under which they may occur; processes related to how agencies may plan for the contingency of a shutdown; effects of shutdowns, focusing especially on federal personnel and government operations; and issues related to shutdowns that may be of interest to Congress. This CRS report is intended to address questions that arise frequently related to the topic of government shutdowns. However, the report does not closely track developments related to the appropriations process for a given fiscal year. For links to CRS resources related to annual appropriations, see the "CRS Appropriations Status Table," at http://www.crs.gov/AppropriationsStatusTable/Index. Additional resources related to funding gaps and shutdowns are identified below. Agency Shutdown Plans For links to agency shutdown plans (also sometimes called "contingency plans") of varying dates, see the Office of Management and Budget's (OMB's) website, at https://www.whitehouse.gov/omb/information-for-agencies/agency-contingency-plans/. CRS Written Products Listing of CRS written products related to FY2014 shutdown. For an annotated list of CRS products that relate to the FY2014 funding gap, shutdown, and related status of appropriations, see CRS Report R43250, CRS Resources on the FY2014 Funding Gap, Shutdown, and Status of Appropriations, by [author name scrubbed]. Funding gaps history. For discussion of funding gaps in recent decades and a more detailed chronology of legislative actions and funding gaps that led to the two shutdowns of FY1996 and the shutdown of FY2014, see CRS Report RS20348, Federal Funding Gaps: A Brief Overview, by [author name scrubbed]. Past government shutdowns. For an annotated list of historical documents and other resources related to past government shutdowns, see CRS Report R41759, Past Government Shutdowns: Key Resources, by [author name scrubbed] and [author name scrubbed]. CRS Services For questions concerning the impact of a shutdown on a specific agency or program in the executive branch, legislative branch operations, or judicial branch operations, see the contact information for CRS subject matter experts who are listed in CRS Report R41723, Funding Gaps and Government Shutdowns: CRS Experts; use the "place a request" function on the CRS website; call CRS at [phone number scrubbed]; or see the "Key Policy Staff" table at the end of this report. |
Roughly every five years, Congress debates and revises omnibus legislation—referred to as the "farm bill"—governing federal farm and food policy. Congress is currently reviewing U.S. farm policy before commodity provisions in the Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 ; the 2008 farm bill) expire in 2012. A major topic is the so-called "farm safety net." The U.S. Department of Agriculture and the broader farming community often refer to the price and income support programs of the farm bill's Title I and the crop insurance and disaster assistance programs of Title XII as encompassing the farm safety net. While many critics of farm subsidies take issue with what does and does not constitute a safety net and whether current farm programs actually perform as such, this report uses the term safety net as a catchall descriptor rather than an assessment of the safety net merits of the various programs. Several farm programs contain elements of a safety net, which is intended to protect farmers against risks or ensure a minimum level of economic well-being. For example, crop farmers and landowners receive counter-cyclical payments (CCP) when crop revenue declines below a certain level. In contrast, one of the largest farm budget outlays—"direct payments"—delivers nearly $5 billion every year to the same set of owners of agricultural base acres irrespective of the level of commodity prices or whether the land is farmed. This report provides a brief description of the current farm safety net programs as a background for the congressional debate that is expected to precede the next round of omnibus farm legislation in 2012. The report also examines budget and policy issues and discusses implications for U.S. farm policy in the context of the World Trade Organization (WTO). The federal government supports farm prices and income for major field crops such as corn, soybeans, cotton, and rice and helps farmers manage risks associated with variability in crop yields and prices through a collection of commodity programs. Many policymakers and farmers consider federal support of farm businesses necessary for their financial survival, given the unpredictable nature of agricultural production and markets. In contrast, many environmental groups argue that these subsidies encourage overproduction on environmentally fragile land using excessive pesticides and fertilizers. Others, including budget hawks, have long argued that farm subsidies are an unfair market-distorting use of taxpayer dollars. In addition, farm subsidies are routinely the subject of harsh criticism from the editorial pages of many major U.S. newspapers. As provided under the 2008 farm bill and other legislation, farm safety net programs can be divided into three main categories (as shown in Figure 1 and Table 1 ): c ommodity programs provide income support and attempt to address farm price or revenue risk for selected field crops; risk management provides protection from declines in yield or revenue for a much broader set of commodities, including many field and specialty crops and some livestock; and supplemental disaster assistance is available for most commodities (crops and livestock) when weather-related losses are not covered by other programs. Historically, federal programs have primarily benefitted farmers (and landowners) of the major field crops, such as wheat, corn, soybeans, rice, cotton, and sugar. Milk is also included. Most of these commodities have a long history of government support dating back to the 1930s. In recent years, other crops such as dry peas and lentils have become eligible commodities. In contrast, producers of specialty crops (e.g., fruits, vegetables, horticulture crops) and livestock have generally received little or no direct government support through commodity programs, and instead they must manage their own risk and/or rely on crop insurance and disaster assistance. Payment limits control the overall level of payments made to individuals to some extent. However, farm operators or landowners have avoided payment limits in the past by subdividing individual farms into multiple operators by use of certificate exchanges for marketing loan benefits and by other means. Importantly, farm support has evolved over many decades by modifying or adding programs. As a result, programs sometimes overlap or work at cross purposes, generating criticism that they are not well integrated, cost too much, or do not provide adequate risk protection. Each of the three major program categories is described in the sections below. Additional program details are available in the CRS reports referenced in each section. Traditional commodity programs for field crops include three basic types of benefits for farmers/landowners: direct payments, counter-cyclical payments, and marketing loan benefits (7 U.S.C. 8701 et seq. ). The first two types of payments are made under the Direct and Counter-cyclical Payment Program (DCP). Eligible DCP crops are wheat, corn, grain sorghum, barley, oats, upland cotton, rice, pulse crops, soybeans, other oilseeds, and peanuts. In lieu of counter-cyclical payments, farmers may select the Average Crop Revenue Election (ACRE) program (see " Average Crop Revenue Election (ACRE) " below). Except for direct payments, the level of market prices relative to program parameters defined in the 2008 farm bill partly determines the payment amount to individual farmers. See Table 2 for program parameters, and the box entitled "Commodity Program Payment Example," below , for an illustration of the relationship between market prices and commodity payments. Direct payments are fixed annual payments based on a farm's historical plantings, historical yields, and a national payment rate. Direct payments were first established by the 1996 farm bill ( P.L. 104-127 ), when they were called Agricultural Market Transition Act (AMTA) payments (also referred to as Production Flexibility Contract Payments). At that time, they were described as payments to transition farmers away from the previous target-price, deficiency payment program. However, in the 2002 farm bill ( P.L. 107-171 ), AMTA payments were made permanent instead of being phased out. With crop prices relatively high and farm payments low, many observers assert that a major reason for converting to fixed payments was to preserve the funding in the farm bill baseline. Direct payment rates vary by crop as specified in the 2008 farm bill and do not depend on market prices. To receive the payment, farmers have almost complete flexibility in what they plant (except for fruit, vegetable, and wild rice planting restrictions), but they must abide by conservation provisions that basically amount to good management practices. In the Congressional Budget Office (CBO) March 2010 baseline projection for FY2011-FY2020, direct payments total $49 billion, 77% of the Title I baseline (excluding crop insurance). Direct payments are a relatively steady $4.9 billion per year on average. Some farmers depend on these payments to pay operating expenses and secure bank credit. Supporters also point out that direct payments are generally regarded as an acceptable form of subsidization by the World Trade Organization because they do not depend on current production or prices (see " WTO Compatibility of Current Farm Programs ," below). Critics point out that direct payments can inflate land prices and rental rates because at least a portion of the payments accrue to the landlord (see " Eligible Producers ," below). Critics also say that because direct payment rates are static and payments are made under all price, yield, and income scenarios—high or low—the program provides no risk protection for producers but is simply a taxpayer-financed income transfer to owners of historical agricultural base acres. Counter-cyclical payments are crop-specific payments that depend on the relationship between national average farm prices and government-set target prices. When national farm prices drop below a certain threshold (i.e., a crop's target price minus the direct payment rate), participating farmers and landowners receive a payment based on their farm's historical acreage and yield. In the last five years (FY2006-FY2010), counter-cyclical payments have averaged $1.859 billion per year, ranging from $0.3 billion in FY2008 to $4.0 billion in FY2006. In the CBO 10-year baseline (FY2011-FY2020), counter-cyclical payments average only $0.559 billion per year, lower mostly because of higher price expectations but also because of some substitution by ACRE payments. The counter-cyclical program payment rate formula depends on market prices, but it does not require the farmer to produce any of the commodity. As with direct payments, counter-cyclical payments are made to the owners of qualifying crop-specific, agricultural base acres. Thus, counter-cyclical payments are decoupled from yield and acreage, but not from market prices. As a result, the United States has classified them as "amber box" when reporting agricultural subsidies to the WTO, which are limited in size together with other amber box subsidies. In recent years, prices for some commodities, including peanuts and cotton, have been below levels that trigger counter-cyclical payments. For other commodities, such as wheat, farm prices have been above program parameters specified in the 2008 farm bill, resulting in no counter-cyclical payments and generating concerns among farm groups that this program is providing little or no price protection for some farmers. The Marketing Assistance Loan (MAL) program provides additional financial benefits to farmers in the form of a guaranteed floor price for qualifying field crops, in addition to providing short-term financing. The process begins with a government loan to participating farmers of designated crops (those listed above, plus extra long staple cotton, wool, mohair, and honey). The loan is made at a specified "per-unit" loan rate using the crop as collateral. This loan rate, in effect, establishes a price guarantee. Prior to loan maturity, if the local market price (called the "posted price") is at or above the loan rate, the farmer repays the loan principal and interest. In contrast, when the posted price is below the loan rate, the farmer may repay the loan at that price (called the "loan repayment rate") and pocket the difference as a "marketing loan gain." Or, rather than taking the loan when the posted price is below the loan rate, farmers may request a "loan deficiency payment," with the payment rate equal to the difference between the loan rate and the loan repayment rate. Program benefits are available on the entire crop produced, which means a farmer receives no benefits in the event of a crop loss. This is in contrast to the other two programs that make payments on historical acres and yields and therefore are not dependent on current production. Given recent price levels, the MAL program has paid only limited benefits in recent years for most crops, and some farmers have criticized loan rates as being too low relative to prevailing market prices. Raising loan rates in the next farm bill would increase projected outlays. In the last five years (FY2006-FY2010), the marketing assistance loan program has cost an average of $3.4 billion per year, ranging from $0.5 billion in FY2008 to $10.3 billion in FY2006. In the 10-year CBO baseline (FY2011-FY2020), marketing assistance loans average $0.225 billion per year, again lower than the recent past because of higher market price expectations. Critics of the MAL program note that the absence of a payment limit encourages larger farm operations to expand at the expense of smaller producers. The newest farm program is the Average Crop Revenue Election (ACRE) program, introduced in the 2008 farm bill. ACRE payments are revenue driven rather than price driven like counter-cyclical payments and MAL benefits. ACRE is designed to protect farmers against revenue losses for each DCP crop, regardless of the cause: price decline, yield loss, or some combination of the two. As a new program, ACRE does not have a spending history. The CBO baseline projects outlays for ACRE will average $311 million per year for FY2011-FY2020. The ACRE program pays a farmer when two conditions are met: (1) the actual state-level revenue for a crop (determined after harvest) falls below a guaranteed level (determined before harvest), and (2) the farmer experiences an individual crop revenue loss on a farm. The second trigger is required so that payments are made only to farmers who experience a revenue loss. If farmers select the ACRE option on a farm, their selection is permanent for the remainder of the 2008 farm bill (i.e., through the 2012 crop). In addition, they forgo 20% of their direct payments; loan rates are reduced by 30%; and the participants are not eligible for counter-cyclical program payments on the farm. The program applies to all DCP crops on that farm, and payments for each crop are calculated separately. A farmer who operates more than one farm may elect to enroll one or all farms in ACRE. Program participation has been fairly low to date. For the 2009 crop year, approximately 8% of the total number of eligible farms elected to participate in ACRE, representing nearly 13% of base acres (total program acreage). Program complexity is an issue that reportedly has limited participation. The determination of a payment under ACRE generally requires the crop year to be finished in order to calculate the season-average farm price used in the payment calculation. As a result, payments—once calculated—are not made until well after the crop has been harvested. Some farmers find it challenging to (1) determine if enrollment would be advantageous, and/or (2) explain the program to landlords. Also, some farmers and university researchers have expressed a preference for pursuing a county-wide trigger rather than a state trigger to more effectively cover local revenue losses. Separately, critics of ACRE have also said that the program can duplicate payments and coverage when low prices and/or yields result in both crop insurance indemnities and ACRE payments. The 2008 farm bill defines a producer (for purposes of farm program benefits) as an owner-operator, landlord, tenant, or sharecropper that shares in the risk of producing a crop and is entitled to a share of the crop produced on the farm. A term commonly used in federal regulations is "actively engaged in farming," which generally means providing significant contributions of capital (land or equipment) and labor and/or management, and receiving a share of the crop as compensation. In addition, an individual must comply with certain conservation and planting flexibility rules. Conservation rules include protecting wetlands, preventing erosion, and controlling weeds. Planting flexibility rules allow crops other than the program crop to be grown, but generally prohibit planting fruits or vegetables on subsidized acreage. Farming enterprises usually involve some combination of owned and rented land. Two types of rental arrangements are common: cash rent and share rent. Under cash rental contracts, the tenant pays a fixed cash rent to the landlord. The landlord receives the same rent, bears no risk in production, and thus is not eligible to receive program payments. The tenant bears all of the risk, takes all of the harvest, and receives all of the government subsidy. Under share rental contracts, the tenant usually supplies most of the labor and machinery while the landlord supplies land and perhaps some inputs (e.g., chemicals or seed) or management. Both the landlord and tenant bear risk in producing a crop and receive a portion of the harvest. Both are eligible to share in the government subsidy. Even though tenants might receive all of the government payments under cash rent arrangements, they might not keep all of the benefits if landlords demand higher rent. Economists widely agree that a large portion of government farm payments passes through to landlords, and that government payments raise the price of land and cash rental rates. This increases a farm's production costs and can make it difficult for young or beginning farmers to start a farm business. The commodity programs described above generally make payments based on either an individual farm's historical yield (direct and counter-cyclical payments), current state yields (ACRE payments), or actual volume produced (Marketing Assistance Loan Program). As specified in the 2008 farm bill, payment rates are fixed levels for direct payments and variable levels based on market prices for the other programs. Given these yield and price parameters, commodity programs essentially address price or revenue risk, mostly at the national market level, for individual farmers producing specific crops. None of the programs attempt to address production risk. Crop insurance and disaster programs discussed below in the " Risk Management " section are designed to meet this need. Dairy and sugar producers also benefit from federal programs. Milk prices are indirectly supported through federal purchases of nonfat dry milk, butter, and cheese at minimum product support prices. Producers also receive counter-cyclical "milk income loss contract" (MILC) payments when prices fall below a target price (see Table 2 ). Import controls on many dairy products limit supplies and support farm prices. Some members of Congress, dairy producers, and dairy industry associations are developing alternative proposals to current dairy polices. In the past five years (FY2006-FY2010), direct payments for dairy support (excluding price support purchases) have averaged $383 million per year, ranging from $0 in FY2008 to $994 million in FY2009. The CBO projection for FY2011-FY2020 is an average of $102 million per year. Sugar is supported through import quotas and domestic marketing allotments that artificially raise the price of sugar to consumers. No government payments are made to growers and processors. The CBO baseline reflects the no net cost policy, with $0 in the baseline for FY2011-FY2020 and a $0 average outlay for the past five years (FY2006-FY2010). The federal crop insurance program provides producers with risk management tools to address crop yield and/or revenue losses on their farms. Among farm safety net programs, crop insurance has perhaps the widest commodity and regional coverage. In addition, its revenue protection feature handles both price and yield risk. The Noninsured Crop Disaster Assistance Program (NAP) attempts to fill in the gaps in catastrophic coverage in counties where crop insurance policies are not offered. Federal crop insurance has grown in importance as a farm risk management tool since the early 1990s due, in large part, to federal subsidy intervention. The federal government pays a substantial portion of the farmer's crop insurance premium. In addition, the government subsidizes the administration and delivery of crop insurance policies by private insurance companies, and underwrites a major share of the loss risk associated with the overall crop insurance pool. The federal crop insurance program is permanently authorized by the Federal Crop Insurance Act, as amended (7 U.S.C. 1501 et seq .), and is administered by the U.S. Department of Agriculture's Risk Management Agency (RMA). In 2009, crop insurance policies covered 265 million acres. Major crops are covered in most counties where they are grown. Four crops—corn, cotton, soybeans, and wheat—accounted for more than 73% of total enrolled acres. For these major crops, a large share of plantings are covered by crop insurance: corn, at 83% of plantings; cotton, 94%; soybeans, 83%; and wheat, 82%. Over the last five years (FY2006-FY2010), CBO data indicate that crop insurance outlays have averaged $5.2 billion per year. The August 2010 CBO baseline projection for FY2011-FY2020 reflects a growth in crop insurance costs, at an average of $8.1 billion per year, rising steadily from about $7.6 billion per year in FY2011 to $8.7 billion in FY2020. Policies for less widely produced crops are available in primary growing areas. Examples include dry peas, blueberries, citrus, and walnuts. In total, policies are available for more than 100 crops (including coverage on a variety of fruit trees, nursery crops, pasture, rangeland, and forage). Many specialty crop producers depend on crop insurance as their only "safety net," unlike field crop producers who are also eligible for farm commodity program payments. Livestock coverage has recently become available. Relatively new or pilot programs protect livestock and dairy producers from loss of gross margin or price declines. These policies are not subsidized, which has limited producer participation. In purchasing a policy, a producer growing an insurable crop selects a level of coverage and pays a portion of the premium, which increases as the level of coverage rises. The remainder of the premium is covered by the federal government (nearly 60% of the total premium, on average, is paid by the government). In the case of catastrophic coverage (paying 55% of the market price for losses in excess of 50% of normal historical production), farmers pay a $300 administrative fee per crop for each county where the crop is grown, but the government pays the full premium. In the absence of subsidies, farmer participation in the crop insurance program would be substantially lower. Federal crop insurance policies are generally either yield based or revenue based. For most yield-based policies, a producer can receive an indemnity if there is a yield loss relative to the farmer's "normal" (historical) yield. Revenue-based policies were developed in the mid-1990s to protect against crop revenue loss resulting from declines in yield, price, or both. The most recent addition has been products that protect against losses in whole farm revenue rather than for just an individual crop (see " Whole-Farm Insurance Policies ," below). While the crop insurance program generally receives favorable marks from farmers, producers of some crops, such as rice, contend that current policies are of little value to them because premiums are too high relative to the insurance guarantee levels. Critics of crop insurance cite a need to control rising program costs. They also contend that heavy government subsidization of crop insurance policies distorts risk markets and encourages the expansion of crop production onto highly sensitive marginal lands. Furthermore, economists have long argued that the subsidization of "actuarially sound premiums" represents a form of taxpayer-financed income transfer. Adjusted Gross Revenue (AGR)-Lite is a whole farm revenue protection plan of insurance. The plan is available in 36 states and provides protection against low revenue stemming from natural disasters and market fluctuations that affect income. Most farm-raised crops, animals, and animal products are eligible. AGR-Lite (and its companion policy AGR for crops) uses a producer's five-year historical farm average revenue as reported on the Internal Revenue Service (IRS) tax return form (Schedule F or equivalent forms) and an annual farm report as a base to provide a level of guaranteed revenue for the insurance period (a one-year period corresponding with the producer's IRS tax period). Producers must have less than $2.05 million in approved gross revenue to participate and have no more than 50% of total revenue from commodities purchased for resale. Coverage levels range from 65% to 80% of historical revenue, with payment rates ranging from 75% to 90% for losses in excess of the minimum coverage level. Changes in inventory are accounted for in the revenue calculation. To date, whole-farm insurance has seen limited use. With individual crop insurance policies already providing significant protection for many producers, combined sales of AGR and AGR-Lite were only 826 policies in 2009, a small fraction of the more than 2 million crop insurance policies sold. Also, observers say the policy is complicated in terms of compiling the information needed to consider purchasing the insurance and making the application. Others have also noted that for such a policy to be widely adopted, coverage levels need to be substantially higher than individual crop insurance policies (i.e., higher than the current 80% level) in order to provide an amount of risk protection equivalent to that afforded by individual crop policies. Producers who grow a crop that is currently ineligible for crop insurance may be eligible for a direct payment under USDA's Noninsured Crop Disaster Assistance Program (NAP). NAP has permanent authority under the Federal Crop Insurance Reform Act of 1994 ( P.L. 103-354 , as amended), and is administered by USDA's Farm Service Agency. Outlays for NAP are much smaller than for crop insurance, usually about 1%-1.5% of crop insurance outlays. From FY2006 to FY2010, NAP outlays averaged $74 million per year. The USDA projection for FY2011-FY2020 is an average of $92 million per year. To be eligible for a NAP payment, a producer must first apply for coverage under the program by the application closing date, which varies by crop but is generally about 30 days prior to the final planting date for an annual crop. Like catastrophic crop insurance, NAP applicants must also pay an administrative fee ($250 per crop for NAP). In order to receive a NAP payment, a producer must experience at least a 50% crop loss caused by a natural disaster or be prevented from planting more than 35% of intended crop acreage. For any losses in excess of the minimum loss threshold, a producer can receive 55% of the average market price for the covered commodity. Hence, NAP is similar to catastrophic crop insurance coverage. In addition to the insurance coverage for disasters provided by crop insurance and NAP payments, the 2008 farm bill included authorization and funding for five new disaster programs to cover losses through FY2011. The new programs are designed to address the ad hoc nature of disaster assistance provided to producers during the last two decades. Since 1988, Congress has regularly made emergency financial assistance available to farmers and ranchers, primarily in the form of crop disaster payments and livestock assistance. The new supplemental disaster programs are projected by CBO to cost $3.9 billion over the five-year life of the 2008 farm bill, or about $770 million per year on average. From FY2003 to FY2009, ad hoc disaster assistance averaged $1.2 billion per year, often enacted in two-year intervals. The largest of the new disaster programs is the Supplemental Revenue Assistance Payments Program (SURE), which is designed to compensate eligible producers for a portion of crop losses that are not eligible for an indemnity payment under the crop insurance program or NAP. The program provides payments to producers for crop revenue losses due to natural disaster or adverse weather incurred on or before September 30, 2011. The program departs from both traditional disaster assistance and crop yield insurance by calculating and reimbursing losses using total crop revenue for the entire farm (i.e., summing revenue from all crops for an individual farmer). Under SURE, a farmer's revenue from all crops in all counties is compared with a guaranteed level that is computed mostly from expected or average yields and prices. As a result, the program considers the disaster's impact on a farmer's entire enterprise and not on just the crop(s) that were adversely affected. If the actual farm revenue (including farm program payments and insurance indemnities) is less than the farm's guaranteed level, the producer receives a payment, calculated as 60% of the difference between the two amounts. In contrast, if actual whole farm revenue does not fall below the guarantee, whereby losses for one crop are offset by revenue gains for another, no disaster payment is made. Payments are limited so that the guaranteed level cannot exceed 90% of expected farm income in the absence of a natural disaster. A common criticism of SURE has been that the determination of a payment is data intensive and requires the crop year to be finished in order to calculate the season-average farm price used in the payment calculation. As a result, payments—once calculated—are not made until well after the disaster has occurred. The 2008 farm bill also authorized three new livestock assistance programs and a tree assistance program. The Livestock Indemnity Program (LIP) compensates ranchers at a rate of 75% of market value for livestock mortality caused by a disaster. The Livestock Forage Disaster Program (LFP) assists ranchers who graze livestock on drought-affected pastureland or grazing land. The Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP) compensates producers for disaster losses not covered under other disaster programs. Finally, the Tree Assistance Program (TAP) provides payments to eligible orchardists and nursery tree growers to cover 70% of the cost of replanting trees or nursery stock following a natural disaster. While SURE and other disaster programs authorized in the 2008 farm bill are meant to replace the need for ad hoc payments, the 111 th Congress considered additional emergency payments for producers for 2009 crop losses because of reduced potential for payments under SURE and the time lag between actual losses and government assistance. These agricultural disaster provisions did not pass Congress, but the Administration announced in 2010 that it would implement a 2009 disaster assistance package estimated at $630 million under "Section 32" authority, making payments to producers of rice, soybeans, sweet potatoes, and cotton who suffered at least a 5% loss in certain counties. Critics of SURE point out that renewed interest in ad hoc emergency disaster legislation indicates the inadequacy of the SURE program as currently designed. A major question for policymakers is how well the whole-farm disaster assistance approach helps farmers manage farm-level risk. Some farmers have already complained that the whole-farm approach, as established in the 2008 farm bill, is too complicated, given the large amount of information needed to administer it. Moreover, potential recipients say SURE typically does not result in disaster payments for diversified operations because aggregating revenue across a farmer's entire operation for payment determination substantially reduces the likelihood of receiving assistance. Recent and growing federal budget deficits have increased calls within both Congress and the Administration for fiscal restraint and government-wide spending reductions. The Congressional Budget Office has said that the FY2009 deficit "was the largest as a share of GDP since the end of World War II, and the deficit expected for 2010 would be the second largest…. Under current law, the federal fiscal outlook beyond this year is daunting…. Those accumulating deficits will push federal debt held by the public to significantly higher levels." With that background, President Obama created the bipartisan National Commission on Fiscal Responsibility and Reform to propose long-term solutions for a sustainable federal budget, noting that all programs were under consideration. For agriculture, the Commission recommended reducing mandatory agricultural spending by $15 billion from FY2012-FY2020, including direct payments, crop insurance premium subsidies and insurance company reimbursements, conservation, and the Market Access Program. Similarly, the Bipartisan Debt Reduction Task Force proposal would reduce agricultural spending, but by twice that amount, $30 billion through FY2020. It would tighten payment limits, reduce crop insurance premium subsidies and insurance company reimbursements, and consolidate and cap conservation programs. At best, this budget situation is likely to prevent any increase in overall new spending on a 2012 farm bill. Thus, the level of funding in the CBO baseline for agricultural programs will be of paramount importance as the development of a 2012 farm bill progresses. Each year, CBO issues a baseline budget projection for all federal spending under current law over a multi-year period. Projected spending in the baseline represents CBO's estimate at a particular point in time of what federal spending and revenues likely would be under current law if no policy changes were made over the projected period. The baseline serves as a benchmark or starting point for future budget analyses. Whenever new legislation (such as a farm bill) is introduced that affects federal mandatory spending, its impact is measured as a difference from the baseline. Any increase in costs above the baseline level may be subject to certain budget constraints (such as pay-go). The process of scorekeeping and estimating baselines is done in Congress by CBO, acting under the supervision of the House and Senate Budget Committees. The current, tight federal budget situation is unlike that faced by Congress when it wrote the 2002 farm bill. At that time, a brief federal budget surplus allowed Congress to spend $73 billion more than its 10-year baseline. It was relatively easy to keep existing programs and add new programs across the spectrum of the omnibus farm bill. More recently, the 2008 farm bill was held to be budget neutral, although it received additional funding from outside the agriculture committees' jurisdiction. This outside funding from changes in tax policies provided offsets for higher spending on nutrition and other non-commodity programs, and allowed the overall bill to be budget neutral while increasing total farm bill spending. However, procedural difficulties related to negotiating these offsets with other committees, such as the House Ways and Means Committee and the Senate Finance Committee, prolonged the development of the 2008 farm bill and added constituencies that were not always in line with agriculture committee priorities. Given these difficulties, most policy observers expect the next farm bill will be budget-neutral at best, and written within the confines of the agriculture committees. In this scenario, the level of funding in the CBO baseline would set a maximum amount of funding available for a new farm bill. Offsets to pay for any new programs—such as a new farm safety net—would need to come from within the agriculture committees' jurisdiction. To increase one program, another program would need to be decreased. Offsets could occur within titles or functions of the farm bill (e.g., from within the commodity subsidy program), or could come from transfers between titles or functions within the farm bill (e.g., between commodity subsidies and conservation programs). Moreover, 37 programs in the 2008 farm bill received mandatory funding but do not have any assumed baseline funding beyond FY2012. To continue these programs, offsets of up to $10 billion over five years may be needed. Thus, the political stakes could be increasingly high among the various interest groups and constituencies needed to pass the farm bill. Moreover, some fear that budget reconciliation could be required before the 2008 farm bill expires. Budget reconciliation would require cuts in existing farm bill programs to save money before a new farm bill is written, and these cuts could make even fewer funds available in the baseline for the 2012 farm bill. For the Title I farm commodity programs in particular, additional infusions of mandatory funding are unlikely given the improbability of offsets from outside the agriculture committees. Other titles in the farm bill such as nutrition, bioenergy, and conservation have had more success in recent farm bills competing for additional funds. Thus, the pool of money for any proposed revisions to the farm safety net may likely come from the existing baseline for the farm commodity programs and the crop insurance program. Existing programs such as direct payments, the various counter-cyclical payments, or crop insurance might be replaced, revised, or reduced to pay for new farm safety net programs. Figure 3 shows the actual outlays and projected CBO baseline for the farm commodity payments, crop insurance, non-insured assistance, and supplemental and ad hoc disaster payments from FY2003 to FY2020. Combined outlays for these broadly defined safety net and/or farm income support programs have ranged from $12.2 billion in 2008 to $20.5 billion in 2006. The average for the actual outlays from FY2003 to FY2010 is $15.7 billion per year. The projected annual average for FY2011-FY2020 in the August 2010 CBO baseline is 5.6% smaller at $14.8 billion. Of particular note in this analysis when comparing the baseline projection to the recent past is that crop insurance outlays have increased while counter-cyclical support has decreased. In fact, crop insurance outlays have increased more than threefold over the period, rising to an estimated $7.3 billion in FY2010 as higher policy premiums from rising crop prices drove up premium subsidies and expense reimbursements to private insurance companies. These costs are projected to stay high, rising to $8.7 billion in FY2020. Conversely, Title I farm commodity program costs have had a nearly corresponding decrease since FY2003. This is because the counter-cyclical payment component has decreased as market prices for farm commodities generally have risen from levels a decade ago. The status of supplemental disaster assistance remains uncertain and unpredictable. By definition, ad hoc disaster payments are subject to congressional action and are not included in baseline projections. The so-called "permanent" agricultural disaster provisions (e.g., SURE) in the 2008 farm bill are authorized only temporarily and have baseline only through the end of the 2008 farm bill. Figure 4 shows the components in the baseline projection for the Title I farm commodity programs, crop insurance, NAP, and the permanent disaster program. Crop insurance is the largest component of projected payments, comprising $81 billion of the $148 billion 10-year total. Direct payments are the next largest, at $49 billion over FY2011-FY2020. Counter-cyclical and ACRE payments are the third-largest component, with nearly $9 billion over 10 years. Cotton accounts for about 55% of the combined counter-cyclical and ACRE payment projection, with ACRE payments for corn rising near the end of the period and accounting for 17% of the projection. Whether or not direct payments are considered part of the farm safety net (because they are fixed and not tied to changes in prices or revenue), their magnitude in comparison to counter-cyclical payments makes it likely that some proposals for a new safety net could include funding offsets from direct payments. Figure 5 shows how the Title I farm commodity payments are allocated by commodity (including direct payments, counter-cyclical payments, ACRE, and the marketing loan programs; that is, the green bars of Figure 3 ). Corn is the commodity receiving the most support, both in the FY2003-FY2010 period and in the FY2011-FY2020 projected period. Cotton is the next-highest supported commodity in total terms, but is planted on comparatively fewer acres. Wheat, soybeans, and rice round out the top five supported commodities, which together account for 93% of the Title I baseline. While commodity allocations are not directly associated with the design of a safety net, these shares nonetheless reflect some of the support and influence in the commodity title (for example, that corn growers were the primary advocates for the development of the ACRE provisions in the 2008 farm bill). Besides budget issues, several policy questions are being raised to assess the current farm safety net programs and consider potential changes. How well does the multitude of programs support farmers and/or help them manage overall business risks? What are the holes in the farm safety net with respect to commodities, regional coverage, or farm size? Is it money well spent, or is there a better combination of programs that would meet the objectives of policymakers? For supporters of farm programs, continued calls for wide-scale emergency disaster relief are an indication that the farm safety net is not functioning as well as producers and policymakers would like. Two programs with the most genuine safety net features, the SURE and ACRE programs, have been criticized as being too complex, which reportedly has limited participation, while providing too few benefits for farmers who face economic hardship. Also, some farmers have complained, both recently and prior to the 2008 farm bill, that MAL benefits and counter-cyclical payments do not provide enough assistance because trigger levels are mostly below current and expected price levels. Production costs relative to current levels of support are also a concern for many farmers, including dairy producers. Critics of farm programs have long questioned the need for farm subsidies, contending that resources for agriculture could be better spent advancing environmental goals or improving agricultural productivity. Others cite an economic argument against the farm commodity programs: like any subsidy, farm programs distort production, capitalize benefits to the owners of the resources, encourage concentration of production, and comparatively harm smaller domestic producers and farmers in lower-income foreign nations. Several issues might shape any potential changes to farm safety net programs in the next farm bill debate. Managing farm risk —Crop insurance has very high participation rates, a result driven in part by the high subsidization levels but also because the program in fact reduces both yield and revenue risks. Some members of Congress and policy observers have wondered if crop insurance might be the only element of the farm safety net that remains in the distant future if farm programs are rationalized and funding is reduced. Farm policy observers have identified significant overlap between farm programs. For example, the ACRE program and crop insurance both address revenue variability. Also, the current farm program mix has several variations of "counter-cyclical-style" payments, including marketing loan benefits, traditional (price) counter-cyclical payments, ACRE (revenue) payments, revenue-type crop insurance, and whole-farm insurance. In the view of some, a different array of programs might reduce farm risk in a more cost-effective way. Commodity coverage —The extent of the current commodity coverage is primarily a result of the historical and evolving nature of farm policy. Producers of major commodities such as wheat, corn, soybeans, rice, cotton, and milk have benefited the most from farm programs because farmers and policymakers representing those commodities shaped the programs from their inception. Since then, most other commodity advocates have not had the interest or sufficient political power to add their commodities to the mix. Commodity coverage could be increased by changing the commodity mix for current programs or by developing a whole-farm program or insurance policy that could be more comprehensive than USDA's current insurance policy and eliminate potential overlap of coverage across the various existing programs. Biofuels subsidies —The federal government has enacted an increasing number of programs that support the use of agriculture-based biofuels, foremost of which is corn-based ethanol. In the past decade, corn use for ethanol has expanded corn demand by nearly 30%, driving corn prices higher. In 2009, biofuels subsidies totaled nearly $6 billion, and corn has not been the only beneficiary. The increased demand for corn has contributed to an expansion of corn area into non-traditional crop areas, raising prices for other major field crops. Many federal budget watchers argue that the expanding biofuels subsidies should be counted with the pool of agricultural price and income subsidies since this has been one of their major effects. Complexity —The program structure for ACRE and SURE requires a substantial amount of individual farm data, assumptions, and calculations. As a result, determining whether or not the programs benefit an individual producer is not readily apparent beforehand, which affects participation. Similarly, the complexities of such programs require significant setup and ongoing administrative costs. The complexity has arisen, in part, from budget responsibility that requires actual losses to be determined after the end of the marketing year—possibly for the whole farm, rather than making payments sooner on less comprehensive information. Program limits and farm size —Payment limits for the farm commodity programs, with the exception of the marketing assistance loan program, either set the maximum amount of farm program payments that a person can receive per year or set the maximum amount of income that an individual can earn and still remain eligible for program benefits (a means test). The payment limits issue is controversial because it directly addresses questions about what size farms should be supported, whether payments should be proportional to production or limited per individual, and who should receive payments. Some policymakers want limits to be tightened to save money and reduce the possibility of encouraging expansion of large farms at the expense of small farms. Others say larger farms should not be penalized for the economies of size and efficiencies they have achieved. Crop insurance has no payment limits, a feature that some policymakers say makes crop insurance an attractive centerpiece of farm policy because it helps small and large farms alike, with neither apparently gaining at the expense of the other. A major constraint affecting future U.S. policy choices is the broad set of rules and disciplines of the World Trade Organization (WTO), which the United States, as a founding member, has agreed to adhere to and abide by. As one of the world's largest agricultural producers and trading nations, the United States routinely sees its domestic and trade policies subjected to the scrutiny of foreign competitors and the news media. U.S. farm policy is constantly being evaluated against WTO rules. In particular, U.S. domestic agricultural policy is subject to commitments made under the WTO's Agreement on Agriculture (AA) and, to the extent that domestic policy effects spill over into international markets, U.S. farm policy is also subject to certain rules under the Agreement on Subsidies and Countervailing Measures (SCM). Policies or programs found to be in violation of WTO rules may be subject to challenge by another WTO member under the WTO dispute settlement process. The importance of WTO rules and commitments has been made salient by the so-called "Brazil cotton case," in which a WTO dispute settlement panel ruled against both the U.S. cotton and GSM-102 export credit guarantee programs. The United States is expected to bring both programs into WTO compliance or be subject to WTO-sanctioned retaliation. Since most governing provisions over U.S. farm programs are statutory, new legislation could be required to implement even minor changes to achieve compliance. So, a key question that policymakers will ask of virtually every existing farm program, as well as new farm proposals, is how will it affect U.S. commitments under the AA, and U.S. compliance with SCM rules? The answer rests not only on cost, but also on the proposal's design, implementation, and market effects. This section briefly discusses how U.S. farm programs, particularly Title I price and income support programs, would possibly comply (or not) with the WTO's AA and SCM. Regarding domestic farm programs, the AA categorizes programs by the extent to which they have the potential to distort production and trade. Annual government support made under the most trade-distorting programs is measured by the aggregate measurement of support (AMS) index. Outlays under such programs are known as amber box subsidies. Under the AA, the United States is committed to spending no more than $19.1 billion per year on AMS amber box support. WTO members have committed to operating amber box programs so as to keep spending within the WTO limit. Even if a farm program stays within its WTO spending limit, it may be subject to WTO challenge under the rules of the Agreement on Subsidies and Countervailing Measures (SCM). The SCM establishes formal definitions and rules for trade-related subsidies; however, SCM rules also pertain to domestic policies that have international market effects. In the case of U.S. farm commodity programs, the most likely SCM concern is compliance under "actionable subsidy" rules. Actionable subsidies (i.e., those subsidies that are not expressly prohibited but against which legal action may be taken) are broadly defined as those subsidies which cause "adverse effects" to the interests of other members (i.e., (1) injury, (2) nullification or impairment of benefits, or (3) serious prejudice to the interests of another member). An agricultural subsidy may be challenged under claims of adverse effects in agricultural markets—even if the subsidy remains within specified spending limits. Any amber box program is potentially vulnerable to scrutiny and challenge based on SCM rules. This is because the primary amber box-qualifying criteria of being "market distorting" leaves the program vulnerable to the charge of leading to adverse effects in the marketplace under the SCM agreement. Trade analysts have argued that the adverse effects criteria of "serious prejudice" represent a lower threshold for achieving successful challenges to agricultural support programs than the injury requirement under a countervailing duty claim. Three principal criteria must be established to verify the existence of adverse effects: 1. the subsidy constitutes a substantial share of farmer returns or covers a substantial share of production costs, 2. the subsidized commodity is important to world markets because it forms a large share of either world production or world trade, and 3. there is a causal relationship between the subsidy and adverse effects in the relevant market. When measured against these criteria, available evidence suggests that all major U.S.-subsidized program crops, particularly crops receiving benefits under both the counter-cyclical payments program and the marketing assistance loan program, are potentially vulnerable to dispute settlement challenges. In spite of U.S. vulnerability, there are reasons why challenges may rarely be filed—disputes are economically and diplomatically costly, and a lost challenge can help to legitimize the disputed program. Some policy measures that are likely to attract future scrutiny and possibly lead to WTO consultations or challenges include the following: Arbitrarily setting revenue targets at fixed values that are significantly above historical levels. This is most easily avoided by using a historical moving-average of prices or revenues to reflect market conditions. Establishing a low threshold trigger for a loss payment such that it will be tripped during years of normal or slightly below normal revenue outcomes. Linking payments to costs of production. An industry's cost structure determines its competitiveness relative to both foreign competitors and to other industries or sectors that might have more productive uses for that industry's resources. The AA also includes three categories of programs—green box, blue box, and de minimis —that are exempted from AMS spending limits. Green box policies are presumed to be less or minimally trade or production distorting. Blue box policies are payments made under a production-limiting program based on historical area, yield, or production data or a fixed number of livestock. The de minimis exemption is spending that is sufficiently small (less than 5%)—relative to either the value of a specific product or total (i.e., non-product-specific) production—to be deemed benign. Annex 2 of the AA includes a list of potentially exempt agricultural support programs: general farm services (e.g., research and extension), food security stockholding, domestic food aid, decoupled income support (e.g., direct payments), income insurance or income safety net programs, relief from natural disaster, structural adjustment through producer or resource retirement or investment aids, environmental program payments, and regional assistance program payments. The United States has consistently notified its direct payments outlays as green box exempt. However, this status was found lacking (due to the planting restriction on fruits, vegetables, and wild rice) by a WTO panel during the course of the WTO Brazil cotton dispute. A WTO challenge of their green box eligibility could potentially result in the disqualification of direct payments from exemption and push U.S. AMS spending over its WTO limit. The green box rules most relevant for Title I-type programs are those programs that provide for government financial participation in either an income insurance or income safety net program or in a natural disaster relief program. With respect to income insurance or income safety net programs , eligible payments require an agricultural income loss exceeding 30% of average gross income (or the equivalent in net income terms) in the preceding three-year period (or the preceding five-year period, excluding the highest and lowest years—the so-called Olympic average), with such payment compensating for less than 70% of the income loss in the year of eligibility. Payments must be based solely on income—not production, price, or input factors. In addition, total annual payments made under this program and under natural disaster relief cannot exceed 100% of a producer's total loss. Under green box rules, eligible payments (whether direct or through government crop insurance) for natural disaster relief must be based on formal government recognition of the disaster. Payments must be determined by a production loss exceeding 30% of production in the preceding three-year (or five-year Olympic average) period; be applied only to losses of income, livestock, land, or other production factors; and not be for more than the total replacement cost. Total annual payments under this and the income safety net programs cannot exceed 100% of a producer's total loss. To the extent that any crop-specific income or whole farm safety net program payments are triggered by any loss smaller than 30%, or provide reimbursement or indemnification of more than 70% of the loss, then the program does not qualify for green box exclusion and must either seek exemption under another "box" or be counted against the AMS limit. For example, under USDA's adjusted gross revenue insurance polices, producers may insure gross revenue coverage of up to 80% of historical revenue, and payments are triggered on losses of as little as 20% from historical average revenue. As a result, U.S. crop insurance subsidies (net indemnities) do not qualify for inclusion in the green box. Instead, they are notified to the WTO as amber box AMS, although they have always been exempted under the non-product-specific de minimis exclusion (see below). The United States has not notified any program spending under the blue box since the old target-price deficiency payments that ended with the 1996 farm law ( P.L. 104-127 ). A key feature of deficiency payments was their link to land set-aside requirements, thus meeting the "production-limiting" characteristic of the blue box. It is unlikely that a whole-farm safety net program or crop-specific income program could be designed (without some notable land or resource constraint) that would meet current AA blue box criteria. The United States has traditionally made only minor use of the product-specific de minimis exemption, in large part because any qualifying program accounts for less than 5% of the product's annual production value. In contrast, a whole-farm safety net proposal, by definition, would involve an aggregation of all farm-related income generating activities. As such it could not be considered for exclusion under the product-specific de minimis , but instead must determine the potential for qualification under the "non-product-specific" de minimis exemption. To qualify for the non-product-specific de minimis exemption, the annual outlay of the whole-farm, safety net program must be added to the value of support provided by all other non-product-specific AMS measures (e.g., certain irrigation subsidies, state credit programs, counter-cyclical payments, and farm storage facility loans). If the total annual cost is less than 5% of the value of total U.S. agricultural production, then all such support—including the whole-farm safety net—would be exempted from the U.S. total annual AMS spending limit; otherwise it must be counted toward the $19.1 billion annual limit. Through 2007 (the data year for its most recent notification), the United States has notified all of its crop insurance subsidies under the "non-product-specific" de minimis exemption category. The WTO compatibility of a whole-farm safety net program would depend on many things. First, will it meet green box exemption criteria with a 30% loss trigger and payments of no more than 70% of a loss? Second, if it is deemed an amber box program, will it replace existing amber box programs or be added to them? Additive programs are likely to increase AMS spending, possibly bringing the AMS limit into play. Third, will the program influence producer decision making beyond simple risk reduction? Will the program have adverse market effects? Is it likely to encourage greater production (and lower prices) than would occur in its absence? A yes answer to any of the questions in this third category could result in a WTO challenge. Several forces are acting on policymakers as Congress considers revising the farm safety net. These include the historical development of farm programs and the accompanying political process, concerns about the budget deficit, biofuel and energy policy in general, and U.S. commitments under the WTO. How these and other forces play out during the farm bill debate will determine what if any changes are made to the farm safety net. | Roughly every five years, Congress debates and revises omnibus legislation governing federal farm policy. Commodity provisions in the 2008 farm bill (P.L. 110-246) expire in 2012, and Congress is currently reviewing U.S. farm policy. The collection of federal farm programs, which make payments to farmers and landlords, is often referred to by the broader farming community as the "farm safety net." Some programs such as "counter-cyclical payments" (which rise when crop prices decline) contain elements of a safety net—which is usually intended to protect recipients against economic risks. Other farm program payments, such as direct (fixed) payments, are made irrespective of market prices. As provided under the 2008 farm bill and other legislation, farm safety net programs can be divided into three main categories. Commodity programs provide income support and attempt to address farm price or revenue risks for selected field crops. Risk management (primarily crop insurance) provides protection from declines in yield or revenue for a much broader set of commodities, including many field and specialty crops and some livestock. Supplemental disaster assistance is available for most agricultural commodities (crops and livestock) when weather-related production losses are not covered by other programs. Many policymakers and farmers consider federal support of farm businesses necessary for their financial survival, given the unpredictable nature of agricultural production and markets. In contrast, many environmental groups and budget hawks argue that farm subsidies encourage overproduction on environmentally fragile land and are a market-distorting use of tax dollars. Historically, federal programs have primarily benefitted farmers (and landowners) of the major crops, such as wheat, corn, cotton, and sugar, with policy constructed over many decades by modifying or adding programs. As a result, programs sometimes overlap or work at cross purposes, generating criticism that they are not well integrated, cost too much, or do not provide adequate risk protection. Additional potential issues for Congress in the next farm bill debate include the extent of the current commodity coverage, program complexity and its impact on participation and effectiveness, and the effect of biofuel subsidies on agriculture. The current federal budget situation is likely to prevent any increase in overall spending on a 2012 farm bill. Thus, the level of funding in the Congressional Budget Office (CBO) baseline budget for agricultural programs will be of paramount importance. Combined outlays for farm safety net programs have averaged $15.7 billion per year during FY2003 to FY2010, with a high of $20.5 billion in FY2006 and a low of $12.2 billion in FY2008. CBO's projected annual average for FY2011-FY2020 is $14.8 billion. With crop prices relatively high, counter-cyclical support has declined in recent years while crop insurance outlays (which are directly related to crop prices) have increased sharply. The pool of money for any changes to the farm safety net will likely come from the existing baseline for the commodity programs and the crop insurance program. A constraint affecting future U.S. policy choices is the broad set of rules of the World Trade Organization (WTO), which the United States, as a founding member, has agreed to abide by. Farm bill proposals, if implemented, will affect U.S. commitments, mainly through cost, program design, implementation, and market effects. Under the WTO Agreement on Agriculture, the United States is committed to spending no more than $19.1 billion per year on "amber box" support (programs considered to be the most trade distorting). The WTO compatibility of any new proposal, such as a whole-farm safety net program, would depend on how its provisions mesh with WTO criteria for loss triggers, payment levels, and production and trade effects. |
Many innovations that have become familiar features of modern elections originated at leastin part as a way to reduce election fraud such as tampering with ballots to change the vote count fora candidate or party. For example, in much of nineteenth century America, a voter typically wouldpick up a paper ballot preprinted with the names of candidates for one party and simply drop theform into the ballot box. There was no need to actively choose individual candidates. (3) This ticketor prox ballot was subject to fraud in at least two ways. First, the number and sequence of ballotsprinted was not controlled, so it could be difficult to determine if a ballot box had been stuffed withextra ballots or if ballots had been substituted after votes were cast. Second, an observer coulddetermine which party a voter had chosen by watching what ballot the voter picked up and depositedin the ballot box -- votes could therefore be bought or coerced with comparative ease. Australian Secret Ballot. After a series of scandals involving vote-buying in the 1880s, calls for reform led to widespread adoption of theAustralian or mark-choice ballot. (4) Such ballots listthe names of all candidates, and the voter marksthe ballot to choose among them. The ballots are commonly printed with unique, consecutive serialnumbers, facilitating ballot control and thereby helping to prevent ballot stuffing and substitution. All printed ballots are otherwise identical, and voters typically fill them out in the privacy of a votingbooth. This ballot secrecy makes it difficult for anyone else to know with certainty what choices avoter has made. While providing improved security, the Australian secret ballot did not eliminatetampering. Ballots could still be removed, spoiled, or altered by corrupt pollworkers, or evensubstituted or stuffed, although with greater difficulty than with prox ballots. It also did noteliminate the possibility of vote-buying or coercion, but it made them more difficult. (5) Mechanical Lever Machine. One way to eliminate some means of ballot tampering is to eliminate document ballots. That became possiblewith the introduction of the lever voting machine in 1892. With this system, a voter enters the votingbooth and sees a posted ballot with a small lever near the name of each candidate or other ballotchoice. The voter chooses a candidate by moving the appropriate lever. Mechanical interlocksprevent voters from choosing more candidates than permitted for an office (such as two candidatesfor President). After completing all choices, the voter pulls a large lever to cast the ballot, and thevotes are recorded by advances in mechanical counters in the machine. The lever machine thereforeeliminates the need to count ballots manually. Instead, pollworkers read the numbers recorded bythe counters. Because there is no document ballot, recounts and audits are limited to review of totalsrecorded by each machine. Of course, tampering is also possible with lever machines. For example,the mechanisms could be adjusted so that the counter does not always advance when a particularcandidate is chosen. Computer-Assisted Counting (Punchcard and Optical Scan). Another major technological advance in voting -- the first use of computersto count votes -- came with the introduction of the punchcard system, first used in 1964. Theoptical-scan voting system, which also uses computers for vote-counting, was first used in the 1980s. In both kinds of voting system, document ballots are fed into an electronic reader and the talliesstored in computer memory and media. Tallying can be done at either the precinct or a centrallocation. Computer-assisted counting of document ballots can be done very rapidly, thus speedingthe reporting of election results. It is much more efficient for counting large numbers of ballots thanmanual tallying. It makes some kinds of tampering more difficult than with manual counting, butit does not eliminate them, and it creates possibilities for tampering with the counting software andhardware. Electronic Voting Machine. DREs (direct recording electronic systems) are the first completely computerized voting systems. They wereintroduced in the 1970s. DREs are somewhat analogous to (although more sophisticated than) levermachines. The voter chooses candidates from a posted ballot. Depending on the equipment used, theballot may be printed and posted on the DRE, as it is with a lever machine, or it may be displayedon a computer screen. Voters make their choices by pushing buttons, touching the screen, or usingother devices. The voter submits the choices made before leaving the booth, for example by pushinga "vote" button, and the votes are then recorded electronically. There is considerable variability in the design of DREs, but they can be classified into three basic types. The oldest design essentially mimics the interface of a lever machine. The entire postedballot is visible at once. Instead of moving levers to make choices, the voter pushes a button nextto a candidate's name, or pushes on the name itself, triggering an underlying electronic microswitchand turning on a small light next to the choice. With the second type, a ballot page is displayed ona computer screen, and the voter uses mechanical devices such as arrow keys and buttons to makechoices on a page and to change ballot pages. The third type is similar to the second except that ithas a touchscreen display, where the voter makes a choice by touching the name of the candidate onthe computer screen and casts the ballot by pressing a separate button after all choices have beenmade. In all kinds of DREs, when a ballot is cast, the votes are directly stored in a computer memorydevice such as a removable memory card or nonvolatile memory circuit. As with lever machines,there is no document ballot, although with a DRE each cast ballot may also be separately recorded. Touchscreen and other DREs using computer-style displays are arguably the most versatile anduser-friendly of any current voting system. Each machine can easily be programmed to displayballots in different languages and for different offices, depending on voters' needs. It can also beprogrammed to display a voter's ballot choices on a single page for review before casting the vote. It can be made fully accessible for persons with disabilities, including visual impairment. (6) Like levermachines, it can prevent overvotes and ambiguous choices or spoilage of the ballot from extraneousmarks, since there is no document ballot; but it can also notify voters of undervotes. (7) No other kindof voting system possesses all of these features. DREs and HAVA. The popularity of DREs, particularly the touchscreen variety, has grown in recent years, (8) and their use is expected to increasesubstantially under provisions of HAVA. Three provisions in the Act are likely to provide such animpetus. First, HAVA authorized $3.65 billion over four years for replacing punchcard and levermachines and for making other election administration improvements, including meeting therequirements of the Act. In FY2003, Congress appropriated $1.48 billion for these purposes ( P.L.108-7 ), and the Administration requested $500 million for FY2004. Second, beginning in 2006,HAVA requires that voting systems notify voters of overvotes and permit them to review theirballots and correct errors before casting their votes. (9) Third, the Act requires, also beginning in 2006,that each polling place used in a federal election have at least one voting machine that is fullyaccessible for persons with disabilities. DREs are the only machines at present that can fulfill theaccessibility requirement. They can also easily meet the requirements for error prevention andcorrection. Security Concerns about DREs. One thing that distinguishes DREs from document ballot systems is that with DREs, the voter does not see theactual ballot, but rather a representation of it on the face of the machine. With few exceptions,current DREs do not provide a truly independent record of each individual ballot that can be usedin a recount to check for machine error or tampering. The ballot itself consists of redundantelectronic records in the machine's computer memory banks, which the voter cannot see. This isanalogous to the situation with mechanical lever voting machines, where casting the ballot movescounters that are out of view of the voter. In a lever machine, if the appropriate counters do notmove correctly when a voter casts the ballot, the voter will not know, nor would an observer. Similarly, with a DRE, if the machine recorded a result in its memory that was different from whatthe voter chose, neither the voter nor an observer would know. (10) The same is true with a computerized counting system when it reads punchcards or optical scan ballots. Even if the ballot is tabulated in the precinct and fed into the reading device in the presenceof the voter, neither the voter nor the pollworker manning the reader can see what it is recording inits memory. However, with such a reader, the ballot documents could be counted on anothermachine or by hand if there were any question about the results. Lever machines also do not have an independent document ballot. That has led some observers to distrust those machines, but most who use them appear confident that tests and other proceduralsafeguards render them sufficiently safe from tampering. Is the same true for DREs? Somecomputer experts think not, arguing that the software could be modified in ways that could alter theresults of an election and that would be very difficult to detect. This concern appears to stem largelyfrom three factors: Malicious computer code, or malware, can often be written in such a way that it is very difficult to detect. (11) DRE software is moderately complex, and it is generally accepted that the morecomplex a piece of software is, the more difficult it can be to detect unauthorized modifications. (12) Most manufacturers of DREs treat their software code as proprietaryinformation and therefore not available for public scrutiny. Consequently, it is not possible forexperts not associated with the companies to determine how vulnerable the code is to tampering. (13) Voting System Standards and Certification. Concerns such as those described above have been voiced by some experts at least since the 1980s. (14) Thedevelopment of the Voluntary Voting Systems Standards (VSS) by the Federal Election Commission(FEC) in 1990, and the subsequent adoption of those standards by many states, helped to reducethose concerns. The VSS were developed specifically for computer-assisted punchcard, optical scan,and DRE voting systems. They include a chapter on security, which was substantially expanded inthe updated version, released in 2002. (15) Alongwith the standards, a voluntary testing andcertification program was developed and administered through the National Association of StateElection Directors (NASED). In this program, an independent test authority (ITA) chosen byNASED tests voting systems and certifies those that comply with the VSS. (16) Testing is done of bothhardware and software, and the tested software and related documentation is kept in escrow by theITA. (17) If questions arise about whether thesoftware used in an election has been tampered with, thatcode can be compared to the escrowed version. Systems that receive NASED certification may alsoneed to go through state and local certification processes before being used by an electionjurisdiction. HAVA creates a new mechanism for the development of voluntary voting system standards. It creates the Election Assistance Commission (EAC) to replace the FEC's Office of ElectionAdministration and establishes three bodies under the EAC: a 110-member Standards Boardconsisting of state and local election officials, a 37-member Board of Advisors representing relevantgovernment agencies and associations and fields of science and technology, and a 15-memberTechnical Guidelines Development Committee chaired by the Director of National Institute ofStandards and Technology (NIST). This last committee is charged with making recommendationsfor voluntary standards (called guidelines in the Act), to be reviewed by the two boards and theEAC. (18) HAVA also requires the EAC to provide for testing, certification, and decertification of voting systems and for NIST to be involved in the selection and monitoring of testing laboratories. TheEAC is also required to perform a study of issues and challenges -- including the potential for fraud-- associated with electronic voting, and periodic studies to promote accurate, secure, andexpeditious voting and tabulation. HAVA also provides grants for research and development onsecurity and other aspects of voting systems. The voting system requirements in the Act do notspecifically mention security but do require that each voting system produce a permanent paper auditdocument for use as the official record for any recount. This requirement is for the system, not foreach ballot. For example, most DREs can print a tally of votes recorded and therefore can meet thisrequirement. The Caltech/MIT Study. The problems identified after the November 2000 federal election prompted wide public concern about voting systems and led toseveral major studies (19) with recommendations,many of which were incorporated in HAVA. Themost extensive examination of security was performed by scientists at the California Institute ofTechnology and the Massachusetts Institute of Technology. Their report identified four mainsecurity strengths of the electoral process that has evolved in the United States: the openness of theelection process, which permits observation of counting and other aspects of election procedure; thedecentralization of elections and the division of labor among different levels of government anddifferent groups of people; equipment that produces "redundant trusted recordings" of votes; and thepublic nature and control of the election process. (20) The report expressed concern that current trendsin electronic voting are weakening those strengths and pose significant risks, but that properlydesigned and implemented electronic voting machines can improve, rather than diminish, security. The California Task Force Report. The concernsexpressed by the Caltech/MIT study and others were partially addressed by HAVA, but as statesbegan to acquire DREs, and the appointment of EAC members was delayed, (21) some observers beganexpressing concerns that states were purchasing flawed machines with no federal mechanism inplace for addressing the problems. In response to such concerns, the California secretary of stateestablished a task force to examine the security of DREs and to consider improvements. The report (22) recommended changes to how voting systems are tested at the federal, state, and local levels, as wellas other changes in security for software and for vendor practices. It also recommended theimplementation of a voter-verified audit trail -- that is, a mechanism, whether paper-based orelectronic, that produces an independent record of a voter's choices that the voter can verify beforecasting the ballot and that can be used as a check against tampering or machine error. Until such asystem can be implemented, the task force recommended the use of "parallel monitoring," in whicha selection of machines are tested while in actual use on election day to determine if they arerecording votes accurately. The Hopkins Study. Until recently, the concerns raised about DRE vulnerabilities were considered by many to be largely hypothetical. However, inearly 2003, some election-reform activists discovered (23) an open website containing large numbersof files relating to voting systems of Diebold Election Systems, a major voting system vendor whichhad recently won contracts with Georgia and Maryland to provide touchscreen DREs. Activistsdownloaded and posted many of those files on Internet sites, and the authors of the Hopkins studyused some of those files to analyze computer source code that "appear[ed] to correspond to a versionof Diebold's voting system." (24) Their analysisconcluded that the code had serious security flaws thatcould permit tampering by persons at various levels, including voters, election workers, Internet"hackers," and even software developers. Diebold quickly rebutted those claims, (25) arguing that theywere based on misunderstanding of election procedures and of the equipment within which thesoftware was used, and that the analysis was based on an "inadequate, incomplete sample" ofDiebold's software. Some computer scientists, while agreeing that the code contained security flaws,also criticized the study for not reflecting standard election procedures. (26) Shortly after the Hopkins study was released, Maryland Governor Robert Ehrlich ordered that the contract with Diebold be suspended pending the outcome of an independent security analysis. That analysis, (27) while agreeing with several ofthe criticisms of the Hopkins study, found that theDiebold system, as implemented in the state, had serious security flaws. The report concludesoverall that this voting system, "as implemented in policy, procedure, and technology, is at high riskof compromise" and made many recommendations for improvements. (28) The Maryland State Boardof Elections has developed a plan to implement those recommendations. (29) The extent to which the risks identified in the Maryland study may apply to other states or to other DREs may be worth examination by state officials. In Ohio, which has also been consideringthe purchase of Diebold DREs, secretary of state Kenneth Blackwell has also initiated a securityevaluation of electronic voting devices from four v endors. (30) Elections are at the heart of the democratic form of government, and providing sufficientsecurity for them is therefore critical to the proper functioning of a democracy. There has been somedisagreement among experts about the seriousness of the potential security problems with DREs and,therefore, what is needed to ensure sufficient security. While it is generally accepted that tamperingis possible with any computer system given enough time and resources, some experts believe thatcurrent security practices are adequate. Others believe that substantial additional steps are needed. To determine the nature and extent of the problem and what solutions might be considered requiresan understanding of some general concepts in computer security, which are discussed in this section,along with their applicability to computer-assisted voting systems. The discussion is organized alongfour themes: threats, vulnerabilities, defense, and response and recovery after an incident occurs. The term threat can be used in several different ways, but in this report it refers to a possible attack -- what could happen. Descriptions of threats often include both the nature of the possibleattack, those who might perpetrate it, and the possible consequences if the attack is successful. Vulnerability usually refers to a weakness that an attack might exploit -- how an attackcould beaccomplished. Analysis of threats and vulnerabilities, when combined, can lead to an assessmentof risk . Statements of risk often combine both the probability of a successful attack and somemeasure of its likely consequences. (31) Defense refers to how a system is protected from attack. Response and recovery refer to how, and how well, damage is mitigated and repaired andinformation and functionality are recovered in the event of a successful attack. Kinds of Attacks and Attackers. The best known type of attack on a voting system is one that changes the vote totals from what voters actually cast. Historically, such tampering has been performed by corrupt officials or partisans, one of the mostfamous examples being Tammany Hall in New York City, of which Boss Tweed said, "the ballotsmade no result; the counters made the result." (32) Sometimes, others who stood to benefit from aparticular outcome would be involved, as was reportedly the case with respect to allegations ofvote-buying in Indiana with money from some of New York's "robber barons" in the presidentialelection of 1888. (33) The goal of such tamperingwould generally be to influence the final vote tallyso as to guarantee a particular result. That could be accomplished by several means, such as adding,dropping, or switching votes. Many of the features of modern voting systems -- such as secretballoting and the use of observers -- are designed to thwart such threats. The impact of such vote tampering depends on several factors. Two of the most important are the scale of an attack and the competitiveness of the contest. An attack would have to have sufficientimpact to affect the outcome of the election. For that to happen, scale is critical. If tamperingimpacts only one ballot or one voting machine, the chances of that affecting the election outcomewould be small. But tampering that affects many machines or the results from several precinctscould have a substantial impact, although it might also be more likely to be detected. The scale ofattack needed to affect the outcome of an election depends on what proportion of voters favor eachcandidate. The more closely contested an election is, the smaller the degree of tampering that wouldbe necessary to affect the outcome. (34) While attacks that added, subtracted, or changed individual votes are of particular concern, other kinds of attacks also need to be considered. One type of attack might gather information thata candidate could use to increase the chance of winning. For example, if vote totals from particularprecincts could secretly be made known to operatives for one candidate before the polls closed, (35) theresults could be used to adjust get-out-the-vote efforts, giving that candidate an unfair advantage. Another type of attack might be used to disrupt voting. For example, malware could be used tocause voting machines to malfunction frequently. The resulting delays could reduce turnout, perhapsto the benefit of one candidate, or could even cause voters to lose confidence in the integrity of theelection in general. The latter might be of more interest to terrorists or others with an interest inhaving a negative impact on the political system generally. An Evolving Threat Environment. The kinds ofattacks described above are potential threats against any voting system. However, the growing useof information technology in elections has had unique impacts on the threat environment. It providesthe opportunity for new kinds of attacks, from new kinds of attackers. As information technologyhas advanced and cyberspace has grown, so too have the rate and sophistication of cyberattacks ingeneral: (36) The number of reported computer-security violations has grown exponentially in the past decade, from about 100 in 1989 to more than 100,000 in the first three quarters of 2003. (37) Potential threats may now come from many sources -- amateur or professionalhackers using the Internet, insiders in organizations, organized crime, terrorists, or even foreigngovernments. With respect to election tampering, some such attackers could benefit in traditionalways, but some, such as terrorists, might be interested instead in disrupting elections or reducing theconfidence of voters in the electoral process. New and more ingenious kinds of malware are constantly being invented andused. There are now tens of thousands of known viruses, and the sophistication of tools used todevelop and use new ones has increased. Malware in a voting system could be designed to operate in very subtle ways, for example,dropping or changing votes in a seemingly random way to make detection more difficult. Malwarecan also be designed to be adaptive -- changing what it does depending on the direction of the tally. It could also potentially be inserted at any of a number of different stages in the development andimplementation process -- from the precinct all the way back to initial manufacture -- and lie inwait for the appropriate moment. Several other kinds of attack could also be attempted in addition to malware. Among them are electronic interception and theft or modification of information during transport or transmission,modifications or additions of hardware, and bypassing system controls or misuse of authority totamper with or collect information on software or election data. (38) The threats discussed above, and others, are of course only harmful potentially. Their mere existence does not in itself imply anything about the likelihood that they are a significant risk in agenuine election. To be such a risk, there must be vulnerabilities in the voting system that can beexploited. For the purposes of this report, discussion of vulnerabilities is divided into two categories-- technical and social. Technical Vulnerabilities. This category includes weaknesses stemming from the computer code itself, connection to other computers, and the degreeof auditing transparency of the system. Computer Code. In the recent public debate about the security of DREs, much of the attention has focused on the computer code. Two significant potentialvulnerabilities relate to the use of cryptography in the system and the way the code is designed. Cryptography (39) is oneof the most powerful tools available for protecting the integrity of data. Robust cryptographic protocols are well-developed and in common use, for example in onlinefinancial transactions. Cryptography is important not only in making it difficult for unauthorizedpersons to view critical information (security), but also in making sure that information is notchanged or substituted in the process of being transferred (verification). This could be a concern forDREs; both the Hopkins and Maryland studies found weaknesses in the way encryption was used. The design of software can have a significant effect on its vulnerability to malware. Both the complexity of the code and the way it is designed can have an impact. It is a general principle ofcomputer security that the more complex a piece of software is, the more vulnerable it is to attack. That is because more complex code will have more places that malware can be hidden and morepotential vulnerabilities that could be exploited, and is more difficult to analyze for securityproblems. In fact, attackers often discover and exploit vulnerabilities that were unknown to thedeveloper, and many experts argue that it is impossible to anticipate all possible weaknesses andpoints of attack for complex software. With DREs, each machine requires relatively complex software, since it serves as a voter interface, records the ballot choices, and tallies the votes cast onthe machine. (40) The first function requires the mostcomplex software, especially if the machine isto be fully accessible to all voters. The code used in optical-scan and punchcard readers can besimpler, as it performs fewer functions. Software code that is not well-designed from a security perspective is more likely than well-designed code to have points of attack and weaknesses that could be exploited, as well as placesfor malware to be hidden. However, code can be designed so as to minimize such vulnerabilities,and well-developed procedures have been established to accomplish this goal. (41) These procedurescan be applied to both new and legacy systems. Good design involves not only the code itself, butalso the process by which it is developed and evaluated. DRE code has been criticized with respectto its design, (42) although the proprietary nature ofthe software has precluded thorough publicassessment. The systems may also use commercial off-the-shelf software for functions such as theoperating system, and that software could also have vulnerabilities. However, the software in themajor systems in use today has been evaluated and certified as meeting VSS requirements,includingthose for security. (43) Connection to Other Computers. This can be a vulnerability because it provides potential avenues for attack. The most well-known attack targetsare computers with direct Internet connections that hackers can exploit. Concerns about such attackshave made the adoption of Internet voting in public elections generally unattractive so far from asecurity perspective. (44) While a measure ofprotection can be provided by firewall programs andrelated technology, the safest approach is to ensure that the voting system computers, including notjust the voting machines themselves but also computers involved in ballot generation and votetallying, are not connected to the Internet or to any other computers that are themselves connectedto the Internet. This isolation is sometimes called "air-gapping." However, an effective air gap mustinclude sufficient security controls for removable media such as floppy disks, (45) CDs, and the memorycards that are often used to transport data from the precinct to the central election office. (46) Vendors and election jurisdictions generally state that they do not transmit election results from precincts via the Internet, but they may transmit them via a direct modem connection. However,even this approach can be subject to attack via the Internet, especially if encryption and verificationare not sufficient. That is because telephone transmission systems are themselves increasinglyconnected to the Internet (as exemplified, for example, by the increasing use of Internet-basedtelephony), and computers to which the receiving server may be connected, such as through a localarea network (LAN), may have Internet connections. In fact, organizations may be unaware of theextent of such connections. (47) This can be evenmore of an issue if the system uses wirelessconnectivity. The way that a voter interacts with the DRE may provide another possible source of connection. For example, with the Diebold DRE, a "smartcard" (48) is inserted into the voting machine to start thevoting process (some machines use other methods, such as a numerical code). The Hopkins studyclaims that voters or pollworkers could program their own smartcards and use them to voterepeatedly or to manipulate the voting machine. The Diebold rebuttal rejected this assertion. TheMaryland study, while not ruling out this vulnerability, states that software and physical controls,and the openness of the voting booth, (49) minimizethe likelihood of exploitation. Auditing Transparency. In current DREs, the actionsthat occur between ballot screen and the final vote tally are not subject to human observation. Thevoter sees a visual representation of the ballot on the computer screen or face of the DRE. When thevoter pushes the button to cast the ballot, the machine records the votes electronically. That meansthat a voter cannot know if the machine recorded the choices the voter saw on the screen or someother choices, and an observer also cannot check to see if all ballots cast are counted correctly. Theformer vulnerability also exists with a mechanical lever machine, and the latter with an optical scanor punchcard ballot reader, but with a reader, there is a document ballot that can be checkedindependently. While DREs are generally designed to make a separate recording of each ballotcast, (50) this is not an independent record but rathera copy in a different format of the information sentto the tallying registers. Social Vulnerabilities. A significant and increasingly sophisticated kind of attack -- dubbed "social engineering" by hackers -- involvesfinding and exploiting weaknesses in how people interact with computer systems. (51) Such socialvulnerabilities can include weaknesses relating to policy, procedures, and personnel. Of the 14specific risks identified in the Maryland study, most were of these types. (52) Policy. A security policy lays out the overall goalsand requirements for a system and how it is implemented, including the technology itself,procedures, and personnel. (53) An absent or weakpolicy, or even a good one, if it is not implemented,is considered a substantial vulnerability. Security policies of election administrators, vendors,third-party suppliers, and the ITAs are all relevant. The Maryland study found that the Dieboldsystem as implemented did not comply with the state's information security policy and standards. The study did not examine the security policies of Diebold or other relevant entities. Procedure. The security policy provides the basis from which procedures such as access controls are developed. Election administration is a complexeffort involving vendors, ITAs, state and local government, and pollworkers who are oftenvolunteers, as well as voters. Also, DREs are potentially targets of attack at virtually any point fromwhen they are initially developed and manufactured to when they are used in the polling place. Consequently, security procedures are especially important. Vulnerabilities can occur, for example,if the controls that the manufacturer uses to prevent insertion of malware are inadequate; if theanalyses performed by evaluators is not sufficient to detect security problems with the technology;if the chain of custody for software, including updates -- from when it is certified to when it is usedin an election -- is weak or poorly documented; or if auditing controls are insufficient. As withsecurity policy, absent or poor procedures, or even good ones if they are not properly implemented,can create serious vulnerabilities. The Maryland study did not examine vendor or ITA practices (54) but did raise several concerns with respect to the procedures used by the state. Personnel. Perhaps the most important single factor in determining the vulnerability of a system is the people involved. It is they who must implementsecurity policies and procedures and defend against any attacks. If they are not adequately skilledand trained, they may be unable to prevent, detect, and react to security breaches, and they maythemselves be more vulnerable to a "social engineering" attack. In addition, it can be particularlydifficult to defend against attack by an insider, so background checks and other controls to minimizethat risk are especially important. The Maryland study pointed out that the state training programfor the Diebold system did not include a security component. Goals of Defense. It can be useful to think of three goals of defense from an attack on a computer-based system: protection, detection, andreaction. (55) Protection involvesmaking a target difficult or unattractive to attack. For example, goodphysical security can prevent attackers from accessing voting machines in a warehouse. Use ofencryption and authentication technologies can help prevent attackers from viewing, altering, orsubstituting election data when it is transferred. Currently, election jurisdictions and vendors appear to rely heavily on procedural mechanisms for protection. (56) These may include accesscontrols, certification procedures, pre-electionequipment-testing, and so forth. Such procedures are an essential element of an effective defense,although some observers dispute that they are sufficient to prevent tampering. Even if they are, theymust be implemented and followed properly if they are to ensure adequate protection. However, insome circumstances, the time and resources needed to follow such procedures may conflict withother important goals, such as the timely administration of an election, forcing election officials tochoose whether to risk bypassing or modifying security procedures. (57) Detection involves identifying that an attack is being or was attempted. For example, election observers can serve as detectors of a potential attack. One of the criticisms of DREs has been thatit is a "black box" system, and observers cannot detect suspicious activity within the machine. (58) Oneapproach to addressing this issue is the use of auditing. That can include engineering the DRE sothat it creates a log of all actions performed, especially those that might indicate tampering. It canalso include the creation of an audit trail for votes. HAVA requires such a trail for the votingsystem, but some observers have proposed the use of voter-verified ballots for auditing (discussedbelow (59) ). Cryptographic protocols may also beuseful in detecting attempts at tampering. (60) However, any specific mechanisms that might be built into the technology itself are proprietary andtherefore not discussed in this report. Reaction involves responding to a detected attack in a timely and decisive manner so as toprevent its success or mitigate its effects. For example, if an observer sees something suspiciousduring voting or tallying, the process can be stopped and the situation investigated. Also, a votingmachine may be programmed to shut down if certain kinds of problems are encountered. The systemmight have additional defense measures such as antivirus software. To be most effective, the countermeasure must be implemented before the attacker can do significant damage. Effective reaction therefore requires early detection of an attack. Given the lackof transparency of DRE operations, heavy reliance may need to be placed on technologicalcountermeasures. Elements of Defense. It is generally accepted thatdefense should involve a focus on three elements: personnel, technology, and operations. (61) The personnel component focuses on a clear commitment to security by an organization's leadership,assignment of appropriate roles and responsibilities, implementation of physical and personnelsecurity measures to control and monitor access, training that is appropriate for the level of accessand responsibility, and accountability. The technology component focuses on the development,acquisition, and implementation of hardware and software. The operations component focuses onpolicies and procedures, including such processes as certification, access controls, management, andassessments. A focus that is not properly balanced among those elements creates vulnerabilities. Computer security experts have criticized computer-assisted voting in part because they believe that thesecurity focus has emphasized procedural safeguards too heavily. The use of older, "legacy"hardware and software technology, and weak technology defenses, as well as lack of training ofelection personnel in security, are among the concerns experts have cited. The validity of suchconcerns has been disputed by others. (62) For applications where security considerations are a priority, techniques have been developed to engineer systems to the appropriate level of security corresponding to the specific needs for theapplication. Such systems are designed with carefully specified requirements and are thoroughlyreviewed and tested before implementation. (63) Some experts have proposed that such an approachbe used in the development of voting systems. (64) Another general principal is that an effective defense cannot be focused only on one particular location but needs to operate at all relevant points in the entire enterprise. (65) For voting systems,these points would likely include development (both software and hardware) by the manufacturer,the certification process, acquisition of the voting system (including software and hardware updates)by the state, state and local implementation, and use during elections. Because of the proprietarynature of vendor practices, the defenses used by them could not be determined for this report. (66) Stateprocedures are more transparent in many cases but vary from state to state. (67) Finally, an effective defense is based on the assumption that attackers will continuously attempt to breach the defenses (including devising new ways to attack) and that they will eventually find avulnerability to exploit. Therefore, a successful defense should be robust, so that security needs aremet even if an attack occurs. (68) One way toaccomplish this is through a layered defense, in whichmore than one defense mechanism is placed between the attacker and the target. (69) If the outer layeris breached, the next comes into play. Each layer should include both protection and detectioncapability. For example, a state will use a combination of physical security (e.g., lock and key),procedural controls (e.g., who is given access to the system and for what purpose) and auditing (arecord of what was done and by whom) to defend against tampering with voting systems. Georgiadoes additional validation testing on software installed on machines in a local election jurisdictionto ensure that it is the same as the certified software. (70) Other states may have similar procedures. Trade-Offs. The combined use of goals and elements as discussed above is known as defense in depth . Such a strategy requires balancing"protection capability and cost, performance, and operational considerations." (71) This balancing caninvolve difficult questions, especially with regard to resource allocation. For example, how mucheffort should be expended in threats that may have a significant probability but a comparatively lowimpact versus addressing those with very low probability but very high impact? The need to weighsuch trade-offs occurs throughout the security arena. In the area of homeland security, the numberof casualties from a terror attack using the smallpox virus could be much higher than from an attackwith explosives, but the latter is widely considered much more likely. Furthermore, there are manyother factors that must be weighed, such as balancing protection against the threat, on the one hand,against the safety of countermeasures (such as vaccines) and disruption to daily life (such asscreening for explosives) on the other. Setting priorities with respect to investment in defense in such cases is far from straightforward. This is true for election administration as well. Decisions about what kinds of security to provideand how to provide it must be made in complex circumstances. For example, with DREs, theprobability of successful tampering occurring may be very small, but the impact of a successfulattack could be very high. At the same time, current DREs arguably reduce the risks of certain kindsof tampering that can occur with paper ballots -- such as selectively spoiling certain ballots duringcounting. Many DREs also have other highly desirable features, as discussed earlier, (72) that cansubstantially reduce the number of votes lost because of voter error or other problems. Accordingto one study, over a million of such "lost votes" could have been prevented during the November2000 presidential election if better-designed voting technology had been used. (73) Also, security measures may have unanticipated impacts. Measures that made voting much more difficult or complicated and thereby discouraged voters from participating or increased the rateof voter or pollworker error would probably not be worth implementing. Furthermore, votingmachines are only part of the election administration system, and security must be integral to thewhole system to be effective. The idea that no defense is perfect and that attackers try to find the imperfections means that defenders need to assume that an attack will at some point be successful. Some damage will occurbefore the attack is detected and stopped (assuming that the attack is detected -- in the case of votetampering, an attacker would usually prefer that the attack not be discovered and will make effortsto hide it (74) ). For this reason, mechanisms forminimizing and recovering from damage that occursare considered desirable. They are also desirable in the event of damage that can result from sourcesother than an attack, such as power outages, malfunctioning voting machines, or administrativeproblems. For example, DREs store vote data in redundant memory locations, in the event that onememory fails. As the difficulties with spoiled ballots from the November 2000 Presidential electionindicated, (75) recovery from some kinds of damagemay not be possible, and reliance must be placedon strengthening preventive measures. Thus, HAVA requires that voters be notified of overvotesbefore a ballot is cast and be given the opportunity to correct errors. (76) One criticism of DREs has been that if a problem is discovered during auditing, it is not clear what can be done to identify which votes were valid and which were not. For example, if a machineis suspected of harboring malware, should all votes from it be discarded, or would some be counted? How election officials answer such questions will depend on state law, regulations, and practices. One mechanism for recovery from some kinds of problems is the recount, in which ballots are counted a second time to address concerns about the accuracy of the original count. DREs, like levermachines, simplify recounts and reduce chances for error in them because the recounts are based onthe vote tallies from the machines, rather than individual ballots. However, problems with themachines themselves, including tampering, would probably not be discovered through a recount. There appears to be an emerging consensus among computer scientists that current DREs, and to a lesser extent other computer-assisted voting systems, do not adhere sufficiently to currentlyaccepted security principles for computer systems, especially given the central importance of votingsystems to the functioning of democratic government. (77) However, election administrators and thosewith related expertise tend to express more confidence in the systems as they are currently realized. (78) Also, the fact that security concerns exist does not in itself mean that voting systems have beencompromised or are likely to be. It does, however, suggest that the issues raised need to beaddressed expeditiously, especially given the evolving threat environment and vulnerabilitiesdiscussed above. The question of confidence in computer-assisted voting systems is important in general, since voters must have confidence in the integrity of the voting systems they use if they are to trust theoutcomes of elections and the legitimacy of governments formed as a result of them. If the concernsthat have been raised about DRE security become widespread, that confidence could be eroded,whether or not those concerns are well-founded. This potential problem could be exacerbated by twofactors. One is the likelihood, especially given the applicable provisions of HAVA, that the use ofDREs will increase. The other is the likelihood of increasing concentration of market share forvoting systems in a few companies. (79) Historically,election jurisdictions in the United States haveused a wide diversity of voting systems provided by a broad array of vendors. This diversity hasbeen considered an advantage by many, not only in meeting the diverse needs of electionjurisdictions, but also for security, especially in statewide and federal elections where more systemsmay be used. Some experts believe that it is much more difficult to successfully commit widespreadtampering with elections if many different systems need to be compromised than if only a few mustbe. In any case, as the usage of DREs increases, they and the companies that make and sell themmay be subjected to increased public scrutiny. For these and other reasons, many experts and observers have proposed actions to resolve the controversy over DRE security. Several of these ideas are discussed below. Some observers have argued that existing security mechanisms are sufficient to resolve any problems and that no new solutions are necessary, although current procedures may need to beimproved, as recommended by the Maryland study. (80) These observers argue that the federal VotingSystem Standards (VSS); NASED, state, and local certification processes; and vendor and electionadministration procedures and controls, when properly implemented, provide sufficient security toprevent tampering. They also point to the lack of any proven case, despite many accusations, ofelection fraud involving computer tampering, (81) and that criminal penalties provide a deterrent toelection fraud. (82) Critics state, in contrast, thatthose processes and procedures are flawed, and thatrecommended or stated security procedures are not always followed. They also point out that theabsence of a proven case of tampering does not necessarily mean that it has not been attempted, andthat as the usage of DREs increases, the potential payoff for tampering, and hence the potentialthreat, will also increase. (83) Some critics have stated that the security provisions in the VSS are insufficient, (84) and that theirdevelopment did not follow best practices in this area, as promulgated and practiced, for example,by national and international standards-setting organizations such as the American NationalStandards Institute (ANSI), the International Organization for Standardization (ISO), and NIST,which has been involved only marginally in the development and implementation of the VSS. (85) TheVSS have also been criticized for placing too many constraints on the development of newtechnology that can address security concerns. (86) Critics also point out that several of the problemsidentified by the Hopkins and Maryland studies occurred despite the certification by NASED thatthe Diebold system conforms to the VSS. HAVA requires changes in the processes for developing standards for and certifying voting systems. It establishes a Technical Guidelines Development Committee under the new ElectionAssistance Commission to assist the EAC in the development of voluntary voting system guidelines. These guidelines will essentially replace the current Voluntary Voting System Standards (VSS), butthe Act also stipulates that the initial set of guidelines will be the most recently adopted version ofthe VSS. The new Committee established by HAVA will be chaired by the Director of NIST and willinclude, among others, representatives of ANSI, the Institute of Electrical and Electronics Engineers(IEEE), and NASED. IEEE has already begun developing new draft voting system standards. (87) These standards would presumably be used to help inform the guideline-development process oncethe EAC and its support bodies are established. The importance of standards was reinforced with the initial adoption and implementation of the VSS, which led to significant improvements in computer-assisted voting systems. Standards areessential to security because they specify measurable attributes a system needs to be consideredtrustworthy, and they can reduce design flaws. (88) However, a particular challenge that arises withrespect to security standards is that it is not possible to anticipate all the ways a system might beattacked. In addition, standards can provide adversaries with information they can use in searchingfor vulnerabilities. (89) Therefore, security standardsneed to be continually reevaluated as new threatsand vulnerabilities are discovered. Also, it is considered risky to treat adherence to standards as anindication that a system is secure. (90) The federalgovernment requires that federal agencies adhereto a set of computer-security policies, standards, and practices, (91) but these do not apply to votingsystems, which are under the purview of state and local governments. Standards can be difficult and time-consuming to develop, especially under the commonly used consensus approach, in which stakeholders reach agreement on provisions to be included. Strengthsof this approach, when properly implemented, are that the resulting standards are less likely tocontain substantial omissions, and they are more likely to be acceptable to users and otherstakeholders. Efforts to develop the VSS began in the 1970s, but the standards were not approveduntil 1990. (92) The Common Criteria forInformation Technology Security Evaluation (ISO/IEC15408), which is a set of requirements for evaluating the security of information technology, tookfive years to develop, efforts having been begun in 1993 and completed in 1998. (93) The IEEE votingstandards project began in 2001 and has proceeded amid some controversy, which apparently is notatypical for standards panels addressing difficult issues. (94) Given those considerations and the delaysin establishing the EAC, it is not clear whether new standards or guidelines will be in place beforethe HAVA voting system requirements go into effect in January 2006; however, HAVA requires theTechnical Guidelines Development Committee to submit its initial recommendations to the EACwithin nine months of the Committee's appointment. (95) In any case, even after new standards areapproved, there remain issues relating to testing and certification. For example, should all votingsystems be required to adhere to the new guidelines or should those certified under the VSS continueto be accepted? The current process for testing and certification of voting systems was initiated by NASED in 1994. HAVA directs the EAC to provide for "testing, certification, decertification, andrecertification of voting system hardware and software by accredited laboratories" (Sec. 231(a)(1)). It gives NIST responsibility for recommending and reviewing testing laboratories. While HAVA maintains the voluntary nature of adherence by states to federal voting system standards and use of certified systems, most states have adopted the VSS. (96) Consequently, if theEAC decertifies voting systems that do not meet the new guidelines, many states would likelyreplace those systems, provided that funding were available to do so. However, the more stringenta set of standards is with respect to security, the more time-consuming and expensive it may be totest and certify the system (some have criticized the Common Criteria for this reason, althoughothers have suggested that they be applied to voting systems (97) ). More secure systems may also bemore expensive to manufacture. Consequently, there may be economic disincentives for investmentin highly secure voting systems, although such disincentives would likely become less important ifpublic concern grows. Under the current VSS, testing is performed under specific laboratory test conditions. Such tests are necessary to determine if the system meets the standards, but some experts have proposedthat they are not sufficient, that additional testing needs to be done under realistic conditions of use,involving actual voters, and that systems should be retested after use in the field. (98) Even if new guidelines and certification procedures can be developed that include state-of-the-art security features, some observers believe that this will not be sufficient. They pointto three problems: (1) Given the time required to develop and implement new voting systemguidelines and to test and certify systems under them, systems reflecting such guidelines will not bein place for several years, whereas the threat from cyberattacks is present and growing. (2)Overreliance on any one line of defense, such as security standards, runs counter to therecommended use of defense in depth. (3) The use of standards does nothing about the reducedobservability and transparency that characterizes computerized voting systems (99) in contrast to moretraditional systems, and therefore cannot sufficiently address concerns about public confidence inthe integrity of computer-assisted voting. Some experts also believe that certification and proceduralcontrols, including auditing, can never guarantee security of a voting system. (100) This problem, theysay, is further complicated by the need for ballot secrecy, which is not an issue, for example, incomputerized financial transactions. Some experts have proposed the use of open source software code for at least some voting system software. (101) Such code would beavailable for public inspection and undergo thoroughsecurity review, and these experts argue that it would therefore be more secure because the opensource review process would be more thorough and identify more potential security flaws than ispossible with proprietary code. Advocates of proprietary or closed source code argue, in contrast,that this approach makes potential flaws more difficult to discover and therefore to exploit. Evenif open source code is superior with respect to security (which remains unproven), DREs often usecommercial off-the-shelf (COTS) software (such as Microsoft Windows) that is proprietary. (102) Currently, the code for virtually all voting system software in the United States is closely heldby the vendors, who release it only to select parties, such as the ITAs, under nondisclosureagreements. The vendors argue that the use of proprietary software is important both to protect theirintellectual property rights and for security. While secrecy can be an important security tool(sometimes called "security through obscurity"), it has some weaknesses. First, it is fragile, in thatonce this defense is breached, the damage cannot be repaired -- the code cannot be made secretagain. Second, use of secrecy limits the number of people who can examine the code, therebylimiting the scrutiny it can receive for vulnerabilities. Both of these potential weaknesses weredemonstrated by the circumstances leading to the Hopkins study. Diebold code was posted (perhapsinadvertently) on an open Internet server; the authors analyzed this code and claimed to havediscovered several vulnerabilities (which Diebold disputed). Some have proposed resolving this issue by using a modular approach that separates the voterinterface or ballot choice function (equivalent to marking an optical-scan ballot) from thevote-casting function (putting the ballot in the optical-scan reader). (103) The software for the latterwould be open source and standardized and for the former proprietary and more flexible. Thereasons are that vote casting is a straightforward, well-defined process that requires high security toensure that the voter's actual choices are recorded and counted, whereas the voter interface is whereinnovations can provide the greatest advances in usability and other benefits for voters, and thesecurity requirements are not as stringent. The code used for vote casting and counting can be muchsimpler than that needed for the voter interface, making security potentially much easier to achievethan is currently the case with DREs, where both functions are housed within a single unit. Verifiability in elections can be thought of as consisting of two components. One involves thecapability of the voter to verify that his or her ballot was cast as intended. This is what is usuallymeant by voter verifiability . The other involves the capability to determine that the final tallyaccurately reflects all votes as cast by the voters and that it includes no additional votes -- in otherwords, that no votes were improperly changed, omitted, or added. This has been called resultsverifiability . (104) If all voters can obtainboth voter and results verifiability, that is known as universalverifiability . (105) Roll-call voting providesrobust universal verifiability -- voters publicly record theirvotes, which are counted in the presence of all voters. However, this approach sacrifices ballotsecrecy and can be used only for very small electorates. While ballot secrecy reduces the risk of voteselling and coercion, it complicates verifiability, since voters cannot know directly if their ballotswere counted as cast. Hand-counted paper ballot systems, which can provide ballot secrecy, mayprovide universal verifiability only under some very limited circumstances and only for very smallelectorates. Such systems can provide a kind of surrogate results verifiability, if observers closelywatch the counting of ballots, but even that can be difficult to achieve. Lever machines andcomputer-assisted voting systems arguably exhibit neither voter nor results verifiability, althoughdocument-based systems such as optical scan and punchcards do retain the capacity for surrogateresults verifiability if manual recounts are done in the presence of observers. Some observers believe that the potential security problems associated with the lack of transparency and observability in vote casting and counting with DREs cannot be resolved throughthe use of security procedures, standards, certification, and testing. They assert that the only reliableapproach is to use ballots that voters can verify independently of the DRE and that these ballotsbecome the official record for any recounts. Others assert that voter verifiability is a highly desirablefeature but caution about some of the proposed ways of achieving it. Still others believe that thereare problems with the approach that make it undesirable. HAVA requires that each voting system produce a paper audit record for the system and that this be the official record for recounts. It also requires that voters have the opportunity to correcttheir ballots before that record is produced. However, it does not stipulate that that record consistof individual ballots or that it be verifiable by the voter. At least four different ways of achieving voter verifiability have been proposed. These are discussed below to illustrate the range of complexity and issues involved. Voter-Verifiable Paper Ballot. In the most widelydiscussed method, the DRE would print a paper ballot with the voter's choices listed. The votercould then verify that the ballot accurately reflected the voter's choices as made on the DRE. Anydiscrepancies could then be called to the attention of a pollworker. Once the voter was satisfied withthe paper ballot, it would be deposited in a ballot box (106) and kept in the event of a recount. A sampleof these ballots could also be counted as part of a standard audit for comparison with the total count. Some observers also believe that any recount using these paper ballots should be performed by handrather than machine. This approach has the following potential advantages: (1) Any recount would be based on an independent record that the voter had had an opportunity to verify. (2) Each election could beaudited, and any significant discrepancies between the electronic and paper tallies would trigger afull recount. (3) If the recount were performed by hand, that would take advantage of thetransparency and observability that can be associated with that approach. (4) The method could helpensure voter confidence in the legitimacy of election results, since voters would know that ballotsthey had verified would be available for recounts. The approach has also been criticized, with critics asserting the following: (1) It makes voting more complicated and time-consuming by requiring extra steps by the voter. (2) The use of printerswould substantially increase both the cost of administering an election and the risk of mechanicalfailure of a voting machine. (3) It is generally accepted that paper ballot systems cannot be made toconform to the HAVA accessibility requirements. (107) (4) Since the method is largely untested, it isnot clear to what extent it would improve security in practice and what impacts it might have onvoters. (108) (5) Hand counting of the paperballots would be time-consuming and arguably moreerror-prone than machine counting. (109) Votemeter. There is an electronic version of the above method, in which an electronic device would be attached to the DRE. This votemeter wouldhave a display on which the voter could verify choices and it would record those choicesindependently of the DRE. Those records would be used in any recount and could also be talliedseparately by an independent agency -- to provide a check on possible collusion with respect to theDREs. Advantages to such a system over a paper trail would be that it would not have the problemsof manual paper recounts, it could provide a fast, independent, full audit of the DRE vote, and itcould be accessible to blind persons via an audio input. However, it would still be more complexfor the voter than current systems, and voters would need to trust that the attached unit was secure. Modular Voting Architecture. A third way toprovide voter verifiability with DREs is analogous to optical scan or punchcard balloting withprecinct counting. (110) After a voter makeschoices on the voter interface (such as a touchscreen), themachine writes the ballot to a memory card or other device, called a frog, which the voter then takesto another machine that reads the ballot. This reader would be highly secure, as discussed above. (111) It would have a display so that the voter could verify choices before casting the ballot. A readercould even be provided with an audio program to allow blind voters to verify choices. (112) Theadvantages and disadvantages of this system are similar to those for the previous two, depending onits particular design. Encrypted Votes. All three of the above approaches essentially provide a second, independent audit channel for the voting system. Anotherway of providing verifiability uses cryptographic methods to provide a kind of electronicverification. (113) Proponents argue that aproperly designed system using encrypted votes isconceptually different from the "electronic ballot box" exemplified by DRE technology and that itprovides for privacy, transparency, auditability, and security in a superior way to any currentapproach. This can be part of a more comprehensive system that uses cryptographic methodsthroughout the election process -- from election preparation through auditing of the results -- thatpurports essentially to mimic electronically or even improve upon the observability and transparencyassociated historically with manually counted paper ballot systems. There are several different possible approaches using cryptographic protocols. (114) In one kindof system, the voter, before casting the vote in the voting booth, can see the ballot choices theencrypted information will correspond to. When the vote is cast, a receipt is generated withencrypted information, which could be in any of several different forms, such as a number or apattern printed on a piece of paper. (115) Afterthe election, each voter can also determine if his or hervote was counted as cast by comparing the receipt to posted information. (116) However, because theinformation on the receipt is encrypted, no one, including the voter, can prove what choices weremade. (117) The encryption is performed witha set of encryption keys that have been generatedindependently by different election trustees -- for example, an election administrator andrepresentatives of each of the major political parties. Votes, to be counted, must be decrypted, whichis accomplished by each trustee applying his or her key, and shuffling the votes before sending themto the next trustee. (118) Information related tothe encryption is also posted that makes it possible fora trustee or a member of the public to audit and authenticate the election. (119) If a trustee (or anyoneelse) attempts to change, omit, or add any ballot, that will be detected in the audit, because thechanges will show up as invalid, just as someone trying to modify an encrypted financial transactionwill be discovered. At least one proposed system also permits auditing by observers during thecourse of the election. Proponents of this approach claim that the capabilities of checking the vote before and after casting the ballot while maintaining ballot secrecy, along with the high probability of detecting anytampering through public auditing, means that, unlike with DREs, it is not necessary for voters orelection or party officials to trust the voting machines to produce the correct tallies. In this sense,the encrypted-vote system is even more transparent than paper ballots that are hand-counted in thepresence of observers. It is much closer in transparency to a roll-call vote, but it retains ballotsecrecy. Proponents also believe that use of this approach could reduce the costs of elections byreducing the need for physical security, testing, and other activities. They also state that the integrityof the system is not dependent on the secrecy of the encryption keys, although privacy might becompromised if all keys were broken or stolen or all trustees colluded. If successful, the approach could address many of the security issues with DREs that this report discusses. However, it does not yet appear to have been independently evaluated and therefore couldhave currently unknown disadvantages and vulnerabilities. Also, it is not clear that it would havethe same potential positive impact on voter confidence as paper-based voter verification might. Thatis because a voter who does not understand the technology behind the system -- and few voters arelikely to -- may have no greater basis for confidence in the correspondence between the encryptedreceipt and the choices the voter made than is currently the case with DREs. Some proponents,however, believe that those concepts are simple enough that they can be taught in secondaryschool. (120) If the system relies on printers at each voting booth, that raises issues similar to those with respect to printers for voter-verifiable paper ballots. Similarly, the verifiability feature increases thecomplexity of the voting process for voters, with unknown consequences. In addition, it is not clearto what extent valid ballots could be recovered in the event that tampering was found or malfunctionoccurred. Finally, some critics question whether encrypted receipts are in fact unable to show avoter's choices. Proponents argue that these concerns are either unlikely to be a problem in practiceor are relatively easy to address. The several methods proposed to address the verifiability issue -- ranging from printing paperballots to new electronic ways of voting -- each have different strengths and weaknesses, makingit difficult to determine at present whether any of these approaches should be adopted. At the sametime, many observers would agree that finding ways to increase the verifiability and transparencyof electronic voting is desirable. DRE technology is clearly evolving fairly rapidly and has not yetbecome settled, as witnessed by the diversity of available devices and features in comparison to otherkinds of voting systems. (121) This environmentmay promote developing improved security and otherdesirable properties of the technology. At the same time, as jurisdictions continue to adopt DREsin response to HAVA and other factors, pressures to resolve security issues quickly may increase. While a defense-in-depth approach would appear to be generally desirable for addressing security questions with DREs, as discussed above, any attempt to implement such an approach needsto take into account potential problems that can be associated with making substantial changes inthe way an election is administered. For example, when a voting system is replaced in a jurisdiction,the proportion of residual votes and problems administering the election may actually increaseinitially, at least in part because neither voters nor pollworkers are familiar with the new system. Inaddition, there are no proven cases of tampering with DREs or other computer-assisted votingsystems in public elections. (122) For these andother reasons, some observers argue that any changesto current technology and procedures should be incremental. Others, however, state that given theevolving threat environment and the concerns that have been identified, an incremental approach isnot sufficient to prevent undetected tampering that could change the outcome of an election. Policymakers will need to weigh such differences in determining what if any actions to take inresponse to this set of issues. Three general approaches are discussed below for addressing the issues raised in this report. First, action could be left to state and local jurisdictions that administer elections. Second, the EACcould address the issues. Third, Congress could take any of several possible actions. Theseapproaches and options, which are not mutually exclusive, are discussed in turn below. States. Elections are administered by state and local governments, with the federal government playing a circumscribed role. Although that rolewas substantially enhanced with the enactment of HAVA, the law stipulates that methods ofimplementation of its requirements are to be left to the discretion of the states (Sec. 305). States maytherefore address these issues individually, as, for example, California, Maryland, and Ohio havealready been doing. (123) The availability offederal funding under HAVA to improve electionadministration by state and local governments, as well as the creation of an independent federalagency whose purpose is to assist those governments in election administration, should improve theability of those governments to ensure the security of elections. Leaving action to the states wouldallow them to react to the issues in a timely fashion and in ways that are most responsive to theirindividual circumstances and could lead to a variety of options being tested by different states,making it easier to determine which approaches work best. However, this approach might also leadto a patchwork of responses, which could be challenging for vendors to meet and could lead to somestates being more vulnerable to tampering than others. EAC. The Election Assistance Commission created by HAVA will have some responsibilities to provide guidance and to perform studies andresearch specifically relating to the security of voting systems. Its work in this area will involveNIST and others with experience in computer security. The EAC and its supporting boards andcommittees may provide an effective venue for addressing fundamental questions regarding votingsystem security and helping states meet their needs and responsibilities in this regard as well asissues relating to voter confidence in the security of DREs. One option would be that the EAC couldperform an independent security review of current DREs. This might be especially useful if it couldbe done in cooperation with a selection of states exhibiting a range of security policies andprocedures. However, to address the issue, the EAC must first form the relevant boards andcommittees, and any study would require a significant amount of time to complete. The EAC maynot, therefore, be able to resolve the controversy before states need to make decisions about whichkinds of voting systems to acquire. Congress. Among the possible actions that Congress might consider are hearings, funding to address the controversy, and revisions to HAVA. Congress could choose to hold hearings on the issue for several purposes, such as clarifying issuesand options, providing guidance to the EAC, or exploring funding and legislative options. It couldalso use other means, such as legislative report language or direct communication from congressionalleaders, to encourage the EAC to address the controversy in an expedited manner. Given the range of proposals for addressing DRE security issues, and the uncertainties associated with those proposals, Congress might also consider supporting research and development(R&D) in this area to identify the most appropriate solutions. In the past, economic incentives forprivate investment in such R&D have been weak, given the small, fragmented nature of the marketfor voting systems and the relatively low demand for sophisticated security for those systems. Withthe funding for new voting systems that HAVA provides, the evolving threat environment, and otherfactors, that situation may be changing. HAVA also authorized grants for R&D to improve securityand other aspects of voting technology (Sec. 271), but Congress has not appropriated fundsspecifically for that program. Presumably, the EAC could use some of its general operating fundsfor such work, or Congress could appropriate funds specifically for it. Several options for revising HAVA might be considered for a legislative response to the controversy: (124) A specific security provision could be added to the voting system requirements, stipulating, for example, that voting systems must adhere to security requirements for federalcomputer systems as required under current law, (125) or requirements or a mechanism to develop themthat is specified in the provision. The voting system audit requirement in the Act could be revised to require avoter-verifiable paper ballot (126) or some othersystem of voter verifiability. Voting systems could be required to use open-sourcesoftware. The Act could specify a security review and certification process for all votingsystems. The Act could specify that experts in security be represented on the TechnicalGuidelines Development Committee. The EAC could be directed to provide security consultation services to stateand local jurisdictions. The deadlines for meeting relevant requirements, such as for accessibility ofvoting systems, could be delayed pending resolution of the controversy. Federal funding could be provided for upgrades or replacements for DREspurchased under HAVA if they are shown subsequently to have significant securitydefects. Some of the above options would themselves be controversial, as discussed earlier in this report with respect to voter verifiability and use of open source software. In addition, creating additionalrequirements would further increase the federal role in election administration, which may beopposed by those who believe that it should be left to the states as much as possible. Options thatwould strengthen the ability of the EAC to help address this controversy may themselves be lesscontroversial but might not lead to a timely resolution of the issues. Delays in meeting HAVArequirements are also likely to be controversial, and, some would argue, may not be necessary if thecontroversy can be resolved before 2006. Finally, additional funding authorization andappropriations may be difficult to enact in a constrained budget environment. The purpose of this report has been to explain the controversy about the security of DREs andto lay out the issues raised and options for addressing them. The report does not attempt to resolvethe controversy. However, some conclusions can be drawn with respect to the questions asked atthe beginning of the report. Do DREs exhibit genuine security vulnerabilities? If so, could those vulnerabilities be exploited to influence an election? Given the worsening threat environment for information technology and the findings of several studies and analyses discussed in this report, at least some current DREs clearly exhibit securityvulnerabilities. Those vulnerabilities pose potential but not demonstrated risks to the integrity ofelections, in that no proven cases exist involving tampering with DREs. Observers differ in theirviews about whether these potential risks are significant enough that they need to be addressedurgently or whether they can be addressed incrementally. To what extent do current election administration procedures and other security measures protect against threats to and vulnerabilities of DRE systems? The answer to this question is a central point of contention in the controversy, with vendors and election administrators generally claiming that current measures are sufficient and certain otherexperts, most notably many computer scientists, and some activists claiming that they are not. Thesedifferences of opinion appear to be based in part on differences in philosophical perspective. Proponents of approaches such as voter verifiability believe that elections should rely for securityon openness, transparency, and observability of the entire election process, and that currently toomuch trust is placed in the behavior and capabilities of vendors, election officials, and other involvedparties. Many election administrators and vendors, and some other observers, believe that the viewsof such proponents are based on misunderstandings of how voting systems work and how electionsare administered. They also believe that approaches such as a voter-verifiable paper ballot wouldnot be of net benefit to the proper functioning of elections. Resolution of such fundamentaldifferences may require -- if it is in fact achievable -- that those on both sides of this controversydevelop better understanding of the bases for the views of the other side. Finding an effectivesolution may be easier if concerned computer scientists understand in detail how elections are run(perhaps by working directly with administrators) and if election administrators understandcybersecurity more clearly (perhaps by working with computer scientists). In any case, as indicated by some of the studies discussed in this report, significant improvements in the security of DREs may be found through careful analysis of current systems andhow they are implemented and administered, without requiring voter verifiability or other substantialchanges. However, such improvements in current systems are not likely to address the fundamentalconcerns raised by proponents of voter verifiability. Do those threats and vulnerabilities apply to computer-assisted voting systems other than DREs? The potential threats and vulnerabilities associated with DREs are substantially greater than those associated with punchcard or optical scan readers, both because DREs are more complex andbecause they have no independent records of the votes cast. However, document-ballot readers arepotentially subject to malware that could affect the count, to vulnerabilities associated withconnection to other computers, and some other kinds of tampering. Therefore, the security ofsystems using readers might also benefit from some of the same kinds of approaches that have beenproposed for DREs, such as improvements to current security policies and procedures, use of modernsoftware engineering techniques, and use of strong cryptographic protocols. What are the options for addressing any threats and vulnerabilities that do exist, and what are the relative strengths and weaknesses of the different options? The report discusses seven proposals for addressing the security issues raised about DREs. They include using current procedures and security mechanisms, with improvements as necessary;improving standards for the development and certification of voting systems; using open-sourcesoftware for voting systems; and several methods to improve the transparency and verifiability ofelections, including voter-verified paper ballots and an electronic version of that approach, use ofmodular electronic voting architecture that physically separates the voter interface from the castingand counting functions; and a system that uses cryptographic protocols to permit voters to verify thattheir ballots were cast as intended and that no votes were improperly changed, omitted, or added. These proposals vary in ease of implementation, the degree to which they have been tested inapplication, and the level of contention about both their ability to resolve the controversy and theiroverall desirability. Most of the public debate has centered around whether to rely on current procedures and mechanisms or adopt voter-verifiable paper ballots. However, these are clearly not the only options,and the debate might benefit from fuller consideration of other possibilities such as those discussedabove. In addition, several of the proposals discussed are not mutually exclusive, and a resolutionof the controversy may involve elements of several proposals. Three policy approaches, which are also not mutually exclusive, were discussed. The matter could be left to state and local governments, which administer elections; some states have alreadytaken action. The newly formed EAC could address the issues through its convening power andresponsibilities in the development of voluntary guidelines for and certification of voting systems. Congress could decide to use hearings or other mechanisms to provide guidance on the issues, or itmight decide that a legislative solution is necessary. Several legislative options exist, ranging fromfunding for research on the issue to adding requirements on DRE security to HAVA. The benefitsand disadvantages of these approaches depend on many factors, and a legislative solution maybecome more attractive if the controversy cannot be resolved through other means. | In July 2003, computer scientists from Johns Hopkins and Rice Universities released a security analysis of software purportedly from a direct recording electronic (DRE) touchscreen votingmachine of a major voting-system vendor. The study drew public attention to a long-simmeringcontroversy about whether current DREs are vulnerable to tampering that could influence theoutcome of an election. Many innovations that have become familiar features of modern elections, such as the secret ballot and mechanical lever voting machines, originated at least in part as a way to reduce electionfraud and abuse. Computer-assisted counting of ballots, first used in the 1960s, can be done veryrapidly and makes some kinds of tampering more difficult. However, it does not eliminate thepotential for fraud, and it has created new possibilities for tampering through manipulation of thecounting software and hardware. DREs, introduced in the 1970s, are the first voting systems to becompletely computerized. Touchscreen DREs are arguably the most versatile and user-friendly ofany current voting system. Their use is expected to increase substantially under provisions of TheHelp America Vote Act of 2002 (HAVA, P.L. 107-252 ), especially the requirement that, beginningin 2006, each polling place used in a federal election have at least one voting machine that is fullyaccessible for persons with disabilities. With DREs, unlike document-ballot systems, the voter sees only a representation of the ballot; votes are registered electronically. Some computer security experts believe that this and otherfeatures of DREs make them more vulnerable to tampering than other kinds of voting systems,especially through the use of malicious computer code. While there are some differences of opinionamong experts about the extent and seriousness of those security concerns, there appears to be anemerging consensus that in general, current DREs do not adhere sufficiently to currently acceptedsecurity principles for computer systems, especially given the central importance of voting systemsto the functioning of democratic government. Others caution, however, that there are nodemonstrated cases of computer tampering in public elections, and any major changes that might bemade to improve security could have unanticipated negative effects of their own. Several proposalshave been made to improve the security of DREs and other computer-assisted voting systems. Theyinclude (1) ensuring that accepted security protocols are followed appropriately, (2) improvingsecurity standards and certification of voting systems, (3) use of open-source computer code, and (4)improvements in verifiability and transparency. Much of the current debate has focused on which such proposals should be implemented and through what means -- in particular, whether federal involvement is necessary. Some states arealready addressing these issues. The Election Assistance Commission established by HAVA willhave some responsibilities relating to voting system security and could address this controversydirectly. Some observers have also proposed federal funding for research and development in thisarea, while others have proposed legislative solutions including enhancement of the auditrequirements under HAVA. |
The Islamic State organization (IS, aka the Islamic State of Iraq and the Levant, ISIL/ISIS, or the Arabic acronym Da'esh ) emerged as a major international security threat amid more than a decade of conflict in Iraq after 2003 and the outbreak of unrest and conflict in Syria in 2011 (see Appendix A ). The group's core mem bership remains in Iraq and Syria, and its efforts have been bolstered by a network of foreign fighters and affiliate groups in several countries across the Middle East, Africa, and Asia (see Appendix B ). The Islamic State's apocalyptic ideology, its revolutionary intent toward the strategically important Middle East, and its embrace of transnational terrorism have alarmed policymakers around the world and spurred global debate over strategies and policy options for defeating the group. As the area under the Islamic State's control in Iraq and Syria has been progressively eliminated ( Figure 1 ), policymakers have considered how to address the threats the group still poses as it evolves, and are debating how best to stabilize recaptured areas. The Islamic State no longer occupies the vast areas of northern and western Iraq and central and eastern Syria that it once held and exploited. From 2014 through 2018, it lost large amounts of territory it had captured between 2013 and 2017, and thousands of personnel. These losses resulted from military operations by the U.S.-led international coalition and a number of U.S.-backed local forces. Nevertheless, Defense Department officials assess that the Islamic State "is well-positioned to rebuild and work on enabling its physical caliphate to re-emerge," and "probably is still more capable than Al Qaeda in Iraq at its peak in 2006-2007, when the group had declared an Islamic state and operated under the name Islamic State of Iraq...." From a counterterrorism and broader security perspective, U.S. officials assess that the group is prosecuting active insurgent campaigns in Iraq and Syria and remains a threat in and beyond these areas. According to some U.S. estimates, approximately 30,000 current and former IS personnel may remain present in areas of Syria and Iraq. U.N. reports make similar estimates and assessments. Other coalition officials have stated that, "that number seems a bit high" and estimated that there are "over a thousand" IS fighters in the Middle Euphrates River Valley. As of August 2018, coalition officials assess that fewer IS fighters are actively fighting from among this wider population, but point to their broader estimates to suggest that the group retains considerable ability to draw strength from supporters who have otherwise curtailed their activity for self-preservation or strategic reasons. Coalition officials assess that morale among IS supporters has worsened since the group's high point and that the group's finances, recruitment streams, communications, public outreach, and leadership have been substantially disrupted. U.N. estimates describe the Islamic State as "reverting from a proto-State structure to a covert network" and cite information provided by Member States in judging that "the collective discipline" of the Islamic State group is "intact," as are some of its key bureaucratic entities. Official IS media output has declined since its 2014-2015 high point but has rebounded from its 2017 low points, with output now focused equally on operations in Syria and Iraq and actions by affiliated groups elsewhere. In March 2017, U.S. officials estimated that as many as 40,000 individuals from more than 110 countries had traveled to Syria and/or Iraq to engage in combat as members of various armed groups since 2012. According to the ODNI, this figure included more than 6,600 Westerners, including Europeans and some U.S. citizens. Hundreds of these Western foreign fighters, including dozens of U.S. citizens, joined the ranks of the Islamic State. As of mid-2018, U.S. and international reports concluded that few new foreign fighters now travel to Syria or Iraq, but also noted that the net flow of fighters away from these countries "remains lower than expected." This may be attributable to difficulties in travel and attrition. Researchers underscore that the population of foreign fighters that travelled to these countries after 2011 "is larger, more global, and more diverse in terms of age, gender and experience in the conflict zones" than previous such cohorts. According to a March 2018 United Nations assessment, "these differences make the potential challenges associated with returnees and relocators significantly bigger, but also more complex" than in the past. The Islamic State's affiliate in Afghanistan reportedly has the highest percentage of foreign fighters among the group's affiliates, and significant numbers of fighters of European origin have returned to their countries of origin. North African and Arab Gulf states also have reported returning fighters. It remains to be seen whether and how the Islamic State's significant territorial losses since 2017 will impact its ability to plan, direct, or fund attacks outside of Syria and Iraq. In February 2018, the U.S. intelligence community assessed that the Islamic State "almost certainly will continue to give priority to transnational terrorist attacks," and that "U.S.-based homegrown violent extremists (HVEs) will remain the most prevalent Sunni violent extremist threat in the United States." One recent study found that despite a significant reduction in the number of successful IS attacks in Europe and North America in 2018, the number of attempted IS attacks in Europe has remained unchanged. This has led some analysts to assess that there is "no correlation" between the Islamic State's loss of territory and the level of threat the group poses to the West. The Obama Administration's strategy for reducing the threats posed by the Islamic State was predicated on the principle of working "by, with, and through" U.S.-supported local partners as an alternative to large and direct applications of U.S. military force and/or large investments of U.S. personnel and resources. The Trump Administration has maintained this general partnership-based approach but also has made some changes, including the temporary deployment of additional U.S. military personnel to both Iraq and Syria. U.S.-led coalition operations and coalition-backed offensives by local partner forces enabled the recapture of IS strongholds at Mosul, Iraq and Raqqah, Syria in 2017. As of August 2018, only isolated pockets of IS control remain in or near Syrian-government controlled parts of eastern Syria, and U.S. officials state their intent to launch "a very significant military operation" against "ISIS fighters holed up in a final area of the Middle Euphrates Valley," followed by efforts "to train local forces to hold the ground to make sure that the area remains stabilized so ISIS cannot return." The challenges associated with defeating the Islamic State as a military force capable of controlling territory have receded, but have been replaced by overlapping policy challenges related to preventing the group's remnants from becoming a chronic insurgent threat. U.S. relations with the government of Syria appear likely to remain hostile, and U.S. relations with Iraq are uncertain amid ongoing government formation negotiations. The Trump Administration and Congress continue to review U.S. plans for assistance to state and non-state partner forces and for the stabilization of conflict-affected areas in light of these circumstances. Congress has authorized and appropriated funds for the continuation of U.S. military operations against the Islamic State, for the continued training and equipping of partner forces, and for the stabilization of areas recaptured from the Islamic State. State Department officials have stated that the Trump Administration it is committed to pursuing and achieving the enduring defeat of the Islamic State and has announced new personnel appointments and stabilization funding decisions in pursuit of U.S. objectives. Congress has requested that the Administration provide lawmakers with a new articulation of its strategies toward the Islamic State and toward Syria and Iraq, and may pose additional questions about Administration plans and priorities. The 115 th Congress has considered, but not enacted, a new authorization for the use of military force against the Islamic State and other terrorist groups ( S.J.Res. 59 ), and may consider alternative approaches and options during the remainder of the second session. Although Islamic State leaders have claimed and endorsed attacks across a wide geographic area since 2014, the role of IS leaders in planning, aiding, or directing such attacks has varied according to publicly available accounts. IS leaders have repeatedly encouraged and sought to provide ideological justifications for independently organized and executed attacks by individuals who support the organization but are unable to travel to Syria or Iraq to join its ranks. Most IS claims in the wake of such attacks have described the perpetrators as its "soldiers," whether or not the individuals in question have been publicly shown to have an operational link to or history with the organization. In May 2016, then-IS spokesman Abu Mohammed al Adnani urged IS supporters in Europe and the United States to carry out individual attacks, and subsequently released IS propaganda material containing both encouragement and instruction on methods for improvised attacks. The Defense Department confirmed Adnani was killed by a U.S. airstrike in September 2016. In August 2018, IS leader Abu Bakr al Baghdadi praised individual attackers active to date in Europe, Canada, and other "countries of the cross," urging others to follow their example using "what is easy to obtain" and said such attacks "equal one thousand operations where we are." As noted above, the U.S. intelligence community assessed in February 2018 that the Islamic State poses a continuing terrorist threat to U.S. interests and partners worldwide, and stated that "U.S.-based homegrown violent extremists (HVEs) will remain the most prevalent Sunni violent extremist threat in the United States." U.S. officials and observers continue to debate the extent to which elements of the Islamic State organization based overseas have the capability to direct, support, or conduct attacks inside the United States. U.S. intelligence officials have described attempted attacks by IS supporters as "inevitable" and have stated that the size and scope of the global network of individuals mobilized to support the group suggests that related terrorist threats may persist for years to come. The Trump Administration has broadly continued the Obama Administration's partnership-based approach to the conflict with the Islamic State, while directing changes to U.S. military operations and U.S. assistance programs. The global coalition to defeat the Islamic State has organized its cooperative activities along "lines of effort," including direct military action, supporting Iraqi and Syrian partner ground forces, gathering and sharing intelligence, and making efforts to restrict flows of foreign fighters, disrupt the Islamic State's finances, and eliminate its leaders. The Trump Administration has continued progress that started under the Obama Administration in eliminating the Islamic State as a military threat in Syria and Iraq, but IS attacks in both countries continue, IS affiliates elsewhere are active, and IS leaders remain at large. U.S. intelligence community unclassified assessments note that gains have been made against the group but warn of the long-term challenges of stabilization, the likelihood of persistent insurgent and terrorist threats from IS operatives, and the dilemmas posed by outflows of foreign fighters from Iraq and Syria. As the Islamic State has lost ground since 2014, observers and policymakers have more frequently discussed challenges related to the governance and reconstruction of recaptured areas. U.S. officials and some Members of Congress express their desire to consolidate gains achieved to date and avoid the emergence or renewal of other conflicts. Current U.S. intelligence estimates warn that an IS-fueled insurgent campaign has begun in Syria and Iraq, foresee billions of dollars in reconstruction costs in liberated areas, and suggest that a host of complex, interconnected political, social, and economic challenges may rise from the Islamic State's ashes. These concerns are echoed in the broader policy discussion regarding prospects for an Islamic State resurgence, even after the group no longer holds territory. According to one view, the Islamic State will seek to exploit the failed uprising against the Syrian government and "co-opt the resistance against Assad, the surviving symbol of repression, use it to fill their ranks, and establish a permanent post in the region." Proponents of this view argue that insurgencies can lie dormant as long as the grievances underlying them remain unaddressed and that the roots of the current Syrian uprising can be traced in part to the Islamist uprising suppressed by former President Hafiz al Asad in the 1970s and 1980s. Other observers have stated that the Islamic State appears to be making inroads in some areas of Iraq via small-scale attacks, only months after Iraqi officials declared victory over the group in December 2017. The Islamic State organization and its regional adherents have thrived in ungoverned or under-governed areas of countries affected by conflict or political instability. These permissive environments provide resources and safe-haven for IS operations and in some cases offer recruits from among disaffected local groups. Prospects and options for undermining IS supporters have been shaped by the relative success or failure of efforts to restore security, address political grievances, boost economic growth, and promote effective governance. Examples may be drawn from recent developments in places such as Iraq, Syria, Egypt's Sinai Peninsula, Libya, Afghanistan, Yemen, the Sahel, the southern Philippines, and the Lake Chad basin. In Iraq, the United States has emphasized the importance of providing support to inclusive security forces under central government command, maintained support for forces affiliated with the Kurdistan Regional Government on these terms, and sought to preserve Iraq's political and territorial unity pursuant to its constitution. U.S. assessments have identified vulnerabilities that could challenge Iraqi efforts to combat IS remnants, including lack of interagency cooperation among various security, law enforcement, and intelligence organizations, the destruction of large portions of Iraq's law enforcement infrastructure (such as prisons), and the limited capability of Iraqi security forces to prevent smuggling across the Syria-Iraq border. In Syria, the United States has sought a negotiated settlement to the conflict that would see President Asad and some of his supporters leave office while preserving the institutions and security structures of the Syrian state. U.S. support for a predominantly Kurdish coalition of forces in northern Syria has raised some parties' concerns about relations between Arabs and Kurds in the country, relations between Syrian Kurds and Kurds in neighboring countries, and Syria's long term political and territorial integrity. In some settings, such as Egypt and Nigeria, U.S. counterterrorism partnership with national governments and military forces may test U.S. commitments on political reform and human rights. In other settings that have lacked credible, broadly accepted governments in recent years such as Libya or Yemen, dependable partners may remain elusive and the United States and other actors may reserve the option of pursuing unilateral military action against IS affiliates and other extremist groups. Working with partners in these countries carries risks of influencing underlying political disputes in unpredictable ways or inadvertently empowering parties to local conflicts that may be hostile to U.S. security or preferences. To the extent that U.S. and coalition strategy remains predicated on the cooperation of partner forces on the ground and the coordination of multinational efforts in the region and beyond, U.S. officials may continue to be challenged to accommodate the complimentary and competing interests of other local, regional and global actors in the pursuit of shared goals. The Trump and Obama Administrations have considered groups and individuals associated with the Islamic State and participating in hostilities against the United States or its coalition partners to be legitimate military targets pursuant to the 2001 Authorization for the Use of Military Force (AUMF) against Al Qaeda ( P.L. 107-40 ; 50 U.S.C. §1541 note), subject to executive branch discretion. The executive branch has acknowledged military operations against Islamic State targets in Iraq, Syria, Afghanistan, Libya, the Philippines, Niger, and Somalia. In the 115 th Congress, the Senate has considered legislation ( S.J.Res. 59 ) that would replace the 2001 AUMF. Iraq and Syria. U.S. military operations against the Islamic State in Iraq and Syria are organized under the command of Combined Joint Task Force – Operation Inherent Resolve (CJTF-OIR). As of August 2017, U.S. and coalition forces had used combat aircraft, armed unmanned aerial vehicles, and sea-launched cruise missiles to conduct more than 24,500 strikes against Islamic State targets in Iraq and Syria since August 8, 2014, and September 22, 2014, respectively. As of March 2018, CJTF-OIR reported that U.S. military operations related to the Islamic State as part of OIR since the beginning of kinetic operations on August 8, 2014, had cost $23.5 billion. Afghanistan. Operation Freedom's Sentinel (OFS) consists of two "complementary missions": first, since early 2015, the NATO-led mission in Afghanistan, known as "Resolute Support Mission" (RSM), has focused on training, advising, and assisting Afghan government forces; second, combat operations by U.S. counterterrorism forces, along with some partner forces, also continue and have increased since 2017, targeting the Islamic State's Khorasan Province affiliate and Al Qaeda. The Department of Defense does not disaggregate the costs of kinetic operations against the Islamic State from the wider costs of OFS operations. As of June 2018, $134.3 billion has been obligated in support of OFS since that operation began on January 1, 2015. Libya. The U.S. military assisted local militia forces in recapturing territory from the Islamic State's affiliate in Libya during 2016, where Operation Odyssey Lightning included a campaign of airstrikes, as well as the deployment of small numbers of U.S. military personnel to gather information and build relationships with local anti-IS groups. Periodic U.S. strikes have targeted IS personnel and other extremists in Libya since. In 2017 and 2018, U.S. Africa Command (AFRICOM) stated that "instability in Libya and North Africa may be the most significant, near-term threat to U.S. and allies' interests" in Africa, and that, in light of prevailing conditions in Libya, "the risk of a full-scale civil war remains real." Philippines. In 2017, the Department of Defense launched Operation Pacific Eagle-Philippines (OPE-P), aimed at assisting the Philippines armed forces in defeating southern Philippines-based IS affiliates and other extremist groups. Roughly 250 U.S. military advisers, including U.S. special operations forces, provide training, advice, and assistance on a bilateral basis to the Philippines armed forces. According to the Department of Defense, OPE-P is intended to be a "short-term, targeted operation" and provides assistance exclusively at the request of the Philippines government. According to United States Indo-Pacific Command (USINDOPACOM), the Department of Defense had obligated or committed $89.8 million for OPE-P as of June 2018. The United States also provided two surveillance aircraft and two surveillance drones in 2017 and 2018 for counterterrorism purposes. In July 2018, the U.S. government announced that it would provide $26.5 million in State Department counterterrorism assistance to the Philippines over a two-year period. The U.S. Agency for International Development (USAID) has provided nearly $32 million for humanitarian and recovery efforts in IS-affected areas of the Philippines. U.S. military personnel have deployed to Iraq to advise, assist, and train Iraqi forces, gather intelligence on the Islamic State, and secure U.S. personnel and facilities. As of March 2018, U.S. officials reported that more than 138,000 Iraqi personnel had received training, including Iraqi Security Forces, police, Kurdish peshmerga , and Sunni tribal fighters. Iraqi and U.S. officials are consulting on the scope and terms of a longer term security partnership that may see U.S. personnel stay in Iraq to help refit, advise, and train Iraqi security forces as they seek to eliminate remaining IS fighters and prevent the group's insurgent campaign from taking hold. The U.S. military presence in Iraq is authorized by Iraq's government through an exchange of diplomatic notes that cites the security provisions of the 2008 bilateral Strategic Framework Agreement. U.S. contributions to training efforts in Iraq are made in part through the Iraq Train and Equip program, which Congress authorized in the FY2015 National Defense Authorization Act (NDAA, Section 1236 of P.L. 113-291 ). The NDAA for FY2019 ( P.L. 115-232 ) extended the authorization for the Iraq training program through December 31, 2020. The Office of Security Cooperation at the U.S. Embassy in Iraq also provides security force and related management assistance to the Iraqi military and other national security forces. The Trump Administration requested $850 million for Iraq Train and Equip program efforts as part of its FY2019 defense appropriations request for the Counter-ISIS Train and Equip Fund (CTEF). Congress authorized and funded a train and equip program for vetted Syrians in 2014 for select purposes, including supporting U.S. efforts to combat the Islamic State and other terrorist organizations in Syria and promoting the conditions for a negotiated settlement to Syria's civil war (Section 1209 of H.R. 3979 , P.L. 113-291 ). The program's limited results as of September 2015, Russian military intervention in Syria, and support by some Members of Congress for broader civilian protection missions led the Obama Administration to alter the program beginning in October 2015. Obama Administration officials described their intended overall approach to the redesigned program as "transactional" and performance-based, with Syrian beneficiaries receiving U.S. support as opportunities present themselves and relative to their effectiveness on the battlefield and the alignment of their actions with U.S. interests. The revamped train and equip program has since shifted away from training and equipping wholly new units of vetted recruits and toward equipping and enabling vetted leaders and existing groups inside Syria who are fighting the Islamic State organization. U.S.-trained, equipped, and compensated individuals are now active under the rubric of a Kurdish-Arab coalition force in northern Syria known as the Syrian Democratic Forces (SDF), an Internal Security Force in Raqqah, and the Mughawir al Thawra (MAT, Revolutionary Commandos) group in remote southeast Syria. Equipment, including some weaponry and ammunition, has been provided to SDF and other forces, and U.S. special operations personnel have been deployed to Syria to advise and assist the SDF and MAT in operations against the Islamic State. The underlying authority for the Department of Defense Syria train and equip program remains Section 1209 of the FY2015 defense authorization act ( P.L. 113-291 ), as amended and extended by subsequent legislation. Congress has not appropriated funds specifically for the Syria train and equip program since the program's inception. Congress has authorized the reprogramming of defense funds to operations and maintenance accounts to fund program activities subject to the prior approval of congressional defense and appropriations committees. The FY2019 NDAA ( P.L. 115-232 ) extended the authorization for the program through December 31, 2019. The Trump Administration requested $300 million in FY2019 Counter-ISIS Train and Equip Fund (CTEF) monies for Syria programs. U.S. officials have stated that the Islamic State is likely to evolve into an insurgency force in both Syria and Iraq, despite the success of coalition forces in significantly degrading the group's capabilities. In February 2018, the U.S. intelligence community assessed that "ISIS core has started—and probably will maintain—a robust insurgency in Iraq and Syria as part of a long-term strategy to ultimately enable the reemergence of its so-called caliphate." U.S. intelligence officials expect that the group is "likely to focus on regrouping in Iraq and Syria, enhancing its global presence, championing its cause, planning international attacks, and encouraging its members and sympathizers to attack in their home countries." In Iraq and Syria, competition and discord between and among local actors continue to complicate U.S. objectives, as does intervention by and competition among regional and extra-regional actors, including Russia, Iran, Turkey, and the Arab Gulf States. These complications have become more immediate and relevant as IS forces have ceded territory, and, in some places, struggles have commenced over who will define the future of liberated areas. Iraq remains mired in political and fiscal crises, with Iraqi leaders and factions competing for advantage in government formation talks amid popular demands for improved security, service delivery, and an end to corruption. Attacks on civilians, security forces, and local officials attributed to IS fighters continue across areas of north, central, and western Iraq in a pattern of violence some observers liken to the period prior to the Islamic State's reemergence as a major force in 2013 and 2014. The U.S. intelligence community assessed in February 2018 that the Islamic State "will remain a terrorist and insurgent threat, and the group will seek to exploit Sunni discontent to conduct attacks and try to regain Iraqi territory." The community further concluded that despite the group's "loss of territory, the social and political challenges that gave rise to the group remain and threaten the cohesion of the Iraqi state." The conflict between the Asad government of Syria and armed opposition groups has shifted in favor of pro-Asad forces, but a de facto division of the country persists. Pro-Asad forces, remaining armed anti-Asad forces (including Al Qaeda affiliated extremists), and Turkish security forces control areas to the south and west of the Euphrates River, while areas to the north and east of the river are under the control of U.S.-backed Kurdish and Arab groups. U.S. and coalition forces are preparing to launch military operations against remaining IS strongholds in areas outside the Syrian government's control. Further consolidation of security control in western Syria by pro-Asad forces may encourage the government to further amplify its demands for foreign forces it considers to be hostile (including the United States) to leave Syrian territory. U.S. partners also may feel compelled to reach political and security understandings with the Syrian government that could complicate continued U.S. operations in areas under their control. The Trump Administration has signaled its intention to continue providing security support to Syrian partner forces to enable them to internally secure areas recaptured from the Islamic State, but it remains to be seen whether or how reassertion of authority by the Asad government might affect U.S. plans. As noted above, U.S., coalition, and local partner forces have degraded the Islamic State's ability to operate in much of Syria, but it is not certain that the Asad government, its partners, and U.S. partners would be able to maintain and consolidate these gains in the absence of U.S. and coalition operations and support. Members of Congress continue to debate the proper means and ends for U.S. efforts to combat the Islamic State organization while exercising oversight over U.S. military operations and a wide array of other counter-IS programs. Since 2014, Congress has authorized and appropriated billions of dollars for military operations and new types of nonlethal and lethal assistance for select groups and forces in Iraq, Syria, and Afghanistan, but has not passed a new authorization for the use of military force against the Islamic State. Key questions in ongoing executive and legislative policy debates include the following: How should the United States balance the use of diplomatic, military, intelligence, economic, and law enforcement tools in responding to various IS-related threats? How can the United States best undermine the appeal of the Islamic State's ideology? Should the United States prioritize the fight against the Islamic State, prioritize efforts to stabilize Syria and other countries where IS forces operate, or pursue counter-IS operations and stabilization simultaneously? How have military operations that have recaptured territory from the Islamic State affected the threat that the group poses? Which forces should carry out future military and counterterrorism operations against the group, and what support or direction should the U.S. government provide? What political and military arrangements might best keep extremists from returning to recaptured areas or drawing new support? What stabilization assistance might be needed? Who will provide it, for how long, and on what terms? What should be done to address short and long term risks posed by returning foreign fighters in numerous countries? What unique challenges do foreign fighter issues pose in various places and what should the U.S. approach be? Does lasting progress against the Islamic State depend on durably altering the political dynamics of Iraq, Syria, and other locations where the Islamic State has attracted supporters? How should the evolving IS threat shape overall U.S. policy toward Syria and Iraq, the provision of assistance to U.S. partners there, and U.S. policies toward displaced persons and stabilization? What effects might U.S. assistance for government security forces and select subnational actors in the fight against the Islamic State have on broader and longer term security and political conditions in various countries of interest? Appendix A. Emergence and Organizational Development Roots in Iraq and Syria The Islamic State's direct ideological and organizational roots ( Figure A-1 ) lie in the forces built and led by the late Abu Musab al Zarqawi in Iraq from 2002 through 2006— Tawhid wal Jihad (Monotheism and Jihad) and Al Qaeda in the Land of the Two Rivers (aka Al Qaeda in Iraq, or AQ-I). Zarqawi took advantage of Sunni animosity toward U.S. forces and feelings of disenfranchisement at the hands of Iraq's Shia and Kurds to advance a uniquely sectarian agenda that differed from Al Qaeda's in important ways. Some experts attribute Sunni resentment to the use by some Shia of the democratic political process to monopolize political power in Iraq. Following Zarqawi's death at the hands of U.S. forces in June 2006, AQ-I leaders repackaged the group as a coalition called the Islamic State of Iraq (ISI). ISI lost its two top leaders in 2010 and was weakened, but not eliminated, by the time of the U.S. withdrawal in 2011. The precise nature of ISI's relationship to Al Qaeda leaders from 2006 onward is unclear. Under the leadership of former U.S. detainees Ibrahim Awad Ibrahim al Badri al Samarra'i (aka Abu Bakr al Baghdadi), Taha Subhi Falaha (aka Abu Mohammed al Adnani), and others, the Islamic State of Iraq rebuilt its capabilities from 2010 onward. By early 2013, the group was conducting dozens of deadly attacks a month inside Iraq and had begun operations in neighboring Syria. In April 2013, Abu Bakr al Baghdadi announced his intent to merge his forces in Iraq and Syria with those of the Syria-based, Al Qaeda affiliated group Jabhat al Nusra (Support Front), under the name of the Islamic State of Iraq and the Levant (ISIL/ISIS). Jabhat al Nusra and Al Qaeda leaders rejected the merger, underscoring growing tensions among Sunni extremists. Al Qaeda leader Ayman al Zawahiri sought to remind IS leaders of previous pledges of loyalty to Al Qaeda made by deceased IS figures, but IS leaders rejected his claims. Al Qaeda's general command issued a statement disavowing the Islamic State in early 2014. Islamic State leaders declared that their group "is not and has never been an offshoot of Al Qaeda," and said that since they viewed themselves as a sovereign political entity, they had given leaders of the Al Qaeda organization deference over time rather than full pledges of obedience. Declaration of Caliphate In June 2014, Islamic State leaders declared their reestablishment of the caliphate ( khilafa , lit. succession to the prophet Mohammed), dropped references to Iraq and the Levant in their name, demanded the support of believing Muslims, and named Abu Bakr al Baghdadi as caliph and imam (leader of the world's Muslims, Figure A-2 ). IS leaders have highlighted Baghdadi's reported descent from the Quraysh tribe—the same tribe as the Prophet Muhammad—as well as his religious training, as qualifications for his position as caliph. Islamic State spokesman Abu Muhammad al Adnani describes Baghdadi as, "the mujahid shaykh, the learned, the active, and the devout, the warrior and the renewer, the descendant of the Prophet's house." The group cites its implementation of several of the historical requirements of the caliphate/imamate as further grounds for the religious legitimacy of its actions. U.S. officials suggest that the concept of reviving or renewing the caliphate has attracted some followers to the Islamic State organization, Baghdadi's self-appointment as caliph has been rejected by many Islamic scholars and has yet to inspire mass political support. In one open letter to Baghdadi, a group of prominent Muslim scholars questioned the legitimacy of his appointment, asking "Who gave you authority over the ummah (community of believers)? Was it your group? If this is the case, then a group of no more than several thousand has appointed itself the ruler of over a billion and a half Muslims." Rather than debate Baghdadi's credentials, most Muslim critics simply reject the entire premise of an Islamic State-led caliphate. In particular, they condemn the group's unilateral announcement of a caliphate without consultation or consensus in the broader Muslim community. Some jihadist groups, including Al Qaeda, also have rejected Baghdadi's appointment as caliph, arguing that he is simply another military commander and is owed no special loyalty. Al Qaeda leaders Osama Bin Laden and Ayman al Zawahiri viewed the late Taliban leader Mullah Omar as the rightful leader of faithful Muslims and pledged loyalty ( bay'a ) to him, although their views about the wisdom and legitimacy of declaring a caliphate under his leadership or Al Qaeda's differ from those of the Islamic State. In the wake of Mullah Omar's death, Zawahiri has pledged loyalty to his successors, first to the late Mullah Akhtar Mansoor and then to Mawlawi Haibatullah Akhundzada, urging other Muslims to do so. The apparently limited appeal of Al Qaeda and Islamic State demands for leadership recognition suggests that their violent agenda remains popular only among a relatively small, if dangerous, minority of the world's Sunni Muslims. Appendix B. IS Affiliates and Adherents Since 2014, some armed groups have recognized the Islamic State caliphate and pledged loyalty to Abu Bakr al Baghdadi. Groups in Yemen, Egypt, Algeria, Saudi Arabia, Libya, Afghanistan, and Nigeria have used the Arabic word " wilayah " (state/province) to describe themselves as constituent members of a broader IS-led caliphate. The implications of such pledges of loyalty to the Islamic State on groups' objectives, tactics, and leadership structures appear to vary and may evolve. The Trump and Obama Administrations have considered groups and individuals associated with the Islamic State and participating in hostilities against the United States or its coalition partners to be legitimate military targets pursuant to the 2001 Authorization for the Use of Military Force against Al Qaeda, subject to executive branch discretion. As of 2018, experts consider the following IS adherents to be the most significant and capable: The Islamic State in Egypt (IS-SP) Terrorists based in the Sinai Peninsula (the Sinai) have been waging an insurgency against the Egyptian government since 2011. While the terrorist landscape in Egypt is evolving and encompasses several groups, the Islamic State's Sinai Province affiliate (IS-SP) is known as the most lethal. The group is designated as a Foreign Terrorist Organization pursuant to Section 219 of the Immigration and Nationality Act (8 U.S.C. §1189) and is listed as a Specially Designated National (SDN) by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC). The State Department has stated that IS-SP has used the "under-governed safe haven" found in parts of Egypt's Sinai region to plan attacks both in the Sinai and in mainland Egypt. It has claimed credit for destroying Metrojet Flight 9268, which exploded in mid-air over the Sinai Peninsula on October 31, 2015, killing all 224 passengers aboard. Two years later, on November 24, 2017, IS-SP gunmen launched an attack against the Al Rawdah mosque in the town of Bir al Abed in northern Sinai. That attack killed at least 305 people, making it the deadliest terrorist attack in Egypt's modern history. IS-SP also has targeted Coptic Christians living in northern Sinai. In December 2017, IS-SP attempted to assassinate the Egyptian Ministers of Defense and Interior at the El Arish International Airport in northern Sinai. The group is estimated to have between 800 and 1,200 fighters in the Sinai Peninsula and affiliated cells in the Nile Valley. In February 2018, the U.S. State Department designated ISIS Egypt as a Specially Designated Global Terrorist group (SDGT) under Section 1(b) of Executive Order (E.O.) 13224. In announcing the designation, the State Department noted that "In May 2017, ISIS announced that ISIS-Egypt was a distinct entity from the FTO and SDGT group ISIS-Sinai Province. ISIS-Egypt has claimed responsibility for numerous attacks in Egypt; in December 2016, for example, the group bombed Cairo's Coptic Christian cathedral, killing 28 people." See, U.S. Department of State, State Department Terrorist Designations of ISIS Affiliates and Senior Leaders, Media Note, Office of the Spokesperson, February 27, 2018. On February 9, 2018, the Egyptian military launched a campaign, dubbed "Operation Sinai 2018." At the onset of operations, perhaps as many as 42,000 Egyptian troops reportedly were stationed in the Sinai to combat IS-SP. According to one Egyptian media report citing official Egyptian military statements, as of late May 2018, the total number of those killed since the operation began in February 2018 has reached more than 300, including at least 37 Egyptian military personnel. In April 2018, the Egyptian military announced that it had killed Nasser Abu Zaqoul, the purported head of IS-SP. The Islamic State in Libya (Wilayah Libya/Tarabalus/Barqa) Supporters of the Islamic State (IS) in Libya announced three affiliated wilayah (provinces) corresponding to the country's three historic regions— Wilayah Tarabalus in the west, Wilayah Barqa in the east, and Wilayah Fezzan in the southwest in 2014 and 2015. Nevertheless, the group does not appear to have created corresponding organizational infrastructure to back its claims, and current operational claims from the group are consistently released in the name of Wilayah Barqa or Wilayah Libya . In July 2018, United Nations reporting citing Member State information estimated that the group has 3,000 and 4,000 members and "still has the capacity to launch significant attacks within Libya and across the border." In 2015, U.S. military officials estimated the number of IS supporters in Libya at approximately 3,500 fighters, and later estimated that figure had grown to as many as 6,000, among a much larger community of Libyan Salafi-jihadist activists and militia members. In February 2016, the U.S. intelligence community described the IS presence in Libya as "one of its most developed branches outside of Syria and Iraq," and said the group was "well positioned to expand territory under its control in 2016." Such expansion was prevented after the group's stronghold in the central coastal city of Sirte came under siege in May and June 2016 by fighters from the nearby city of Misrata and neighboring towns. IS members in Sirte had previously tried and failed to impose their control on the eastern city of Darnah, but were met with resistance from other armed Islamist groups. IS losses in and around Sirte during the latter half of 2016 were facilitated by a U.S. military campaign (Operation Odyssey Lightning). U.S. assessments stated that by the end of 2017, IS elements in Libya "were in a position to carry out only local-level operations." As of May 2017, IS-Libya was reported to have approximately 500 fighters, down from 6,000 members in early 2016. Nevertheless, supporters of the group remain active and carry out attacks against militia and security forces in eastern and western Libya adjacent to the group's apparent core area of operation in remote central Libya. According to July 2018 U.N. reporting, "cells persist around Tripoli, Misrata and Sabratah in the west, with a substantial presence in southern Libya around Ghat and Al Uwainat, and Ajdabiya and Darnah in the east." In November 2015, the U.S. military conducted an airstrike thought to have killed the Iraqi leader of IS operations in Libya, the first such U.S. strike on IS operatives outside of Syria and Iraq. A February 2016 U.S. strike on the western Libyan town of Sabratha targeted an IS-camp and killed dozens of IS fighters, including many from Tunisia. Islamic State supporters in Libya are designated as a Foreign Terrorist Organization pursuant to Section 219 of the Immigration and Nationality Act (8 U.S.C. §1189) and are listed as a Specially Designated Global Terrorists (SDGT) by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC). The Islamic State in Nigeria (West Africa Province, Wilayah Gharb Afriqiyya) This northeast Nigeria-based Sunni insurgent terrorist group is widely known by the name Boko Haram ("western education is forbidden") and was formerly known as Jama'a Ahl as-Sunna Li-da'wa wa-al Jihad ("People Committed to the Propagation of the Prophet's Teachings and Jihad"). In 2015, its leadership pledged allegiance to the Islamic State, and renamed itself as the Islamic State's West Africa Province (aka ISWAP, ISIS-WA, hereafter IS-WA). Boko Haram subsequently split into two factions, and in August 2016, IS leadership recognized the leader of the offshoot group, Abu Musab al Barnawi, as IS-WA's new wali ("governor"). Many observers, including the U.S. government, now refer to the original faction as Boko Haram and Barnawi's as IS-WA. Both pose an ongoing security threat in Nigeria and the surrounding Lake Chad Basin region. More than 15,800 deaths have been attributed to Boko Haram since 2011 (more than 6,500 in 2015 alone), and more than 2 million people have been displaced by related violence, which spread into neighboring Cameroon, Chad and Niger in 2015. The group threatens civilian, state and international targets, including Western citizens, in the region; in 2011 it bombed the United Nations building in Nigeria's capital, Abuja. Reports suggest that Boko Haram and IS-WA operate in distinct but overlapping areas of northeast Nigeria and the surrounding region, with IS-WA appearing to be based near Lake Chad and the Nigeria-Niger border. The groups appear to use different tactics (see U.N. Document S/2017/35), with Boko Haram continuing to deploy women and children as suicide bombers and IS-WA more often focusing on military targets. U.S. government assessments stated that Boko Haram and IS-WA carried out hundreds of attacks in Nigeria in 2017, using suicide bombers, IEDs, raids, ambushes, and kidnappings. The State Department designated Boko Haram and a splinter faction, Ansaru, as Foreign Terrorist Organizations pursuant to Section 219 of the Immigration and Nationality Act (8 U.S.C. §1189) in 2013. It similarly so designated ISIS-WA in February 2018. Counterterrorism cooperation with Nigeria has been constrained by various factors. U.S. counterterrorism assistance to the Lake Chad Basin countries has grown substantially since 2014, and the region has been a priority for Department of Defense-funded counterterrorism programs. The Islamic State in the Greater Sahara The Islamic State in the Greater Sahara (IS-GS) is an offshoot of the Algerian-led regional network Al Qaeda in the Islamic Maghreb (AQIM). Based along the Mali-Niger border, IS-GS was formed when leader Adnan Abu Walid al Sahrawi (alt: Abou Walid Sahraoui) pledged allegiance to the Islamic State in May 2015; Islamic State leadership acknowledged the pledge in October 2016. Al Sahrawi, reportedly born in the disputed territory of Western Sahara, was previously a prominent figure in an AQIM splinter faction known as the Movement for Unity and Jihad in West Africa. In May 2018, the U.S. government listed IS-GS (aka ISIS-GS) and Al Sahrawi as Specially-Designated Global Terrorists subject to U.S. sanctions. IS-GS has claimed several attacks, notably including an ambush of U.S. Special Operations Forces in western Niger in October 2017 in which four U.S. soldiers were killed. The group is also rumored to be holding a U.S. civilian who was kidnapped in Niger in 2016, although it has made no public claim to that effect. Otherwise, the group has focused on local targets, and many analysts assess its activities to be primarily driven by grievances among its rural Malian and Nigerien recruitment base, fueled by ethnic conflicts as well as patterns of state neglect and abuse. U.N. sanctions monitors reported in mid-2018 that IS-GS members maintained ties with AQIM's Mali-based network, and that both groups shared "the goal of destabilizing the Sahel and any normalization of life there, to maintain freedom of movement in the north [of Mali] and access to smuggling routes." Assessments of the group's size have varied; at least 50 militants reportedly participated in the October ambush in Niger, and recent media accounts estimate several hundred combatants total. The Islamic State-Khorasan Province (ISKP, Wilayah Khorasan) ISKP (also referred to as Islamic State-Khorasan or ISK), is an increasingly prominent actor in the conflict in Afghanistan and a major target of U.S. operations there. The group was originally made up of disaffected Taliban and other fighters who declared allegiance to IS as early as 2013; the Islamic State officially announced ISKP as its Afghan affiliate in January 2015. The group was designated as a Foreign Terrorist Organization pursuant to Section 219 of the Immigration and Nationality Act (8 U.S.C. §1189) and listed as a Specially Designated Global Terrorist (SDGT) in January 2016. The group has long been concentrated in eastern Afghanistan, particularly Nangarhar province, but established operational capabilities in the north by early 2017. The senior ISKP leader in northern Afghanistan (himself a former Taliban commander) was killed in a U.S. airstrike in April 2018. In announcing the strike, NATO described Jowzjan, the northern province where he was killed, as "the main conduit for external support and foreign fighters from Central Asian states into Afghanistan." A July 2018 U.N. report expanded on that assessment, saying that "significant numbers [of foreign fighters] have made their way to Afghanistan" from Syria and Iraq and that several foiled attacks in Europe originated from ISKP. While U.S. commanders estimated in March 2017 that U.S. and Afghan military efforts had reduced ISKP strength to around 700 fighters, ISKP now boasts 3,500 to 4,000 militants according to U.N. and other estimates. ISKP leader Hafiz Saeed Khan (a former member of the Pakistani Taliban) was killed in a U.S. strike in July 2016; successors Abdul Hasib and Abu Sayed were killed in in April and July 2017, respectively. 2017 saw intense fighting against ISKP; as many as half of the 14 U.S. combat casualties that year occurred in anti-ISKP operations. The Taliban (condemned as an "apostate movement" by IS) has also targeted ISKP; a large contingent of ISKP fighters surrendered to Afghan forces in August 2018 after being defeated in a Taliban offensive. ISKP has claimed responsibility for a number of large-scale urban attacks against civilians, including multiple bombings targeting Afghanistan's Shia minority. In June, Inspectors General oversight reporting stated that "ISIS-K remained a deadly threat in northeast Afghanistan and in Kabul, even after an intense U.S. and Afghan air and ground campaign against the terrorist group." The Islamic State in Yemen (Wilayah Al Bayda/Aden-Abyan) In Yemen, where an ongoing conflict has continued since 2015, various affiliates of the Islamic State (collectively referred to by the U.S. government as ISIS-Y) have targeted government forces in Aden and certain religious factions using suicide bombers, vehicle-borne suicide bombs, and improvised explosive devices (IEDs). Militants who claim allegiance to the Islamic State have taken advantage of the war to repeatedly bomb mosques known for attracting worshippers of Zaydi Islam, an offshoot of Shia Islam (with legal traditions and religious practices which are similar to Sunni Islam). Islamic State terrorists have targeted supporters of the Houthi Movement, a predominately Zaydi armed militia and political group that aims to rule wide swaths of northern Yemen and restore the "Imamate," or Zaydi-led monarchical rule that intermittently governed northern Yemen from 893 AD to 1962. The Houthis are currently at war with a coalition of predominately Sunni Arab states led by Saudi Arabia, and the Islamic State may see this war as an opportunity to increase sectarian hatred in Yemen. Though wracked by war, Yemen has not traditionally had the same kind of sectarian animosity as other Arab states such Iraq and Lebanon. The group was designated as a Foreign Terrorist Organization pursuant to Section 219 of the Immigration and Nationality Act (8 U.S.C. §1189) and listed as a Specially Designated Global Terrorist (SDGT) in May 2016. In October 2017, the U.S. Treasury imposed sanctions on several individuals who are leaders and/or financiers of Islamic State affiliates in Yemen. U.S. government assessments stated that IS-Y attacks increased in late 2017. In October 2017, the U.S. military reportedly launched its first air strike against ISIS-Y when it targeted a training camp in Al Bayda governorate. The Islamic State in the Caucasus (Wilayah Kawkaz) The Islamic State recognized Wilayah Kawkaz in June 2015 after IS supporters purportedly drawn from several predominantly Muslim Russian republics in the Caucasus pledged allegiance to Abu Bakr al Baghdadi. Reports suggest that commanders once affiliated with the Al Qaeda-aligned Islamic Emirate of the Caucasus, established in 2007 and declared a terrorist organization by the United States in 2011, make up the leadership of the IS-affiliated organization. The group was designated as a Foreign Terrorist Organization pursuant to Section 219 of the Immigration and Nationality Act (8 U.S.C. §1189) and listed as a Specially Designated Global Terrorist (SDGT) in September 2015. Russian officials claimed to have killed the emir of Wilayah Kawkaz in December 2016. Foreign fighters from Russia reportedly made up an influential component of the Islamic State's now decimated fighting force in Iraq and Syria, and late IS leader Abu Omar al Shishani may have helped cultivate deeper ties between IS forces and individuals in the North Caucasus. The Islamic State in Saudi Arabia (Wilayah Najd/Hijaz/Haramayn) IS leaders in Syria and Iraq have threatened the kingdom's rulers and state clerics directly and called on the group's supporters in Saudi Arabia to attack Shia Muslims, Saudi security forces, and foreigners. IS supporters have claimed responsibility for several attacks in the kingdom since 2014, including suicide bombing attacks on Shia mosques in different parts of the country and attacks targeting Saudi security forces. In June 2015, an IS-affiliated Saudi suicide bomber blew himself up in a Kuwaiti mosque, killing more than two dozen people and wounding hundreds. Saudi officials have arrested more than 1,600 suspected IS supporters and claim to have foiled several planned attacks. U.S. diplomatic facilities closed temporarily in March 2015 in connection with threat information, and in 2016 an IS suicide bomber attacked the U.S. Consulate in Jeddah. U.S. officials continue to warn of the potential for attacks on U.S. persons and facilities in the kingdom, along with other Western and Saudi targets. The Islamic State in Saudi Arabia and one related individual are listed as Specially Designated Global Terrorists (SDGT) by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC). The Islamic State arguably poses a unique political threat to Saudi Arabia in addition to the tangible security threats demonstrated by a series of attacks and arrests inside the kingdom since late 2014. IS leaders claim to have established a caliphate to which all pious Sunni Muslims owe allegiance, directly challenging the legitimacy of Saudi leaders who have long claimed a unique role as Sunni leaders and supporters of particular Salafist interpretations of Sunni Islam. IS critiques of Saudi leaders may resonate with some Saudis who have volunteered to fight for or contributed on behalf of Muslims in several conflicts involving other Muslims over the last three decades. In August 2018, IS leader Abu Bakr al Baghdadi called on Saudis to rise up and disregard arguments that security is preferable to unrest and infighting. He further alleged that the Saudi government's social reform plans are a plot to "Westernize and Germanize" Muslims and destroy their religion and beliefs. Saudi leaders argue that it is the Islamic State that lacks legitimacy and threatens to bring violence to Saudi society. Some Saudi observers in 2014 compared the group's ideology to that of other violent, deviant groups from the past and present. The Islamic State in East Asia (Wilayah Sharq Asia, ISIS-Philippines) Areas in the southern Philippines where the government has failed to assert full control largely due to decades-long Muslim separatist insurgencies have provided breeding grounds for extremist groups and Islamic State affiliates. In recent years, Islamist militants from Indonesia, Malaysia, and outside the region also have gone to western Mindanao and the Sulu Archipelago. ISIS-Philippines (ISIS-P), also known as Daulah Islamiyah, comprises several groups, including branches and remnants of the Abu Sayyaf Group (ASG), the Maute Group, the Bangsamoro Islamic Freedom Fighters, and Ansuar al-Khalifa Philippines. With U.S. military assistance, the Philippine Armed Forces (AFP) eroded the strength of the ASG, one the oldest and most established indigenous terrorist organizations in the Philippines, reducing it from 1,000-2,000 fighters in 2002 to about 300-400 in 2013. By 2015, however, a combination of factors – including the withdrawal of the U.S. Joint Special Operations Task Force–Philippines (JSOTF-P), the collapse of a peace agreement between the Philippine government and the Moro Islamic Liberation Front (MILF), and the rise and then difficulties of the Islamic State in the Middle East – fueled a resurgent Islamist terrorist threat in the Philippines. In May 2017, the Maute Group and other Filipino Islamist extremist organizations that had pledged allegiance to IS, along with dozens of foreign fighters, laid siege to Marawi, the capital of Lanao del Sur province. When the Philippine military retook the city after five months, in October 2017, the conflict had resulted in the deaths of nearly 900 militants, over 150 AFP troops and roughly 50 civilians, as well as the destruction of much of the city. The Philippine military has continued to engage in "low-level clashes" with ISIS-P, whose numbers dropped to an estimated 200 fighters during the battle for Marawi in 2017, but which may be rebounding. Since late 2017, Islamist extremist groups reportedly have regrouped and begun to attract hundreds of new followers. The ASG has sustained itself economically through ongoing criminal activities such as kidnapping for ransom, extortion, and drug trafficking. Other sources for financing for ISIL-P have included IS funding and the looting of banks and homes during the Marawi siege. | The Islamic State (IS, aka the Islamic State of Iraq and the Levant, ISIL/ISIS, or the Arabic acronym Da'esh) is a transnational Sunni Islamist insurgent and terrorist group that controlled large areas of Iraq and Syria from 2014 through 2017. The group attracted a network of global supporters and its leader, Abu Bakr al Baghdadi, received pledges of affiliation from groups in several other countries. A series of terrorist attacks attributed to the group or to individuals it has inspired have claimed hundreds of lives on four continents since November 2015, including in the United States. While U.S. and allied forces in 2017 and 2018 successfully liberated most of the territory formerly held by the group in Syria and Iraq, IS leadership remains at large and IS fighters appear to be evolving into an insurgent force. The group's international affiliates continue to operate, and individuals inspired by the group continue to attempt attacks in Europe and elsewhere. The stabilization of areas recovered from the group in Iraq and Syria remains an ongoing challenge, and a U.S. military spokesperson for the counter-IS campaign warned in August 2018 that, "We cannot emphasize enough that the threat of losing the gains we have made is real, especially if we are not able to give the people a viable alternative to the ISIS problem." Members of Congress, executive branch officials, and their international counterparts continue to debate a range of proposals for consolidating battlefield gains made to date and preventing the Islamic State from succeeding in its stated objectives of remaining and expanding. President Obama's goals for U.S. strategy were to degrade and ultimately defeat the Islamic State through U.S. direct military action and support for local partner forces. President Donald Trump directed his Administration to develop a comprehensive plan to defeat the group and has accelerated U.S. military operations while augmenting U.S. contributions to stabilization in liberated areas. The U.S. military continues to conduct operations against the group in Iraq, Syria, and Afghanistan, while monitoring and occasionally striking its affiliates and personnel elsewhere. Parallel U.S. assistance efforts support stabilization in areas once held by the group, and diplomatic efforts have promoted political reconciliation among local factions in countries where Islamic State supporters are active. The United States also provides security assistance to partner governments in support of operations against Islamic State affiliates and to strengthen the ability of partners to deter and respond to Islamic State attacks. Evolving counterterrorism cooperation and intelligence sharing efforts among a wider network of concerned governments seek to further limit the ability of IS supporters to carry out transnational terrorist attacks. Interrelated conflicts and political crises in Iraq, Syria, and other countries where the Islamic State operates complicate efforts to address and durably eliminate the threats posed by the group. Military operations may reduce the numbers of IS fighters and liberate IS-held territory, but the underlying political disputes and development challenges that the Islamic State has exploited may create ongoing openings for the group if governance and reconstruction needs go unmet. Governments may continue to face difficult decisions about the potential risks and rewards of various military, law enforcement, surveillance, intelligence sharing, financial, border security, refugee admission, and consular countermeasures. This report provides background on the Islamic State organization, discusses its goals, operations, and affiliates, reviews U.S. legislative and policy debates, and reviews relevant legislation from the 114th and 115th Congresses. For more information, see CRS Report RL33487, Armed Conflict in Syria: Overview and U.S. Response; CRS Report R45096, Iraq: In Brief; CRS Report R43760, A New Authorization for Use of Military Force Against the Islamic State: Issues and Current Proposals; and, CRS In Focus IF10328, The Islamic State. |
The origin of the Trade Adjustment Assistance for Farmers (TAAF) program can be traced back to a 2000 Department of Labor report recommending that a separate program be enacted "to assist agricultural producers and workers affected adversely by imports" if the objective is to assist them to remain in their current occupations. The report described the existing trade adjustment assistance (TAA) programs that provided (1) limited technical assistance to help business firms (including some that produced agricultural and food products) regain economic competitiveness or to shift into producing other goods, and (2) training assistance to workers (including those employed by some agricultural firms) to facilitate their transition into other occupations. It noted that the provision of direct financial assistance (such as income supplements) to farmers, or efforts to financially enable them to continue producing the commodity adversely affected by imports rather than help them adjust to employment in other sectors, would be inconsistent with the objectives of the then-existing TAA programs. Observers stated that farmers and ranchers typically did not qualify for the TAA workers program because they were self-employed (and thus rarely were eligible for unemployment benefits) and were less likely to want to be retrained for a new occupation (particularly if earning income from producing other crops or from non-farm sources). Others pointed out that agricultural producers who are most likely to be affected by import surges are those producing a commodity that receives little or no price protection and does not receive direct payments under traditional farm subsidy programs. Frequently cited at the time was the impact of increased competition that U.S. fruit and vegetable growers, as well as livestock producers, have encountered due to imports from Mexico and Canada under the North American Free Trade Agreement. The Trade Act of 2002 established a new Trade Adjustment Assistance for Farmers program by amending the Trade Act of 1974 ( P.L. 93-618 ). The U.S. Department of Agriculture's (USDA's) Foreign Agricultural Service (FAS) is the lead administrative agency for the TAAF program, with responsibility for certifying eligible commodities and producer groups. USDA's Farm Service Agency (FSA) has responsibility for processing and approving individual applications for assistance under TAAF, and for disbursing cash payments to eligible producers. A third USDA agency, the National Institute for Food and Agriculture (NIFA), provides training and technical assistance to producers who are approved for TAAF benefits. As amended by the enacted 2009 economic stimulus package ( P.L. 111-5 , Division B, Subtitle I), the program assists agricultural producers who have been adversely affected by competition from imports of a commodity that they produce. An "agricultural commodity producer" is defined as a "person that shares in the risk of producing an agricultural commodity and that is entitled to a share of the commodity for marketing, including an operator, a sharecropper, or a person that owns or rents the land on which the commodity is produced," or a person who reports a gain or loss on a federal income tax return from "the trade or business of fishing." Support is available in the form of enhanced technical assistance and seed money to enable a producer to formulate and implement a business adjustment plan. Producers of raw and natural agricultural commodities (crops, livestock, farm-raised aquatic products, and wild-caught seafood that competes with aquaculture products) and of "any class of goods within an agricultural commodity" must follow a two-part process to receive benefits. First, a producer group must be certified by USDA as eligible to apply for program benefits (see " Requirements for a Commodity Group to Be Certified "). Second, if the group is certified, individual producers in that group must meet certain requirements to be approved to receive technical assistance and cash payments (see " Individual Producer Eligibility Requirements " and " TAAF Program Benefits "). A group of agricultural producers can petition the Secretary of Agriculture to be certified as eligible to participate in the TAAF program (i.e., to qualify for benefits). To certify a commodity group, the Secretary must determine that the increase in imports of the agricultural commodity produced by members of the group "contributed importantly" to at least a 15% decline in the national average price, quantity of production, or value of production or cash receipts of the commodity. In making a determination, the Secretary must compare the volume of imports of "articles like or directly competitive with the agricultural commodity" produced by the group in the marketing year in which the petition is filed, to the average volume of imports in the three preceding marketing years. The addition of two other qualifying factors—"quantity of production" and "value of production/cash receipts"—besides price gives the Secretary greater flexibility in determining if a commodity group is eligible to access program benefits. The Secretary then has 40 days to make a determination on a group's petition. If the Secretary certifies that a group qualifies for assistance, each producer in the group has 90 days to apply for TAAF benefits. To be eligible, an individual producer must show in the application submitted to USDA that (1) the agricultural commodity was produced in the year covered by the group's petition, and in at least one of the three preceding marketing years; (2) the quantity of the commodity produced in that year has decreased compared to the amount produced in a previous year, or the price received for the commodity in that year has decreased compared to the average price received in the preceding three marketing years; and (3) no cash benefits were received under the TAA for Workers and TAA for Firms programs, nor were benefits received based on producing another commodity eligible for TAAF assistance. The reauthorization of TAAF through FY2021 under P.L. 114-27 does not alter the eligibility requirements for commodity groups or individual producers that existed heretofore. The changes enacted in 2009 refocus the TAAF program by (1) making technical assistance available to an eligible producer, and (2) providing financial resources so that a producer can put into effect a business plan to make adjustments in the operation. A producer approved for the TAAF program is entitled to receive initial technical assistance (TA) to improve competitiveness in the production and marketing of the commodity certified to receive benefits. Such assistance is to include information on what steps could be taken to improve the yield and marketing of that commodity, and on exploring the feasibility and desirability of substituting one or more alternative commodities for the one being produced. USDA can provide supplemental assistance to cover reasonable transportation and subsistence expenses that a producer incurs in accessing initial technical assistance if provided in a location outside a normal commuting distance. A producer who completes this initial phase is eligible to participate in intensive technical assistance. This includes training courses to assist the producer in improving the competitiveness of the same commodity or an alternative commodity, and financial assistance to develop an initial business plan based on the courses completed. USDA is required to approve a producer's initial business plan if it reflects the skills gained by the producer through the courses taken. Further, this plan must demonstrate how the producer will apply these skills to his circumstances. If the plan is approved, the producer is entitled to not more than $4,000 to implement this plan, or to develop a long-term business adjustment plan. A producer who completes the intensive phase and whose initial business plan has been approved is then eligible for assistance to develop a long-term business adjustment plan. USDA is required to approve this adjustment plan if it includes steps calculated to materially contribute to the producer's economic adjustment to changing market conditions, takes into account the interests of the workers employed by the producer, and demonstrates that the producer will have sufficient resources to implement the business plan. If approved, the producer is entitled to $8,000 to implement this long-term plan. The amount of assistance that a producer can receive to implement both the initial business plan and the long-term business adjustment plan is limited to $12,000 in the 36-month period after USDA has certified producers of the commodity as eligible for TAAF benefits. Further, TAAF-eligible producers cannot receive cash benefits under any other TAA program. An applicant is ineligible for TAAF assistance in any year in which his average adjusted gross income exceeds the level specified in Section 1001D of the Food Security Act of 1985 as amended (i.e., $500,000 of non-farm income, or $750,000 of farm income, depending on the details of the applicant's involvement in a farm operation, beginning with the 2009 crop year). The Secretary of Agriculture is required to provide written notice to each agricultural commodity producer in a group certified as eligible to receive benefits. A notice stating the benefits available to certified producers must also be published in newspapers of general circulation in the areas in which such producers reside. When notified by the International Trade Commission (ITC) that it has begun a safeguard investigation of a particular agricultural commodity, the Secretary of Agriculture is required to conduct a study of (1) the number of agricultural commodity producers who are producing a competitive commodity who have been or are likely to be certified eligible for TAAF, and (2) the extent to which existing programs could facilitate producers' adjustment to import competition. A safeguard (e.g., in the form of additional tariffs, expanded quota, or another restriction on imports) is intended to provide relief from the adverse impact of imports when temporary protection will enable the domestic sector (i.e., producers) to make adjustments to meet import competition. Within 15 days after the ITC has determined whether or not injury has occurred and reported its recommendations to the President, the Secretary must submit a report to the President on the USDA study's findings. The Trade Act of 2002 ( P.L. 107-210 ) that established the TAAF program authorized and appropriated $90 million annually for FY2003 through FY2007 to operate the program. Under Section 1(c) of P.L. 110-89 , Congress provided an appropriation of $9 million for TAAF for the first quarter of FY2008 (October 1 to December 31). Funding then lapsed until October 1, 2008, when Section 1887 of the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) authorized and appropriated $90 million in each of FY2009 and FY2010, and $22.5 million for the first quarter of FY2011 (October to December 2010). This provision also specified that funding shall cover the costs of administering the TAAF program. Congress temporarily extended funding for TAAF by providing an appropriation of $10.4 million for the period January 1, 2011, through February 12, 2011, in Section 101 of the Omnibus Trade Act of 2010 ( P.L. 111-344 ), but USDA viewed this six-week period as too short to implement another FY2011 program, so no activity occurred. Under Section 223 of the Trade Adjustment Assistance Extension Act of 2011 ( P.L. 112-40 ), Congress authorized $90 million in each of FY2012 and FY2013, and $22.5 million for the first quarter of FY2014 (i.e., October through December 2013). This provision, unlike those in the 2002 and 2009 authorizations, did not appropriate any funds. Because Congress did not subsequently appropriate funds, USDA did not announce TAAF programs for FY2012, FY2013, and the first quarter of FY2014. Authority to operate TAAF expired on December 31, 2013. Most recently, Section 403 of Title IV of the Trade Preferences Extension Act of 2015 ( P.L. 114-27 ) authorized TAAF to be appropriated $90 million each year for FY2015 through FY2021. As such, any program activity under TAAF will depend on the level of funding that Congress may appropriate. To date, no new funds have been appropriated. Because Congress in 2009 significantly revised TAAF's statutory provisions from those initially enacted, the text that follows describes how this program operated in the period before, and then in the period after, these changes. The break between periods reflects the lack of program authority in the January to September 2008 period. Activity under the TAAF in the FY2003-December 2007 period was much lower than authorized funding levels because of low producer participation and low payments, according to the Government Accountability Office (GAO). Of the $459 million authorized for the 5¼-year period through December 31, 2007, budget outlays totaled almost $49 million, according to USDA's Office of Inspector General (OIG) and USDA's Foreign Agricultural Service. This included $27.7 million in cash benefits paid to producers, $9.5 million for technical assistance, and $10.5 million for administrative costs ( Table 1 ). Of the 72 petitions filed by producer groups for assistance during the 5-year period that USDA received petitions, USDA certified or approved 30 groups ( Table 2 ). Shrimp and salmon producers accounted for most of the cash benefits paid out. Producers of Concord grapes, lychees, olives, wild blueberries, fresh potatoes, Florida avocadoes, snapdragons, and catfish were among other producer groups that USDA certified to be eligible for assistance ( Table 3 ). About 8,400 producers qualified for cash payments ( Table 2 ). On August 25, 2009, USDA's Foreign Agricultural Service published a proposed rule to establish procedures for a group to request certification of eligibility, and for individual producers to apply for technical assistance and cash benefits, under the amended TAAF program. On March 1, 2010, USDA issued the TAAF interim rule and announced that it would immediately begin to implement the FY2010 program. This allowed producer groups to submit petitions to be certified for eligibility, which, if approved, permit individual members of a group to apply for program benefits. For FY2010, USDA accepted petitions through April 14, 2010. It certified 3 of the 11 petitions submitted by producer groups ( Table 2 ). If a petition was approved, eligible producers had to file applications for assistance within 90 days of the certification. On May 21, 2010, USDA announced that it would accept petitions for the FY2011 TAAF program through July 16, 2010. USDA in late September 2010 certified 7 of the 19 producer groups that submitted petitions ( Table 2 ). Eligible producers had until late December 2010 to file applications for assistance. With the 2009 changes to the TAAF program that eased the criteria for a producer group to be certified and for individual producers to be approved for program assistance, more of the provided funding has been used than in the FY2003-December 2007 period. USDA committed $127 million of the almost $203 million authorized for the 2¼-year period ending December 2010. This included $81.1 million in cash benefits and training costs for producers, $34.0 million for developing the technical assistance resources to be used to provide training, and $12.0 million for administrative costs ( Table 1 ). Funds obligated under the 2009 amendments represented 63% of authorized funding. (For comparison, outlays in the earlier period of FY2003 through December 2007 accounted for 10% of funding authority.) Of the 30 petitions filed since FY2009 by producer groups seeking certification (i.e., eligibility to qualify for assistance), USDA certified 10 groups. These included producers of shrimp, catfish, lobsters, asparagus, and wild blueberries ( Table 3 ). USDA subsequently approved about 4,500 producers for training assistance and cash benefits in FY2010. Another 5,700 applications were approved under the FY2011 program ( Table 2 ). USDA data show that most of the benefits under both years' programs flowed to shrimp producers in Alaska and along the Gulf and southern Atlantic states. As of late FY2012, of the 10,242 producers approved in FY2010 and FY2011 to receive program benefits, 80% had completed the intensive 12-hour training phase, 79% had completed their initial business plan, and 61% had completed their long-term business plan. Benefits to individual producers are based on the amount of funds authorized each year and are available only to those approved to receive technical and financial assistance. For the FY2010 program, approved producers were eligible for $12,000 in cash payments (see " TAAF Program Benefits ," above, for details). But because only $22.5 million were available in the shortened FY2011 period for a larger number of approved applicants than in the previous year, each producer received pro-rated cash payments. During FY2012, FY2013, and FY2014, USDA continued to disburse financial assistance to producers approved to receive benefits under the FY2010 and FY2011 programs as they subsequently met certain benchmarks. As required by Section 1894 of P.L. 111-5 , the Government Accountability Office (GAO) in mid-July 2012 reported on the operation and effectiveness of the 2009 amendments made to the TAAF statute. It found that USDA certified relatively few commodities (five) under the changes made to the program, but that TAAF benefited most of the farmers and fishermen (over 10,200) who produced these certified commodities and had been approved to receive assistance. GAO discovered that the 2009 changes in the criteria used to determine whether a commodity can be certified were a factor leading to four of the five commodity certifications. For example, FAS under the pre-2009 criteria would not likely have been able to certify asparagus or shrimp solely on the basis of a decline in price. But in applying one new criterion—a decrease in the quantity produced of a commodity—as producers adjusted to increased imports, these two commodities were qualified to be certified. In reviewing how USDA implemented the program, GAO offered three recommendations: Require spouses of producers (i.e., those who share in the risk of producing an agricultural commodity) who may be eligible to apply for assistance to provide documentation on how they contribute to producing a certified commodity. This would address instances where USDA may have approved the applications of spouses who did not engage in producing a certified commodity, and thus had no assurance that TAAF assistance was appropriately targeted to intended recipients. Take steps to help ensure that any financial assistance payments made to producers are used for intended purposes (e.g., by requiring them to detail in their business plans how they plan to use these funds). This would address the acknowledgement made by USDA officials that some producers likely use the payments for unrelated expenses. Broaden the program's evaluation approach to help ensure that USDA can comprehensively evaluate the impact of the TAAF program on producers' competitiveness. GAO noted that the performance measures and surveys used by USDA do not measure quantifiable outcomes or cover all key areas of the program. To illustrate, conducting a final survey 6-12 months after producers complete the program does not allow for gathering insights into their perceptions of TAAF's long-term effectiveness. Also, USDA has not corroborated the results of surveys to help isolate the program's impact from other influences. USDA commented that it generally agrees with these recommendations, and that if a future TAAF program retains the same statutory requirements, it will consider specific ways to address them. In an audit report of TAAF dated October 2013, the USDA's Office of Inspector General (OIG) identified a number of shortcomings in the administration of the TAAF program. The objective of the audit was to evaluate the internal controls established by FAS, FSA, and NIFA for administering the TAAF program, and to assess the program's policies and procedures. More specifically, the audit sought to determine whether (1) TAAF program recipients were eligible for program participation; (2) funds were properly obligated, distributed in a timely fashion, and accurately calculated; (3) program reporting requirements were met; and (4) oversight was sufficient to ensure that TAAF was administered in an accountable and equitable manner. A sampling methodology was developed to carry out this task. In brief, the OIG found the agencies did not have the appropriate controls in place to ensure that TAAF program participants were eligible, that payments were accurate, or that oversight was sufficient. The audit made a number of recommendations that follow from four key findings below. Agency responses to the findings and recommendations advanced by OIG are included in the audit report. 1. At the end of FY2009, FAS did not return unobligated TAAF program funds to the Department of the Treasury, nor did it provide evidence to show that all remaining funds were needed to meet future financial obligations. 2. FAS did not sufficiently analyze the documentation submitted by producer groups in support of their request for price pre-certification approvals for their commodities under a streamlining procedure. As a consequence, FAS applied the pre-price certification approvals in an overly broad manner, with the result that two of five such approvals that OIG examined did not meet the criteria established for approval. 3. Although FAS was the lead agency with oversight responsibility for the TAAF program, the agency failed to effectively monitor, or conduct reviews of, the two other agencies' day-to-day administration of the program, with the result that OIG identified 85 ineligible producers who participated in the TAAF program and who received approximately $284,000 in program benefits to which they were not entitled. 4. NIFA did not ensure that the TAAF program database was in compliance with federal information system security requirements for certification and accreditation. Following the enactment of P.L. 114-26 —the law that provides the President with Trade Promotion Authority (TPA)—the Obama Administration concluded negotiations on the Trans-Pacific Partnership (TPP) regional free-trade agreement, which includes the United States and 11 other Pacific-facing nations, but to date the agreement has not been ratified by Congress or by other TPP countries. Meanwhile, negotiations between the United States and the European Union to conclude a Transatlantic Trade and Investment Partnership (T-TIP) agreement are ongoing. Considering the breadth of these two potential regional trade agreements, the economic diversity of the nations involved, and the broad range of U.S. agricultural and fishery products that might potentially be affected if TPP were to be implemented or if T-TIP were to be successfully concluded and implemented—or both—it is conceivable that some U.S. agricultural producers and fishermen might qualify for trade adjustment assistance under TAAF in the years ahead. Whether TAAF will be provided with funding to allow it to resume operations, and at what level, is for Congress to determine. In the event that Congress decides to appropriate funds to reactivate TAAF, Congress could provide oversight of the program in light of recommendations advanced by GAO and the USDA's Office of Inspector General. | The Trade Adjustment Assistance for Farmers (TAAF) program provides technical assistance and cash benefits to producers of farm commodities and fishermen who experience adverse economic effects from increased imports. Congress first authorized this program in 2002, and made significant changes to it in the 2009 economic stimulus package (P.L. 111-5). The 2009 revisions were aimed at making it easier for farmers and fishermen to qualify for program benefits, and provided over $200 million in funding through December 2010. Subsequently, P.L. 112-40 (enacted in October 2011) authorized $202.5 million through December 2013, but no new program activity has occurred since December 2010 for lack of appropriated funds. In June 2015, Congress passed H.R. 1295, the Trade Preferences Extension Act of 2015, authorizing TAAF through FY2021, and the President signed the bill into law on June 29, 2015, as P.L. 114-27. Any program activity would still be contingent on the appropriation of funds. The U.S. Department of Agriculture (USDA) is required to follow a two-step process in administering TAAF. First, a group of producers must be certified eligible to apply. Second, a producer in a certified group must meet specified requirements to be approved for benefits. To be certified, a group must show that imports were a significant cause for at least a 15% decline in one of three factors: the price of the commodity, the quantity of the commodity produced, or the production value of the commodity. Once a producer group is certified, an individual producer within that group must meet three requirements to be approved for program benefits. These include technical assistance with a training component, and financial assistance. A producer must show that (1) the commodity was produced in the current year and also in one of the previous three years; (2) the quantity of the commodity produced decreased compared to that in a previous year, or the price received for the commodity decreased compared to a preceding three-year average price; and (3) no benefits were received under any other trade adjustment assistance program. The training component is intended to help the producer become more competitive in producing the same or another commodity. Financial assistance is to be used to develop and implement a business adjustment plan designed to address the impact of import competition. From 2009 to 2011, USDA certified 10 of 30 petitions filed by producers of 5 commodity groups—shrimp, catfish, asparagus, lobster, and wild blueberries. USDA approved TAAF benefits for about 4,500 individual producers in FY2010, and for about 5,700 producers in FY2011. In a 2012 audit of TAAF, the Government Accountability Office recommended that USDA require spouses who apply for assistance to submit documentation on how they contribute to producing a commodity, take steps to ensure that the program's financial assistance component is used for intended purposes, and adopt a longer-term approach to evaluate its effectiveness. A 2013 audit by USDA's Office of Inspector General (OIG) identified several shortcomings in administering the program, including determining eligibility and providing effective oversight. The 2015 reauthorization of TAAF programs follows directly in the wake of the enactment of Trade Promotion Authority (TPA) legislation (P.L. 114-26) that President Obama had requested of Congress to facilitate the conclusion of regional free trade agreements, including the Trans-Pacific Partnership (TPP) with 11 other Pacific-facing nations. Under P.L. 114-27, TAAF is authorized to receive $90 million annually for FY2015 through FY2021, subject to annual appropriations. No new funding has been appropriated since the program's reauthorization. |
The Internet is often described as a "network of networks" because it is not a single physical entity but, in fact, hundreds of thousands of interconnected networks linking hundreds of millions of computers around the world. Computers connected to the Internet are identified by a unique Internet Protocol (IP) number that designates their specific location, thereby making it possible to send and receive messages and to access information from computers anywhere on the Internet. Domain names were created to provide users with a simple location name, rather than requiring them to use a long list of numbers. Top Level Domains (TLDs) appear at the end of an address and are either a given country code, such as .jp or .uk, or are generic designations (gTLDs), such as .com, .org, .net, .edu, or .gov. The Domain Name System (DNS) is the distributed set of databases residing in computers around the world that contain the address numbers, mapped to corresponding domain names. Those computers, called root servers, must be coordinated to ensure connectivity across the Internet. The Internet originated with research funding provided by the Department of Defense Advanced Research Projects Agency (DARPA) to establish a military network. As its use expanded, a civilian segment evolved with support from the National Science Foundation (NSF) and other science agencies. While there were (and are) no formal statutory authorities or international agreements governing the management and operation of the Internet and the DNS, several entities played key roles in the DNS. For example, the Internet Assigned Numbers Authority (IANA), which was operated at the Information Sciences Institute/University of Southern California under contract with the Department of Defense, made technical decisions concerning root servers, determined qualifications for applicants to manage country code TLDs, assigned unique protocol parameters, and managed the IP address space, including delegating blocks of addresses to registries around the world to assign to users in their geographic area. NSF was responsible for registration of nonmilitary domain names, and in 1992 put out a solicitation for managing network services, including domain name registration. In 1993, NSF signed a five-year cooperative agreement with a consortium of companies called InterNic. Under this agreement, Network Solutions Inc. (NSI), a Herndon, VA, engineering and management consulting firm, became the sole Internet domain name registration service for registering the .com, .net., and .org. gTLDs. After the imposition of registration fees in 1995, criticism of NSI's sole control over registration of the gTLDs grew. In addition, there was an increase in trademark disputes arising out of the enormous growth of registrations in the .com domain. There also was concern that the role played by IANA lacked a legal foundation and required more permanence to ensure the stability of the Internet and the domain name system. These concerns prompted actions both in the United States and internationally. An International Ad Hoc Committee (IAHC), a coalition of individuals representing various constituencies, released a proposal for the administration and management of gTLDs on February 4, 1997. The proposal recommended that seven new gTLDs be created and that additional registrars be selected to compete with each other in the granting of registration services for all new second level domain names. To assess whether the IAHC proposal should be supported by the U.S. government, the executive branch created an interagency group to address the domain name issue and assigned lead responsibility to the National Telecommunications and Information Administration (NTIA) of the Department of Commerce (DOC). On June 5, 1998, DOC issued a final statement of policy, "Management of Internet Names and Addresses." Called the White Paper, the statement indicated that the U.S. government was prepared to recognize and enter into agreement with "a new not-for-profit corporation formed by private sector Internet stakeholders to administer policy for the Internet name and address system." In deciding upon an entity with which to enter such an agreement, the U.S. government would assess whether the new system ensured stability, competition, private and bottom-up coordination, and fair representation of the Internet community as a whole. The White Paper endorsed a process whereby the divergent interests of the Internet community would come together and decide how Internet names and addresses would be managed and administered. Accordingly, Internet constituencies from around the world held a series of meetings during the summer of 1998 to discuss how the New Corporation might be constituted and structured. Meanwhile, IANA, in collaboration with NSI, released a proposed set of bylaws and articles of incorporation. The proposed new corporation was called the Internet Corporation for Assigned Names and Numbers (ICANN). After five iterations, the final version of ICANN's bylaws and articles of incorporation were submitted to the Department of Commerce on October 2, 1998. On November 25, 1998, DOC and ICANN signed an official Memorandum of Understanding (MOU), whereby DOC and ICANN agreed to jointly design, develop, and test the mechanisms, methods, and procedures necessary to transition management responsibility for DNS functions—including IANA—to a private-sector not-for-profit entity. On September 17, 2003, ICANN and the Department of Commerce agreed to extend their MOU until September 30, 2006. The MOU specified transition tasks which ICANN agreed to address. On June 30, 2005, Michael Gallagher, then-Assistant Secretary of Commerce for Communications and Information and Administrator of NTIA, stated the U.S. government's principles on the Internet's domain name system. Specifically, NTIA stated that the U.S. government intends to preserve the security and stability of the DNS, that the United States would continue to authorize changes or modifications to the root zone, that governments have legitimate interests in the management of their country code top level domains, that ICANN is the appropriate technical manager of the DNS, and that dialogue related to Internet governance should continue in relevant multiple fora. On September 29, 2006, DOC announced a new Joint Project Agreement (JPA) with ICANN which was intended to continue the transition to the private sector of the coordination of technical functions relating to management of the DNS. The JPA extended through September 30, 2009, and focused on institutionalizing transparency and accountability mechanisms within ICANN. On September 30, 2009, DOC and ICANN announced agreement on an Affirmation of Commitments (AoC) to "institutionalize and memorialize" the technical coordination of the DNS globally and by a private-sector-led organization. The AoC affirms commitments made by DOC and ICANN to ensure accountability and transparency; preserve the security, stability, and resiliency of the DNS; promote competition, consumer trust, and consumer choice; and promote international participation. ICANN is a not-for-profit public benefit corporation headquartered in Los Angeles, CA, and incorporated under the laws of the state of California. ICANN is organized under the California Nonprofit Public Benefit Law for charitable and public purposes, and as such, is subject to legal oversight by the California attorney general. ICANN has been granted tax-exempt status by the federal government and the state of California. ICANN's organizational structure consists of a Board of Directors (BOD) advised by a network of supporting organizations and advisory committees that represent various Internet constituencies and interests (see Figure 1 ). Policies are developed and issues are researched by these subgroups, who in turn advise the Board of Directors, which is responsible for making all final policy and operational decisions. The Board of Directors consists of 16 international and geographically diverse members, composed of one president, eight members selected by a Nominating Committee, two selected by the Generic Names Supporting Organization, two selected by the Address Supporting Organization, two selected by the Country-Code Names Supporting Organization, and one selected by the At-Large Advisory Committee. Additionally, there are five non-voting liaisons representing other advisory committees. The explosive growth of the Internet and domain name registration, increasing responsibilities in managing and operating the DNS, and the rollout of the new gTLD program has led to marked growth of the ICANN budget, from revenues of about $6 million and a staff of 14 in 2000, to total support and revenue of $159 million and a head count of 373 budgeted for 2015. ICANN has been traditionally funded primarily through fees paid to ICANN by registrars and registry operators. Registrars are companies (e.g., GoDaddy, Google, Network Solutions) with which consumers register domain names. Registry operators are companies and organizations that operate and administer the master database of all domain names registered in each top level domain (for example VeriSign, Inc. operates .com and .net, Public Interest Registry operates .org, and Neustar, Inc. operates .biz). Congressional committees (primarily the Senate Committee on Commerce, Science and Transportation and the House Committee on Energy and Commerce) maintain oversight on how the Department of Commerce manages and oversees ICANN's activities and policies. Other committees, such as the House and Senate Judiciary Committees, maintain an interest in other issues affected by ICANN, such as intellectual property and privacy. The Appendix shows a listing of congressional committee hearings related to ICANN and the domain name system dating back to 1997. The Department of Commerce (DOC) has no statutory authority over ICANN or the DNS. However, because the Internet evolved from a network infrastructure created by the Department of Defense, the U.S. government originally owned and operated (primarily through private contractors such as the University of Southern California, SRI International, and Network Solutions Inc.) the key components of network architecture that enable the domain name system to function. The 1998 Memorandum of Understanding between ICANN and the Department of Commerce initiated a process intended to transition technical DNS coordination and management functions to a private-sector not-for-profit entity. While the DOC plays no role in the internal governance or day-to-day operations of ICANN, the U.S. government, through the DOC, retains a role with respect to the DNS via three separate contractual agreements. These are the Affirmation of Commitments (AoC) between DOC and ICANN, which was signed on September 30, 2009; the contract between IANA/ICANN and DOC to perform various technical functions such as allocating IP address blocks, editing the root zone file, and coordinating the assignment of unique protocol numbers; and the cooperative agreement between DOC and VeriSign to manage and maintain the official DNS root zone file. On September 30, 2009, DOC and ICANN announced agreement on an Affirmation of Commitments (AoC) to "institutionalize and memorialize" the technical coordination of the DNS globally and by a private-sector-led organization. The AoC succeeds the concluded Joint Project Agreement (which in turn succeeded the Memorandum of Understanding between DOC and ICANN). The AoC has no expiration date and would conclude only if one of the two parties decided to terminate the agreement. Various Internet stakeholders disagreed as to whether DOC should maintain control over ICANN after the impending JPA expiration on September 30, 2009. Many U.S. industry and public interest groups argued that ICANN was not yet sufficiently transparent and accountable, that U.S. government oversight and authority (e.g., DOC acting as a "steward" or "backstop" to ICANN) was necessary to prevent undue control of the DNS by international or foreign governmental bodies, and that continued DOC oversight was needed until full privatization is warranted. On the other hand, many international entities and groups from countries outside the United States argued that ICANN had sufficiently met conditions for privatization, and that continued U.S. government control over an international organization was not appropriate. In the 110 th Congress, Senator Snowe introduced S.Res. 564 , which stated the sense of the Senate that although ICANN had made progress in achieving the goals of accountability and transparency as directed by the JPA, more progress was needed. On April 24, 2009, NTIA issued a Notice of Inquiry (NOI) seeking public comment on the upcoming expiration of the JPA between DOC and ICANN. According to NTIA, a mid-term review showed that while some progress had been made, there remained key areas where further work was required to increase institutional confidence in ICANN. These areas included long-term stability, accountability, responsiveness, continued private-sector leadership, stakeholder participation, increased contract compliance, and enhanced competition. NTIA asked for public comments regarding the progress of transition of the technical coordination and management of the DNS to the private sector, as well as the model of private-sector leadership and bottom-up policy development which ICANN represents. Specifically, the NOI asked whether sufficient progress had been achieved for the transition to take place by September 30, 2009, and if not, what should be done. On June 4, 2009, the House Committee on Energy and Commerce, Subcommittee on Communications, Technology, and the Internet, held a hearing examining the expiration of the JPA and other issues. Most members of the committee expressed the view that the JPA (or a similar agreement between DOC and ICANN) should be extended. Subsequently, on August 4, 2009, majority leadership and majority Members of the House Committee on Energy and Commerce sent a letter to the Secretary of Commerce urging that rather than replacing the JPA with additional JPAs, the DOC and ICANN should agree on a "permanent instrument" to "ensure that ICANN remains perpetually accountable to the public and to all of its global stakeholders." According to the committee letter, the instrument should ensure the permanent continuance of the present DOC-ICANN relationship; provide for periodic reviews of ICANN performance; outline steps ICANN will take to maintain and improve its accountability; create a mechanism for implementation of the addition of new gTLDs and internationalized domain names; ensure that ICANN will adopt measures to maintain timely and public access to accurate and complete WHOIS information; and include commitments that ICANN will remain a not-for-profit corporation headquartered in the United States. Under the AoC, ICANN commits to remain a not-for-profit corporation "headquartered in the United States of America with offices around the world to meet the needs of a global community." According to the AoC, "ICANN is a private organization and nothing in this Affirmation should be construed as control by any one entity." Specifically, the AoC calls for the establishment of review panels which will periodically make recommendations to the ICANN Board in four areas: Ensuring accountability, transparency and the interests of global Internet users —the panel will evaluate ICANN governance and assess transparency, accountability, and responsiveness with respect to the public and the global Internet community. The panel will be composed of the chair of ICANN's Governmental Advisory Committee (GAC), the chair of the Board of ICANN, the Assistant Secretary for Communications and Information of the Department of Commerce (i.e., the head of NTIA), representatives of the relevant ICANN Advisory Committees and Supporting Organizations, and independent experts. Composition of the panel will be agreed to jointly by the chair of the GAC and the chair of ICANN. Preserving security, stability, and resiliency —the panel will review ICANN's plan to enhance the operational stability, reliability, resiliency, security, and global interoperability of the DNS. The panel will be composed of the chair of the GAC, the CEO of ICANN, representatives of the relevant Advisory Committees and Supporting Organizations, and independent experts. Composition of the panel will be agreed to jointly by the chair of the GAC and the CEO of ICANN. Impact of new gTLDs —starting one year after the introduction of new gTLDs, the panel will periodically examine the extent to which the introduction or expansion of gTLDs promotes competition, consumer trust, and consumer choice. The panel will be composed of the chair of the GAC, the CEO of ICANN, representatives of the relevant Advisory Committees and Supporting Organizations, and independent experts. Composition of the panel will be agreed to jointly by the chair of the GAC and the CEO of ICANN. WHOIS policy— the panel will review existing WHOIS policy and assess the extent to which that policy is effective and its implementation meets the legitimate needs of law enforcement and promotes consumer trust. The panel will be composed of the chair of the GAC, the CEO of ICANN, representatives of the relevant Advisory Committees and Supporting Organizations, independent experts, representatives of the global law enforcement community, and global privacy experts. Composition of the panel will be agreed to jointly by the chair of the GAC and the CEO of ICANN. On December 31, 2010, the Accountability and Transparency Review Team (ATRT) released its recommendations to the Board for improving ICANN's transparency and accountability with respect to: Board governance and performance, the role and effectiveness of the GAC and its interaction with the Board, public input and policy development processes, and review mechanisms for Board decisions. At the June 2011 meeting in Singapore, the Board adopted all 27 ATRT recommendations. According to NTIA, "the focus turns to ICANN management and staff, who must take up the challenge of implementing these recommendations as rapidly as possible and in a manner that leads to meaningful and lasting reform." On December 31, 2013, the second ATRT (ATRT2) a follow-up report to the Board with 12 new recommendations (most of which arising from the issues raised in the first ATRT report). A contract between DOC and ICANN—specifically referred to as the "IANA functions contract"—authorizes ICANN to manage the technical underpinnings of the DNS. Specifically, the contract allows ICANN to perform various critical technical functions such as allocating IP address blocks, editing the root zone file, and coordinating the assignment of unique protocol numbers. Additionally, and intertwined with the IANA functions, a cooperative agreement between DOC and VeriSign (the company that operates the .com and .net registries) authorizes VeriSign to manage and maintain the official root zone file that is contained in the Internet's root servers that underlie the functioning of the DNS. By virtue of these legal agreements, the DOC has authority over the root zone file, meaning that the U.S. government can approve or deny changes or modifications made to the root zone file (changes, for example, such as adding a new top level domain). The June 30, 2005, U.S. government principles on the Internet's domain name system stated the intention to "preserve the security and stability" of the DNS, and asserted that "the United States is committed to taking no action that would have the potential to adversely impact the effective and efficient operation of the DNS and will therefore maintain its historic role in authorizing changes or modifications to the authoritative root zone file." The JPA was separate and distinct from the DOC legal agreements with ICANN and VeriSign. As such, the expiration of the JPA and the establishment of the AoC did not directly affect U.S. government authority over the DNS root zone file. Foreign governmental bodies have long argued that it is inappropriate for the U.S. government to maintain that exclusive authority over the DNS. On July 2, 2012, NTIA announced the award of the most recent (and current) IANA functions contract to ICANN through September 30, 2015 (with an option to extend the contract through September 2019). The contract includes a separation between the policy development of IANA services and the implementation by the IANA functions contractor. The contract also features "a robust company-wide conflict of interest policy; a heightened respect for local national law; and a series of consultation and reporting requirements to increase transparency and accountability." The IANA contract continued to specify that the contractor must be a wholly U.S. owned and operated firm or a U.S. university or college; that all primary operations and systems shall remain within the United States; and that the U.S. government reserves the right to inspect the premises, systems, and processes of all facilities and components used for the performance of the contract. The IANA functions contract with ICANN and the cooperative agreement with Verisign give NTIA the authority to maintain a stewardship and oversight role with respect to ICANN and the domain name system. On March 14, 2014, NTIA announced its intention to transition its stewardship role and procedural authority over key domain name functions to the global Internet multistakeholder community. If a satisfactory transition can be achieved, NTIA will let its IANA functions contract with ICANN expire as early as September 30, 2015. NTIA is asking ICANN to convene interested global Internet stakeholders (both from the private sector and governments) to develop a proposal to achieve the transition. Specifically, NTIA expects ICANN to work collaboratively with parties directly affected by the IANA contract, including the Internet Engineering Task Force (IETF), the Internet Architecture Board (IAB), the Internet Society (ISOC), the Regional Internet Registries (RIRs), top level domain name operators, Verisign, and other interested global stakeholders. In October 2013, many of these groups—specifically, the Internet technical organizations responsible for coordination of the Internet infrastructure—had called for "accelerating the globalization of ICANN and IANA functions, towards an environment in which all stakeholders, including all governments, participate on an equal footing." NTIA has stated that it will not accept any transition proposal that would replace the NTIA role with a government-led or an intergovernmental organization solution. In addition, NTIA told ICANN that the transition proposal must have broad community support and address the following four principles: support and enhance the multistakeholder model; maintain the security, stability, and resilience of the Internet DNS; meet the needs and expectation of the global customers and partners of the IANA services; and maintain the openness of the Internet. Supporters of the transition argue that by transferring its remaining authority over ICANN and the DNS to the global Internet community, the U.S. government will bolster its continuing support for the multistakeholder model of Internet governance, and that this will enable the United States to more effectively argue and work against proposals for intergovernmental control over the Internet. Supporters also point out that the U.S. government and Internet stakeholders have, from the inception of ICANN, envisioned that U.S. authority over IANA functions would be temporary, and that the DNS would eventually be completely privatized. According to NTIA, this transition is now possible, given that "ICANN as an organization has matured and taken steps in recent years to improve its accountability and transparency and its technical competence." Those opposed, skeptical, or highly cautious about the transition point out that NTIA's role has served as a necessary "backstop" which has given Internet stakeholders confidence that the integrity and stability of the DNS is being sufficiently overseen. Critics assert that in the wake of the Edward Snowden NSA revelations, foreign governments might gain more support internationally in their continuing attempts to exert intergovernmental control over the Internet, and that any added intergovernmental influence over the Internet and the DNS would be that much more detrimental to the interests of the United States if NTIA's authority over ICANN and the DNS were to no longer exist. Another concern regards the development of the transition plan and a new international multistakeholder entity that would provide some level of stewardship over the domain name system. Critics are concerned about the risks of foreign governments—particularly those favoring censorship of the Internet—gaining influence over the DNS through the transition to a new Internet governance mechanism that no longer is subject to U.S. government oversight. On March 27, 2014, Representative Shimkus introduced H.R. 4342 , the Domain Openness Through Continued Oversight Matters (DOTCOM) Act. H.R. 4342 would prohibit the NTIA from relinquishing responsibility over the Internet domain name system until GAO submits to Congress a report on the role of the NTIA with respect to such system. The report would include a discussion and analysis of the advantages and disadvantages of the change and address the national security concerns raised by relinquishing U.S. oversight. It would also require GAO to provide a definition of the term "multistakeholder model" as used by NTIA with respect to Internet policymaking and governance. H.R. 4342 was referred to the House Energy and Commerce Committee. On April 2, 2014, the Subcommittee on Communications and Technology held a hearing on the DOTCOM Act. H.R. 4342 was approved by the House Energy and Commerce Committee on May 8, 2014. Subsequently on June 5, 2014, the House Energy and Commerce Committee requested that the GAO examine the Administration's proposal to transition NTIA's current authority over IANA to the multistakeholder Internet community. On May 22, 2014, the text of the DOTCOM Act was offered by Representative Shimkus as an amendment to H.R. 4435 , the National Defense Authorization Act for FY2015. During House consideration of H.R. 4435 , the amendment was agreed to by a vote of 245-177. H.R. 4435 was passed by the House on May 22, 2014. The House Armed Services bill report accompanying H.R. 4435 ( H.Rept. 113-446 ) stated the committee's belief that any new Internet governance structure should include protections for the Department of Defense-controlled .mil generic top level domain and its associated Internet protocol numbers. The committee also supported maintaining separation between the policymaking and technical operation of root-zone management functions. On June 2, 2014, the Senate Armed Services Committee reported S. 2410 , its version of the FY2015 National Defense Authorization Act. Section 1646 of S. 2410 ("Sense of Congress on the Future of the Internet and the .mil Top-Level Domain") stated that it is the sense of Congress that the Secretary of Defense should advise the President to transfer the remaining role of the United States Government in the functions of the Internet Assigned Numbers Authority to a global multi-stakeholder community only if the President is confident that the '.MIL' top-level domain and the Internet Protocol address numbers used exclusively by the Department of Defense for national security will remain exclusively used by the Department of Defense. Section 1646 also directed DOD to take "all necessary steps to sustain the successful stewardship and good standing of the Internet root zone servers managed by components of the Department of Defense." In the report accompanying S. 2410 ( S.Rept. 113-176 ), the committee urged DOD to seek an agreement through the IANA transition process, or in parallel to it, between the United States and the Internet Corporation for Assigned Names and Numbers and the rest of the global Internet stakeholders that the .mil domain will continue to be afforded the same generic top level domain status after the transition that it has always enjoyed, on a par with all other country-specific domains. The Carl Levin and Howard P. "Buck" McKeon National Defense Authorization Act for Fiscal Year 2015 was signed by the President on December 16, 2014 ( P.L. 113-235 ). The enacted law does not contain the DOTCOM Act provision contained in the House-passed version. Section 1639 of P.L. 113-235 ("Sense of Congress on the Future of the Internet and the .mil Top-Level Domain") states it is the sense of Congress that the Secretary of Defense should support the IANA transfer only if assurances are provided for the protection of the current status of legacy top-level domain names and Internet Protocol address numbers, particularly those used by the Department of Defense and the components of the United States Government for national security purposes; mechanisms are institutionalized to uphold and protect consensus-based decision making in the multi-stakeholder approach; and existing stress-testing scenarios of the accountability process of the multi-stakeholder model can be confidently shown to work transparently, securely, and efficiently to maintain a free, open, and resilient Internet. It is also the sense of Congress that the Secretary of Defense should "take all necessary steps to sustain the successful stewardship and good standing of the Internet root zone servers managed by components of the Department of Defense, including active participation, review, and analysis for transition planning documents and accountability stress testing." On May 8, 2014, the House Appropriations Committee approved H.R. 4660 , the FY2015 Commerce, Justice, Science (CJS) Appropriations Act, which appropriates funds for DOC and NTIA. The bill report ( H.Rept. 113-448 ) stated that in order that the transition be more fully considered by Congress, the committee's recommendation for NTIA does not include any funds to carry out the transition and that the committee expects that NTIA will maintain the existing no-cost contract with ICANN throughout FY2015. During House consideration of H.R. 4660 , an amendment offered by Representative Duffy was adopted on May 30, 2014 (by recorded vote, 229-178) which stated that (Section 562) "[n]one of the funds made available by this Act may be used to relinquish the responsibility of the National Telecommunications and Information Administration with respect to Internet domain name system functions, including responsibility with respect to the authoritative root zone file and the Internet Assigned Numbers Authority functions." H.R. 4660 was subsequently passed by the House on May 30, 2014. On June 5, 2014, the Senate Appropriations Committee reported its version of the FY2015 Commerce, Justice, Science, and Related Agencies Appropriations Act ( S. 2437 ). In the bill report ( S.Rept. 113-181 ) the committee directed NTIA to conduct a thorough review and analysis of any proposed transition of the IANA contract in order to ensure that ICANN has in place an NTIA approved multi-stakeholder oversight plan that is insulated from foreign government and intergovernmental control. Further, the committee directed NTIA to report quarterly to the committee on all aspects of the privatization process and further directed NTIA to inform the committee, as well as the Committee on Commerce, Science, and Transportation, not less than seven days in advance of any decision with respect to a successor contract. The committee also expressed its concern that NTIA has not been a strong advocate for U.S. businesses and consumers through its participation in ICANN's Governmental Advisory Committee (GAC), and stated that it awaits "the past due report on NTIA's plans for greater involvement in the GAC and the efforts it is undertaking to protect U.S. consumers, companies, and intellectual property." The Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ) was signed by the President on December 16, 2014. Section 540 provides that during FY2015, NTIA may not use any appropriated funds to relinquish its responsibility with respect to Internet domain name system functions, including its responsibility with respect to the authoritative root zone file and the IANA functions. The prohibition on funding for NTIA's IANA transition activities expires on September 30, 2015. Additionally, the Explanatory Statement accompanying P.L. 113-235 reiterates House and Senate language regarding ICANN and IANA matters and modifies the Senate language by directing NTIA "to inform appropriate Congressional committees not less than 45 days in advance of any such proposed successor contract or any other decision related to changing NTIA's role with respect to ICANN or IANA activities." The Explanatory Statement also directs NTIA to submit a report to the House and Senate Committees on Appropriations within 45 days of enactment of P.L. 113-235 regarding "any recourse that would be available to the United States if the decision is made to transition to a new contract and any subsequent decisions made following such transfer of Internet governance are deleterious to the United States." Other legislation addressing the proposed transition included the following: H.R. 4367 (Internet Stewardship Act of 2014, introduced by Representative Mike Kelly on April 2, 2014), which would prohibit NTIA from relinquishing its DNS responsibilities unless permitted by statute; H.R. 4398 (Global Internet Freedom Act of 2014, introduced by Representative Duffy on April 4, 2014), which would prohibit NTIA from relinquishing its authority over the IANA functions; and H.R. 5737 (Defending Internet Freedom Act of 2014, introduced by Representative Mike Kelly on November 19, 2014), which would prohibit NTIA from relinquishing its responsibilities over domain name functions unless it certifies that the transition proposal meets certain specified criteria. H.R. 4367 , H.R. 4398 , and H.R. 5737 were referred to the Committee on Energy and Commerce. Meanwhile, the House Judiciary Committee, Subcommittee on Courts, Intellectual Property, and the Internet, held a hearing on April 10, 2014, that examined the proposed transition. The DOTCOM Act of the 113 th Congress was reintroduced into the 114 th Congress by Representative Shimkus as H.R. 805 on February 5, 2015. The DOTCOM Act of 2015 would prohibit NTIA from relinquishing responsibility over the Internet domain name system until GAO submits a report to Congress examining the implications of the proposed transfer. H.R. 805 directs GAO to issue a report no later than one year after NTIA receives a transition proposal. The report shall include a discussion and analysis of the advantages and disadvantages of the proposed transfer; any principles or criteria that the NTIA has set for the transfer; each transfer proposal received by the NTIA; the processes used by the NTIA and any other federal agencies for evaluating the proposals; any national security concerns raised by the relinquishment; and any concerns raised by such relinquishment with respect to the security of the Internet domain name system or the security of other information networks and systems. The GAO is also directed to include a definition of the term "multistakeholder model" as used by the NTIA with respect to Internet policymaking and governance, and definitions of any other terms necessary to understand the matters covered by the report. H.R. 805 was referred to the House Committee on Energy and Commerce. In the Senate, S.Res. 71 —designating the week of February 8 through February 14, 2015, as "Internet Governance Awareness Week"—was introduced by Senator Hatch on February 5, 2015. S.Res. 71 seeks to increase public awareness regarding NTIA's proposed transition, encourage public education about the importance of the transition process, and call the attention of the participants at the ICANN meeting in Singapore to the importance of designing accountability and governance reforms to best prepare ICANN for executing the responsibilities that it may receive under any transition of the stewardship of the IANA functions. S.Res. 71 was passed by the Senate on February 5, 2015. On February 25, 2015, the Senate Committee on Commerce, Science, and Transportation held a hearing entitled "Preserving the Multistakeholder Model of Internet Governance." Testimony was heard from NTIA, ICANN, and others on the status of the transition. ICANN has convened a process through which the multistakeholder community will attempt to come to consensus on a transition proposal. The process is divided into two separate but related parallel tracks: (1) IANA Stewardship Transition and (2) Enhancing ICANN Accountability. Based on feedback received from the Internet community at its March 2014 meeting in Singapore, ICANN put out for public input and comment a draft proposal of Principles, Mechanisms and Process to Develop a Proposal to Transition NTIA 's Stewardship of the IANA F unctions . Under the draft proposal, a steering group would be formed "to steward the process in an open, transparent, inclusive, and accountable manner." The steering group would be composed of representatives of each ICANN constituency and of parties directly affected by the transition of IANA functions (for example, Internet standards groups and Internet number resource organizations). On June 6, 2014, after receiving public comments on the steering group draft proposal, ICANN announced the formation of a Coordination Group which is responsible for preparing a transition proposal. The IANA Stewardship Transition Coordination Group (ICG) is comprised of 30 individuals representing 13 communities. These representatives were selected by their respective communities. On August 27, 2014, the ICG released its charter, which states that its mission is "to coordinate the development of a proposal among the communities affected by the IANA functions." The ICG has requested a proposal for each of the three primary IANA functions (protocol parameters, numbering, and domain name-related functions) to be developed by the three operational communities associated with each of those primary functions. Upon receipt of the three proposals, the ICG will work to develop a single consolidated proposal. The three proposals and their current status break out as follows: Domain Names—developed by the Cross Community Working Group to Develop an IANA Stewardship Transition Proposal on Naming Related Functions (CWG-Stewardship). This proposal is still in progress. The best case scenario for submitting a final proposal to the ICG is June 2015. Number Resources—Consolidated RIR (Regional Internet Registries) IANA Stewardship Proposal Team (CRISP Team). The five RIRs, which are shepherding the development of the numbering proposal, submitted the final proposal to the ICG on January 15, 2015. Protocol Parameters—IANAPLAN Working Group (IANAPLAN WG). The Internet Engineering Task Force (IETF), which is shepherding the protocol parameter proposal, finalized and submitted its proposal to the ICG on January 6, 2015. While the Number Resources and the Protocol Parameter proposals were completed in January 2015, consensus on a domain name function proposal has proven more difficult to reach, with the CWG-Stewardship group unable to meet an initial January 2015 deadline that has now been extended—under a best case scenario—to June 2015. This is perhaps due to the fact that both numbering and protocols are currently performed by external groups that already perform these activities under contract with ICANN. The domain name IANA function is performed by ICANN itself (under contract to NTIA), and the question of how to transition away from the NTIA contract with respect to the domain naming function is inherently more complex and controversial. The main debate within the multistakeholder community is whether a new organization should be created to oversee the IANA function contract (an external solution), or whether ICANN itself—subject to enhanced accountability measures—should be given authority over the IANA function (an internal solution). In parallel with the IANA stewardship transition process, ICANN has initiated a separate but related process on how to enhance ICANN's accountability. The purpose of this process is to ensure that ICANN will remain accountable to Internet stakeholders if and when ICANN is no longer subject to the IANA contract with the U.S. government. Specifically, the process is to examine how ICANN's broader accountability mechanisms should be strengthened to address the potential absence of its historical contractual relationship with the DOC, including looking at strengthening existing accountability mechanisms (e.g., the ICANN bylaws and the Affirmation of Commitments). To implement the accountability process, ICANN has formed a Cross Community Working Group (CCWG) that will develop proposals to enhance ICANN's accountability toward all stakeholders. The CCWG-Accountability is comprised of 25 members appointed by chartering organizations and 141 participants contributing to mailing list conversations and meetings. Decisions will be made by consensus. Additionally, the CCWG will be open to any interested person as a participant. Participants will be able to attend and participate in all meetings, but will not be part of any consensus or decision-making process. Additionally, up to seven advisors, to be selected by a Public Experts Group, will provide the CCWG with independent advice and research and identify best practices at an early stage of deliberation. Other members of the CCWG include an ICANN staff member, a past participant in the Accountability and Transparency Review Team(s), a liaison with the IANA Stewardship Transition Coordination Group (ICG), and an ICANN Board liaison. All of those individuals will participate but are not part of the decision-making process. The CCWG is pursuing two interrelated Work Streams. Work Stream 1 focuses on mechanisms enhancing ICANN accountability that must be in place or committed to within the time frame of the IANA Stewardship Transition, which can take place as early as September 30, 2015. Work Stream 2 focuses on addressing accountability topics for which a timeline for developing solutions and full implementation may extend beyond the IANA Stewardship Transition. If approved by all or most of the CCWG chartering organizations, an accountability proposal will be submitted to the ICANN Board, which can approve the proposal or send it back to the CCWG for modification or reconsideration. Any decision by the Board not to implement a recommendation (or a portion of a recommendation) is to be accompanied by a detailed rationale. According to ICANN, the Workstream 1 proposal is to be submitted to the ICANN Board in June 2015, while the Workstream 2 proposal is to be submitted sometime after the ICANN 54 meeting, which will be held October 2015. NTIA will ultimately have to approve the multistakeholder community proposal in order for transition to take place. Given that Congress has prohibited NTIA from spending any FY2015 appropriated funds on relinquishing its responsibility with respect to Internet domain name system functions, many observers have wondered what role NTIA will play during the transition process. At the 2015 State of the Net Conference, NTIA Administrator Lawrence Strickling stated: we will not use appropriated funds to terminate the IANA functions contract with ICANN prior to the contract's current expiration date of September 30, 2015. Nor will we use appropriated dollars to amend the cooperative agreement with Verisign to eliminate NTIA's role in approving changes to the authoritative root zone file prior to September 30. On these points, there is no ambiguity. The legislative language, however, makes it equally clear that Congress did not expect us to sit on the sidelines this year. The act imposes regular reporting requirements on NTIA to keep Congress apprised of the transition process. To meet those requirements, NTIA will actively monitor the discussions and activities within the multistakeholder community as it develops the transition plan. We will participate in meetings and discussions with ICANN, Verisign, other governments and the stakeholder community with respect to the transition. We will continue to represent the United States at the meetings of ICANN's Governmental Advisory Committee. We will provide informal feedback where appropriate. We are as aware as anyone that we should not do anything that interferes with an open and participatory multistakeholder process. We support a process where all ideas are welcome and where participants are able to test fully all transition options. Nonetheless, the community should proceed as if it has only one chance to get this right. Everyone has the responsibility to participate as they deem appropriate. If, by asking questions, we can ensure that the community develops a well-thought-out plan that answers all reasonable concerns, we will do so. Administrator Strickling called on the CWG-Stewardship group to equally consider all transition proposal models and to ensure that any new organizational structures created to replace NTIA's oversight of the IANA functions contract be itself accountable and not susceptible to inefficiencies and politicization. With respect to the accountability process (CCWG-Accountability), NTIA stated that: it is critical that this group conduct "stress testing" of proposed solutions to safeguard against future contingencies such as attempts to influence or take over ICANN – be it the Board, staff or any stakeholder group—that are not currently possible given its contract with NTIA. We also encourage this group to address questions such as how to remove or replace board members should stakeholders lose confidence in them and how to incorporate and improve current accountability tools like the reviews called for by the Affirmation of Commitments. Finally, NTIA has stated that both transition processes (IANA function stewardship and accountability) should remain in sync, and that NTIA will only consider a coordinated and complete transition plan. As regards the timing, NTIA has stated: As for timing, both groups are aiming to deliver a transition plan to us in the summer. While September 2015 has been a target date, because that is when the base period of our contract with ICANN expires, we have the flexibility to extend the contract if the community needs more time to develop the best plan possible. Because cyberspace and the Internet transcend national boundaries, and because the successful functioning of the DNS relies on participating entities worldwide, ICANN is by definition an international organization. Both the ICANN Board of Directors and the various constituency groups who influence and shape ICANN policy decisions are composed of members from all over the world. Additionally, ICANN's Governmental Advisory Committee (GAC), which is composed of government representatives of nations worldwide, provides advice to the ICANN Board on public policy matters and issues of government concern. Although the ICANN Board is required to consider GAC advice and recommendations, it is not obligated to follow those recommendations. Many in the international community, including foreign governments, have argued that it is inappropriate for the U.S. government to maintain its legacy authority over ICANN and the DNS, and have suggested that management of the DNS should be accountable to a higher intergovernmental body. The United Nations, at the December 2003 World Summit on the Information Society (WSIS), debated and agreed to study the issue of how to achieve greater international involvement in the governance of the Internet and the domain name system in particular. The study was conducted by the U.N.'s Working Group on Internet Governance (WGIG). On July 14, 2005, the WGIG released its report, stating that no single government should have a preeminent role in relation to international Internet governance. The report called for further internationalization of Internet governance, and proposed the creation of a new global forum for Internet stakeholders. Four possible models were put forth, including two involving the creation of new Internet governance bodies linked to the U.N. Under three of the four models, ICANN would either be supplanted or made accountable to a higher intergovernmental body. The report's conclusions were scheduled to be considered during the second phase of the WSIS held in Tunis in November 2005. U.S. officials stated their opposition to transferring control and administration of the domain name system from ICANN to any international body. Similarly, the 109 th Congress expressed its support for maintaining U.S. control over ICANN ( H.Con.Res. 268 and S.Res. 323 ). The European Union (EU) initially supported the U.S. position. However, during September 2005 preparatory meetings, the EU seemingly shifted its support towards an approach which favored an enhanced international role in governing the Internet. Conflict at the WSIS Tunis Summit over control of the domain name system was averted by the announcement, on November 15, 2005, of an Internet governance agreement between the United States, the EU, and over 100 other nations. Under this agreement, ICANN and the United States maintained their roles with respect to the domain name system. A new international group under the auspices of the U.N. was formed—the Internet Governance Forum (IGF)—which provides an ongoing forum for all stakeholders (both governments and nongovernmental groups) to discuss and debate Internet policy issues. The IGF does not have binding authority and was slated to run through 2010. In December 2010, the U.N. General Assembly renewed the IGF for another five years and tasked the U.N.'s Commission on Science and Technology for Development (CSTD) to develop a report and recommendations on how the IGF might be improved. A Working Group on Improvements to the Internet Governance Forum was formed, which includes 22 governments (including the United States) and the participation of Internet stakeholder groups. Starting in 2010 and 2011, controversies surrounding the roll-out of new generic top level domains (gTLDs) and the addition of the .xxx TLD led some governments to argue for increased government influence on the ICANN policy development process. Governments such as the United States, Canada, and the European Union, while favoring the current ICANN multistakeholder model of DNS governance, have advocated an enhanced role for the Governmental Advisory Committee (GAC) on ICANN policy decisions. Other nations—such as Brazil, South Africa, and India (referred to as IBSA)—favored the creation of an Internet policy development entity within the U.N. system, whose purview would include integrating and overseeing existing bodies (such as ICANN) that are responsible for the technical and operational functioning of the Internet. A third group of nations, including Russia and China, proposed a voluntary "International Code of Conduct for Information Security," for further discussion in the General Assembly of the U.N. The Code included language that promotes the establishment of a multilateral, transparent, and democratic international management of the Internet. On January 13, 2015, the same group of nations released a revised International Code of Conduct for Information Security, which states that "all States must play the same role in, and carry equal responsibility for, international governance of the Internet, its security, continuity and stability of operation, and its development in a way which promotes the establishment of multilateral, transparent and democratic international Internet governance mechanisms which ensure an equitable distribution of resources, facilitate access for all and ensure the stable and secure functioning of the Internet ." The World Conference on International Telecommunications (WCIT) was held in Dubai on December 3-14, 2012. Convened by the International Telecommunications Union (the ITU, an agency within the United Nations), the WCIT was a formal meeting of the world's national governments held in order to revise the International Telecommunications Regulations (ITRs). The ITRs, previously revised in 1988, serve as a global treaty outlining the principles which govern the way international telecommunications traffic is handled. Because the existing 24-year-old ITRs predated the Internet, one of the key policy questions in the WCIT was how and to what extent the updated ITRs should address Internet traffic and Internet governance. The Administration and Congress took the position that the new ITRs should continue to address only traditional international telecommunications traffic, that a multistakeholder model of Internet governance (such as ICANN) should continue, and that the ITU should not take any action that could extend its jurisdiction or authority over the Internet. As the WCIT approached, concerns heightened in the 112 th Congress that the WCIT might potentially provide a forum leading to an increased level of intergovernmental control over the Internet. On May 31, 2012, the House Committee on Energy and Commerce, Subcommittee on Communications and Technology, held a hearing entitled, "International Proposals to Regulate the Internet." To accompany the hearing, H.Con.Res. 127 was introduced by Representative Bono Mack expressing the sense of Congress regarding actions to preserve and advance the multistakeholder governance model. Specifically, H.Con.Res. 127 expressed the sense of Congress that the Administration "should continue working to implement the position of the United States on Internet governance that clearly articulates the consistent and unequivocal policy of the United States to promote a global Internet free from government control and preserve and advance the successful multistakeholder model that governs the Internet today." H.Con.Res. 127 was passed unanimously by the House (414-0) on August 2, 2012. A similar resolution, S.Con.Res. 50 , was introduced into the Senate by Senator Rubio on June 27, 2012, and referred to the Committee on Foreign Relations. The Senate resolution expressed the sense of Congress "that the Secretary of State, in consultation with the Secretary of Commerce, should continue working to implement the position of the United States on Internet governance that clearly articulates the consistent and unequivocal policy of the United States to promote a global Internet free from government control and preserve and advance the successful multistakeholder model that governs the Internet today." S.Con.Res. 50 was passed by the Senate by unanimous consent on September 22, 2012. On December 5, 2012—shortly after the WCIT had begun in Dubai—the House unanimously passed S.Con.Res. 50 by a vote of 397-0. During the WCIT, a revision to the ITRs was proposed and supported by Russia, China, Saudi Arabia, Algeria, and Sudan that sought to explicitly extend ITR jurisdiction over Internet traffic, infrastructure, and governance. Specifically, the proposal stated that "Member States shall have the sovereign right to establish and implement public policy, including international policy, on matters of Internet governance." The proposal also included an article establishing the right of Member States to manage Internet numbering, naming, addressing, and identification resources. The proposal was subsequently withdrawn. However, as an intended compromise, the ITU adopted a nonbinding resolution (Resolution 3, attached to the final ITR text) entitled, "To Foster an enabling environment for the greater growth of the Internet." Resolution 3 includes language stating "all governments should have an equal role and responsibility for international Internet governance" and invites Member States to "elaborate on their respective positions on international Internet-related technical, development and public policy issues within the mandate of ITU at various ITU forums.... " Because of the inclusion of Resolution 3, along with other features of the final ITR text (such as new ITR articles related to spam and cybersecurity), the United States declined to sign the treaty. While the WCIT in Dubai is concluded, the international debate over Internet governance is expected to continue in future intergovernmental telecommunications meetings and conferences. The 113 th Congress will likely monitor this ongoing debate and oversee the U.S. government's efforts to oppose any future proposals for intergovernmental control over the Internet and the domain name system. On April 16, 2013, H.R. 1580 , a bill "To Affirm the Policy of the United States Regarding Internet Governance," was introduced by Representative Walden. Using language similar to the WCIT-related congressional resolutions passed by the 112 th Congress ( S.Con.Res. 50 and H.Con.Res. 127 ), H.R. 1580 states that "It is the policy of the United States to preserve and advance the successful multistakeholder model that governs the Internet." On May 14, 2013, H.R. 1580 was passed unanimously (413-0) by the House of Representatives. In October 2013, the President of ICANN and the leaders of other major organizations responsible for globally coordinating Internet technical infrastructure met in Montevideo, Uruguay, and released a statement calling for strengthening the current mechanisms for global multistakeholder Internet cooperation. Their recommendations included the following: They reinforced the importance of globally coherent Internet operations, and warned against Internet fragmentation at a national level. They expressed strong concern over the undermining of the trust and confidence of Internet users globally due to recent revelations of pervasive monitoring and surveillance. They identified the need for ongoing effort to address Internet Governance challenges, and agreed to catalyze community-wide efforts towards the evolution of global multistakeholder Internet cooperation. They called for accelerating the globalization of ICANN and IANA functions, towards an environment in which all stakeholders, including all governments, participate on an equal footing. The day after the Montevideo Statement was released, the President of ICANN met with the President of Brazil, who announced plans to hold an international Internet governance summit in April 2014 that would include representatives from government, industry, civil society, and academia. NETmundial, which was described as a "global multistakeholder meeting on the future of Internet governance," was held on April 23-24, 2014, in Sao Paulo, Brazil. The meeting was open to all interested stakeholders, and was intended to "focus on crafting Internet governance principles and proposing a roadmap for the further evolution of the Internet governance ecosystem." The outcome of NETmundial produced a nonbinding "NETmundial Multistakeholder Statement" that set forth general Internet governance principles and identified issues to be discussed at future meetings on the future evolution of Internet governance. According to the U.S. government delegation at NETmundial, the meeting outcome reaffirmed the multistakeholder model of Internet governance, endorsed the transition of the U.S. government's stewardship role of IANA functions to the global multistakeholder community, emphasized the importance of strengthening and expanding upon the mandate of the Internet Governance Forum, and underscored the importance of human rights in the implementation of a free and open Internet. On November 17, 2013, ICANN announced the formation of a Panel on the Future of Global Internet Cooperation, which will be composed of stakeholders from government, civil society, the private sector, the technical community, and international organizations. Representing a multistakeholder approach to Internet governance, the Panel prepared a report to "include principles for global Internet cooperation, proposed frameworks for such cooperation and a roadmap for future Internet governance challenges." The report, Towards a Collaborative, Decentralized Internet Governance Ecosystem , was released in May 2014. On August 28, 2014, the creation of a NETmundial Initiative for Internet Governance Cooperation and Development was announced by the World Economic Forum in partnership with ICANN and other governmental, industry, academic, and civil society stakeholders. While having no formal relationship with the April 2014 NETmundial summit held in Brazil, the purpose of the NETmundial Initiative is "to apply the NETmundial Principles to solve issues in concrete ways to enable an effective and distributed approach to Internet cooperation and governance." The ITU's three-week Plenipotentiary Conference in Busan, Republic of Korea, concluded on November 7, 2014. The purpose of the conference, which meets every four years, is to set ITU general policies, adopt four-year strategic and financial plans, and elect ITU officials. Prior to the conference, the U.S. delegation (headed by the State Department) had concerns that some ITU members would attempt to expand ITU's role in Internet governance. In the view of the State Department, the conference concluded successfully, with "the member states decid[ing] not to expand the ITU's role in Internet governance or cybersecurity issues, accepting that many of those issues are outside of the mandate of the ITU." Top Level Domains (TLDs) are the suffixes that appear at the end of an address (after the "dot"). TLDs can be either a country code such as .us, .uk, or .jp, or a generic TLD (gTLD ) such as .com, .org, or .gov. Prior to ICANN's establishment, there were eight gTLDs (.com, .org, .net, .gov, .mil, .edu, .int, and .arpa). In 2000 and 2004, ICANN held application rounds for a limited number of new gTLDs; there are currently 22 gTLDs in operation. Some are reserved or restricted to particular types of organizations (e.g., .museum, .gov, .travel) and others are open for registration by anyone (.com, .org, .info). Applicants for new gTLDs are typically commercial and non-profit organizations who seek to become ICANN-recognized registries that will establish and operate name servers for their TLD registry, as well as implement a domain name registration process for that particular TLD. With the growth of the Internet and the accompanying growth in demand for domain names, debate focused on whether and how to further expand the number of gTLDs. Beginning in 2005, ICANN embarked on a long consultative process to develop rules and procedures for introducing and adopting an indefinite number of new gTLDs into the domain name system. A new gTLD can be any word or string of characters that is applied for and approved by ICANN. Between 2008 and 2011, ICANN released seven iterations of its gTLD Applicant Guidebook (essentially the rulebook for how the new gTLD program will be implemented). On June 20, 2011, the ICANN Board of Directors voted to approve the launch of the new gTLD program, under which potentially hundreds of new gTLDs could ultimately be approved by ICANN and introduced into the DNS. Applications for new gTLDs were to be accepted from January 12 through April 12, 2012, and an application or evaluation fee of $185,000 is required. ICANN's approval of the new gTLD program has been controversial, with many trademark holders pointing to possible higher costs and greater difficulties in protecting their trademarks across hundreds of new gTLDs. Similarly, governments expressed concern over intellectual property protections, and, along with law enforcement entities, also cited concerns over the added burden of combating various cybercrimes (such as phishing and identity theft) across hundreds of new gTLDs. Throughout ICANN's policy development process, governments, through the Governmental Advisory Committee, advocated for additional intellectual property protections in the new gTLD process. The GAC also argued for more stringent rules that would allow for better law enforcement in the new domain space to better protect consumers. While changes were made, strong opposition from many trademark holders led to opposition from some parts of the U.S. government towards the end of 2011, including the Senate Committee on Commerce, Science and Transportation, the House Committee on Energy and Commerce, the House Judiciary Committee, and the Federal Trade Commission. At December 2011 House and Senate hearings, ICANN stated its intention to proceed with the gTLD expansion as planned. ICANN defended its gTLD program, arguing that the new gTLDs will offer more protections for consumers and trademark holders than current gTLDs; that new gTLDs will provide needed competition, choice, and innovation to the domain name system; and that critics have already had ample opportunity to contribute input during a seven-year deliberative policy development process. Ultimately, ICANN did not delay the initiation of the new gTLD program, and the application window was opened on January 12, 2012. On June 13, 2012, ICANN announced it had received 1,930 applications for new gTLDs, including 66 geographic name applications and 116 Internationalized Domain Names (IDNs) in scripts such as Chinese, Arabic, and Cyrillic. With the applications received, ICANN moved into the evaluation phase. ICANN will decide whether or not to accept each of the 1,930 new gTLD applications. The process is multi-tiered and complex. Depending on whether an extended evaluation is required, whether there are objections filed requiring dispute resolution, and whether there is string contention (where one or more qualified applicants are applying for the same gTLD), it could take anywhere from 9 to 20 months (from the time the application window closed on May 30) for a new gTLD to be approved and delegated into the domain name system (DNS). All of the rules, procedures, and policies related to the evaluation of the new gTLDs are provided in ICANN's gTLD Applicant Guidebook, Version 2012-06-04 . As of February 28, 2015, 521 gTLDs have been added to the Internet, and 894 gTLDs are currently proceeding through the process. With the first round application period concluded, there remain significant issues in play as the new gTLD program goes forward. First, ICANN has stated that a second and subsequent round will take place, and that changes to the application and evaluation process will be made such that a "systemized manner of applying for gTLDs be developed in the long term." Second, as the new gTLDs go "live," many stakeholders are concerned that various forms of domain name abuse (e.g., trademark infringement, consumer fraud, malicious behavior, etc.) could manifest themselves within the hundreds of new gTLD domain spaces. Thus, the effectiveness of ICANN's approach to addressing such issues as intellectual property protection of second level domain names and mitigating unlawful behavior in the domain name space will be of interest as the new gTLD program goes forward. Domain names have been viewed by some policymakers as a tool that could be used to protect children from obscene or indecent material on the Internet. In the 107 th Congress, legislation was enacted to create a "kids-friendly top level domain name" that would contain only age-appropriate content. The Dot Kids Implementation and Efficiency Act of 2002 was signed into law on December 4, 2002 ( P.L. 107-317 ), and authorized NTIA to require the .us registry operator (currently NeuStar) to establish, operate, and maintain a second level domain within the .us TLD (kids.us) that is restricted to material suitable for minors. An opposite approach—establishing an adult content top level domain name that could be filtered by parents—has also been considered. In past Congresses, two bills were introduced to require the Department of Commerce to compel ICANN to establish a mandatory top level domain name (such as .xxx) for material that is deemed "harmful to minors." The bills were S. 2426 (109 th Congress), which was introduced by Senator Baucus, and S. 2137 (107 th Congress), which was introduced by Senator Landrieu. Neither of those bills advanced beyond introduction. Meanwhile, as part of its process to add new generic top-level domains (gTLDs), ICANN repeatedly considered (since 2000) whether to allow the establishment of a gTLD for adult content. On June 1, 2005, ICANN announced that it had entered into commercial and technical negotiations with a registry company (ICM Registry) to operate a new ".xxx" domain, which would be designated for use by adult websites. Registration by adult websites into the .xxx domain would be purely voluntary, and those sites would not be required to give up their existing (for the most part, .com) sites. Announcement of a possible .xxx domain proved highly controversial. With the ICANN Board scheduled to consider final approval of the .xxx domain on August 16, 2005, the Department of Commerce sent a letter to ICANN requesting that adequate additional time be provided to allow ICANN to address the objections of individuals expressing concerns about the impact of pornography on families and children and opposing the creation of a new top level domain devoted to adult content. ICANN's Governmental Advisory Committee (GAC) also requested more time before the final decision. At the March 2006 Board meeting in New Zealand, the ICANN Board authorized ICANN staff to continue negotiations with ICM Registry to address concerns raised by the DOC and the GAC. However, on May 10, 2006, the Board voted 9-5 against accepting the proposed agreement, but did not rule out accepting a revised agreement. Subsequently, on January 5, 2007, ICANN published for public comment a proposed revised agreement with ICM Registry to establish a .xxx domain. However, on March 30, 2007, the ICANN Board voted 9-5 to deny the .xxx domain, citing its reluctance to possibly assume an ongoing management and oversight role with respect to Internet content. ICM Registry subsequently challenged ICANN's decision before an Independent Review Panel (IRP), claiming that ICANN's rejection of ICM's application for a .xxx gTLD was not consistent with ICANN's Articles of Incorporation and Bylaws. On February 19, 2010, the three-person Independent Review Panel (from the International Centre for Dispute Resolution) ruled primarily in favor of ICM Registry, finding that its application for the .xxx TLD had met the required criteria, and that the ICANN Board's reversal of its initial approval "was not consistent with the application of neutral, objective and fair documented policy." The IRP decision was not binding; it was the ICANN Board of Directors' decision to determine how to proceed and whether ICM's application to operate a .xxx TLD should ultimately be approved. At ICANN's March 2010 meeting in Nairobi, the Board voted to postpone any decision about the .xxx TLD, and directed ICANN's CEO and general counsel to write a report examining possible options. On June 25, 2010, at the ICANN meeting in Brussels, the Board voted to allow ICM's .xxx application to move forward. The Board approved next steps for the application, including expedited due diligence by ICANN staff, negotiations between ICANN and ICM on a draft registry agreement, and consultation with ICANN's Governmental Advisory Committee (GAC). At the December ICANN meeting in Cartegena, Colombia, the ICANN Board passed a resolution stating that while "it intends to enter into a registry agreement with ICM Registry for the .xxx TLD," the Board will enter into a formal consultation with the Governmental Advisory Committee on areas where the Board's decision is in conflict with GAC advice relating to the ICM application. A February 2011 letter from ICANN to the GAC acknowledged and responded to areas where approving the .xxx registry agreement with ICM would conflict with GAC advice received by ICANN. With the GAC not offering approval of .xxx (and continuing to raise specific objections), the ICANN Board acknowledged that the Board and the GAC were not able to reach a mutually acceptable solution. Ultimately, on March 18, 2011, at the ICANN meeting in San Francisco, the ICANN Board approved a resolution giving the CEO or General Counsel of ICANN the authority to execute the registry agreement with ICM to establish a .xxx TLD. The vote was nine in favor, three opposed, and four abstentions. The .xxx top level domain became available to all registrants starting in December 2011. The security and stability of the Internet has always been a preeminent goal of DNS operation and management. One issue of recent concern is an intrinsic vulnerability in the DNS which allows malicious parties to distribute false DNS information. Under this scenario, Internet users could be unknowingly redirected to fraudulent and deceptive websites established to collect passwords and sensitive account information. A technology called DNS Security Extensions (DNSSEC) has been developed to mitigate those vulnerabilities. DNSSEC assures the validity of transmitted DNS addresses by digitally "signing" DNS data via electronic signature. "Signing the root" (deploying DNSSEC on the root zone) is a necessary first and critical step towards protecting against malicious attacks on the DNS. On October 9, 2009, NTIA issued a Notice of Inquiry (NOI) seeking public comment on the deployment of DNSSEC into the Internet's DNS infrastructure, including the authoritative root zone. On June 3, 2009, NTIA and the National Institute of Standards and Technology (NIST) announced plans to work with ICANN and VeriSign to develop an interim approach for deploying DNSSEC in the root zone. On June 9, 2010, NTIA filed a notice in the Federal Register seeking public comments on its testing and evaluation report and its intention to proceed with the final stages of domain name system security extensions implementation in the authoritative root zone. On July 15, 2010, ICANN published the root zone trust anchor and root operators began to serve the signed root zone with actual keys, thereby making the signed root zone available. Ultimately, DNSSEC must be voluntarily adopted by registries, registrars, and the thousands of DNS server operators around the world in order to effectively deploy DNSSEC at all levels to maximize protection against fraudulent DNS redirection of Internet traffic. Any person or entity who registers a domain name is required to provide contact information (phone number, address, email) which is entered into a public online database (the "WHOIS" database). The scope and accessibility of WHOIS database information has been an issue of contention. Privacy advocates have argued that access to such information should be limited, while many businesses, intellectual property interests, law enforcement agencies, and the U.S. government have argued that complete and accurate WHOIS information should continue to be publicly accessible. ICANN has debated this issue through its Generic Names Supporting Organization (GNSO), which is developing policy recommendations on what data should be publicly available through the WHOIS database. On April 12, 2006, the GNSO approved an official "working definition" for the purpose of the public display of WHOIS information. The GNSO supported a narrow technical definition favored by privacy advocates, registries, registrars, and non-commercial user constituencies, rather than a more expansive definition favored by intellectual property interests, business constituencies, Internet service providers, law enforcement agencies, and the Department of Commerce (through its participation in ICANN's Governmental Advisory Committee). At ICANN's June 2006 meeting, opponents of limiting access to WHOIS data continued urging ICANN to reconsider the working definition. On October 31, 2007, the GNSO voted to defer a decision on WHOIS database privacy and recommended more studies. The GNSO also rejected a proposal to allow Internet users the option of listing third party contact information rather than their own private data. Currently, the GNSO is exploring several extensive studies of WHOIS. On June 22, 2011, the ICANN announced the initiation of four separate studies of WHOIS, which were recommended by the Governmental Advisory Committee (GAC) in 2008. The studies examine WHOIS "misuse," WHOIS registrant identification, WHOIS proxy and privacy "abuse," and the feasibility of a WHOIS proxy and privacy reveal study. Meanwhile, a WHOIS policy review team, established by the Affirmation of Commitments, began its first review of WHOIS policy on October 1, 2010. The team issued its final report on May 11, 2012. The report issued 16 recommendations for strengthening WHOIS, including those related to registrar compliance and improving WHOIS data accuracy and access. On November 8, 2012, the ICANN Board approved a resolution directing the ICANN CEO to launch a new effort to redefine the purpose of collecting, maintaining, and providing access to gTLD registration data, and to consider safeguards for protecting that data. On June 6, 2014, an Expert Working Group released its final report detailing recommendations to the ICANN Board for a next-generation Registration Directory Service to replace the current WHOIS system. ICANN is currently developing next steps for how to implement the Expert Working Group report. Ever since the domain name system has been opened to commercial users, the ownership and registration of domain names has raised intellectual property concerns. The White Paper called upon the World Intellectual Property Organization (WIPO) to develop a set of recommendations for trademark/domain name dispute resolutions, and to submit those recommendations to ICANN. At ICANN's August 1999 meeting in Santiago, the board of directors adopted a dispute resolution policy to be applied uniformly by all ICANN-accredited registrars. Under this policy, registrars receiving complaints will take no action until receiving instructions from the domain-name holder or an order of a court or arbitrator. An exception is made for "abusive registrations" (i.e., cybersquatting and cyberpiracy), whereby a special administrative procedure (conducted largely online by a neutral panel, lasting 45 days or less, and costing about $1,000) will resolve the dispute. Implementation of ICANN's Domain Name Dispute Resolution Policy commenced on December 9, 1999. Meanwhile, the 106 th Congress passed the Anticybersquatting Consumer Protection Act (incorporated into P.L. 106-113 , the FY2000 Consolidated Appropriations Act). The act gives courts the authority to order the forfeiture, cancellation, and/or transfer of domain names registered in "bad faith" that are identical or similar to trademarks, and provides for statutory civil damages of at least $1,000, but not more than $100,000, per domain name identifier. Currently, intellectual property is one of the key issues driving the debate over ICANN's addition of new generic top level domain names, with many trademark holders, industry groups, and governments arguing that a proliferation of new gTLDs could compromise intellectual property and increase the costs of protecting trademarks. Domain names have also recently been viewed as a possible way to address piracy of online content. In the 112 th Congress, S. 968 , the Protecting Real Online Threats to Economic Creativity and Theft of Intellectual Property Act (PROTECT IP), and H.R. 3261 , the Stop Online Piracy Act (SOPA), were introduced to prohibit Internet service providers from directing Internet traffic to domain names with infringing content. Many of the technical, operational, and management decisions regarding the DNS can have significant impacts on Internet-related policy issues such as intellectual property, privacy, Internet freedom, e-commerce, and cybersecurity. As such, decisions made by ICANN affect Internet stakeholders around the world. In transferring management of the DNS to the private sector, the key policy question has always been how to best ensure achievement of the White Paper principles: Internet stability and security, competition, private and bottom-up policymaking and coordination, and fair representation of the global Internet community. What is the best process to ensure these goals, and how should various stakeholders—companies, institutions, individuals, governments—fit into this process? Controversies such as the new gTLDs and .xxx have led some governments to criticize the ICANN policymaking process, and to suggest various ways to increase governmental influence over that process, whether it be an enhanced role for the GAC or a greater role for a U.N.-based or multilateral entity. With the increasing impact of the Internet on virtually all aspects of modern society, some governments argue that they should have an enhanced role in developing Internet policies that will affect their citizens. On the other hand, defenders of the multistakeholder model argue that the phenomenal growth of the Internet has been and will continue to be fostered by a bottom-up, consensus approach, which serves to protect policy decisions from the political and bureaucratic control of national governments and international and multilateral institutions. The 114 th Congress is likely to closely examine NTIA's March 14, 2014, proposed transitioning of its authority over ICANN and the DNS to a wholly multistakeholder-driven entity. Congress will likely consider whether the proposed transition is in the best interest of the United States and in the best interest of the Internet. As a transition plan is developed by ICANN and the Internet community, Congress will likely monitor and evaluate that plan, and seek assurances that a DNS free of U.S. government stewardship will remain stable, secure, resilient, and open. As part of its examination, Congress will likely continue assessing to what extent ongoing and future intergovernmental telecommunications conferences constitute an opportunity for some nations to increase intergovernmental control over the Internet, and how effectively NTIA and other government agencies (such as the State Department) are working to counteract that threat. Ultimately, how these issues are addressed could have profound impacts on the continuing evolution of ICANN, the DNS, and the Internet. | Navigating the Internet requires using addresses and corresponding names that identify the location of individual computers. The Domain Name System (DNS) is the distributed set of databases residing in computers around the world that contain address numbers mapped to corresponding domain names, making it possible to send and receive messages and to access information from computers anywhere on the Internet. Many of the technical, operational, and management decisions regarding the DNS can have significant impacts on Internet-related policy issues such as intellectual property, privacy, Internet freedom, e-commerce, and cybersecurity. The DNS is managed and operated by a not-for-profit public benefit corporation called the Internet Corporation for Assigned Names and Numbers (ICANN). Because the Internet evolved from a network infrastructure created by the Department of Defense, the U.S. government originally owned and operated (primarily through private contractors) the key components of network architecture that enable the domain name system to function. A 1998 Memorandum of Understanding (MOU) between ICANN and the Department of Commerce (DOC) initiated a process intended to transition technical DNS coordination and management functions to a private-sector not-for-profit entity. Additionally, a contract between DOC and ICANN authorizes ICANN to perform various technical functions such as allocating IP address blocks, editing the root zone file, and coordinating the assignment of unique protocol numbers. By virtue of this contract and two other legal agreements, DOC exerts a legacy authority and stewardship over ICANN, and arguably has more influence over ICANN and the DNS than other national governments. On March 14, 2014, the DOC's National Telecommunications and Information Administration (NTIA) announced its intention to transition its stewardship role and procedural authority over key domain name functions to the global Internet multistakeholder community. If a satisfactory transition and Internet governance mechanism can be achieved, NTIA stated that it would let its contract with ICANN expire as early as September 30, 2015. NTIA has also stated that it will not accept any transition proposal that would replace the NTIA role with a government-led or an intergovernmental organization solution. Legislation was introduced into the 113th Congress seeking to limit NTIA's ability to transfer its authority over certain domain name functions. Ultimately, the 113th Congress enacted two legislative provisions that address NTIA's proposed transition. Section 540 of the Consolidated and Further Continuing Appropriations Act, 2015 (P.L. 113-235) provided that during FY2015, NTIA may not use any appropriated funds to relinquish its responsibility with respect to Internet domain name system functions. Meanwhile, Section 1639 of the FY2015 National Defense Authorization Act (P.L. 113-235) contained Sense of Congress language on the future of the Internet and the .mil top-level domain. In the 114th Congress, H.R. 805 (the DOTCOM Act of 2015) would prohibit NTIA from relinquishing responsibility over the Internet domain name system until the Government Accountability Office (GAO) submits a report to Congress examining the implications of the proposed transfer. In the Senate, S.Res. 71 (designating the week of February 8 through February 14, 2015, as "Internet Governance Awareness Week") seeks to increase public awareness regarding NTIA's proposed transition and emphasizes the importance of designing accountability and governance reforms to best prepare ICANN for executing the responsibilities that it may receive under the possible transition. S.Res. 71 was passed by the Senate on February 5, 2015. The 114th Congress is likely to closely examine the benefits and risks of NTIA's proposed transition of its authority over ICANN. As a transition plan is developed by ICANN and the Internet community, Congress will likely monitor and evaluate that plan, and seek assurances that an Internet and domain name system free of U.S. government stewardship will remain stable, secure, resilient, and open. Congress will also likely continue to monitor ICANN's rollout of the new generic top level domain (gTLD) program, while also assessing to what extent ongoing and future intergovernmental telecommunications conferences constitute an opportunity for some nations to increase intergovernmental control over the Internet. How these and other DNS-related issues (such as intellectual property, cybersecurity, and privacy) are ultimately addressed and resolved could have profound impacts on the continuing evolution of ICANN, the DNS, and the Internet. |
The Biomass Crop Assistance Program (BCAP) is intended to assist with some of the feedstock supply challenges facing the cellulosic biofuels industry. One ongoing hurdle for cellulosic biofuels development and manufacturing is the need for a constant supply of available biomass. However, the cellulosic biofuels industry has struggled with the quintessential "chicken and egg" problem—investors are reluctant to invest in processing plants based on a technology (i.e., the conversion of cellulosic biomass to biofuels) that has yet to achieve success at a commercial scale, while producers are unwilling to devote land and resources to planting a dedicated biomass crop without nearby biofuels plants to buy it. In other words, the development of a cellulosic biofuels industry hinges simultaneously on the effective availability and use of new biomass feedstocks. This report provides a description of BCAP's main components—annual & establishment payments, matching payments, and project areas—as outlined in USDA's final rule, along with a discussion of program funding and implementation issues. Annual U.S. ethanol production expanded rapidly between 2001 and 2011, rising from under 2 billion gallons to over 13 billion gallons during that period. To date, most biofuels production in the United States has been from corn starch. As a result, corn use for ethanol grew from a 7% share of the U.S. corn crop in 2001 to an estimated 40% share of the 2011 corn crop. Dedicating an increasing share of the U.S. corn harvest to ethanol production evoked fears of unintended market and environmental consequences. As a result of these and other concerns, policy makers sought to redirect their bioenergy policies to provide incentives for the research and development of new agriculture-based renewable fuels, especially second-generation biofuels (based on non-food crop biomass such as cellulose and algae), and to expand their distribution and use. In particular, through the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140 ), Congress established a goal of 36 billion gallons of biofuel use by 2022, including 16 billion gallons of cellulosic biofuels. Similarly, the 2008 farm bill (the Food, Conservation, and Energy Act of 2008, P.L. 110-246 ) included an energy title, Title IX, with a set of bioenergy programs administered primarily by the U.S. Department of Agriculture (USDA) that focused on non-corn-ethanol biofuels. Among the Title IX bioenergy programs of the 2008 farm bill is BCAP —authorized by Congress to support the establishment and production of eligible biomass crops for conversion to bioenergy in selected areas, and to assist agricultural and forest land owners and operators with collection, harvest, storage, and transportation (CHST) of eligible material for use in a biomass conversion facility. The 2014 farm bill (Agricultural Act of 2014; P.L. 113-79 ) extends BCAP through FY2018 with some modifications to its implementation and with new mandatory funding. Land Eligibility. Enrolled land eligibility is expanded by including land under expiring Conservation Reserve Program (CRP) or ACEP easement contracts. Eligible Material . Residue from crops receiving Title I payments is included as eligible material, while exclusions are extended to any whole grain from a Title I crop, as well as bagasse and algae. One- T ime E stablishment P ayments . These payments are limited to no more than 50% of the cost of establishment (down from 75%), not to exceed $500 per acre or $750/acre for socially disadvantaged farmers or ranchers. CHST M atching P ayments . These payments may not exceed $20 per dry ton (down from $45 per dry ton) and are available for a two-year period. In addition, CHST funding is now available for technical assistance. Not less than 10% or more than 50% of funding may be used for CHST. New BCAP Report . Not later than four years after enactment of the 2014 farm bill, USDA shall submit to the House and Senate Agriculture Committees another report on best practices from participants receiving assistance under BCAP. BCAP is administered by USDA's Farm Service Agency (FSA) and receives mandatory funding through the Commodity Credit Corporation (CCC). BCAP has two main statutory purposes: to support the establishment and production of eligible crops for conversion to bioenergy in selected areas; and to assist agricultural and forest land owners and operators with collection, harvest, storage, and transportation (CHST) of eligible material for use in a biomass conversation facility. To meet the above-stated statutory purposes, BCAP provides financial assistance to owners and operators of agricultural land and non-industrial private forest land who wish to establish, produce, and deliver biomass feedstocks. BCAP provides two categories of financial assistance: 1. establishment and annual payments , including a one-time payment of up to 50% of the cost of establishment for perennial crops, and annual payments (i.e., rental rates based on a set of criteria) of up to 5 years for non-woody and 15 years for woody perennial biomass crops; and 2. CHST matching payments , at a rate of $1 for each $1 per ton provided, up to $20 per ton, for a period of two years, which may be available to help eligible material owners with CHST of eligible material for use in a qualified biomass conversion facility. These two payments types—annual/establishment and matching—include different eligibility and sign-up requirements, payment rates, and contract lengths ( Table 1 ). BCAP's annual and establishment payments are available to certain producers who enter into contracts with USDA to produce eligible biomass crops on contract acres within designated BCAP project areas. They are intended to encourage longer-term investment by producers in dedicated biomass crops for bioenergy production. Producer eligibility under BCAP's establishment and annual payments is limited to approved project areas. BCAP establishment payments may cover up to 50% of the cost of establishing (i.e., clearing, planting, and seeding) a perennial crop, including woody biomass, within a project area. These costs may include the cost of seeds and stock for perennials; the cost of planting the perennial crop; and, for nonindustrial private forestlands, the cost of site preparation and tree planting. Previously established biomass crops, crops established using other federal sources, and annual crops are not eligible for establishment payments but may still be eligible for annual payments. BCAP annual payments would support up to 15 years of eligible woody crop production and 5 years of non-woody crop production. These payments would assist with the additional risk and possible forgone income associated with shifting away from traditional crop production. Annual payments are on a per-acre basis and would use market-based rental rates determined by FSA. Rental rate calculations are similar to those used for the CRP, a land conservation program under which farmers receive annual payments for removing environmentally sensitive land from agricultural production. Annual payments may be reduced by a percentage of the sum of both the value of the harvest/collection and any BCAP matching payments for several reasons, including if an eligible crop is delivered to the biomass conversion facility: for conversion to cellulosic biofuels (payments reduced by 1%); for conversion to advanced biofuels (payments reduced by 10%); or for conversion to heat, power, or biobased products (payments reduced by 25%); if an eligible crop is used for purposes other than conversion to heat, power, biobased products, or advanced biofuels (payments reduced by 100%); if the producer violates a term of the contract; or under other circumstances determined by USDA. As defined in statute, only private agricultural and non-industrial private forest lands are considered eligible under the annual and establishment payment portion of BCAP. Federal and state-owned lands are ineligible. Lands enrolled in existing land retirement programs for conservation purposes—the Conservation Reserve Program (CRP) or the Agricultural Conservation Easement Program (ACEP)—also become eligible during the fiscal year that their land retirement contract expires. To address the concern of native grassland conversion, any land considered "native sod" as of June 18, 2008, (i.e., the date of enactment of the 2008 farm bill) is considered ineligible. Producers within the selected BCAP project area would be eligible to receive annual and establishment payments after entering into a BCAP contract. According to the USDA final rule, producers with already established eligible crops would be unable to collect an establishment payment but would remain eligible for annual payments. The project sponsor would also be eligible to collect annual and establishment payments, so long as the land is eligible and not federal, state, or government owned. The 2008 farm bill defines the term "eligible crop" under the annual and establishment payment portion of BCAP as a crop of renewable biomass (see text box below ). This is different from the matching payment portion of BCAP, which includes a separate definition for "eligible material." Although both eligible crops and eligible material are defined as renewable biomass, exclusions for the two differ. Eligible crops under the annual and establishment payment portion of BCAP may not include crops eligible for payments under Title I of the 2008 farm bill or any plant that is invasive or noxious or has the potential to become invasive or noxious. It is noteworthy that algae is included as an eligible crop, but not as an eligible material; thus, algae may qualify for annual and/or establishment payments but not matching payments, as described below. BCAP contracts for annual and establishment payments vary in length: 5 years for non-woody perennial crops and 15 years for woody perennial crops. All contracts are required to have an active and current conservation plan or forest stewardship plan, depending on the type of crop grown. These plans seek to address environmental concerns of potential impact on soil, water, and related resources. Participants must also be in compliance with highly erodible and wetland conservation requirements. Agreements for annual and establishment payments may be made between USDA and a project area sponsor. Agreements specify the qualified project area sponsor's plans and how the sponsor will support the establishment and production of eligible crops for conversion to bioenergy in the BCAP project areas. This could include the type of biomass that will be used for the project, the intended use of the biomass and type of energy produced, and any new or proposed uses for the biomass. CHST matching payments under BCAP assist agricultural and forest land owners and operators with collection, harvest, storage, and transportation of eligible material for use in a biomass conversion facility. Unlike the annual and establishment payments discussed above, the matching payments do not define eligible facilities by project areas. BCAP's matching payments are available to eligible material owners who deliver eligible material to qualified biomass conversion facilities. They provide two-year contracts whereby USDA would pay—at the rate of up to $1 for each $1 per dry ton equivalent of biomass—the price to collect, harvest, store, and transport eligible material to biomass conversion facilities. Payments may not exceed $20 per ton. Matching payments are intended to provide incentives for collecting underutilized biomass for bioenergy production. This would remove existing biomass where it might not currently be profitable to do so (e.g., crop residue or forest undergrowth). Eligible material must be harvested directly from the land and separate from a higher-value product (e.g., Title I crops). Invasive and noxious species are considered eligible material and land ownership (private, state, federal, etc.) is not a limiting factor to receive matching payments. A biomass conversion facility is defined in statute as a facility that converts or proposes to convert renewable biomass into heat, power, biobased products, or advanced biofuels. To become a BCAP qualified biomass conversion facility, the facility must enter into an agreement with USDA within the state where it is located. Unlike under the BCAP annual and establishment payments, land is not a limiting factor. If the material is determined to be eligible, then the land from which it comes is not an issue. According to the USDA final rule, eligible material may be harvested or collected from certain National Forest System and Bureau of Land Management lands; from nonfederal lands, including state and locally held government lands; and from tribal lands held in trust by the federal government. A material owner must first apply and be approved as eligible by FSA before deliveries to qualified biomass conversion facilities are eligible for matching payments. For materials collected on private lands, an eligible material owner could be the landowner, the operator or producer of the farming operation, a biomass conversion facility that owns or operates eligible land, or a person designated by the landowner. For public lands, material owners must have the right to harvest or collect material through a permit, contract, or agreement with the appropriate agency or government entity. Federal government entities are not eligible. Similar to eligible crops under the annual and establishment payments, eligible material is also defined as renewable biomass. However, the exclusions to renewable biomass differ for eligible materials as compared with eligible crops. Eligible material does not include crops eligible to receive payments under Title I of the 2014 farm bill; animal waste and byproducts (including fats, oils, greases, and manure); food waste and yard waste; algae; and bagasse. Also, any woody eligible material collected or harvested outside of the contract acreage that would otherwise be used for existing market products is ineligible—this provision was added to prevent BCAP matching payments from pulling resources away from existing industries such as particle-board producers that often rely on low-cost scraps from construction zones and lumber yards. In contrast, invasive and noxious species are considered eligible material. According to the final rule, eligible material must be collected directly from the land, separated from a high-valued product (such as a Title I crop), and collected according to an approved conservation plan, forest stewardship plan, or equivalent plan. This requirement is intended to prevent high-value products from becoming eligible for matching payments. Agreements for matching payments may be made between USDA and an eligible biomass conversion facility. According to USDA's final rule, these agreements include items such as the obligations of the facility to provide a purchase list, receipts, and scale tickets for the eligible material owners; maintain accurate records of all eligible material purchases; calculate the dry ton weight equivalent of tonnage delivered; pay fair market value for eligible material regardless of the material owner's eligibility for BCAP matching payments; and make the facility's address and contact information publicly available. Eligible material owners must notify FSA following delivery to an eligible biomass conversion facility. Once delivery is verified by FSA, payments are made based on total actual tonnage delivered, total payment received, and certification from the conversion facility. BCAP matching payments are limited to $1 per dry ton equivalent provided by the biomass conversion facility, not to exceed $20 per ton. Payment terms are limited to no more than two years beginning on the date of first payment by USDA. BCAP assistance for establishing and producing biomass crops is available within designated project areas. BCAP project areas are specific geographic areas where producers may enroll land into BCAP contracts and produce specified biomass crops. Participants may be eligible to receive financial and technical assistance as well as annual payments to establish these crops. Project areas are established based on proposals submitted (on a voluntary basis) to USDA's Farm Service Agency (FSA) by either a group of producers or an entity that converts biomass to heat, power, a biobased product, or an advanced biofuel. The USDA final rule (75 Federal Register 66212) makes no restrictions on who may sponsor a project. Sponsors could include biomass conversion facility owners, such as federal entities, private entities, state or local government agencies, schools, or nongovernment organizations. Those interested in submitting a proposal are encouraged to contact their FSA state office for details. Upon designation of a project area, certain producers within the project area are then eligible to enroll land into the program. The statute authority requires project area sponsors to include the following as part of the proposal: a description of the eligible land including the geographic boundary describing the area where land can be enrolled; a list of eligible crops of each producer that will participate in the proposed project area; a letter of commitment from a biomass conversion facility that the facility will use the eligible crops intended to be produced in the project area; evidence that the biomass conversion facility has sufficient equity available, if the facility is not operational at the time the proposal is submitted; and any other appropriate information about the biomass conversion facility that gives reasonable assurance that the plant will be in operation by the time eligible crops are ready for harvest. Project area proposals are submitted to the applicable FSA state office for recommendation to the national office. If the project areas spans multiple states, the project proposals are submitted to the FSA state office where a majority of the project area land is located. Proposals are evaluated on a set of statutorily defined criteria, including the volume of crops proposed to be produced; the volume of biomass from sources other than those grown on contract acres; the anticipated economic impact to the project area; the opportunity for local producers to participate in ownership of the facility; the impact on soil, water, and related resources; the variety of biomass production approaches within the project area; and the range of eligible crops among project areas. Proposals meeting these criteria would be considered eligible for BCAP as project areas. Project proposals are accepted by FSA on a continuous basis and, if the project is approved, producers within the project area could be eligible for annual payments and establishment payments. Producers within a designated BCAP project area may apply to enroll land into the program and receive assistance to grow eligible biomass crops. Biomass must be established, produced, and harvested or collected according to an approved conservation, forest stewardship, or similar plan to ensure that soil, water, and other resource concerns are adequately addressed on the enrolled land. As of this report, 11 BCAP project areas had been approved. The project areas and their approved eligible biomass crops are listed in Table 2 . Under the 2008 farm bill, BCAP was authorized to receive "such sums as necessary" for each of the fiscal years 2008 through 2012. This mandatory funding is provided through the borrowing authority of USDA's Commodity Credit Corporation (CCC). As a result, USDA could use a virtually unlimited amount of funding from the CCC to implement BCAP, until the program's authority expired on September 30, 2012. Because funding is mandatory and paid through CCC, no annual appropriations are required for BCAP. Instead, actual BCAP outlays were to depend on the number of participants and the extent of eligible biomass crops involved in the program. However, as BCAP implementation unrolled and outlays exceeded initial expectations, Congress placed spending caps on the program's mandatory funding authority via annual appropriations measures. Under the 2008 farm bill (FY2008-FY2012), nearly $300 million was paid out to projects in 31 states. This is substantially more outlays than projected under the initial 2008 projections of program costs by the Congressional Budget Office (CBO), which estimated $36 million cumulative during the authority of the program (FY2008-FY2012). No outlays were made under BCAP in FY2008 since the program was not yet operational. Program costs totaled $2.1 million in FY2009, then soared to $248 million in FY2010. The sharp increase in outlays for FY2010 was mostly the result of CHST matching payments to biomass materials that met the legal definition of qualifying materials but that were not intended for use in the production of second-generation biofuels (see Table 3 ). As a result, Congress became concerned about limiting this type of unintended outlays and began to limit the program through appropriations. For FY2010, Congress limited the mandatory authorization for BCAP to $552 million, and subsequently reduced its program authority to $112 million for FY2011, In response to the reduced level of funding for FY2011, FSA suspended the CHST matching payment portion of the program through FY2011. Outlays subsequently declined to $24.3 million in FY2011.In its final rule for the BCAP program, USDA announced a re-prioritization of program funds that emphasized annual and establishment payments, especially under existing contracts, over CHST matching payments (see next section " Selected Issues " for details). For FY2012, Congress further limited mandatory funding for BCAP to $17 million, while actual outlays were $15.9 million. BCAP, along with most of the other major Title IX bioenergy programs—with the exception of the Feedstock Flexibility Program for Bioenergy Producers—expired at the end of FY2012 and lacked baseline funding going forward. However, the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 )—signed into law by President Obama on January 2, 2013—extended the 2008 farm bill ( P.L. 110-246 ) through FY2013. No new mandatory funding was included for BCAP under ATRA; instead, ATRA included discretionary funding of $20 million for BCAP authorized to be appropriated for FY2013, but Congress appropriated no funds for BCAP for FY2013 The 2014 farm bill authorized mandatory funding of $25 million annually for FY2014 through FY2018; no discretionary funding is authorized. In its final score of the 2014 farm bill, CBO projected cumulative BCAP outlays of $99 million for the five-year period FY2014-FY2018. As of March 2014, USDA projected that outlays under BCAP for FY2015 would recede to $7.4 million. For FY2015, Congress further limited mandatory funding for BCAP to not more than $23 million in the Consolidated and Continuing Appropriations Act, 2015 ( P.L. 113-235 ). As the administrating agency for BCAP, USDA's Farm Service Agency (FSA) maintains on its website a "BCAP Handbook" and other program documents, the latest USDA BCAP notices and news releases, as well as current information on BCAP project areas. This section includes a brief chronology of BCAP rule development and program implementation. On May 5, 2009, President Barack Obama issued a directive addressing a variety of advanced biofuel priorities. The presidential memorandum requested the Secretary of Agriculture to accelerate investment in and production of biofuels, and it specifically listed energy programs in the 2008 farm bill, including "guidance and support for collection, harvest, storage, and transportation (CHST) assistance for eligible materials for use in biomass conversion facilities." On June 11, 2009, USDA published a Notice of Funds Available (NOFA; 74 Federal Register 27767) to implement the CHST matching payments component of BCAP. USDA's notice eventually raised concern about possible market competition between the CHST matching payments program and existing wood manufacturing industries. The NOFA was terminated on February 3, 2010. On February 8, 2010, USDA published a proposed rule for BCAP (75 Fed. Reg. 6264) suspending CHST program enrollment and proposing rules to implement the remainder of the BCAP program. On October 27, 2010, USDA issued the BCAP interim (i.e., final) rule (74 Fed. Reg. 27767) which implements the full BCAP program, including the annual and establishment payment component. The interim (final) rule adopted many of the provisions outlined in the proposed rule, made further revisions, and responded to the more than 24,000 comments received on the proposed rule. In response to funding reductions through the appropriations process, FSA suspended the CHST matching payments portion of the program through FY2011. The last deadline for submitting project area proposals for annual and establishment payments was September 23, 2011. As of June 2012, USDA had selected 11 BCAP project areas and continued to enroll producers for annual and establishment payments. However, due to the reduced funding availability imposed by limitations on the availability of mandatory funding through the annual appropriations process (see above discussion), USDA published an interim rule on September 15, 2011 (76 Fed. Reg. 56949), amending the BCAP regulation to provide specifically for prioritizing limited program funds in favor of the ''project area'' portion of BCAP. The limited funding available for BCAP means that not all BCAP requests can be funded. The interim rule explicitly provides a priority for funding establishment and annual payments for project area activities because "such activities will produce the greatest long term good in BCAP by providing an ongoing supply of new biomass." Under the interim rule, matching payments for CHST would only be funded if resources are available after funding all eligible project area applications. The interim rule also enables prioritization among project area proposals if eligible requests exceed available funding. Among the remaining BCAP-related tasks of the 2008 farm bill, USDA was required to submit a report to the House and Senate Agriculture Committees on the dissemination of the best practice data and information gathered from participants receiving assistance under BCAP no later than four years after enactment of the 2008 farm bill (i.e., by June 18, 2012). This report was made available in February 2013. In June 2014, under the authority of the 2014 farm bill, USDA issued a Notice of Funds Availability for BCAP for FY2014 in which it made available $12.5 million for BCAP matching payments to facilitate the delivery of eligible biomass material, with the balance of the funds available for FY2014 to be used for technical assistance activities, such as implementation, operation, compliance, monitoring and maintenance of all components of BCAP. Citing time limitations, the agency indicated that no funding would be made available for crop establishment activities for project areas in 2014, nor for creating new project areas. In December 2014, USDA announced it would issue final regulations to implement changes to BCAP included in the 2014 farm bill during the winter of 2015, which it indicated would be followed by a new funding opportunity. Initially BCAP's CHST matching payments raised questions and concerns about feedstock eligibility, sustainability, and the slow development of cellulosic biofuels. Some of these issues were addressed by the 2014 farm bill. They are briefly reviewed here for historical context. Defining what is considered an eligible material or eligible crop under BCAP became somewhat contentious during the early years of implementation. By 2010, concerns had surfaced about eligible material creating direct competition with existing uses through the CHST matching payments. Others have expressed concerns about allowing certain fast-growing non-native plants to be included as eligible crops. Many of the issues that initially arose around BCAP have been addressed, and so have become less acute over time. Among lingering issues is a concern that a number of grasses that are considered invasive species, and that also have favorable characteristics as energy crops, may in theory have the potential to cause economic and environmental damage in spite of efforts to prevent such an outcome. Another concern centers on the continued slow development of a commercial-scale cellulosic biofuels industry that BCAP was meant to support. A summary of issues related to eligible crops and materials follows. In early 2010, after USDA's 2009 notice on CHST matching payments, some manufacturing and nursery industries that use wood shavings, wood chips, sawdust, and other wood "scraps" noticed an increase in price for their raw materials. This increase was linked, by some, to the CHST matching payments, which offered a federal payment match for the same materials if delivered to a qualified biomass conversion facility. The CHST matching payment of up to $45 per ton created an incentive for material owners to sell to biomass facilities rather than to manufacturers that use the same raw materials for products such as composite panels, particle board, and fiberboard, or to nurseries and landscaping firms that use bark and wood chips for mulch. Renewable biomass harvested from the National Forest System and other public land is subject to a statutory provision that prohibits material that would otherwise be used for higher-value products. This prohibition, however, did not initially apply to renewable biomass harvested from private land. In USDA's initial proposed rule (February 8, 2010), such biomass remained eligible for CHST matching payments, largely because the 2008 farm bill ( P.L. 110-246 ) did not specifically prohibit biomass that would have otherwise been used for higher-value products produced on private land. However, based on the initial reaction to the CHST matching payments, USDA expanded the public land restriction to private land as well. Therefore, all biomass material that would otherwise be used for higher-value products, from either public or private sources, is considered ineligible under USDA's final rule. In an effort to enforce this division between higher-value products, in its final rule (October 27, 2010) USDA added the requirement that "eligible material be directly harvested from the land " in accordance with an approved conservation plan, forest stewardship plan, or equivalent plan; be separated from a higher-value product; and not be classified as a higher-value product by USDA. For example, wood chips are considered eligible material if they are collected directly from the land. Therefore, wood chips collected from delivered and processed trees after the trees are delivered to pulp and paper facilities do not qualify. However, wood chips created in the field from diseased trees for ease of transport to a biomass conversion facility are eligible for matching payments. Another example would be corn cobs as an eligible material. If corn cobs are separated from the higher-value product (i.e., corn kernels) in the field and the cobs are then collected as residue in accordance with a conservation plan and delivered to a conversion facility they are considered eligible for matching payment. If the corn cobs are collected at a vegetable processing facility after being delivered and separated from the higher-value product, they are not considered eligible. This is considered incidental to the normal marketing of the crop and not representative of the collection or harvesting of biomass that would not otherwise be collected. While manufacturing industries that use wood residue offered the greatest opposition to CHST matching payments as published under the USDA notice, those in the lumber industry that were receiving higher prices also questioned the sustainability of the provision. Some in the biomass industry highlight the temporary nature of the CHST matching payments (maximum two years), and hope that future implementation will focus on the BCAP annual and establishment payments, which are longer-term. As mentioned earlier, in its final rule for the BCAP program, USDA announced a re-prioritization of program funds that emphasized annual and establishment payments, especially under existing contracts, over CHST matching payments. In addition, the 2014 farm bill lowered the maximum CHST payment rate per ton to $20, in part, to further minimize any incentive or preference away from existing uses. Others questioned USDA's ability to distinguish between high-value product material and renewable biomass material in the future, despite the language in the final rule requiring it to be harvested directly from the land. Some believe the fungible nature of wood could continue to generate competition between wood-based product output and renewable energy production. The 2014 farm bill explicitly addressed this issue in Section 9010, where the definition of "eligible material" in previous law was rewritten to include the following exclusion: "(vi) any woody eligible material collected or harvested outside contract acreage that would otherwise be used for existing market products." Finally, the watchdog group Taxpayers for Common Sense has asserted that the great majority of facilities for CHST payments are in the mature wood products industry, with relatively few participating facilities utilizing alternative biomass sources, such as municipal waste and bioenergy crops, in the production of advanced biofuels. Some have expressed concern that eligibility criteria for materials and crops under BCAP may conflict with practices aimed at limiting the introduction of invasive and noxious species. Others, including USDA, praise invasive and noxious species' inclusion in BCAP as an incentive to further eradication efforts. The BCAP program provides separate definitions of eligible material and eligible crops. Eligible crop criteria apply to the annual and establishment payments portion of BCAP and eligible material criteria refer to BCAP's CHST matching payments. Invasive and noxious species are considered ineligible as crops for BCAP's annual and establishment payments, but are not excluded as eligible material under BCAP's CHST matching payments. The inclusion of invasive and noxious species as eligible material has generated both concern and interest in the environmental community. Some note that while the incentive for removal is praiseworthy, such removal could have the unintended consequence of perpetuating the species. USDA's final rule addresses this concern by excluding removal and transportation during reproductive periods and requiring removal be in accordance with a new or amended conservation plan, forest stewardship plan, or equivalent plan. If a material owner violates the current federal standards for noxious weeds, then all matching payments must be repaid. According to USDA, removal costs associated with spreading or establishing an invasive or noxious species while carrying out the activities to receive a matching payment are "outside the scope of BCAP" and would rely on state and other federal laws for penalties. Several plant traits of an ideal biomass crop are also commonly found among invasive grasses: low energy requirements for maintenance; efficient use of light, water, and nutrients; perennial growth; and high yields. Based on comments received from USDA's proposed rule, crops of species such as giant miscanthus, pennycress, and black locust may be considered eligible energy crops. Many of these are non-native, fast-growing, perennial grass or trees that some consider an ideal energy crop for many of the reasons stated above. Others are concerned that non-sterile varieties can become invasive and noxious or that genetically engineered (GE) varieties could result in hybridization with wild relatives, resulting in invasive or noxious species causing economic and ecological damage. Some states include varieties of these species on statewide noxious weed listings. In these states, they would be ineligible as a crop under USDA's final rule; however, there is continued concern that the plant's introduction as a crop could have unintended consequences, given that the USDA final rule does not distinguish between the sterile varieties and non-sterile varieties. Even the BCAP Final Programmatic Environmental Impact Statement (FPEIS) highlights potential issues associated with the introduction of GE species and non-native varieties for use as biomass crops. To prevent the spread of invasive or noxious species, USDA is relying on thorough, site-specific environmental evaluation of a project area prior to selection. This could potentially slow implementation of the program or impose costs on biomass producers. In 2009, concerns emerged about "black liquor" meeting the definition of renewable material under BCAP, and thus potentially qualifying for CHST matching payments. Black liquor is a waste product from the paper production process composed of mostly organic lignin and inorganic pulping chemicals, and has long been used in the pulp and paper industry as a source of energy. An existing alternative fuel excise tax credit targeting blends of biofuels with petroleum products for transportation purposes was expanded under the 2007 Energy Independence and Security Act (EISA; P.L. 110-140 ) to include alternative fuels used by non-transportation industries. As a result, paper companies, who were already using black liquor for processing energy at the treatment plant, by including a small mixture of diesel were now able to claim their black liquor as a biofuel that qualified for the biofuel excise tax credit. According to news reports, the black liquor loophole cost taxpayers over $4 billion in 2009. A provision in the enacted health care bill ( P.L. 111-148 ) disqualified black liquor from eligibility as of January 1, 2010. USDA's final rule for BCAP states that black liquor is considered an industrial waste by-product and therefore is not eligible under BCAP. Despite this declaration, those in favor of black liquor's inclusion as an eligible source object to USDA's reasoning that black liquor is made from "inorganic" material, citing that "neither the statute nor the BCAP eligible materials list requires that eligible biomass actually originate directly from the land." The 2008 farm bill definition of "eligible material" simply referred to renewable biomass as: "(A) IN GENERAL.—The term 'eligible material means renewable biomass. The 2014 farm bill explicitly addressed this issue in Section 9010 by adding precision to the definition of "eligible material" as follows: "(A) IN GENERAL.—The term 'eligible material means renewable biomass harvested directly from the land ... " BCAP has a dual purpose of establishing new dedicated biomass crops for bioenergy production (annual and establishment payments) and increasing the collection of existing and underutilized biomass for bioenergy production (matching payments). The latter purpose—incentives for biomass removal in areas where it is possible but not currently profitable—is a key factor for the forestry sector. The removal of hazardous wildfire fuels and invasive species could provide biomass for renewable energy conversion rather than being disposed of in ways that contribute additional carbon to the atmosphere. In addition to biomass removal from forestland, crop residue is also considered to be viable biomass for renewable energy production. Following harvest, the remaining plant, or residue, can be left on the ground for soil health, erosion and weed control, water quality, and nutrient management. Many federal conservation programs provide financial assistance for practices that increase crop residue retention on the land, because of the environmental benefits. The BCAP payments to remove this residue for bioenergy production have caused some to question whether this is a duplication of the federal effort and is counterproductive. Soil scientists in particular are concerned that the benefits to bioenergy would not outweigh the potential soil and environmental concerns associated with the removal of crop residue and caution against removing too much residue in sensitive areas. Dedicated biomass crops, such as switchgrass, hybrid poplars, and hybrid willows, are considered by many to be more desirable crops because they have a short rotation (re-grow quickly after each harvest) and use fewer resources, such as water and fertilizers, than traditional field crop production. Compared with field crops such as corn, dedicated biomass crops are also thought to have less impact on available food supplies. Despite potential environmental benefits, concerns persist about the additional use of fertilizers and water resources that could be required to increase the per-acre yields for these crops to become economically feasible. The potential development of a cellulosic-based ethanol industry is presently impeded by the state of cellulosic conversion technology, which has been slow to move production from laboratory setting to commercial scale and which is thought to be expensive relative to corn-based production. In addition, U.S. ethanol production now appears to have hit the "blend wall"—the potential inability of the domestic market to absorb ethanol above a 10% share of domestic gasoline fuels. However, the enormous potential supply of low-cost cellulosic plant material available in the United States makes it an attractive prospective feedstock and helps to explain the continuing interest in it among policy makers. The 2014 farm bill energy title provides nearly $1.5 billion in financial incentives and support to encourage the production and use of advanced (mainly cellulosic) biofuels, including the $125 million in mandatory funding for BCAP. Grants and loan guarantees leverage industry investments in new technologies and infrastructure, as well as in the production of cellulosic feedstocks. However, BCAP is the principal program designed to help "kick start" the U.S. cellulosic biofuels sector. BCAP attempts to remove some of the risk for biomass growers by supporting the production of dedicated crop and forest cellulosic feedstocks and by providing incentives for harvest and post-production storage and transport. Despite government support for BCAP and other related federal programs, the cellulosic ethanol sector has been slow to develop. Prior to the startup of several commercial-scale facilities earlier this year, including the POET-DSM Project LIBERTY plant in Iowa and the Abengoa SA plant in Kansas, only small volumes of cellulosic ethanol had been produced by a few small refineries (mostly pilot or demonstration in scope). Due to the slow progress in establishing a commercial-scale cellulosic ethanol industry, EPA has been compelled to substantially reduce the cellulosic biofuel RFS mandates set by Congress for the years 2010 through 2014. The EPA waiver of the cellulosic biofuels RFS for five consecutive years, coupled with reduced BCAP funding under the 2014 farm bill, and the congressional climate of budget austerity, likely has increased the uncertainty associated with the future investments needed to kick-start this sector. | The Biomass Crop Assistance Program (BCAP) is designed to assist the bioenergy industry to overcome the hurdle of continuous biomass availability—viewed as a critical deterrent to private sector investment in the cellulosic biofuels industry. To accomplish this, BCAP is charged with two tasks: (1) to support the establishment and production of eligible crops for conversion to bioenergy in selected areas, and (2) to assist agricultural and forest land owners and operators with collection, harvest, storage, and transportation (CHST) of eligible material for use in a biomass conversion facility. BCAP was created in 2008 by the Food, Conservation, and Energy Act of 2008 (P.L. 110-246, 2008 farm bill), shortly after Congress had vastly expanded the usage mandate for renewable fuels, including cellulosic biofuels in the Energy Security and Independence Act of 2007 (EISA, P.L. 110-140). BCAP was envisaged as a mechanism for jump-starting the production of cellulosic feedstock for what was expected to be a rapidly expanding industry. The 2014 farm bill (Agricultural Act of 2014; P.L. 113-79) extends BCAP through FY2018, but with a number of changes aimed at limiting program costs. BCAP is administered by the U.S. Department of Agriculture's (USDA's) Farm Service Agency (FSA). BCAP provides two categories of financial assistance: (1) annual and establishment payments that share in the cost of establishing and maintaining production of eligible biomass crops; and (2) matching payments that share in the cost of the collection, harvest, storage, and transportation (CHST) of biomass to an eligible biomass conversion facility. BCAP assistance for establishing and producing biomass crops is available within designated project areas. BCAP project areas are specific geographic areas where producers may enroll land into BCAP contracts and produce specified biomass crops. Under the 2008 farm bill, BCAP was authorized to receive such sums as necessary, meaning that funding for BCAP was both mandatory through the borrowing authority of USDA's Commodity Credit Corporation and open-ended since it depended on program participation. However, Congress imposed an upper limit on BCAP funding from FY2010 through FY2012 through appropriations bills. No funds were available for BCAP for FY2013. In fashioning the 2014 farm bill, Congress made a number of changes to BCAP. Standing out among the changes was a hard cap on the program's mandatory authorization level. The 2014 farm bill replaced the open-ended authorization for BCAP in the 2008 farm bill with a cap of $25 million per year of mandatory funding for FY2014 through FY2018. Congress has further limited BCAP through appropriations bills, with the result that outlays under the program have declined steeply since peaking at nearly $250 million in FY2010. In December 2014, Congress passed the Consolidated and Continuing Appropriations Act, 2015 (P.L. 113-235), which imposed an upper limit of $23 million in funding for BCAP for FY2015. In part, these changes reflect the much slower-than-expected pace at which the cellulosic biofuels industry has developed. Concerns that arose in the early years after BCAP was authorized—for example, that it could heighten competition over eligible woody biomass, thus raising the price of that material to the detriment of traditional users, such as nurseries and others, and that the by-product of paper production, "black liquor," could qualify for CHST matching payments—have been addressed, and so have become less acute. Some have argued the payments are largely unnecessary and therefore wasteful. An ongoing issue is that while BCAP's primary purpose is to facilitate the development of an expanding, commercial-scale cellulosic biofuel industry by helping it meet its feedstock challenges, numerous headwinds continue to retard the development of that industry. |
The United States is currently facing two key challenges related to the U.S. intercontinental ballistic missile (ICBM) force. The first is sustainment of the current force and the implementation of needed improvements in operations and support. The second is the planned modernization of the ICBM force, including building new weapons, expected in the late 2020s. Both would likely necessitate increased funding, but the Budget Control Act (BCA) limits funding for the Department of Defense (DOD) through 2021. Moreover, the United States also plans to modernize other components of its nuclear forces during the 2020s, which would also likely necessitate further significant increases in spending in the 2020s. Congress has a key role in any decisions related to these issues. The discussion about whether to modernize or replace the ICBM force is a significant part of the national debate about the future of U.S. nuclear weapons. Supporters argue that ICBMs have been the cornerstone of the U.S. nuclear force posture since the 1960s, when the U.S. fielded the first Minuteman III missile. While deterrence in the 21 st century is more difficult for the U.S. than it was in the past, having the right mix of nuclear capabilities to deal with new challenges is still seen as crucial. The 2010 Nuclear Posture Review (NPR) identifies a variety of emerging situations in which ICBMs might play a role in deterring adversaries, stabilizing regions and reassuring allies and partners. Both Russia and China are modernizing their nuclear weapons. Moreover, the U.S. relationship with China is evolving, North Korea has developed nuclear weapons, and Iran has pursued a nuclear program that may eventually provide a weapon capability. The United States also continues to extend deterrence to allies and partner nations with a "credible U.S. 'nuclear umbrella.'" Thus, according to many observers, the United States would need to sustain and modernize its ICBM force to manage challenges in the new global security and threat environment. While long-range nuclear bombers and submarine launched ballistic missiles (SLBMS) are relatively concentrated in location (and therefore may be vulnerable to attack), the size, protection, and dispersion of ICBM forces makes them virtually impossible to destroy short of an all-out nuclear attack. Additionally, since an ICBM force can only be crippled by a large and unmistakable nuclear attack, land-based ICBMs can provide clarity about when a country is under attack and who the attacker is. Others, however, argue that ICBMs are a relic of the Cold War and play little or no role in helping the United States meet "21 st century security challenges." Further, they argue that, in an era of constrained resources and declining defense budgets, U.S. security would be better served by investing in new advanced conventional weapons than by sustaining and modernizing the ICBM force. Experts agree that the international security environment has changed dramatically since the end of the Cold War. As President Obama noted in the 2010 Nuclear Posture Review Report, the threat of global nuclear war has become remote, but the risk of nuclear attack has increased. Some nations may be shifting their security strategy to rely more on nuclear weapons in an effort to counter the U.S. conventional forces. The Nuclear Posture Review further noted that, "as long as nuclear weapons exist," the United States will sustain secure and effective nuclear forces. In this view, these nuclear forces will continue to play an essential role in deterring potential adversaries and reassuring allies and partners around the world. In "A Nuclear Deterrent for the 21 st Century," Clark Murdock writes, "much like the United States in the 1950s when it faced massive Warsaw Pact conventional forces, other states are increasing their reliance on nuclear weapons. Nuclear weapons offset conventional military superiority. When the U.S. military declares that it is seeking 'full spectrum dominance", it simply reinforces the dependence of our would-be competitors on nuclear weapons." There are several issues for Congress. First, Congress may consider whether the current plans for the nuclear enterprise (consisting of leadership, people and things that work on the nuclear mission) are sufficient to address the problems within the ICBM force or whether there may be other ways to sustain the current force. Second, Congress may consider whether the United States should continue to deploy ICBMs in the future nuclear force structure, particularly in light of expected financial constraints. It may consider whether nuclear weapons modernization programs will compete with each other, or with conventional weapons programs, for scarce resources. Finally, Congress may question whether the United States can afford to forgo ICBM sustainment and modernization programs in an era of changing national security challenges. The U.S. nuclear force is a "Triad" consisting of strategic ballistic missile submarines (SSBNs) that carry submarine-launched ballistic missiles (SLBMs), the land-based ICBM force, and long-range bomber aircraft. Each leg of the triad has both strengths and weaknesses, leading some analysts to recognize the complementary capabilities of the three legs. According to the Nuclear Posture Review, "strategic nuclear submarines and the SLBMs they carry represent the most survivable leg of the U.S. nuclear Triad." Some argue single-warhead ICBMs contribute to stability, and like SLBMs are not vulnerable to air defenses. Unlike SLBMs and ICBMs, bombers can be visibly forward deployed, as a signal in crisis to strengthen deterrence of potential adversaries and assurance to allies and partners. Others contend that, because each leg of the triad contributes unique attributes that enhance deterrence and reduce risk, together they comprise a robust deterrent that complicates a potential adversary's offensive and defensive planning. In this view, they provide a "synergistic force" that provides protection against the failure of any single one of its legs. As a result, many analysts believe that these complementary capabilities justify retaining all three legs for the foreseeable future. The ballistic missile submarine force has been a part of the U.S. nuclear deterrent since the 1960s. Experts argue that the SSBN leg of the Triad provides the United States with its most survivable and enduring nuclear strike capability because they serve as an undetectable launch platform for intercontinental missiles. The United States Navy currently deploys 14 Ohio-class SSBNs, with 12 available for deployment at any given time. Seven are based in Bangor, Washington, and patrol in the Pacific Ocean, while five are based in Kings Bay, Georgia, and patrol in the Atlantic Ocean. These submarines carry a total of 288 Trident II D5 SLBMs, each of which can carry up to eight nuclear warheads. The Ohio-class submarines have a service life of 42 years—2 20-year cycles with a 2-year mid-life nuclear refueling. The Ohio-class SSBNs were first deployed in 1981 and are to reach the end of their planned service life at a rate of approximately one boat per year between 2027 and 2040. The Navy plans to replace each retiring boat, starting in 2031, with a new class of ballistic missile submarine, referred to as the SSBNX, or the Ohio-class replacement. The Navy originally planned to begin using the replacement boats in 2029, but in 2012 the Pentagon announced a two-year delay to the SSBNX program. This would push back completion of the first SSBNX to 2031. The FY2015 budget includes $1.4 billion for the Ohio-replacement program. The Navy is also modernizing the Trident II D5 SLBMs with which both boats are armed. They are planned to remain in the arsenal until 2042. The FY2016 budget includes $1.2 billion for this Trident II Life Extension Program (LEP). The United States currently bases 18 B-2 Spirit stealth bombers at Whiteman Air Force Base in Missouri, and 76 B-52H Stratofortress bombers at Minot Air Force Base, ND, and Barksdale Air Force Base, LA, that can be equipped for nuclear missions. The B-2 bombers are equipped to carry B61 gravity bombs, while the B-52s can deliver gravity bombs or nuclear-armed air-launched cruise missiles (ALCMs). Some analysts attribute a number of advantages to the strategic bomber leg of the triad. Unlike land- or sea-based missiles, bombers can be recalled after launch. Bombers can launch quickly from their bases in an effort to survive a nuclear first strike. U.S. bombers also carry the nuclear weapons with the lowest yield, which means they offer a more diverse range of less devastating options for the President. The Air Force is developing a new long-range penetrating bomber with nuclear capabilities, known as the LRS-B. The 2012 Aircraft Procurement Plan anticipates a procurement of 80-100 bombers at an estimated per unit cost of $550 million, for a total of $40-60 billion. The Pentagon's FY2014 budget includes $359 million for research and development of the bomber. The Air Force plans to spend $32.1 billion over the next ten years on research and development of the new bomber. The Air Force has also begun development of a new nuclear-armed cruise missile, known as the LRSO, which would replace the existing ALCM after 2030 and allow the bomber force to launch stand-off weapons in future contingencies. In addition to developing a new long-range bomber, the Air Force is also modernizing the current B-2 fleet. These aircraft became operational in 1997 and have a planned service life of six decades. In order to continue delivering long-range direct attack munitions in an anti-access environment, the B-2 will need upgrades in communication, offensive, and defensive systems. According to the Nuclear Posture Review, the Pentagon is to invest over $1 billion over the next five years on upgrades for the B-2 survivability and mission effectiveness. The United States Air Force currently bases 450 Minuteman III ICBMs, with 150 each located at F.E. Warren Air Force Base, WY; Malmstrom Air Force Base, MT; and Minot Air Force Base, ND. In order to meet warhead levels set by START II, the U.S. permanently reduced the number of warheads in all Minuteman III missiles from three warheads to a single warhead. The Air Force plans to retain 400 ICBMs as the United States reduces its forces under the 2010 New START Treaty. Many observers have noticed that, because these ICBMs are geographically dispersed in hardened, underground silos, the ICBMs would be difficult for any adversary to destroy in an attack on the United States. ICBMs are also cited as the "promptest leg of the triad, offering the U.S. the ability to launch a nuclear attack more quickly than the other two legs." Over the past 15 years, the Air Force has pursued several programs that are designed to improve the accuracy and reliability of the Minuteman fleet and to support the operational capability of the Minuteman ICBM through 2030. These programs have addressed aging and technology issues in the missiles' propulsion, guidance, and reentry vehicle systems. Currently, the Air Force is pursuing the ICBM fuse modernization program, which is to replace the current MK21 warhead fuse so that the missiles can operate through 2030. The Air Force plans to procure 693 modernized fuses for the Minuteman fleet, at a cost of $830 million. It has requested $13.7 million for this program in FY2016, and expects to spend around $65 million through 2020. The Air Force is also funding, through its RDT&E budget, a number of programs under the ICBM demonstration and validation (Dem/Val) title that would allow it to create technologies that might support both the existing Minuteman fleet and the future ICBM program (known as the Ground Based Strategic Deterrent.). In October 2010, the Air Force produced an ICBM Master Plan that outlined its approach to sustaining and modernizing the Minuteman (MM) force. This report indicated that the Air Force would sustain the Minuteman III missiles through 2030 and deploy a follow-on system after 2030. The plan states that "beginning in 2020, large-scale investment will be required to sustain MM III through 2030. These modernization efforts must support both sustainment through 2030 and recapitalization for a Minuteman Follow-on after 2030." Also stated is "MM III sustainment funding must continue until Initial Operational Capability (IOC) of a new or replacement weapon system...." This is currently projected to occur in the Dem/Val program described above. The Air Force has reportedly decided to pursue a "hybrid" plan for the next generation ICBM. It would maintain the basic design of the missile, the current communications system, and the existing launch silos, but would replace the rocket motors, guidance sets, post-boost vehicles, and re-entry systems. In other words, the Air Force would deploy a new missile in its existing Minuteman infrastructure. Reports also indicate that, although this missile would be deployed in fixed silos, the design would allow the missiles to be deployed on mobile launchers sometime in the future. The Air Force has requested $75 million for this program in FY2016, but expects to spend $945 million through FY2020. While the Air Force appears committed to pursuing the development of a new ground-based strategic deterrent, there is growing recognition among analysts that fiscal constraints may alter this approach. The RAND Corporation published a 2014 study that outlined six options to modernize the ICBM force. System characteristics go from rather well defined and narrowly scoped to much broader and ambiguous. The first two options, which would not replace the current Minuteman system, would either continue basic sustainment until the system is ineffective or unsustainable or continue indefinite incremental modernization (IIM) until the system is ineffective or unsustainable. The last four options would replace the Minuteman with a new system, with increasing levels of sophistication. These four options would 1. Acquire "Minuteman IV" (MM IV) (which RAND defines to be "Minuteman III–like"). Replace the current system with one of similar capability and with a virtually identical employment concept. 2. Acquire an all-new-design ICBM to be based in existing Minuteman silos with a similar employment concept. 3. Acquire an all-new-design ICBM with an alternative basing scheme but using existing U.S. Air Force military base infrastructure and footprint. 4. Acquire an all-new-design ICBM with an alternative basing scheme requiring use of public lands or enhanced U.S. Air Force military base infrastructure and footprint. Detailed analysis from the RAND study indicates that an "all-new ICBM system will likely cost almost twice (and perhaps even three times) as much as incremental modernization and sustainment of the Minuteman III system." Specifically, the RAND study estimated that the lifecycle costs for incrementally modernizing the Minuteman III would be $60 to $90 billion, while a new silo-based ICBM would cost between $84 billion and $125 billion. Rail- and road-mobile versions would cost significantly more, from $124 billion to $219 billion. This modernization program results in essentially a "new" missile that provides expanded targeting options along with improved accuracy and survivability. RAND found that the cost to replace the Minuteman force would likely be considerably lower than the cost of upgrading and modernizing the current arsenal over the period of FY2012 through FY2050. The historical and projected future cost of maintaining the current Minuteman force and the comparisons of modernization costs are illustrated in Figure 1 and Figure 2 . Ever since 2007, when crews at Minot Air Force Base in North Dakota mistakenly loaded six cruise missiles carrying nuclear warheads on B-52s, transported them to Barksdale Air Force Base in Louisiana, and left them unguarded for 36 hours before anyone realized they were missing, the Air Force has faced questions about morale and operations within its nuclear enterprise. Studies completed at the time identified a number of issues plaguing the community, including a disregard for safety and security rules and an overall sense of "lack of professional pride." Although the Air Force implemented a number of changes in its command structure and operational procedures, new issues have emerged. Specifically, in January 2014 the Air Force announced that it uncovered cheating on the monthly proficiency exams required of missileers at the 341 st Missile Wing at Malmstrom Air Force Base in Montana. Reports of drug use among some airmen and morale problems at Air Force bases renewed concerns with the state of the Air Force nuclear enterprise. In response to these concerns, Secretary of Defense Chuck Hagel initiated two reviews, one internal and one external to DOD. These reviews were not about nuclear warheads or nuclear weapons, and the reviews did not focus on the U.S. nuclear force posture or policy. Rather, both reviews focused on the people, systems, and infrastructure of the DOD to support the nuclear triad. The internal review also focused on training, testing, command oversight, mission performance, and investment. Thousands of personnel were interviewed, from officers to enlisted personnel as well as civilians and contractors from across the armed services. The internal review disclosed systemic problems across the nuclear enterprise. In general, these problems can be divided into several categories: "long-standing, known problems that remained unaddressed and so became, over time, under-reported; known problems that were addressed but the corrective actions made the problem worse (or created new problems); and problems that were common knowledge in the field but which were never communicated to leadership." The internal review found that the nuclear deterrent is safe, secure, and effective, today. However, it said, action needs to be taken now to ensure that this remains the case in the future. The review organized its inquiry, findings, and recommendation into four categories: personnel, inspections, organization and investment. In terms of personnel issues, the review identified issues with accountability, manning and skills mix, career development, morale and recognition, the personnel reliability program, and security forces. More specifically, there was a blurring of the lines between accountability and perfection and a lack of promotion opportunities and a lack of a defined, sustainable career path for nuclear officers in the Air Force. Also, the implementation of the personnel reliability program was found to be burdensome, overly technical, and excessively risk-averse. Regarding inspections, the review found that the nuclear enterprise is subject to a culture of excessive inspections. In the Air Force, an additional issue is the demand for perfection at all times and lack of a meaningful self-assessment program. Regarding investment, the review surveyed an aging nuclear enterprise and determined that as the infrastructure continues to age, sustainment will become increasingly more difficult, time-consuming and expensive. Findings included the "lack of a 'weapons system' approach to the ICBM force, leading to disparate and insufficient sustainment and investment decisions for different system components; component issues resulting from an aging, unique, and small-sized programs; and serious shortfalls in basic O&M requirements." The independent review was tasked with examining the nuclear deterrent mission in the Departments of the Navy and the Air Force. The mission was to identify leadership, organization, investment, morale, policy, procedural, and/or other shortcomings that adversely affected the mission. The review team found the following: There were significant disconnects between what the DOD and service leadership expected and what the leadership did to empower the forces to meet those expectations. There were also disconnects between what leadership says and presumably believes and what the sailors, airmen, and Marines who must execute the mission actually experience. The interpretation of how the personnel system measures adequacy of manning differed from the total workload in the field associated with mission and other demands. Additional disconnects existed between the drive for efficiency in logistics support and what those in the field experience in actually getting needed parts in a timely manner. Many divides existed between leadership and the forces on the quality of the training. Finally, there were serious inefficiencies noted from micromanagement, excessive security demands, and the need to address a plethora of requirements not directly contributing to the mission. The review team outlined several initiatives that could be instituted immediately at various levels of leadership. The team recommended that the Secretary of Defense Take back the nuclear mission with direct meetings with senior leaders to ensure programs are in place and follow up on status. Establish support programs and bring together the federated nuclear activities within the Office of the Secretary of Defense (OSD) and the Air Force. Establish the nuclear mission has first priority and ensure equal personnel, logistics, and funding support to match. Acknowledge problems have continued since additional focus has been placed on the nuclear enterprise in 2007-2008. Direct a move from a culture of micromanagement by commanders/supervisors to a culture of empowerment of qualified people to do their work. Hold senior leaders accountable and make it clear that individual behavior is a matter of personal responsibility and that failure to meet performance is a military discipline issue to be addressed by commanders. Over the course of the past year, the parallel reviews have provided Air Force leaders with almost 1,000 pages of observations and recommendations for the missile force. Based on this, the Air Force has commenced a significant number of reforms that involve training, funding and increasing staffing the missile force. Cheating on tests in both the Navy and the Air Force raised questions about the integrity and ethics of the personnel in the nuclear force. The incidents occurred despite Services cultures placing a premium on integrity. The review team found that in both incidents the tests had evolved from a focus on measuring task-based qualifications to career-defining events that had direct, major impact on the professional futures of the participants. The cheating thus arose from pressures associated with the testing program itself, according to the review's authors. Most missileers perceived these tests as important for career progression and believed that these tests had a direct impact on their livelihood. The review recommended that Navy and Air Force senior leadership ensure that training and skill testing should focus on measuring whether the person's knowledge is necessary and sufficient for the mission, but does not transform into a counterproductive demand for higher grades. The independent review raised two significant issues regarding Air Force missiles officers assigned to ICBM combat crew duty: the intensity of the assignment itself, and the uncertainty associated with the missileer career path. ICBM combat crew duty is complex and characterized by high pressure to avoid errors in execution. Many officers on missile duty feel that the rewards of such work are not commensurate with the effort required, despite the knowledge that the work is vital to national security. Therefore, missile crews seek ways to minimize their exposure to primary combat crew duty. One way to do so is to score high marks on proficiency examinations, which can lead to designation as a crew instructor and a reduction in duty on missile alert. This attitude is completely opposite to Air Force flight crews who are generally motivated to spend as much time as possible performing crew duty in the air. Another issue is the long-term viability of the ICBM officer career. While the Air Force needs a large number of junior officers on combat crews, it does not need as many in other ICBM-related assignments such as instructors or working daily operations. Consequently, missileers must anticipate either leaving the service after only one or two duty assignments or applying for a significant change of career paths. The review team offered several recommendations to overcome these issues. First, they recommended that the Secretary of the Air Force and the Chief of Staff of the Air Force (CSAF) should initiate a program to enhance recognition and reward for ICBM duty. This program would address everything from narrowing choices for follow-on career paths, with a guarantee the operators would get one of their three choices, to special pay incentives. The team also suggested the Commander, Air Force Global Strike Command, should return full authority to Missile Combat Crew Commanders for the execution of the duties of the crew and to hold them accountable. Doing so would display trust in Mission Crew Commanders and afford them the opportunity to train and test in their working environment. A third issue that the review team uncovered was the absence of a "nuclear enterprise" across the services and DOD. The "nuclear enterprise" consists of leadership, people and things that work on the nuclear mission. The review team characterized the current nuclear activities across the OSD, Joint Staff, Air Force, and Navy as a "loose federation of separate activities scattered across multiple organizations without clarity in responsibility and accountability." The team's recommendations began with the Office of the Secretary of Defense and the Joint Staff. During the Cold War, the Joint Staff had personnel with expertise on nuclear operational and systems requirements, but this has atrophied over the past three decades. Up through the early 1990s, a triad of officials within the OSD looked across the whole of the nuclear enterprise: The Assistant to the Secretary of Defense for Atomic Energy (ATSD/AE) was responsible for the nuclear warheads and stockpile management on behalf of DOD. The Director, Strategic and Theater Nuclear Forces, within Acquisition, Technology and Logistics (AT&L), was responsible for the development of new nuclear platforms and weapons systems. The Assistant Secretary of Defense for International Security Policy focused on nuclear weapons policy and strategy. Together the three offices focused across the enterprise, synchronizing policy, mission, weapons, and platforms. These offices no longer plan the guidance and sustainment of all nuclear forces. The Nuclear Weapons Council was created to address this issue. The Nuclear Weapons Council serves as the focal point of DOD and the National Nuclear Security Administration to maintain the U.S. nuclear weapons stockpile. Although the Nuclear Weapons Council addresses many of these issues, there is no forum or office effectively integrating across OSD to form a complete nuclear enterprise. Therefore, the review team recommended that OSD and the Joint Staff realign their structures to plan nuclear activities across the entire enterprise: policy, strategy, mission, platforms, weapons, and support. The review team also identified issues within the Air Force that have created strains within the missile force: logistics structure changes, base closures, and organizational realignment that have reduced dedicated support for nuclear forces. The team recommended that the Air Force create a nuclear enterprise that encompasses Air Force Headquarters, Air Force Materiel Command, U.S. Air Forces in Europe and Air Force Global Strike Command. Proposed changes to the nuclear weapons arsenal may require the commitment of significant funding. DOD is asking for 10% annual spending increases over the next five years to implement the recommendations of the recent reviews. This is in addition to the tens of billions of dollars the Pentagon has asked Congress to provide to modernize each leg of the nuclear triad. In the near future, says DOD, the funds are needed to improve morale, such as providing incentive pay, creating new officer positions, and the refurbishment of the 45 underground Minuteman III launch centers—none of which reportedly have been thoroughly vacuumed in more than 50 years. The current strategic nuclear forces in the triad are reaching the end of their service lifetimes. Over the next two decades, Congress will face decisions about the extent to which all of the U.S. nuclear delivery systems would be modernized or replaced with new systems. The Congressional Budget Office (CBO) is required under the National Defense Authorization Act of 2015 to periodically update its estimate of the cost of nuclear forces. CBO estimates that over the 2015-2024 time period, the Administration's plans for nuclear forces would cost $348 billion, an average of about $35 billion a year. (Note: both estimates are provided in nominal dollars; they do not include the effects of inflation.) Given the complexity and cost of the proposed changes to the nuclear workforce and arsenal, several issues arise before Congress. As the Air Force begins to revamp the ICBM leg of the nuclear triad, three significant issues suggest themselves for potential consideration in Congress. As is noted above, the Air Force is pursuing several tracks to sustain the current Minuteman force. The first track includes the ongoing projects funded through the Air Force O&M accounts and the Dem/Val program, while modernization programs needed to recapitalize the ICBM force are planned to be funded in the late 2020s. Included in the President's Budget request in FY2016 are requests to fund nuclear enterprise improvements. These include upgrades to facilities, improvements in manning and safety procedures, as well as technology improvements. The other issue is addressing the recommendations from the internal and external review teams for the nuclear enterprise. Many argue that in the year since those reports were issued, much has improved. DOD leadership is requesting funds to continue to improve the nuclear enterprise. Defense Secretary Chuck Hagel stated the Pentagon would add 10% a year over the next five years to nuclear spending in order to correct the problems. The Pentagon currently spends between $15 billion and $16 billion, so this increase would equate to at least a $7.5 billion increase between 2016 and 2020. The 2016 budget request calls for $8 billion in new spending on the nuclear force over the next five years, including about $1 billion for FY2016. In addition to money, Secretary Hagel promised more troops, more trainers, more equipment and more leadership to nuclear forces, all of which have experienced decades of neglect and deterioration. Also, the Department of Defense began the Force Improvement Program (FIP). Under the DOD FIP program, the Air Force has approved incentive pay and bonuses for missileers, exchange programs across bases and with the Navy, and infrastructure upgrades at missile bases. Air Force Secretary Deborah Lee James has supported implementing the identified changes from both the internal and external reviews of the nuclear forces. James has said "there is no mission more important to our nation's security than the nuclear mission," and the changes to the nuclear force are "aimed at improving morale and shifting from a culture of always preparing for the next test and next inspection." After a year, there is a stark contrast from earlier attitudes in each of the missile wings, with the workforce mostly positive toward leadership actions. Approximately 98% of the Force Improvement Program's recommendations either have been or are being implemented. To ensure focus on each of these programs, Secretary Hagel established the Nuclear Deterrent Enterprise Review Group (NDERG) to establish senior leader accountability and bring together all the elements of the nuclear force into a coherent enterprise. This group is led by Deputy Secretary Bob Work and is to review the actions taken and the progress made in the health of nuclear forces. In addition, Secretary Hagel directed Office of the Secretary of Defense/ Cost Assessment and Program Evaluation (OSD/CAPE) to lead an effort to track and assess the implementation of the over 100 recommendations from the internal and external reviews. CAPE is to also conduct analysis to determine if corrective actions are having the desired effect as well as to continue assessing the health of the nuclear deterrent enterprise. Congress may remain concerned about the implementation of these programs and ask for updates. In the National Defense Authorization Act (NDAA) for Fiscal Year 2016, the House Committee on Armed Services stated As a result of the NER and NDERG, the fiscal year 2016 budget request contained approximately $1.00 billion in additional funding for the Department of Defense nuclear enterprise, with a total of $8.00 billion in additional funding planned over the next 5 years. The committee believes sustained leadership, follow-through, and investment will be required to ensure the revitalization of our nuclear enterprise, including in certain instances improving or changing the culture and leadership standards. The committee believes the NDERG seems to be successful in this regard, but cautions that institutionalization of such a process may be required to ensure sustained attention after key leaders depart. The committee expects the Secretary, the Deputy Secretary, and all leaders within the Department of Defense to ensure continued focus and resources for the Department's "highest priority mission. Many experts believe these programs have made a difference and are improving conditions for airmen. The increased retention of missile combat crews (and other supporting metrics) may indicate that the Air Force initiative is having an effect. Renewed focus on the nuclear forces is paying dividends, some say, but more work is seen as necessary to continue to move the program forward. However, some are skeptical that more money, more people, and more commitment is the right way to address the issue. Many see that nuclear weapons are no longer useful in the current security environment, especially given their destructive power. They argue that it is "unlikely that these problems can be solved by more money, more stars, more organizational changes, reducing burdens on airmen, or recommitting to the importance of deterrence without addressing the underlying problem." The underlying problem, according to these skeptics, is that nuclear weapons no longer play a prominent role in U.S. national security policy. Others also argue that these reforms will not be sufficient in addressing the underlying problems because no amount of cleaning, paint, or increase in pay can offset the sense, in the ICBM force, that there is no meaning to the mission. The morale problems facing the troops who are part of the nuclear enterprise are unlikely to be fully resolved by any changes that DOD can make. Secretary of Defense Chuck Hagel stated in discussing the review that in order to change the situation, "we must change the cultural perception of a nuclear enterprise…We must restore the prestige that attracted the brightest minds of the Cold War era, so our most talented young men and women see the nuclear pathway as promising in value." Some argue that Hagel's assessment only draws further attention to the real issue—the United States is no longer in "the Cold War era." They state the U.S. is in a strategic transition from the Cold War to an era characterized by threats such as al Qaeda, ISIS, and Ebola. They say those who work with nuclear weapons (i) have not been part of the wars in Afghanistan or Iraq that have been the formative experience for the military in recent years, and (ii) hope they are unlikely ever to be called on to carry out their assigned mission. Both the cost to modernize or replace the ICBM arsenal and the future role the ICBM force will play in the nation's defense strategy may also prove of interest to Congress. The United States is currently planning a number of programs to update and modernize most aspects of the U.S. nuclear force. In addition to pursuing sustainment and modernization programs for the ICBM force, the Air Force is beginning work on a new long-range bomber and a new cruise missile, and the Navy is beginning the construction of a new ballistic missile submarine while pursuing a life extension program for its submarine launched D-5 missile. Congress may consider whether the U.S. should continue to deploy ICBMs in the future nuclear force structure, particularly in light of expected financial constraints. It may consider whether nuclear weapons modernization programs will compete with each other, or with conventional weapons programs, for scarce resources. The Department of Energy (DOE) is currently investing in life extension programs for U.S. nuclear warheads. During the Cold War, DOE sustained the U.S. warhead stockpile by designing, testing, and deploying new warheads to replace aging warheads. Because the United States has observed a testing moratorium since 1992, it maintains its current inventory through the Stockpile Stewardship Program, a scientific experimentation and simulation undertaking that assesses the status of the nuclear weapon arsenal without underground nuclear tests. Instead of designing and deploying new warheads, DOE manages and maintains the stockpile by pursuing Life Extension Programs (LEPs) for existing warheads and investing in the supporting and aging infrastructure. Many analysts agree that investments in both the infrastructure and workforce will help sustain the long-term safety, security, and effectiveness of the U.S. nuclear arsenal, but these investments could add to the cost of the nuclear enterprise at the same time that DOD is modernizing its nuclear delivery systems. As calculated by the Congressional Budget Office (CBO), the costs of these programs could reach more than $30 billion per year in the 2020s, and amount to a total of more than $1 trillion over 30 years. Yet, as Frank Kendall, Under Secretary of Defense for Acquisition, Technology and Logistics testified to the Senate Armed Services Committee, this plan could generate "affordability problems" in the 2020s. This can raise questions of whether the United States can, or should, pursue all of these programs. As a result, some have suggested that the United States forgo the ICBM modernization programs and eventually eliminate the ICBM leg of the triad. Over the 2015-2024 time period, the Administration's plans for nuclear forces would cost $348 billion per CBO estimates (see Table 1 ). Of that total, CBO projects that $299 billion would be budgeted by DOD and DOE: $160 billion for strategic nuclear delivery systems and weapons; $8 billion for tactical nuclear delivery systems and weapons; $79 billion for nuclear weapons laboratories and their supporting activities; and $52 billion for nuclear-related command, control, communications, and early-warning systems. The remaining $49 billion represents CBO's estimate of additional costs that would be incurred over the coming decade if the nuclear program costs grow as expected. Congress may also wish to reconsider the role ICBMs play in the national defense. Most experts agree that U.S. nuclear strategy has changed since the Cold War days of potential massive retaliation and mutual assured destruction, but many argue that nuclear weapons still matter for the United States because they are the most credible means of deterring the use of nuclear weapons by other states. While few anticipate a U.S.-USSR-style potential nuclear exchange, some experts suggest that a "second nuclear age" has begun in which numerous nations may possess nuclear weapons and the ability to use them in regional conflicts. The 2010 Nuclear Posture Review recognized this change when it asserted that nuclear terrorism and nuclear proliferation now pose greater threats to U.S. security than established nuclear-armed states. U.S. strategic nuclear forces are not well designed to combat the threat of nuclear terrorism, but future U.S. nuclear strategy will need to account for the threats that may exist as a result of nuclear proliferation. Some argue that ICBMs are antiquated systems unchanged since the Cold War. They contend that the ICBM force is a relic of the Cold War and is not relevant in an environment where the United States no longer faces the threat of a massive attack from the Soviet Union. These analysts argue that because the Pentagon cannot plan "for every contingency, it must plan for the most conceivable future. In this case, that might mean a step back from nuclear weapons toward greater focus on those weapons we might actually use." Others argue that U.S. ICBMs could only be used against Russia because if they were to be sent anywhere else in the world, they would still have to overfly Russia, risking the creation of ambiguous attack indicators that could trigger a nuclear response. On the other hand, some experts argue that ICBMs continue to provide a deterrent to nuclear attack on the homeland. They note that the sheer numbers of Minuteman III silos (400+) that are spread across the American West are invulnerable to all but massive nuclear missile attacks. This curbs those who may wish to attack the United States: conventionally or with nuclear weapons. They note that, without ICBMs, U.S. land-based strategic nuclear targets shrink "from 503 to six, which could all be destroyed with conventional strikes. Only ICBMs require a nuclear strike." Moreover, any attack against the ICBM force represents a direct attack against the United States. Therefore, ICBMs deny prospective enemies "any hope of half-way measures against us: if they mean nuclear war, then they must decide upon nuclear war." As analysts within and outside DOD continue to debate the value of the nuclear deterrent to the defense of the United States, Congress may wish to reevaluate whether to continue to support the nation's ICBM force. Some analysts have questioned whether the United States can, or should forgo its ICBM modernization program even if the missiles' future role is uncertain. These arguments focus more on the uncertainties and challenges in the emerging strategic environment than on the specific military value of the ICBM force. Those who suggest that the United States can forgo its ICBM modernization program argue that the force was designed during the Cold War and is not suited to match the challenges of the current security environment. They argue that threats now come in the form of terrorists, suicide bombers, and regimes not friendly to the U.S. looking for nuclear weapons. They believe that the use of a nuclear ICBM in this environment is unlikely and that the United States should better align its nuclear policies to meet the most urgent priorities: preventing nuclear terrorism and nuclear proliferation. Analysts point out that many security concerns are associated with nuclear terrorism that cannot addressed with ICBMs. They note that weapon-grade nuclear materials may be stored in insecure locations around the world, vulnerable to loss or theft. Also, sensitive equipment and technologies associated with nuclear weaponry are widely available on the black market. While most do not believe that any terrorist organization currently has access to a nuclear weapon or nuclear technology, some argue that it remains a possibility in nuclear-armed states that have lax security or face political upheaval. Nuclear proliferation is another contemporary threat. According to the 2010 Nuclear Posture Review Report, both North Korea and Iran have violated nonproliferation obligations, defied directives of the United Nations Security Council, pursued missile delivery capabilities, and resisted international efforts to resolve through diplomatic means the crises they have created. This could introduce instability not only within their regions, but also around the globe, creating situations in which neighboring countries may view their only option as pursuing a nuclear weapon to protect their interests. This could undermine the credibility of the NPT and threaten destabilization of international security. Many analysts agree that the United States continues to face challenges in strategic security from both Russia and the People's Republic of China (PRC). The United States could seek to address these challenges through dialogue and transparency. Though the dialogue with each country would be different, the message could be similar: fostering good will and partnerships. For example, a strategic dialogue with Russia could allow the United States to explain that "our missile defenses and any future U.S. conventionally armed long-range ballistic missile systems are designed to address newly emerging regional threats, and are not intended to affect the strategic balance with Russia." In turn, the United States could ask Russia to explain their modernization programs as well as their strategic doctrine. A strategic dialogue with China could, likewise, allow both nations to communicate with one another about their views on each other's nuclear strategies, policies, and programs. China's leaders have been vocal about their concerns over the U.S. ballistic missile defenses. As stated in the 2010 Ballistic Missile Defense Review Report, "maintaining strategic stability in the U.S.-China relationship is as important to this Administration as maintaining strategic stability with other major powers." It is seen as important for the U.S. to highlight willingness to work together with the PRC, while simultaneously underlining U.S. support to its allies and partners in the East Asia region. Others, however, doubt that dialogue, even when combined with transparency, would resolve emerging concerns with either Russia or China. In the past year, Russia has taken a number of steps, such as its invasion of Ukraine, its aggressive military exercises, and its violation of the 1987 INF Treaty, that challenge the security interests of the United States and its allies. China has also become more assertive in its region with its actions in the East China and South China Seas in ways that have raised concerns about challenges to U.S. interests and allies. At the same time, both nations are modernizing their nuclear forces and, in some cases, expanding their nuclear arsenals. As a result, many analysts continue to view nuclear weapons, and the nuclear balance, as a significant marker in the U.S. relationship with both Russia and China. They note that a U.S. commitment to modernizing its triad, in general, and its ICBM force, in particular, is necessary to assure stability and U.S. security. Some experts argue that, from a global perspective, the United States must "maintain nuclear parity with the Russians and sustain nuclear superiority over the Chinese." They contend that dealing with a Russian government believing it possessed nuclear superiority would be more difficult than it is at present and that dealing with a China that had achieved nuclear parity would tear big holes in the U.S. nuclear umbrella. Therefore, some argue that, in order to remain a credible player on the world stage, the U.S. must ensure that its nuclear forces and capabilities remain a priority. Others may see less need for a specific balance in nuclear forces, but still believe that maintaining strategic stability with Russia and China should be a key U.S. priority. Admiral Cecil Haney, the Commander of U.S. Strategic Command (STRATCOM) highlighted the value of the U.S. nuclear triad in this uncertain strategic environment in a press conference in March 2015. He noted that "while our nation's nuclear enterprise is safe, secure, and effective, we cannot take it for granted any longer. For decades, we have sustained while others have modernized their strategic nuclear forces...." He indicated that, in this environment, "as a nation, we cannot simply afford to underfund our strategic capabilities. Any cuts to the President's budget, including those imposed by sequestration, will hamper our ability to sustain and modernize our joint military forces and put us at real risk of making our nation less secure and able to address future threats." Secretary of Defense Ashton Carter has not spoken out on this issue, since replacing Secretary Hagel in February 2015. The current ICBM force was deployed in the 1970s, which means it has been in service for over 40 years—much longer than anticipated. The Air Force determined the best way forward is to develop a replacement missile that utilizes modernized silos to ensure viability of the ICBM force structure until 2075. This program is called the Ground-Based Strategic Deterrent (GBSD). The President's FY2016 budget allocates for funds for continued development of the GBSD. Congress will play a key role in determining the future of the GBSD. | Determining the future role of U.S. nuclear weapons within the U.S. national security strategy is currently a topic of much debate. Many senior leaders are determined to design a strategy that defines a new role for U.S. nuclear weapons and makes those weapons responsive and relevant in today's global threat environment. The current U.S. nuclear enterprise consists of a triad of options: Intercontinental Ballistic Missiles (ICBMs), Submarine Launched Ballistic Missiles (SLBMs), and long-range bombers. All three legs of the nuclear triad are aging, since they were largely built to counter the threat of the Soviet Union. Policymakers in Congress and the Executive Branch are now deciding whether to modernize or replace parts of each leg. The Obama Administration's 2010 Nuclear Posture Review (NPR) outlines its approach to reducing nuclear dangers and pursuing the goal of a world without nuclear weapons, while simultaneously advancing broader U.S. security interests. In his April 2009 speech in Prague, President Obama highlighted the current nuclear dangers in the global environment and declared the United States will "seek the peace and security of a world without nuclear weapons." The Nuclear Posture Review provides the roadmap for implementing President Obama's agenda for reducing nuclear risks to the United States, U.S. allies and partners, and the international community. This raises several issues for Congress particularly regarding the Triad's ICBM component. First, Congress may consider whether the current plans for the nuclear enterprise are sufficient to address the problems within the ICBM force or whether there may be other ways to sustain the current force. Second, Congress may consider whether the United States should continue to deploy ICBMs in the future nuclear force structure, particularly in light of expected financial constraints. It may consider whether nuclear weapons modernization programs will compete with each other, or with conventional weapons programs, for scarce resources. Finally, Congress may address questions about whether the United States can afford to forgo ICBM sustainment and modernization programs in an era of changing national security challenges. |
An "inherently governmental function" is one that, as a matter of law and policy, must be performed by federal government employees and cannot be contracted out because it is "intimately related to the public interest." Concerned that the existence of multiple and/or inconsistent definitions of "inherently governmental functions" might be partly responsible for the alleged contracting out of inherently governmental functions by the Department of Defense (DOD) and other agencies, the 110 th Congress enacted legislation ( P.L. 110-417 ) requiring the Office of Management and Budget (OMB) to develop a "single consistent definition" of "inherently governmental functions." This definition is to "ensure that the head of each ... agency is able to identify each position within that department or agency that exercises an inherently governmental function." In response, on March 31, 2010, OMB, through the Office of Federal Procurement Policy, issued a proposed policy letter which would adopt the FAIR Act definition as the single definition. This report provides background, issues, and options for Congress on defining inherently governmental functions within the context of DOD operations. It situates contemporary debates over which functions are inherently governmental within the context of the broader debate about the proper roles of the public and private sectors, surveys existing definitions of "inherently governmental functions" within federal law and policy, and discusses issues and options for Congress in redefining inherently governmental functions or otherwise ensuring that the executive branch's categorization of functions corresponds to the definition of inherently governmental functions. The report focuses upon DOD because of the specific functions that it performs; its prominent role in federal contracting; its unique workforce, which consists of military and civilian personnel; and recent allegations that DOD, among other agencies, has improperly contracted out inherently governmental functions. The current debate over which functions are inherently governmental is part of a larger debate about the proper role of the federal government vis-à-vis the private sector that is as old as the Republic itself. All government functions can arguably be divided into three categories: those that must be performed by government employees, those that should be performed by government employees, and those suitable for private sector performance. However, the size and content of these categories have fluctuated throughout American history. The "must" category has arguably experienced the least fluctuation, whereas the "should" and "private" categories have significantly increased or diminished over time with changes in administrations or even within administrations (e.g., moving from peacetime to war). The "Background" section surveys the history of this public/private debate, focusing particularly upon how it has played out in the context of federal contracting. The debate over DOD functions generally corresponds to the overall public/private debate; however, it sometimes reflects unique aspects of DOD or its procurement system. First, because DOD has two distinct workforces, military and civilian, capable of performing functions, DOD must determine which workforce will perform functions in the "must" or "should" categories. Where functions in the "must" category are concerned, DOD has to determine whether it matters which DOD employees, military or civilian, perform the function. Similarly, where functions in the "should category" are concerned, DOD must determine not only whether the function should be performed in-house or by the private sector, but also which workforce will perform functions deemed appropriate for in-house performance. Second, DOD relies upon ammunition and armaments in its operations, items which some commentators at various periods of time have thought should be manufactured by defense agencies in arsenals or Navy shipyards, for example, instead of by the private sector. The arguments for in-house manufacturing of DOD materiels have varied over the years, but have included the claim that manufacturing of weapons is an inherently governmental function and thus falls within the "must" category. However, such arguments appear to confuse considerations of national defense policy (i.e., the security of having an in-house supply of important products), which might argue for placing the function in the "should" category, with functions "intimately related to the public interest." Third, the federal government has consistently maintained two parallel acquisition systems, civilian and defense, wherein the rules for DOD are not always identical to those for the rest of the federal government. The Constitution, with its enumerated powers and limits on these powers, is the logical, best starting point for distinguishing between "must," "should," and commercial functions. The Constitution envisioned certain functions that must be carried out by one branch or other of the federal government. The legislative function of Article I is clearly an inherently governmental function entrusted to Congress. Article II, with equal clarity, entrusted several inherently governmental functions to the President, such as the executive power, the Commander-in-Chief function, the appointment power, the power to conduct foreign affairs, and the granting of pardons. The Constitution also recognized the public/private tension with explicit limitations on certain public functions when they directly affect private interests. For example, takings of private property under the Fifth Amendment must be for public purpose. However, more than 200 years after ratification of the Constitution, commentators are still trying to determine what constitutes a public purpose. The Constitution also recognized and provided for the other end of the spectrum: private functions. The most explicit such recognition is in the Tenth Amendment, which states, "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." Very early in American history, the Supreme Court in Marbury v. Madison recognized that the President and other executive branch officials exercise inherent powers founded upon their discretion and accountability. In Marbury , while addressing whether a judge whose commission was not delivered to him by a new administration had a legal remedy, the Court distinguished between "ministerial functions" of the executive branch, which officials are legally required to perform, and "political powers," in which executive officials may exercise discretion. Regarding the latter, the Court stated By the constitution of the United States, the President is invested with certain important political powers, in the exercise of which he is to use his own discretion, and is accountable only to his country in his political character, and to his own conscience. To aid him in the performance of these duties, he is authorized to appoint certain officers, who act by his authority and in conformity with his orders. These two issues, discretion and accountability, have remained central to discussions of what functions the government must perform to this day. Various commentators would afford the executive branch different degrees of discretion in classifying particular functions as inherently governmental or commercial and seek to hold the executive branch accountable for its classifications to differing degrees and in differing ways. In attempting to protect the public and private sectors as defined by the Constitution, post-Marbury courts articulated various theories and tests, several of which also appear in some recent discussions of inherently governmental functions. One key test focuses upon functions "affected with the public interest." Courts in the 19 th century, in particular, distinguished between functions "affected with the public interest" and other functions when determining whether government regulation (an exercise of the public sector) of certain businesses (private-sector entities) was permissible. Where the business was "affected with a public interest," such as common carriers were, courts found the regulation permissible. This test arguably focuses upon the functions that the government "should" or "may" perform, however, rather than those that the government "must" perform. Another key test focused upon "public interests" or "public functions." This test was used to determine when private-sector entities were accountable to individuals for certain public-sector protections, such as due process. The courts concluded that when entities, such as company towns, performed public functions, they owed individuals due process. Another key test, largely used in the 1930s, was the "private delegation doctrine," which precluded Congress from delegating its power to legislate (a public-sector power) to third parties not in the government (private-sector entities). Since World War I, one of the primary arenas for the public/private debate and the definition of inherently governmental functions has been federal contracting. The emphasis on public or private entities as the preferred source of goods or services has swung back and forth over the years with the change of administrations or even during administrations. The emphasis has also shifted depending upon which agencies are conducting the procurements and the nature of the goods or services procured. In the 1920s, for example, the government had different emphases in civilian and defense contracting: while the alleged abuses of military contractors during World War I caused the military to perform more work in-house, public contracting by civilian agencies expanded. President Franklin D. Roosevelt essentially reversed the relative use of civilian and military contractors as compared to the 1920s. Prior to World War II, the Roosevelt Administration placed renewed emphasis on the government's role and the benefits of the government performing functions for socioeconomic purposes even when doing so brought it into competition with the private sector (e.g., creation of the Civilian Conservation Corps and the Public Works Administration). In contrast, mobilization for World War II brought greater emphasis on using the private sector to meet the country's defense needs, as well as many changes in the ways in which the government contracted for goods and services. The Truman Administration was generally a period of change and reorganization in the federal government's procurement of goods and services. Several important statutes were enacted in this period, including the Armed Services Procurement Act of 1947, the Renegotiation Act of 1948, the Federal Property and Administrative Services Act of 1949, and the Defense Production Act of 1950. These statutes greatly changed the federal procurement landscape, although they did not directly address which functions the government must perform (i.e., what is inherently governmental). They did, however, address how to make decisions as to who should perform specific functions. President Eisenhower was the first to formally declare a federal policy of not competing with the private sector. This policy was originally published by the Bureau of the Budget (BOB) in a directive issued in 1955: It is the stated policy of the administration that the Federal government will not start or carry on any commercial activity to provide a service or product for its own use if such product or service can be procured from private enterprise through ordinary business channels. This policy was expressed in, and entered the vernacular as, Office of Management and Budget's (OMB's) Circular A-76 in 1966 during the Johnson Administration. Since that time, OMB Circular A-76 has become the primary focal point for discussions of what is an inherently governmental function because it and its four attachments establish guidelines and procedures for determining whether an activity should be performed in-house with government personnel or whether it should be contracted out to the private sector. The 1980s saw numerous disputes between proponents of the government and private sectors. Of these two administrations, the Reagan Administration, in particular, was a strong proponent of smaller government and had many confrontations with Congress over who should perform various functions. This administration would propose or attempt to privatize particular functions, such as depot maintenance. Congress would then respond with either an appropriations rider, prohibiting or conditioning the use of funds to implement the privatization, or with a substantive law declaring a function inherently governmental, among other things. Appendix A provides examples of congressional responses to proposed contracting out by the Reagan and George H.W. Bush Administrations to illustrate possible legislative responses to allegedly improper contracting out by federal agencies. The Clinton Administration was arguably on both sides of the public/private debate, sponsoring plans, such as comprehensive health care reform, that might have expanded the public sector, as well as attempting to end "big government" with its "reinventing government" initiative and enactment of the Federal Activities Inventory Reform (FAIR) Act. The FAIR Act, which is discussed in more detail in the section on definitions of inherently governmental functions, sought to foster increased contracting out of agencies' commercial functions. The George W. Bush Administration could be described as having an even narrower conception of the role of the public sector. Among other things, the Bush Administration proposed amending OMB Circular A-76 so that all functions were presumed commercial unless agencies justified why they were inherently governmental. The Bush Administration's extensive use of contractors in Iraq and Afghanistan also engendered much discussion as to propriety of contracting out certain functions. Critics claimed that the Bush Administration improperly contracted out acquisition, armed security, and contract management functions, among others. Recent announcements by President Obama and Secretary of Defense Robert M. Gates could signal a shift to increased governmental performance of certain functions. President Obama issued a three-page memorandum on March 4, 2009, announcing his Administration's priorities in contracting policy. It highlighted four initiatives: (1) increased competition; (2) use of fixed-price contracts; (3) ensuring that the acquisition workforce can manage and oversee contracts; and (4) ensuring that functions considered to be inherently governmental are not contracted out. As regards contracting out, in particular, the memorandum states Government outsourcing for services also raises special concerns. For decades, the Federal Government has relied on the private sector for necessary commercial services used by the Government, such as transportation, food, and maintenance. Office of Management and Budget Circular A-76, first issued in 1966, was based on the reasonable premise that while inherently governmental activities should be performed by Government employees, taxpayers may receive more value for their dollars if non-inherently governmental activities that can be provided commercially are subject to the forces of competition. However, the line between inherently governmental activities that should not be outsourced and commercial activities that may be subject to private sector competition has been blurred and inadequately defined. As a result, contractors may be performing inherently governmental functions. Agencies and departments must operate under clear rules prescribing when outsourcing is and is not appropriate. Secretary Gates made the President's proposal more concrete with the budget announcement he issued prior to the President's submission of the budget on May 7, 2009: A final recommendation ... will have a significant impact on how defense organizations are staffed and operated. Under this budget request, we will reduce the number of support service contractors from our current 39 percent of the workforce to the pre-2001 level of 26 percent and replace them with full-time government employees. Our goal is to hire as many as 13,000 new civil servants in FY10 to replace contractors and up to 30,000 new civil servants in place of contractors over the next five years. Two main definitions of inherently governmental functions currently exist within federal law and policy. One is a statutory definition, enacted as part of the Federal Activities Inventory Reform (FAIR) Act of 1998. This definition states that an inherently governmental function is "a function so intimately related to the public interest as to require performance by Federal Government employees." The other is a policy-oriented definition contained in Office of Management and Budget (OMB) Circular A-76. This definition states that an inherently governmental activity is "an activity that is so intimately related to the public interest as to mandate performance by government personnel." Other statutes and regulations that define inherently governmental functions do so either by reproducing the language of the FAIR Act or OMB Circular A-76, or by incorporating the definitions of the FAIR Act or OMB Circular A-76 by reference. The Federal Acquisition Regulation (FAR) is a prime example of this. The FAR does not provide a unique definition of inherently governmental functions. Rather, it incorporates the definition of OMB Circular A-76 by reference for purposes of Subpart 7.3, which focuses upon "contractor versus government performance," and it reproduces this definition in its own definitions section for purposes of Subpart 7.5, which identifies "inherently governmental functions." In addition to these definitions, there are numerous statutory, regulatory, and policy provisions designating specific functions as inherently governmental or commercial. These provisions also help establish the meaning of "inherently governmental functions" by specifying what is—and is not—included within that category. Similarly, while not offering their own definitions of inherently governmental functions, the Government Accountability Office (GAO) and the federal courts have tests for identifying inherently governmental functions that they use in designating specific functions as inherently governmental or commercial. This section surveys the current definitions of inherently governmental functions, as well as the functions that have been designated as inherently governmental or commercial by statute, regulation, policy, or GAO or judicial decision. It addresses (1) statutory definitions and declarations; (2) policy-based definitions and declarations; (3) definitions and declarations from administrative law, including GAO decisions; and (4) designations in federal court decisions. The FAIR Act provides the primary statutory definition of inherently governmental functions. There are, however, several other statutory definitions of inherently governmental functions and "functions closely associated with inherently governmental functions." Some of these definitions mirror the definitions of the FAIR Act or OMB Circular A-76, while others incorporate the definitions of the FAIR Act or OMB Circular A-76 by reference. There are also numerous statutory provisions declaring that specific functions are inherently governmental. Originally introduced as the Freedom from Government Competition Act of 1997, the FAIR Act was designed to promote executive agencies' compliance with OMB Circular A-76. OMB Circular A-76 predated the FAIR Act and expressed the federal government's general policy of relying on competitive private enterprises to supply the commercial products and services it needs. OMB Circular A-76 also provided procedures for agencies to conduct cost comparisons to determine whether the government or private enterprises should perform specific activities on the government's behalf. However, although OMB Circular A-76 established policies and procedures, it reportedly failed to result in public-private competitions for performance of commercial activities, or agencies' contracting with the private sector for performance of their commercial activities. The FAIR Act sought to address this situation by requiring agencies to compile annual lists of all commercial activities they perform and make these lists available to Congress and the public. The FAIR Act does not require agencies to contract out any particular activities, however. It requires only that agencies use competitive processes to select the source when they consider contracting with private sector sources for performance of certain activities performed by government employees. Although the FAIR Act's primary focus is upon commercial activities performed by government agencies, it defined inherently governmental functions in order to contrast them with commercial activities. The FAIR Act's definition of inherently governmental functions is itself brief: "The term 'inherently governmental function' means a function that is so intimately related to the public interest as to require performance by Federal Government employees." This definition is, however, followed by lengthy lists of functions included in and excluded from the definition of inherently governmental functions under the act. The FAIR Act describes the "functions included" within its definition of inherently governmental function as ones that "require either the exercise of discretion in applying Federal Government authority or the making of value judgments in making decisions for the Federal Government, including judgments relating to monetary transactions and entitlements." The act then gives a non-exclusive list of examples of the types of "functions included." These are 1. binding the United States to take, or not to take, action by contract, policy, regulation, authorization, order or otherwise; 2. determining, protecting, and advancing U.S. economic, political, territorial, property, or other interests by military or diplomatic action, civil or criminal judicial proceedings, contract management, or otherwise; 3. significantly affecting the life, liberty, or property interests of private persons; 4. commissioning, appointing, directing or controlling officers or employees of the United States; or 5. exerting ultimate control over the acquisition, use, or disposition of the real or personal, tangible or intangible, property of the United States, including the collection, control or disbursement of appropriated and other federal funds. The FAIR Act further describes the "functions excluded" from its definition of inherently governmental functions as those involving (1) gathering information for or providing advice, opinions, recommendations, or ideas to federal officials, or (2) any function that is primarily ministerial and internal in nature. It concludes by giving examples of ministerial and internal functions, which include building security, mail operations, cafeteria operations, housekeeping, facilities operations and maintenance, warehouse operations, motor vehicle fleet management operations, or other routine electrical or mechanical services. The FAIR Act's definition of inherently governmental functions and listing requirements apply to all executive branch agencies named in 5 U.S.C. § 101, all military departments named in 5 U.S.C. § 102, and all independent establishments as defined in 5 U.S.C. § 104. However, the FAIR Act explicitly exempts from the act's requirements (1) GAO; (2) government corporations or government-controlled corporations, as defined in 5 U.S.C. § 103; (3) non-appropriated funds instrumentalities, as described in 5 U.S.C. § 2105(c); (4) certain depot-level maintenance and repair activities of the Department of Defense, as described in 10 U.S.C. § 2460; and (5) agencies with fewer than 100 full-time employees as of the first day of the fiscal year. In addition to the FAIR Act, other statutes have "definitions" sections that include "inherently governmental functions" or "functions closely associated with inherently governmental functions." Two of these statutes provide a definition of inherently governmental functions that, while closely related to the definitions of the FAIR Act and OMB Circular A-76, does not reproduce either of these definitions verbatim. The Coast Guard appropriations authorization act for FY2004 and FY2005 and the National and Community Service Trust Act of 1993 both define an inherently governmental function as any activity that is so intimately related to the public interest as to mandate performance by an officer or employee of the Federal Government, including an activity that requires either the exercise of discretion in applying the authority of the Government or the use of judgment in making a decision for the Government. The verb "mandate" in this definition matches the verb in the definition of OMB Circular A-76, but this definition departs from the definition of OMB Circular A-76 by using "officer or employee of the Federal Government" where OMB Circular A-76 uses "Federal Government employees." This definition also specifically incorporates the functions of exercising discretion and using judgment that are mentioned in OMB Circular A-76 and are among the "functions included" within the FAIR Act's definition of inherently governmental functions. Outside of the Coast Guard appropriations authorization act for FY2004 and FY2005 and the National and Community Service Trust Act of 1993, however, no statute provides a definition of inherently governmental functions different from that in the FAIR Act or OMB Circular A-76. Many statutes incorporate the definition from OMB Circular A-76 by reference when defining inherently governmental functions. Several of these statutes also use the related term, "functions closely associated with inherently governmental functions," but likewise incorporate the definition of OMB Circular A-76 by reference. Several provisions of federal law declare that specific functions are inherently governmental without defining inherently governmental functions. Sometimes, specific functions are defined as inherently governmental without reference to the FAIR Act or the employees performing the functions at the time of the statute's enactment. Examples of such functions are (1) the preparation of agency strategic plans and program performance reports under the Government Performance and Results Act of 1993 and (2) functions connected with the operation and maintenance of hydroelectric power-generating facilities at water resources projects of the Army Corps of Engineers. At other times, specific groups of employees, who were performing certain functions at the time of the statute's enactment, are classified as inherently governmental for purposes of the FAIR Act. Examples include federal employees at the National Energy Technology Laboratory and instructor staff at the Federal Law Enforcement Training Center. At yet other times, Congress effectively renders certain functions inherently governmental, at least temporarily, without classifying them as such, by providing that appropriated funds cannot be expended to contract them out. Finally, Congress sometimes signals its concerns about the executive branch's classification of specific functions without either enacting legislation designating the functions as inherently governmental or precluding the use of appropriated funds to contract the functions out. Congress can do this by expressing its sense that certain functions are inherently governmental, or by imposing additional restrictions—beyond those in the FAIR Act, OMB Circular A-76, or the FAR—upon contracting out activities that are arguably closely associated with inherently governmental functions. Alternatively, but more rarely, Congress expresses its sense that certain functions are commercial, or appropriates funds to contract out activities that some commentators might seek to classify as inherently governmental. OMB Circular A-76 provides the other main definition of inherently governmental functions used in federal law and policy. Office of Federal Procurement Policy Letter 92-1, which provided another significant policy-based definition of inherently governmental functions, was superseded by the 2003 revision of OMB Circular A-76. On March 31, 2010, OMB, through the Office of Federal Procurement Policy, issued a proposed policy letter which would adopt the FAIR Act definition as the single definition of inherently governmental and provide guidance as to its implementation. Another policy document, Department of Defense Instruction Number 1100.22, in its revision of April 6, 2007, both provides a basic definition of inherently governmental functions and designates numerous DOD functions as inherently governmental or commercial. Like its predecessors, the current OMB Circular A-76 "establishes federal policy for the competition of commercial activities." It both (1) articulates the "longstanding policy of the federal government ... to rely on the private sector for needed commercial services" and (2) establishes procedures for agencies to use in determining whether their commercial activities should be performed under contracts with the private sector or in-house by agency personnel. Although pre-2003 versions of OMB Circular A-76 focused on listing only commercial activities, the current version of OMB Circular A-76 requires agencies to list all activities they perform and classify these activities as commercial or inherently governmental. All activities classified as inherently governmental under OMB Circular A-76 must be performed by government personnel. Only those activities classified as commercial can be considered for contracting out. Even in its pre-2003 versions, before agencies were required to list and classify inherently governmental activities, OMB Circular A-76 defined inherently governmental functions when characterizing them as the opposite of commercial activities. The definition in OMB Circular A-76 is itself brief, like the definition in the FAIR Act. The current version of OMB Circular A-76 says only that "An inherently governmental activity is an activity that is so intimately related to the public interest as to mandate performance by government personnel." However, OMB Circular A-76, also like the FAIR Act, follows its brief definition of inherently governmental functions with clarification and examples. The paragraph within the current version of OMB Circular A-76 that defines inherently governmental functions continues by stating [Inherently governmental] activities require the exercise of substantial discretion in applying government authority and/or in making decisions for the government. Inherently governmental activities normally fall into two categories: the exercise of sovereign government authority or the establishment of procedures and processes related to the oversight of monetary transactions or entitlements. An inherently governmental activity involves: (1) Binding the United States to take or not to take some action by contract, policy, regulation, authorization, order, or otherwise; (2) Determining, protecting, and advancing economic, political, territorial, property, or other interests by military or diplomatic action, civil or criminal judicial proceedings, contract management, or otherwise; (3) Significantly affecting the life, liberty, or property of private persons; or (4) Exerting ultimate control over the acquisition, use, or disposition of United States property (real or personal, tangible or intangible), including establishing policies or procedures for the collection, control, or disbursement of appropriated and other federal funds. This language largely corresponds to that of the FAIR Act's examples of "functions included" in its definition of inherently governmental functions. However, the FAIR Act does include one example that is not included in OMB Circular A-76: the commissioning, appointing, directing, or controlling of officers or employees of the United States. The current version of OMB Circular A-76 then provides some further explanations that are unlike those in the FAIR Act or other sources, however. It first distinguishes between the exercise of discretion per se , which it says does not make a function inherently governmental, and the exercise of substantial discretion, which it says makes a function inherently governmental. It then notes that "[a]n activity may be provided by contractor support ... where the contractor does not have the authority to decide on the course of action, but is tasked to develop options or implement a course of action, with agency oversight," before listing six factors that agencies should consider to avoid transferring inherently governmental functions to contractors. See Appendix B for a listing of these six factors. The current version of OMB Circular A-76 also explicitly defines commercial activities: A commercial activity is a recurring service that could be performed by the private sector and is resourced, performed, and controlled by the agency through performance by government personnel, a contract, or a fee-for-service agreement. A commercial activity is not so intimately related to the public interest as to mandate performance by government personnel. Commercial activities may be found within, or throughout, organizations that perform inherently governmental activities or classified work. Additionally, it includes—but does not define—a category of activities that are commercial but "not appropriate for private sector performance." OMB Circular A-76 and its definition of inherently governmental functions apply to all executive departments named in 5 U.S.C. § 101 and all independent establishments as defined in 5 U.S.C. § 104. There are no exemptions. OMB Circular A-76 is, however, a statement of policy, not law. For OMB Circular A-76 to have the force of law, it would need (1) to be the product of a congressional grant of legislative authority promulgated in accordance with any procedural requirements imposed by Congress and (2) a substantive- or legislative-type rule affecting individual rights and obligations. Neither of these requirements are met in the case of OMB Circular A-76. Congress did not explicitly grant the executive branch legislative authority to promulgate OMB Circular A-76; rather, the Eisenhower Administration took it upon itself to promulgate Bulletin 55-4 of the Bureau of the Budget, the predecessor of OMB Circular A-76. Similarly, OMB Circular A-76 prescribes federal policy and procedures for agencies' contracting out, matters not affecting individual rights. Contractors do not generally have due process or other rights to prospective contracts with the federal government. On March 31, 2010, OMB, through the Office of Federal Procurement Policy, issued notice of a proposed policy letter. The proposed policy letter adopts the FAIR Act definition as the single, government-wide definition. It also provides guidance to help agencies determine whether a given function meets the definition of an "inherently governmental function." The letter retains a list of examples of inherently governmental functions, currently found in FAR Subpart 7.5. Created are two tests for agencies to use in determining whether functions not appearing on the list otherwise fall within the definition of inherently governmental. The "nature of the function" test would ask agencies to consider whether the direct exercise of sovereign power is involved. Such functions are uniquely governmental and, therefore, inherently governmental. The "discretion" test would ask agencies to evaluate whether the discretion associated with the function, when exercised by a contractor, would have the effect of committing the government to a course of action. The proposed letter, also, gives guidance as to identifying "functions which are closely associated with inherently governmental functions," and "critical functions." Public comment is requested on 11 specific aspects of the proposed letter. The letter is open to comment until June 1, 2010, and will not become final until 30 days after issuance of the final policy letter. Prior to the 2003 revision of OMB Circular A-76, Office of Federal Procurement Policy (OFPP) Letter 92-1 was another important policy document containing a definition of inherently governmental functions. It was designed to "assist Executive Branch officers and employees in avoiding an unacceptable transfer of official responsibility to Government contractors." It specifically prohibited contracting out inherently governmental functions, which it defined as "[functions] that [are] so intimately related to the public interest as to mandate performance by Government employees." This definition is identical to that in OMB Circular A-76 except for its last word and the capitalization of its next-to-last word. OFPP Letter 92-1 uses "Government employees" where OMB Circular A-76 uses "government personnel." OFPP Letter 92-1 is still occasionally cited as an authority on the definition of inherently governmental functions. However, the 2003 revision of OMB Circular A-76 incorporated some of its contents and superseded it. When DOD functions are involved, Department of Defense Instruction (DODI) 1100.22, Guidance for Determining Workforce Mix , also provides a basic definition of inherently governmental functions and designates specific functions as inherently governmental or commercial. Like OMB Circular A-76, but unlike the FAIR Act, DODI 1100.22 includes a clear statement that "functions and tasks that are [inherently governmental] shall be performed by government personnel." DODI 1100.22 provides a basic definition of inherently governmental functions as "includ[ing], among other things, activities that require either the exercise of discretion when applying Federal Government authority or value judgments when making decisions for the Federal Government." This definition corresponds to the description of the types of functions included in the definitions of inherently governmental functions in the FAIR Act and OMB Circular A-76. In addition to this basic definition, however, DODI 1100.22 provides lengthy lists of what functions do—and do not—qualify as an inherently governmental in the context of DOD operations. Appendix C summarizes how functions performed by military personnel are classified as inherently governmental or commercial within DODI 1100.22. Appendix D provides a similar summary of DODI 1100.22's classification of functions performed by civilian employees of DOD. The key administrative law source on inherently governmental functions is the Federal Acquisition Regulation. Where DOD functions are involved, the Defense Federal Acquisition Regulation Supplement also addresses inherently governmental functions. Further declarations of specific functions as inherently governmental or commercial come from executive orders and GAO decisions. In addition to the FAIR Act and OMB Circular A-76, the Federal Acquisition Regulation (FAR) is the third major source of federal law and policy on inherently governmental functions. Two subparts of the FAR—Subpart 7.3 on "contractor versus government performance" and Subpart 7.5 on "inherently governmental functions"—address such functions. Subpart 7.3 is designed to provide executive branch officials with procedures for contracting out those functions that were found to be appropriate for private-sector performance under OMB Circular A-76 or other authority. This subpart incorporates the definition of OMB Circular A-76 by reference and, like OMB Circular A-76, which requires that agencies perform inherently governmental functions with government personnel, specifies that "[c]ontracts shall not be used for the performance of inherently governmental functions." Subpart 7.5 relies on a definition of inherently governmental functions, contained in Subpart 2 of the FAR, that essentially mirrors the definition of OMB Circular A-76: "Inherently governmental function" means, as a matter of policy, a function that is so intimately related to the public interest as to mandate performance by Government employees. This definition is a policy determination, not a legal determination. An inherently governmental function includes activities that require either the exercise of discretion in applying Government authority, or the making of value judgments in making decisions for the Government. Governmental functions normally fall into two categories: the act of governing, i.e., the discretionary exercise of Government authority, and monetary transactions and entitlements. (1) An inherently governmental function involves, among other things, the interpretation and execution of the laws of the United States so as to— (i) Bind the United States to take or not to take some action by contract, policy, regulation, authorization, order, or otherwise; (ii) Determine, protect, and advance United States economic, political, territorial, property, or other interests by military or diplomatic action, civil or criminal judicial proceedings, contract management, or otherwise; (iii) Significantly affect the life, liberty, or property of private persons; (iv) Commission, appoint, direct, or control officers or employees of the United States; or (v) Exert ultimate control over the acquisition, use, or disposition of the property, real or personal, tangible or intangible, of the United States, including the collection, control, or disbursement of Federal funds. (2) Inherently governmental functions do not normally include gathering information for or providing advice, opinions, recommendations, or ideas to Government officials. They also do not include functions that are primarily ministerial and internal in nature, such as building security, mail operations, operation of cafeterias, housekeeping, facilities operations and maintenance, warehouse operations, motor vehicle fleet management operations, or other routine electrical or mechanical services. Subpart 7.5 provides lengthy, but "not all inclusive," lists of (1) functions that are to be considered inherently governmental and (2) functions that, although not inherently governmental, "may approach being in that category because of the nature of the function, the manner in which the contractor performs the contract, or the manner in which the Government administers contract performance." Appendix E illustrates the functions designated as inherently governmental, or "approaching" inherently governmental, in the FAR. Beyond the examples in these lists, the FAR provides none of the elaboration upon the meaning or identification of inherently governmental functions given by the FAIR Act or OMB Circular A-76. The FAR also provides no guidance upon "functions that approach being inherently governmental" beyond identifying them. It does not bar agencies' contracting out these functions, and at least one decision by the U.S. Court of Federal Claims suggests that these functions can legally be contracted out. The FAR's provisions on inherently governmental functions and functions approaching inherently governmental functions apply to all executive branch agencies not specifically exempted from the FAR and to all service contracts not obtained through personnel appointments, advisory committees, or under statutory authority. The Defense Federal Acquisition Regulation Supplement (DFARS) provides additional guidance on inherently governmental functions for DOD agencies. Like the provisions of the FAR, the provisions of the DFARS are developed by notice-and-comment rulemaking and have the force of law. The DFARS declares that serving as a lead system integrator on a DOD contract entails performing acquisitions functions closely associated with inherently governmental functions and places certain limits on contractors serving as lead systems integrators. Other provisions of the DFARS (1) establish limits, which are lacking in the FAR, on contractor performance of certain functions closely associated with inherently governmental functions; (2) require written determinations that none of the functions to be performed under contract are exempt from private sector performance or inherently governmental prior to contracting them out; and (3) prohibit the award of contracts for functions exempted from private sector performance, as well as those that are inherently governmental. Other statements contained in the Federal Register notices introducing DFARS rules, while not themselves incorporated into the DFARS, indicate that defense agencies consider protection of property and persons, as performed by private security contractors, a commercial activity. Performing preemptive or other types of attacks, in contrast, is considered inherently governmental. Executive orders have also been used to designate certain functions as inherently governmental or commercial. For example, Executive Order 13180, issued by President Clinton on December 7, 2000, designated the "provision of air traffic services" as an inherently governmental function. This order was effectively repealed by Executive Order 13264, issued by President George W. Bush on June 4, 2002, which removed the language designating provision of air traffic services as an inherently governmental function from its discussion of such services. Numerous GAO decisions have also addressed the designation of specific functions as inherently governmental or commercial. GAO comes to address this question in two contexts: (1) in issuing advisory opinions, requested by agency officials, addressing whether agencies' proposed uses of appropriated funds are permissible and (2) in deciding bid protests when a protester challenges agencies' proposed contracting out of allegedly inherently governmental functions. GAO's decisions in bid protests lack the force of law and do not bind federal agencies or protesters. In neither context does GAO offer its own definition of inherently governmental functions. Rather, GAO uses a test for identifying inherently governmental functions that is based heavily on OMB Circular A-76 and the FAR. GAO's test of inherently governmental functions looks for (1) the exercise of substantial discretionary authority by government contractors or (2) the contractor's making value judgments on the government's behalf. Both are factors mentioned along with the definitions of inherently governmental functions in the FAIR Act and OMB Circular A-76 and illustrated by the examples in the FAR. In its decision on NRC Contracts for Reactor Licensing Tests , for example, GAO applied this test to the Nuclear Regulatory Commission's (NRC's) proposal to contract out some of its functions in administering licensing tests for nuclear reactor operators. Under the proposed contract, the contractor would have prepared, administered, and graded the tests, as well as provided the NRC with recommendations on which candidates should be granted licenses. GAO found that the proposed contract did not involve inherently governmental functions because the NRC guidelines relating to the tests provided "such extensive detail and guidance" that the contractors had no opportunity to exercise discretion or make value judgments in preparing, administering, or grading the tests. GAO also emphasized that agency personnel—not the contractor—would ultimately decide who received licenses. When emphasizing ultimate agency decision making, GAO highlighted a further distinction between performing a function and advising or assisting with a function that GAO and the courts sometimes also use when identifying inherently governmental functions. GAO's decision in the Matter of GSA Transportation Audit Contracts similarly illustrates another characteristic of GAO decisions addressing whether specific functions are inherently governmental. In this case, the General Services Administration (GSA) proposed to contract out seven functions it had formerly performed in-house when conducting transportation audits. GAO found that two of these functions were inherently governmental, two were commercial, and the remaining three were not clearly inherently governmental or commercial based on GSA's description of the proposed contracts. As this decision illustrates, GAO examines the context of contractual performance, including the degree of actual supervision that agencies exercise over contractors allegedly assisting government agencies in performing inherently governmental functions. It does not typically classify functions as inherently governmental or commercial in the abstract. Appendix F illustrates how GAO has classified various functions as inherently governmental or commercial. Such GAO classifications do not, however, themselves have the force of law. They are advice or recommendations to agencies. Federal courts have also addressed the question of whether specific functions are inherently governmental or commercial. Two contexts prompt courts to determine what is an inherently governmental function. The first context involves litigation under the FAIR Act, OMB Circular A-76, and the FAR. This context actually entails a smaller number of published decisions than the second context, which involves litigation concerning constitutional rights. The litigation concerning constitutional rights itself takes two forms. First, there are cases involving the "state action doctrine," which consider whether private actors are performing inherently governmental functions in determining (1) whether those actors must provide the same constitutional rights to third parties that the government must provide and (2) whether those actors can claim sovereign immunity for certain actions like government officials can. Second, there are cases involving the "private delegation doctrine," which center upon whether a private party was given impermissible authority to legislate or make rules on the government's behalf. Legislating and rulemaking are inherently governmental functions. The courts, like GAO, do not have an independent definition of inherently governmental functions. In deciding cases under the FAIR Act, OMB Circular A-76, or the FAR, the courts use the definitions provided in these sources. Moreover, in at least some cases, courts give considerable deference to the executive branch's classification of a function as inherently governmental or commercial because of the political question doctrine, under which courts decline to hear issues that have been entrusted to the discretion of another branch of government. In Arrowhead Metals, Ltd. v. United States , for example, the court found that coinage of money is inherently governmental but that the U.S. Mint has discretion to determine whether the stamping of blanks constitutes coinage. In reaching this conclusion, the court noted its "desire to avoid a legislative-executive controversy" regarding whether the striking of blanks in the production of coins constitutes an inherently governmental function. In other cases, the courts use a test of inherently governmental functions much like that used by GAO, focusing upon the degree to which a private party exercises substantial discretion, or makes judgments, on the government's behalf. Functions classified as inherently governmental under the constitutional test include conducting elections; exercising the power of eminent domain; providing police services; investigating allegations of child abuse; exercising prosecutorial discretion; chartering, oversight, and regulation of companies; creation of public monopolies; holding the personal property of prisoners; limiting the First Amendment rights of prisoners; taxing and paying governmental indebtedness or obligations; devising tariff regimes; and hiring diplomatic staff or civil servants. Functions categorized as commercial, in contrast, include providing transportation services to citizens and selling government land on the government's behalf. Designations of specific functions as inherently governmental in judicial decisions have the force of law, at least within the jurisdictions where the decisions are precedent and for so long as the decisions are not overturned. However, a judicial declaration that a function is inherently governmental under a constitutional test would not necessarily preclude the executive branch from contracting out this function under the FAIR Act, OMB Circular A-76, or the FAR. Rather, in the "state action" context, the designation of a function as inherently governmental means only that the contractor performing the inherently governmental function (1) owes private individuals the same constitutional rights that the government owes them and (2) can claim sovereign immunity like government officials can. Similarly, in the "private delegation" context, the designation means only that any regulations issued by the contractor cannot be constitutionally applied to private individuals. The "private delegation" doctrine would not necessarily preclude the contractor from performing other functions under the contract that resulted in the contractor's issuance of the regulations. The 110 th Congress required the Office of Management and Budget (OMB) to review existing definitions of inherently governmental functions and "develop a single consistent definition" of inherently governmental functions by October 14, 2009. Congress did so, in part, because of its concern that federal agencies may have recently contracted out inherently governmental functions due to the existence of multiple and/or inconsistent definitions of this term. This section provides an overview of major policy and legal issues that could be raised by amending the existing definitions of "inherently governmental functions," either in response to OMB's proposal or otherwise, as well as by other options that Congress could employ to prevent alleged contracting out of inherently governmental functions. One option for Congress would be to enact no new legislation addressing the definition of inherently governmental functions or the classification of specific functions as inherently governmental until changes required under existing legislation or proposed by the Obama Administration have been fully implemented. The 110 th and 111 th Congresses have enacted several statutes that address contracting out in general or inherently governmental functions in particular. In addition to the Duncan Hunter National Defense Authorization Act for FY2009, which required OMB to "develop a single consistent definition" of inherently governmental functions, the Omnibus Appropriations Act, 2009, prohibited agencies from conducting new public-private competitions under OMB Circular A-76 through September 30, 2009. This moratorium on public-private competitions was effectively extended beyond FY2009 by provisions in subsequent appropriations acts that require agencies to complete certain studies prior to conducting such competitions. Other enacted legislation requires the Secretary of Defense to include in the Annual Defense Manpower Requirements Report a "summary of the replacement during the preceding fiscal year of contract workyears providing support to major Department of Defense headquarters activities with military end strength or civilian full-time equivalents, including an estimate of the number of contract workyears associated with the replacement of contracts performing inherently governmental or exempt functions"; grants the Department of Defense authority to use appropriated funds available for the purchase of contract services that meet requirements anticipated to continue for five or more years to compensate civilian employees for performing the same requirements and calls for the promulgation of regulations ensuring that the department uses this authority to "build government capabilities that are needed to perform inherently governmental functions, functions closely associated with inherently governmental functions, and other critical functions"; classifies specific functions as inherently governmental; requires the Secretary of Defense to develop guidance related to personal service contracts establishing clear distinctions between DOD employees and the employees of DOD contractors; expresses the sense of Congress that security operations for the protection of resources (including people, information, equipment, and supplies) in uncontrolled or unpredictable high-threat environments should ordinarily be performed by members of the Armed Forces if they will be performed in highly hazardous public areas where the risks are uncertain and could reasonably be expected to require deadly force and requires that regulations to be issued under Section 862(a) of the National Defense Authorization Act for FY2008 ensure that private security contractors are not authorized to perform inherently governmental functions in areas of combat operations; requires the Administrator for Federal Procurement Policy to develop and issue a standard policy to prevent personal conflicts of interest by contractor employees performing acquisitions functions closely associated with inherently governmental functions; expresses Congress's sense that interrogation of enemy prisoners of war, civilian internees, retained persons, other detainees, terrorists, or criminals captured, confined, or detained during or in the aftermath of hostilities is an inherently governmental function and cannot appropriately be transferred to private sector contractors; requires DOD to develop guidelines and procedures to ensure that DOD considers using DOD civilian employees to perform new or currently contracted-out functions that are closely associated with the performance of inherently governmental functions, among other things; requires DOD to ensure that DOD's acquisition workforce is of the appropriate size and skill level to accomplish inherently governmental functions related to the acquisition of major systems and defines a "lead system integrator" as "a prime contractor under a contract for the procurement of services the primary purpose of which is to perform acquisition functions closely associated with inherently governmental functions with respect to the development or production of a major system"; requires the Commission on Wartime Contracting to make specific recommendations regarding, among other things, the process for determining which functions are inherently governmental in contingency operations, including whether providing security in an area of combat operations is inherently governmental; and requires OMB to develop an inventory to track contracts that, among other things, involve inherently governmental functions. Many of these changes have not yet been fully implemented. Similarly, the Obama Administration has recently signaled its commitment to have more functions, in general, performed by the federal government and to ensure that inherently governmental functions, in particular, are not improperly contracted out. Some commentators attributed the alleged contracting out of inherently governmental functions during the George W. Bush Administration, in part, to President Bush's "management agenda," which prominently featured a competitive sourcing initiative. The Obama Administration, in contrast, apparently intends to in-source, as a matter of policy. Members of the administration have signaled their belief that contractors have performed inherently governmental functions, and that too many functions were contracted out in prior administrations. Additionally, OMB released guidance concerning "Managing the Multi-Sector Workforce" in July 2009 that cautions against "overreliance on contractors" and instructs agencies to ensure that functions which are "critical" but not "inherently governmental" be performed only with federal employees to the extent required to retain control of the agency mission and operations. However, once the agency has "sufficient internal capacity" to control its mission and operations, such "essential functions" can be performed by either contractor or governmental personnel, as can functions that are "essential" but not "inherently governmental." Executive agencies have also made some plans for in-house performance of two functions—acquisitions work and provision of security services—whose performance by contractors has been of particular concern to Congress. Such changes in policy may suggest that the executive branch is no longer likely to contract out functions that some allege are inherently governmental. Waiting to see whether implementation of previously enacted legislation and/or the change in administration brings the desired changes in agencies' treatment of specific functions (e.g., performance in-house as opposed to contracting out) is one option for Congress. Prior changes in the law, coupled with the change in administration, might suffice to realize Congress's intent without resorting to more extensive changes in the law that could inadvertently limit the options of future administrations. For example, even without any statutory requirement to do so, the Department of Homeland Security (DHS) recently announced that it would review all newly awarded or renewed DHS contracts for services in excess of $1 million "to ensure that proposed contract awards do not include inherently government functions or impact core functions that must be performed by federal employees." Alternatively, Congress might decide that additional oversight or further statutory changes are immediately necessary to support current executive branch policy initiatives or ensure that future administrations do not have the opportunity to contract out allegedly inherently governmental functions before Congress can check them. One common theme in the recent literature on inherently governmental functions is that there are numerous and/or inconsistent definitions of inherently governmental functions within federal law and policy. For example, in its report on the Duncan Hunter National Defense Authorization Act for FY2009, the House of Representatives noted that the task of determining which functions must be performed by government employees is made even more difficult by the lack of a single definition and accompanying guidance on what constitutes an "inherently governmental function." Currently, the Federal Acquisition Regulation defines that term in multiple places, the Office of Management and Budget Circular A-76 also defines the term, and there is yet another definition in the Federal Activities Inventory Reform Act ( P.L. 105-270 ). There is also the additional DOD-specific definition of [functions] "closely associated with inherently governmental functions." Similarly, in its report Changing the Culture of Pentagon Contracting , the New America Foundation noted that the phrase "inherently governmental functions" appears 15 times in the United States Code "without a clear or consistent definition." Commentators raising this point appear to be suggesting that agencies would not contract out allegedly inherently governmental functions if (1) they did not have to determine which definition applied in particular cases and/or (2) they had clear definitions to guide their decision making in particular cases. Despite being pervasive, however, such concerns about multiple or inconsistent definitions of inherently governmental functions may be overstated given that there are only two main definitions of inherently governmental functions in federal law and policy. Moreover, these two definitions are arguably compatible, as Table 1 and Appendix G illustrate. In fact, the definitions differ in only a few words, although the materials accompanying the definitions diverge to a greater degree. The FAIR Act defines an inherently governmental function as "a function that is so intimately related to the public interest as to require performance by Federal Government employees," while OMB Circular A-76 defines an inherently governmental activity as an "activity that is so intimately related to the public interest as to mandate performance by government personnel." The differences between "activity" and "function," "require" and "mandate," and "government personnel" and "Federal Government employees" are arguably not legally or operationally significant. That there is such apparent compatibility between these definitions should not be surprising, given the history of the three main documents establishing federal law and policy on inherently governmental functions. The FAIR Act was intended to encourage agencies to at least consider outsourcing their commercial functions under the policies and processes of OMB Circular A-76. OMB Circular A-76 was, in turn, amended in 1999 to bring it into conformity with the FAIR Act, and much of OMB Circular A-76 was later incorporated into the FAR. Other commentators have suggested using another phrase instead of inherently governmental functions, such as "core functions," "mission essential functions," or "critical government functions." Commentators making this proposal often do not clarify whether this substitution is largely semantic, with agencies to be prohibited from contracting out core functions, for example, in the same way that they are currently prohibited from contracting out inherently governmental ones, or whether the substitution is intended to shift the debate from questions of law (i.e., what may be contracted out?) to questions of policy (i.e., which of the functions that may lawfully be contracted out should be contracted out?). Proposals of the latter sort are not definitional and are discussed in the section on " Focusing on Questions of Contracting Policy " below. Proposals of the former sort—to replace inherently governmental functions with another phrase that defines which functions agencies may lawfully contract out—would seem to be premised on the belief that agencies will more easily and accurately ascertain which functions they must perform in-house if they can consider specific functions in relation to a defined word or phrase that more clearly expresses the grounds for their decision making. That is, while agency officials may have difficulty determining which functions are inherently governmental because "inherently governmental" is an abstract-sounding concept, core or mission essential or critical functions may be easier to recognize because their very names make clear the basis for recognizing them. By its name, a "core function" would seem to be one central to an agency's activities; a mission essential function, one necessary for the successful accomplishment of a task; and a critical function, one that could have harmful consequences if not performed. All of the terms suggested as definitional replacements for "inherently governmental functions" could also potentially connote a broader set of functions than those encompassed by the term inherently governmental functions, especially under its current definition. The range of mission essential functions, for example, could include any function necessary for the completion of a task, not just those functions that must be performed by government employees because they are "intimately related to the public interest." Translating directions from a foreign language into English could be mission essential (e.g., necessary in order for commanders to get troops from Point A to Point B) without being inherently governmental (e.g., if the troops were on a routine patrol in friendly territory). Replacing "inherently governmental functions" with one of these terms could thus expand the range of functions exempt from contracting out, which might also constitute a short-term solution to any alleged over-reliance on contractors. However, this approach would not necessarily address which functions government employees must perform because they are in the public interest. Moreover, tying functions more closely to agency operations than to the public interest could result in situations where a function is categorized differently by different agencies. For example, translators would not necessarily be mission essential for the Interior Department, although they might be for the State Department. Similarly, translators could be essential for some DOD missions, but not for others. The Correction of Long-Standing Errors in Agencies' Unsustainable Procurements (CLEAN-UP) Act of 2009 ( S. 924 , 111 th Congress) would effectively diminish agencies' ability to contract out inherently governmental functions, among others, by defining other categories of functions related to inherently governmental ones and precluding agencies from contracting out these functions. S. 924 would adopt the FAR's definition of functions closely associated with inherently governmental functions and create its own definition of mission essential functions. This definition includes "functions that, although neither necessarily inherently governmental nor necessarily closely related to an inherently governmental function, are nevertheless considered by executive agency officials to be more appropriate for performance by Federal employees." It then would require heads of executive agencies to "ensure that inherently governmental functions, functions closely related to inherently governmental functions, and mission-essential functions are performed by Federal employees." Such a proposal would, among other things, ensure that allegedly inherently governmental functions are effectively shielded from potential contracting out by "insulating" them within additional layers of functions that could not be contracted out. Executive branch categorizations of particular functions would have less significance under this proposal than under the current law, where functions may be contracted out provided that the contracting agency determines that they are not inherently governmental. Provision of security services in combat zones is one function that might be more easily kept in-house under the CLEAN-UP Act than under existing law. Under existing law, DOD contracted out such services after finding they were not inherently governmental, although some Members of Congress contend that they are inherently governmental functions or functions approaching inherently governmental. Under the CLEAN-UP Act, however, DOD would have to find that these functions are not inherently governmental, closely related to inherently governmental, or mission essential in order to contract them out. The two additional categories into which functions might fall, which would keep them from being contracted out, could increase the likelihood of certain functions being performed in-house. For example, while it may seem plausible, at least to some, that private security contractors do not perform inherently governmental functions, it could seem less plausible that their functions are neither closely associated with inherently governmental functions nor mission essential. Such a change would be a significant one, given that agencies currently may generally contract out functions that they do not find to be inherently governmental. The change might, however, serve only to shift the functions about which disagreements arise. Rather than disagreements over the categorization of functions as inherently governmental, Congress and federal agencies might find themselves in disagreements over the categorization of functions as mission essential. Moreover, such disagreements might have to be resolved by the legislative or political process given the limits on standing to challenge agencies' contracting determinations and the political question doctrine. Another option, not widely discussed, would be to define terms within the existing definition of inherently governmental functions. The existing definition of inherently governmental functions could, perhaps, be made clearer by establishing the meaning of key terms under it. Statutes could prescribe what it means for a function to be "intimately related to the public interest" or "performed by the federal government," for example. Defining "performance by the federal government," in particular, could potentially help remove the distinction between performing and assisting with inherently governmental functions that characterizes GAO opinions and executive branch discussions of inherently governmental functions. For example, in its consideration of the IRS's proposed private debt collection program—which was one of the most prominent non-DOD examples of an agency contracting out allegedly inherently governmental functions—GAO distinguished between collection of taxes, which is inherently governmental, and assisting in collecting taxes by locating and contacting taxpayers to remind them of their tax liability and suggest payment methods, which is not inherently governmental. Any definitional changes, along the lines suggested above or otherwise, may be of limited effectiveness in ensuring that executive branch agencies do not contract out functions that some Members of Congress or commentators believe are inherently governmental. This is, in large part, because many functions are not patently inherently governmental or commercial, as Figure 1 illustrates. The potential effectiveness of definitional changes is also limited by the fact that any definition—of inherently governmental functions or some other construct—would be applied in specific circumstances by executive branch officials, who might not classify functions in the same way that Congress or third-parties would classify them. For example, DOD determined that private security contractors would not be performing inherently governmental functions under the existing law. Some Members of Congress disagreed, however, as is evidenced by their enactment of legislation expressing the sense of Congress that "security operations for the protection of resources ... in uncontrolled or unpredictable high-threat environments should ordinarily be performed by members of the Armed Forces." Congress has attempted to address alleged deficiencies in agencies' application of the definitions of inherently governmental functions in several ways. The 110 th Congress required the Commission on Wartime Contracting to include in its report recommendations on the process for determining which functions are inherently governmental in contingency operations, including whether providing security in an area of combat operations is inherently governmental. The 110 th Congress, as well as other Congresses, also enacted legislation classifying particular functions as inherently governmental. Congress could also require agencies to provide mandatory training for their contracting officers, in particular, on what constitutes an inherently governmental function. Or Congress could provide agencies with lists of functions that are inherently governmental, or potentially suitable for contracting out, like the lists found in the FAR or formerly contained in OMB Circular A-76. None of these approaches is likely to prevent the recurrence of future inter-branch differences of opinion in the classification of particular functions, however. The recommendations of the Commission on Wartime Contracting will be context-specific, and while they might adequately guide DOD in the near future in similar situations, they may not be sufficient to guide decision making by other agencies, in the future, or in dissimilar situations. Enactment of legislation classifying particular functions as inherently governmental is necessarily ad hoc , and often possible only after agencies have already engaged in allegedly improper contracting for performance of inherently governmental functions. Mandatory training for agency officials could cost money, and it would be hard to ensure that the persons providing the training would categorize specific functions in the same way that some Members of Congress or commentators would. These trainers would be employees of or working for the executive branch, which has its own interests in asserting its constitutional and statutory prerogatives in the realm of contracting. No listing of functions could be comprehensive, and even if the list covered all functions currently of concern to Congress, problems may arise in the future related to the performance of functions not presently at issue. Some current disputes over the alleged contracting out of inherently governmental functions during the Bush Administration were arguably exacerbated by the fact that agencies categorize functions as inherently governmental or commercial without knowing all the details about how specific contracts will be performed in specific settings that often later prompt commentators to allege the functions were inherently governmental and should never have been contracted out to begin with. Had Blackwater employees not been involved in several shooting incidents in Iraq, which were unanticipated at the time the State Department entered the contracts with Blackwater, the debate over whether private security contractors perform inherently governmental functions might not have ensued. Prohibiting agencies from contracting out specific functions, or from using appropriated funds to contract out specific functions, would also serve to ensure that certain allegedly inherently governmental functions are not contracted out. Section 730 of the Consolidated Appropriations Act for FY2008, for example, specifies that [n]one of the funds made available in this Act may be used to study, complete a study of, or enter into a contract with a private party to carry out, without specific authorization in a subsequent Act of Congress, a competitive sourcing activity of the Secretary of Agriculture, including support personnel of the Department of Agriculture, relating to rural development or farm loan programs. Such approaches do not require any changes in the definition of inherently governmental functions, and they remove all possible questions about whether the executive branch will categorize a function as Congress might wish. These approaches are probably best utilized as tailored responses to specific concerns, however, because they are reactive and potentially time-limited. Congress generally uses these approaches on an ad hoc basis in response to agencies' contracting out, or proposed contracting out, of specific functions. Moreover, if included in an appropriations bill, such prohibitions could be limited to specific agencies or time periods. Prohibitions in a DOD appropriations bill would not necessarily apply to the Department of State, for example, and prohibitions could be limited to funds covered by the appropriation, or automatically carried over to future appropriations bills long after the situation prompting the prohibition has otherwise been resolved. A more general prohibition on the use of the OMB Circular A-76 process, such as was in place through September 30, 2009, might seem helpful in preventing the contracting out of inherently governmental functions because it addresses all contracting out under OMB Circular A-76. However, such an approach is arguably both over-inclusive and under-inclusive. It is over-inclusive in the sense that prohibiting agencies' contracting out under OMB Circular A-76 encompasses all functions performed by the government, not just those that are allegedly inherently governmental. OMB Circular A-76 articulates the competitive process that agencies are to use in source selection whenever they consider contracting with private sector sources for the performance of commercial activities performed by government employees. It thus potentially applies to contracts for functions that are generally not considered to be inherently governmental (e.g., custodial services), as well as to those for functions that some might argue are inherently governmental (e.g., acquisitions-related functions). A general prohibition on the use of the A-76 process is also under-inclusive in the sense that A-76 addresses only commercial functions performed by government employees. It does not apply to new functions, which have not been performed by government employees, nor does it provide a mechanism for "insourcing," or determining whether government employees or contractors should perform functions currently performed by contractors. Such a prohibition may also generate opposition from trade groups if it appears designed to protect government employees at the expense of contractor employees. Some commentators have suggested that Congress could potentially make agencies less prone to contract out allegedly inherently governmental functions, or other functions, by addressing structural factors that may lead agencies to rely on contractors instead of military personnel or civil servants. "Personnel ceilings" have been identified as one such factor. A personnel ceiling establishes the maximum number of positions that may be budgeted in a job category or for all personnel in an organization. Although DOD is prohibited from converting a function performed by DOD civilian personnel to contractor performance to circumvent a personnel ceiling, it is otherwise subject to ceilings on the number of civilian employees and military personnel. It may also hire contractors without engaging in public-private competitions under OMB Circular A-76 when converting functions from military to DOD civilian performance if the director of the local Human Resources Office determinates that civilian employees cannot be hired. Some commentators have suggested that DOD relied on contractors to perform certain functions, most notably acquisition functions, in part because of the operation of such personnel ceilings. Recently enacted or introduced legislation removed or would remove personnel ceilings imposed by the executive branch, as well as certain congressionally imposed ceilings on the number of DOD personnel. However, such legislation does not address congressionally imposed ceilings outside DOD, or troop needs in situations where DOD civilian personnel cannot be substituted for military ones and there are insufficient volunteers for the military. However, complete removal of personnel ceilings is not possible because of limits on the use of appropriated funds and, arguably, would not comport with some Members' desire to keep agencies within their budgets. Another factor involves the ease of hiring and firing government personnel. Because of the procedural requirements for hiring new federal employees, as well as the procedural protections ensuring that federal employees are not improperly dismissed, agencies can experience difficulties matching their existing personnel to the functions they need to perform when there are sudden changes in their missions. An unanticipated need for workers to perform a new function, or the actual or anticipated ending of a particular mission, poses particular problems. This factor may become less salient over time, however, as Congress has given, or is considering giving, agencies expedited or other hiring authorities, and agencies have begun creating some term-limited positions for federal employees. Congress receives some information about agencies' contracting decisions under the FAIR Act, but this information may be insufficient to enable Congress to adequately ascertain which functions agencies may be improperly contracting out. Under the FAIR Act, agencies must compile annual lists of all activities they perform that are not inherently governmental and make these lists available to Congress and the public. However, such lists include only functions that agencies currently perform, not new functions, and the listings may not provide Congress or the public with enough information to ascertain whether a listed function is, in fact, commercial, as Figure 2 illustrates. Moreover, under the FAIR Act, agencies' lists are not directed to any specific committee(s) of Congress, nor is there an established procedure for congressional review of or response to the lists once they are received. This is not to say that Congress and its Members cannot or do not exercise their oversight functions in response to specific items on agencies' FAIR Act inventories. It does, however, mean that congressional involvement with FAIR Act inventories is ad hoc , not systemic, which could limit Congress's ability to provide effective oversight of contracting out under the FAIR Act. Systemic congressional involvement in the OMB Circular A-76 process is equally limited. OMB Circular A-76 focuses primarily upon public notice, as Figure 3 illustrates; notice to Congress is mentioned only as an accompaniment to public notice. Congress has recently considered several proposals that would increase the information about agencies' contracting decisions available to Congress and/or the public. The CLEAN-UP Act, for example, would require that the Chief Acquisition Officer of each agency, or his or her equivalent, certify that each function to be performed under an agency service contract (including task or delivery orders and exercises of options) is not inherently governmental, closely related to inherently governmental, or mission essential. In addition, agency heads would have to report to the head of OMB annually on each contract, with the report being posted on the Internet and notice of the report's availability being published in the Federal Register . The hope is, apparently, that increased congressional or public awareness of agencies' decisions may diminish the likelihood that an agency will improperly classify as commercial an activity that is arguably inherently governmental. With increased awareness of potentially problematic decisions, Congress could exercise oversight or enact legislation. However, oversight may be insufficient to get an agency to change its classification of a particular function, especially in the short term, and enacting legislation can take time. Another option for Congress would be to shift its focus from questions of contracting law to questions of contracting policy, or from discussions of whether specific functions are inherently governmental to discussions of which of the functions that are not inherently governmental should be performed in-house. The current discussions regarding the definition of inherently governmental functions, or whether certain functions are inherently governmental, do not address what should be done with those functions which are not inherently governmental. Agencies are presently answering these questions on an ad hoc basis, without appreciable congressional guidance, in part because the only government-wide authorities on contracting out were designed for different purposes and focus upon contracting out of commercial functions. The FAIR Act focuses upon listings of commercial functions that could be lawfully contracted out, while OMB Circular A-76 focuses upon how to determine whether government employees or the private sector will perform specific commercial functions. No legislation, regulation, or policy document systematically addresses how agencies should determine which of the non-inherently governmental functions they perform should be performed in-house because of concerns related to transparency, accountability, employment policy, or related issues, although commentators have proposed some such frameworks. Figure 4 illustrates one possible model for separating questions of contract law from those of contract policy, while Figure 5 illustrates one model for deciding questions of contracting policy. The need for "balance" and "reasonableness" in agencies' use of contractors, as well as their need to "maintain agency capability to perform core functions" have been particularly noted. However, discussions of "balance" and "reasonableness" can have two different focal points. While the focus is often on the perceived overuse of contracting out, there are those who believe that the problem is under-use of the private sector. The Freedom from Government Competition Act of 2009, for example, takes the latter view. The cost of performing functions is assessed as part of the A-76 process, although there have been some concerns about how accurately this process reflects the costs of either performance in-house or by contractors. Congress has arguably recently begun to pay increased attention to questions of contract policy. Sections 3 and 11 of the CLEAN UP Act, for example, encourage executive branch agencies to pursue business process engineering, "even if such efforts reduce or increase the need for Federal employees or contractors." Business process engineering is, however, more concerned with cost-savings in operations than it is with decision making as to who performs specific functions. Congress could take additional actions to focus attention on questions of contracting policy by, among other things, holding hearings at which agencies can present and discuss their developing frameworks for deciding questions of contracting policy, mandating that executive branch officials develop a framework for deciding questions of contracting policy, or legislatively establishing such a framework to be used by executive branch officials. A focus on contracting policy may also allow Congress to better address related questions, such as the management and oversight of contractors' work, that often get caught up in the debate over inherently governmental functions, but are arguably separate from it. For example, some commentators seem to desire the expansion of the category of inherently governmental functions because there have been problems with contractor performance under specific contracts and classifying a function as inherently governmental ensures that a contractor cannot lawfully perform that function. However, while it may be tempting to conflate "shall" and "should" and categorize all functions as inherently governmental whenever there are any possible grounds for saying that the government "should" perform them, such an approach could constrain the options of future administrations and avoids the question of which functions must be performed by the government in every case. A function that should be performed by the government could potentially be contracted out in an emergency if it cannot be performed in-house. The same would not be true of an inherently governmental function. Appendix A. Examples of Congressional and Executive Branch Interactions in Defining Inherently Governmental Functions During the 1980s Some illustrations of Congress's responses to attempts by the Reagan and George H.W. Bush Administrations to contract out certain functions during the 1980s may help to clarify the give-and-take in the current debate over the public and private sectors and contracting out. During this period, Congress frequently used the appropriations rider to counter contracting-out decisions. An appropriations rider places conditions—generally in the form of language specifying that "no funds shall be used for"—on the outsourcing of a particular type of function or on outsourcing in general. Alternatively, an appropriations rider might impose conditions that must be met before funds can be expended (e.g., a report to Congress). This type of legislation is easily tailored to particular concerns, but is generally only effective for the period of the appropriation. Appropriations Riders General Prohibitions on Contracting Out An example of a general prohibition on contracting out was contained in the Further Continuing Appropriations Act for FY1983, which provided that none of the funds appropriated under the act for the General Services Administration (GSA) could be obligated or expended to contract out any service performed by GSA employees. Another example of a general prohibition was contained in the National Aeronautics and Space Administration Authorization Act for FY1989, which prohibited the use of funds authorized by the act to contract out any function currently performed by federal employees at the Kansas City National Weather Service Training Center. Prohibitions on Contracting Out Specific Functions The 1984 appropriation for GSA illustrates a more specific type of restriction on contracting out. The continuing resolution for FY1984 specified that no funds could be expended by GSA to contract out any guard, elevator operator, messenger, or custodian functions performed by GSA employees. However, the act granted an exception for certain services contracted out to sheltered workshops employing the "severely handicapped." Another example of a prohibition on contracting out specific functions can be found in the Treasury, Postal Service and General Government Appropriations Act for FY1989, which prohibited use of any funds made available under the act to contract out positions at the Bureau of Engraving and Printing Police Force. Requiring Agencies to Meet Certain Conditions Prior to Contracting Out There were also many instances where Congress required agencies to meet certain conditions before they could use appropriated funds to implement any outsourcing decision. The Departments of Commerce, Justice, and State, the Judiciary and Related Agencies Appropriation Act for FY1989, for example, specified that none of the funds provided under the act could be obligated, or expended through a reprogramming of funds, to contract out any function or activity performed by federal employees without first notifying the Appropriations Committees of both Houses of Congress. The Department of Defense Appropriations Act for FY1989 similarly prohibited the use of funds appropriated by the act for contracting out any activity performed by the Defense Personnel Support Center in Philadelphia unless the Appropriations Committees of both Houses of Congress received advance notice. Specifying Procedures for Contracting Out Another approach was to limit agencies' discretion by prescribing how particular agencies should approach their outsourcing decisions. Congress used this approach to address both contracting out generally and contracting out of specific functions. For example, Congress sometimes enacted statutes setting out the criteria that an agency must use in making outsourcing determinations, the procedure it must follow in any public/private cost comparisons, definitions of key terms (e.g., "inherently governmental functions"), penalties for violations, and any specific or generic exemptions. Chapter 146 of Title 10 of the United States Code, which governs DOD contracting for performance of civilian commercial or industrial functions, illustrates this type of legislation. Chapter 146 has provisions (1) specifying the studies and reports that DOD must perform before converting a function; (2) defining and exempting "core functions;" (3) listing the requirements for conducting cost comparisons involving retirement costs; and (4) listing specifically exempted functions. Interestingly, Chapter 146 was not enacted as one statute, but resulted from several provisions enacted during the 1980s, as the following chronology illustrates. Departme nt of D efense Authorization Act for FY 1980 . This act prohibited DOD from converting, during that fiscal year, any commercial or industrial function of DOD performed by DOD personnel as of November 9, 1979, to performance by a contractor unless the Secretary of Defense notified Congress. Two types of notification were required. First, the Secretary was to notify Congress of any decision to study possible conversion and certify that the government in-house cost calculation for the function was based on an estimate of the most efficient and cost-effective organization for in-house performance. Then, if a decision to convert the function was ultimately made, the Secretary had to report (1) the economic impact on the employees affected, the community, and the federal government; (2) the effects of the conversion on the military mission of the function; and (3) the amount of the private bid for performance of the function, the cost if the function were continued in-house, and any costs or expenditures the government would incur because of the contract. The act also prohibited, during the fiscal year, any conversion to circumvent civilian personnel ceilings. The act exempted funds appropriated for any fiscal year for DOD research, development, testing, or evaluation, or procurement or production related thereto, unless the funds were obligated or expended for operation or support of installations or equipment used for research and development, including maintenance support for laboratories, operation and maintenance of test ranges, or maintenance of test aircraft and ships. Departme nt of Defense Authorization Act for FY 1981 . This act contained restrictions on contracting out that were nearly identical to those included in the DOD authorization for FY1980, but made these restrictions permanent law with an effective date of October 1, 1980. The act prohibited converting any commercial or industrial function of DOD performed by DOD personnel on October 1, 1980, to performance by a private contractor unless the Secretary of Defense provided the following information to Congress in a timely manner: (1) notice of any decision to study possible conversion; (2) a detailed summary comparing the cost of DOD personnel performing the function and performance by a private contractor and demonstrating that privatization of the function would result in cost savings to the government over the life of the contract; (3) certification that the government's in-house cost calculation for the function was based on an estimate of the most efficient and cost-effective organization for in-house performance; (4) a report on the economic impact of the proposed contract on the employees affected, the community, and the federal government; (5) the effects of the conversion on the military mission of the function; and (6) the amount of the private bid for performance of the function, the cost if the function were to be continued in-house, and any cost or expenditure which the government would incur because of the contract. If DOD decided to convert the function after these studies were completed, the Secretary of Defense had to report this decision to Congress. The effective date of this provision was October 1, 1980. The act also prohibited conversion to circumvent civilian personnel ceilings. Department of Defense Authorization Act for FY 1983 . This act amended the 1981 authorization for DOD so that the foregoing prohibitions applied only to functions performed by civilian employees of DOD, as opposed to DOD personnel. It exempted functions performed by 10 or fewer DOD civilian employees, but prohibited modification, reorganization, or division of functions to take advantage of this exemption. The amendment also provided that the restrictions of the act should not apply during war or declared national emergencies. The effective date of this amendment was October 1, 1982. The act also specifically prohibited use of any funds appropriated pursuant to the authorization to contract out firefighting or security-guard functions at any military facility except for the renewal of existing contracts. The act also placed a six-month moratorium on use of any funds appropriated under this authorization for new studies of the benefits or feasibility of contracting out functions performed by DOD civilian employees except for custodial, laundry, refuse collection, grounds maintenance, food service and preparation, and base transportation functions. The six-month period ran from October 1, 1982, to March 31, 1983. Department of Defense Author ization Act for FY 198 4 . This act continued for two years the prohibition on contracting out DOD firefighting and security-guard functions that had been initiated in the DOD authorization for FY1983. The extended prohibition did not apply to contracts to be performed outside the United States, situations where the use of military personnel would affect unit readiness, contracts to be carried out on government-owned but privately operated installations, or renewal of existing contracts. Department of Defense Authorizat ion Act for FY 1985 . This act required the Secretary of Defense to identify logistics activities that are essential to the national defense. The act prohibited contacting out these activities unless the Secretary provided Congress with a "waiver" stating that the activity was no longer required for national defense, as well as the criteria used in granting the waiver. Departmen t of Defense Authorization Act for FY 1986 . This act declared that certain functions of DOD should be deemed logistics activities essential to the national defense under Section 307 of P.L. 98-525 . These functions were depot-level maintenance of mission essential materiel at certain facilities of the Army, Navy, Marines, Air Force, Defense Logistics Agency, and Defense Mapping Agency. Codifying Restrictions from Appropriations Riders As the notes under many of the foregoing provisions indicate, numerous limitations were codified late in the 99 th Congress and or in the 100 th Congress. The National Defense Authorization Act for FY1987, for example, codified the prohibition on contracting out DOD firefighting functions that had been initiated in the DOD authorization for FY1983. However, this prohibition did not apply to contracts performed outside the United States, situations where use of military personnel affected unit readiness, contracts performed on government-owned but privately operated installations, or renewal of existing contracts. The prohibition on contracting out security-guard functions was continued for one year with the same exceptions as for firefighter functions. Also exempted from this prohibition were contracts for security-guard services when the requirement for the services arose after the effective date of the act and the Secretary of Defense determined that the functions could be contracted out without adversely affecting installation security, safety, or readiness. The act also codified the general policy on contracting out noted earlier, (i.e., that DOD should contract out any function not prohibited by law if it would be provided at a lower cost—including any cost differential required by law, executive order, or regulation—by the private sector). Guidelines were provided for determining if money would be saved by contracting out. The National Defense Authorization Act for FY1988 and 1989 similarly made permanent the prohibition on contracting out security-guard functions at DOD facilities, with the same exemptions as apply to firefighter functions. Permanent Laws In addition to appropriations riders, Congress also enacted permanent laws to limit outsourcing. For example, the Veterans' Compensation, Education, and Employment Amendments of 1982 prohibited contracting out medical care provided by what was then the Veterans Administration (VA). If the VA determined that an activity was not a direct patient care activity, or an activity incident to direct patient care, it could contract out the activity provided that the then-Administrator of the VA made two determinations after conducting a study required by the act. First, the Administrator of the VA had to determine that (1) the costs to the government (including the costs of the study) would be lower by 15% or more than the costs of in-house performance and (2) the quality or quantity of health care services would be maintained or enhanced by the contract. The Comprehensive Omnibus Budget Reconciliation Act of 1986 similarly required the National Oceanic and Atmospheric Administration to notify the President of the Senate; the Speaker of the House; the Senate Committee on Commerce, Science, and Transportation; the House Committee on Merchant Marine and Fisheries; and the House Committee on Science and Technology at least 30 days before awarding any contract for the performance of a commercial activity as defined in OMB Circular A-76. The notice had to include a description of the contract, a comparison of the costs of and services provided by contracting out or in-house performance, and an assessment of the benefits to the federal government of proceeding with the proposed contract. The Sikes Act Extension and Amendments authorized the Secretary of Defense to enter into cooperative plans with the Secretary of the Interior and state agencies for the development, maintenance, and coordination of wildlife, fish, and game conservation and rehabilitation on military reservations. The implementation and enforcement of these plans was specifically exempted from OMB Circular A-76 and priority was given to federal and state agencies. This exemption did not apply to existing contracts, but did cover renewals of existing contracts. Appendix B. Factors Used in Determining Whether a Function Is Inherently Governmental Under OMB Circular A-76 Appendix C. Functions Performed by Military Personnel as Classified by DODI 1100.22 Appendix D. Functions Performed by DOD Civilian Employees as Classified by DODI 1100.22 Appendix E. Inherently Governmental Functions and Functions Approaching Inherently Governmental as Classified by the FAR Appendix F. Functions Recognized as Inherently Governmental or Commercial by the GAO Appendix G. Side-by-Side Comparison of the Definitions of Inherently Governmental Functions from the FAIR Act and OMB Circular A-76 | An "inherently governmental function" is one that, as a matter of law and policy, must be performed by federal government employees and cannot be contracted out because it is "intimately related to the public interest." Two main definitions of "inherently governmental functions" currently exist within federal law and policy. One is a statutory definition, enacted as part of the Federal Activities Inventory Reform (FAIR) Act of 1998. This definition states that an inherently governmental function is "a function so intimately related to the public interest as to require performance by Federal Government employees." The other is a policy-oriented definition contained in OMB Circular A-76. This definition states that an inherently governmental activity is "an activity that is so intimately related to the public interest as to mandate performance by government personnel." Other statutes and regulations that define inherently governmental functions do so either by reproducing the language of the FAIR Act or OMB Circular A-76, or by incorporating one of these definitions by reference. Concerned that the existence of multiple or inconsistent definitions of "inherently governmental functions" might be partly responsible for the alleged contracting out of inherently governmental functions by the Department of Defense (DOD) and other agencies, the 110th Congress enacted legislation (P.L. 110-417) requiring the Office of Management and Budget (OMB) to develop a "single consistent definition" of "inherently governmental functions." This definition is to "ensure that the head of each ... agency is able to identify each position … that exercises an inherently governmental function." In response, on March 31, 2010, OMB, through the Office of Federal Procurement Policy, issued a proposed policy letter which would adopt the FAIR Act definition as the single definition. The current debate over which functions are inherently governmental is part of a larger debate about the proper role of the federal government vis-à-vis the private sector. This debate is as old as the Constitution, which prohibits privatization of certain functions (e.g., Congress's legislative function), a prohibition courts enforce under various judicial tests (e.g., nondelegation, functions "affected with the public interest," etc.). Since the 1920s, federal contracting has been a primary arena for the public/private debate, with the executive and legislative branches contesting (1) which functions the government must perform because they are inherently governmental; (2) which functions the government should perform because they are closely related to inherently governmental functions or for some policy reason; and (3) which functions should be left to the private sector. Congress has several options if it is concerned that deficiencies in the existing definitions of inherently governmental functions may lead agencies to improperly contract out such functions. Options include (1) relying upon recent statutory changes and/or the policies of the Obama Administration, which proposes to limit contracting out generally, to effect desired changes in agency contracting; (2) changing the existing definition of "inherently governmental functions"; (3) placing limits on contracting out or use of appropriated funds; (4) addressing structural factors potentially prompting agencies to rely on contractors; (5) providing for more effective oversight of executive branch contracting decisions; and (6) focusing more on questions of contracting policy (i.e., what functions should the government perform?) than on contracting law (i.e., what functions must the government perform?). The 111th Congress has enacted or is considering several bills addressing inherently governmental functions, including P.L. 111-8, P.L. 111-84, P.L. 111-117, H.R. 1436, H.R. 2142, H.R. 2177, H.R. 2682, H.R. 2736, H.R. 2868, and S. 924. |
On July 1, 2012, a record number of Mexican voters headed to the polls to elect a president who will serve a six-year term beginning on December 1, 2012. All 128 seats in the Mexican Senate and 500 seats in the lower house of congress, known as the Chamber of Deputies, were also up for election. Senators will serve six-year terms and deputies will serve three-year terms that began on September 1, 2012. Elections for local and state offices took place in 14 states (including Mexico City's Federal District), six of which held gubernatorial elections. Voters in the Federal District selected a head of government (mayor). Mexico does not permit consecutive reelection for any political office. Thus, the results of these elections could lead to shifts in Mexico's domestic and foreign policy priorities and have implications for U.S.-Mexican relations. Twelve years after losing the presidency for the first time in 71 years, the Institutional Revolutionary Party (PRI) won the presidential election (see Figure 1 ), a plurality of seats in the Senate (see Figure 2 ) and Chamber of Deputies (see Figure 3 ), and gubernatorial elections in Chiapas, Jalisco, and Yucatán (see Figure 4 ). Despite these victories, PRI/Green Ecological Party (PVEM) candidate Enrique Peña Nieto won by a relatively narrow margin over Andrés Manuel López Obrador of the leftist coalition led by the Party of the Democratic Revolution (PRD), and the PRI/PVEM failed to capture a simple majority in either chamber of the congress. In addition to López Obrador's second-place finish in the presidential contest, the PRD and its allies picked up enough seats to become the second-largest force in the Chamber of Deputies, won the governorships of Morelos and Tabasco, and retained control of the mayoralty of the Federal District. The conservative National Action Party (PAN) lost the presidency, two gubernatorial contests, and seats in the Chamber of Deputies, but picked up senate seats and retained the governorship of Guanajuato. For an analysis of the election results, see " Election Results " below. This report provides background information on the parties and presidential candidates that competed in Mexico's 2012 elections, analyzes the election results, and discusses some potential implications of those results for U.S.-Mexican relations in the areas of security cooperation, economic integration, and energy policy. The July 1, 2012, elections occurred at a time when Mexico faced significant economic and security challenges and presidential power was increasingly constrained by a more active congress and Supreme Court, powerful governors, and a vocal civil society. Analysts maintain that Mexico has experienced modest economic growth punctuated by a severe economic crisis (in 2009) and a growing security crisis under two successive PAN administrations. Often, these crises have overshadowed the policy achievements of those governments. As a result, economic and security issues figured as top concerns among the Mexican electorate. The major presidential candidates all stressed the importance of boosting job creation and improving public security in Mexico, with many arguing that an effective way to reduce the influence of criminal groups is by creating jobs. However, voters appeared to believe that the PRI may be best equipped to restore order and restart economic growth, despite uncertainty about how the party's return to power might impact Mexican democracy given its reputation for corruption and undemocratic practices. Since even before the campaign officially began on March 30, 2012, Enrique Peña Nieto of the PRI/PVEM had maintained a double-digit lead in most polls over Josefina Vázquez Mota of the PAN, López Obrador of the coalition led by the PRD, and Gabriel Quadri of the National Alliance Party (PANAL). Polling for the legislative elections followed the same trajectory as the presidential race, with a plurality of voters favoring PRI candidates followed by the PRD-led coalition, the PAN, and then the PANAL. While the polls correctly captured López Obrador overtaking Vázquez Mota as the second-most popular candidate by late May 2012, they generally underestimated the level of popular support for his candidacy. López Obrador benefitted from the YoSoy132 (I am 132) student protest movement that began in Mexico City in mid-May and organized itself through social media. Although the movement largely intended to have some of the youth voters' concerns—such as perceived media bias—heard by all of the candidates, many of its supporters also expressed antipathy for the PRI. Mexico has three major political parties—the PRI, the PAN, and the PRD—two of which formed coalitions with smaller parties for the 2012 federal elections. Another small party formed in 2005 and loosely aligned with Mexico's powerful teacher's union, the PANAL, decided to field its own presidential candidate after the PRI broke its alliance with the party earlier this year. Three states—Sinaloa, Puebla, and Oaxaca—are currently governed by coalitions composed of the PAN, PRD, and other small left-leaning parties. These "stop the PRI" coalitions were successful in the 2010 state-level contests. However, they did not field candidates in the 2011 gubernatorial elections or in the 2012 elections. The Institutional Revolutionary Party (PRI ) unified the country after the Mexican Revolution (1910-1920) by organizing the major groups in Mexican society (organized labor, peasants, professionals) into a corporatist party that governed Mexico from 1929 until 2000. The PRI became a centrist party that relied on a hierarchical party structure, strong patronage system, and periodic electoral fraud to maintain its dominance. Through the 1960s, the PRI presided over a period of strong, state-led economic growth. The PRI's popularity declined, however, after its violent repression of student protesters led to the 1968 Tlatelolco massacre, and its financial mismanagement in the 1970s contributed to an economic crisis in the early 1980s. Dissident PRI members split with the party in the mid-1980s, eventually creating a progressive party known as Party of the Democratic Revolution (PRD) after the PRI embraced neo-liberal (market-friendly) economic policies and proved unwilling to adopt more democratic internal procedures for choosing candidates. PRI presidential candidates were often hand-selected by incumbents through a process known as the "tap of the finger" ( el dedazo ) rather than through party primaries or nominating conventions. The PRI was accused of electoral fraud in the 1988 presidential election and has been criticized for corruption and for previously allowing organized crime to operate relatively freely within certain parameters set by the state. The PRI recently expelled Tomas Yarrington, a former governor of Tamaulipas, from the party after U.S. prosecutors alleged in a civil suit that he bought property in Texas to launder funds for Mexican drug traffickers. PRI power has waxed and waned over the course of the past 15 years. The PRI lost control of the Chamber of Deputies in 1997 and handed over the Mexican presidency to the PAN in 2000. Even as its power diminished in 2000, the PRI remained the largest party in the Mexican Congress and retained control over several key governorships. Prior to the 2012 elections, the PRI controlled 19 of 32 governorships, 25% of the seats in the Senate, and 48% of the seats in the Chamber of Deputies. With the allied PVEM, a small party focused exclusively on environmental protection, the PRI held a majority in the Chamber. The PRI is particularly dominant in the north/northeast and in the Yucatán. It competes with the PRD in southern Mexico. The National Action Party (PAN) is a socially conservative, pro-business party that was formed in 1939 by Catholic activists, professionals, and entrepreneurs who disagreed with the PRI's intervention in the economy and its hierarchical and secularist tendencies. From the 1940s through the mid-1980s, the PAN served as the official opposition to the PRI, but failed to capture any governorships or large numbers of congressional seats. By the late 1980s, however, the PAN had begun to build on the support it had developed in local and state elections to capture governorships in business-friendly northern states and in conservative central western states. Vicente Fox's come-from-behind presidential victory in 2000 marked the party's crowning achievement, but some have become disillusioned that corruption, impunity, and poverty are still pervasive in Mexico after 12 years of PAN rule. Escalating organized crime-related violence, some of which has occurred in response to the Calderón Administration's tough anticrime policies, has also weakened support for the PAN. Before the 2012 elections, the PAN governed six states alone and three in coalition with the PRD, and held 39% of the seats in the Senate and 28% of the seats in the Chamber of Deputies. The Party of the Democratic Revolution (PRD) is a center-left party founded by dissident PRI members in the late 1980s that has formed a "Progressive Movement" coalition with the Workers' Party (PT) and Citizens' Movement (PMC), two smaller left-wing parties. The PRD grew out of a coalition of leftist groups that supported the 1988 presidential bid of Cuauhtémoc Cárdenas, son of famed President Lázaro Cárdenas. Its early transition from movement to political party was hindered by the PRI's opposition to its existence and its own internal divisions. The PRD has traditionally been skeptical of neo-liberal economic policies, opposed opening state oil company Petroleos Mexicanos (PEMEX) to private investment, and called for greater attention to poverty and inequality. The PRD has built its strongest support bases in and around Mexico City, which it has governed since mayors were first elected in the city in 1997, and in the poor states of southern Mexico. The PRD came close to capturing the presidency in 2006 with Andrés Manuel López Obrador, a popular former mayor of Mexico City, as its standard bearer. The party lost popular support and became plagued by internal divisions, however, after López Obrador refused to accept his defeat. Analysts expressed some surprise that the Mexican left coalesced behind López Obrador's 2012 presidential candidacy. Prior to the July 1 elections, the PRD governed the Federal District along with six other states, three alone and three in coalition with the PAN. It held 18% of the seats in the Senate and 13% of the seats in the Chamber of Deputies. PRD presidential candidate Andrés Manuel López Obrador, a native of the southern state of Tabasco, studied political science and public administration at National Autonomous University of Mexico ( Universidad Nacional Autónoma de México ) before returning to Tabasco to work with the Chontal indigenous community. In the late 1980s, he aligned himself with Cuahtémoc Cárdenas, founder of the PRD. López Obrador became the PRD party president for Tabasco in 1989, served as national party president (1996-1999), and succeeded Cárdenas as the second elected mayor of the Federal District encompassing Mexico City (2000-2005), an area with a population of approximately 8.7 million. Extremely popular as mayor, he was expected to win the presidency in 2006. He led in the polls until late April 2006, when he lost support due to comments deemed disrespectful of President Fox and his refusal to take part in presidential debates. López Obrador and his supporters rejected the Electoral Tribunal's September 5, 2006, finding that, despite some irregularities, Felipe Calderón won the 2006 presidential elections. In 2012, Andrés Manuel López Obrador sought to moderate his image and his campaign platform to appeal to a broader cross-section of voters than in 2006, but some analysts predicted that his move to the center might be too little, too late. In 2006, López Obrador's campaign slogan was "for the good of all, the poor first" and focused on poverty reduction, job creation, indigenous rights, and infrastructure investment. Some of his proposals, such as re-opening North American Free Trade Agreement (NAFTA) negotiations to better protect Mexican farmers, alarmed investors. This year, rather than emphasizing the needs of one group over another, López Obrador pledged to help rebuild Mexico into a "republic of love" that is built upon the values of honesty and justice and oriented toward creating jobs and well-being for all. He sought to expand his support base beyond the PRD and supporters of his Movement for National Regeneration (Morena) social movement. Some of his proposals included combating corruption and wasteful government spending; creating jobs and educational opportunities so that youth would not become involved in crime out of economic necessity; and involving the government, private sector, and social groups in development efforts. While López Obrador still disputes the 2006 election results, he has apologized for launching disruptive protests against them and, prior to the election, pledged to accept the 2012 election results even if he did not win. Some analysts, though acknowledging his evolution as a candidate, maintained that López Obrador's continued emphasis on state-led economic growth and revolutionary ideals might not appeal to Mexican voters, an increasingly middle-class and urbane electorate. Enrique Peña Nieto has been active in the PRI in his native state of Mexico since 1984, most recently serving as governor from 2005 to 2011. Peña Nieto obtained a law degree from the Panamerican University ( Universidad Panamericana ) and an MBA from the Monterrey Institute of Technology and Higher Education ( Instituto Tecnológico y de Estudios Superiores de Monterrey ). An attorney, Peña Nieto began working for the government of the state of Mexico in 1993. Prior to his election as governor, he served as the secretary of administration for the state of Mexico from 2000 to 2002 and as a state congressman from 2003 to 2004. Peña Nieto became the majority leader of his party in the state legislature and speaker of that body. From 2005 to 2011, Enrique Peña Nieto served as governor of the state of Mexico, which is home to roughly 15 million people (13.4% of Mexico's population) and constitutes 9.4% of Mexico's Gross Domestic Product (GDP). Peña Nieto's slogan as governor was a "government that delivers," and his programs and activities were frequently covered by Televisa as a result of a lucrative deal to buy air time that his supporters reportedly signed with the national network in 2005. In his final state of the state report, Peña Nieto maintained that his government had created 224,000 jobs, increased investments in infrastructure without taking on additional debt, and doubled tax revenues in the state. The report presented a more mixed record in the area of public security, revealing that kidnappings had increased while homicides had declined. After analysts identified inconsistent data in the report, Peña Nieto revised the report's assertion that the state's overall homicide rate had declined by half during his administration, noting that the rate had remained fairly stable through 2010. In July 2011, Peña Nieto's chosen successor was elected governor with more than 60% of the vote. Enrique Peña Nieto represented the "Committed to Mexico" coalition composed of the PRI and the PVEM. Peña Nieto's campaign pointed to his achievements as governor of the state of Mexico as evidence that he is an effective leader and administrator, while his opponents questioned whether he indeed completed all of the projects that he promised to deliver. The five national commitments he outlined in his presidential platform included restoring peace and liberty (by reducing homicides and kidnappings by 50%), tripling growth in order to create more and better jobs, reducing poverty and making Mexico more inclusive, providing access to quality education for all, and restoring Mexico's leadership position in the world. Peña Nieto has outlined a 10-point economic plan for Mexico that includes opening up PEMEX to private investment and a four-pillar security strategy that emphasizes reducing violence and focusing enforcement and prevention efforts in the most violent areas. As when he was governor, Peña Nieto's team ran a media-savvy campaign that was bolstered by its ties with Mexico's leading television networks. Supporters maintain that the Peña Nieto represents a "new PRI" that is free from the corruption that characterized the party in the past, but critics have questioned how truly independent he is from old-time PRI power brokers. In response to critics and protesters who have argued that a PRI government would govern undemocratically, Peña Nieto released a "democracy manifesto" pledging his commitment to govern in a way that protects freedom of speech and expression, human rights, transparency, and accountability. The least well known of the candidates, Gabriel Quadri, a native of Mexico City, is an environmentalist and researcher who was reportedly surprised when he was approached by PANAL leaders in February 2012 to serve as their presidential candidate after the PRI ended its electoral alliance with the party. Despite the unconventional and apparently undemocratic way he was selected to run for president, some analysts predicted that Quadri's candidacy might help the PANAL broaden its appeal beyond supporters of Elba Esther Gordillo and the national teacher's union. Quadri obtained a degree in civil engineering from the Iberoamerican University ( Universidad Iberoamericana ) and an M.A. in economics from the University of Texas at Austin. He has served as director of environmental planning for Mexico City (1989-1993), president of the National Institute for Ecology (1994-1997), and director general of the Business Council for Sustainable Development in Mexico (1998-2003). Since 2003, he has been associate director of an environmental consulting firm and of a think tank devoted to sustainable development. Quadri ran on a detailed platform that included 17 priority areas of action. His primary proposals focused on reforming education, promoting sustainable economic growth, opening up PEMEX to private investment and reducing the government's dependence on PEMEX revenues, and improving citizen security by expanding the federal police and privatizing some prisons. Despite the detailed proposals he put forth and his solid performance in the two presidential debates convened by IFE, few observers predicted that Quadri de la Torre's long-shot candidacy would garner significant popular support. Josefina Vázquez Mota embraced her status as the first female presidential candidate to represent a major political party in Mexico. Her slogan, "Josefina: Different," stressed the uniqueness of her candidacy, and also sought to subtly distinguish herself from the current Calderón government. Born in Mexico City, Vázquez Mota obtained an economics degree from the Iberoamerican University and completed a program in Executive Business Administration at the Panamerican Institute for Executive Business Administration (Instituto Panamericano de Alta Dirección de Empresas). She has worked as a columnist on economic issues for several Mexican newspapers ( Novedades , El Economista , and El Financiero ) and served as an advisor to business associations such as Coparmex (la Confederación Patronal de la República Mexicana). A longtime PAN party activist, Vázquez Mota was first elected to Congress in 2000, where she served as the deputy chair of the economic policy committee. Vázquez Mota left Congress in December 2000 to serve as minister of social development for the Fox Administration, becoming the first woman to occupy that position. She then served as Mexico's first female minister of education during the first half of the Calderón Administration (2006-2009) before being reelected to Congress in July 2009. Prior to her presidential bid, Vázquez Mota had been serving as the leader of the PAN delegation in the Chamber of Deputies. Vázquez Mota's campaign started on a high note as she decisively defeated the other candidates running for the PAN nomination in February 2012, but she then struggled to gather momentum due to internal disputes within her party and problems within her own team. The PAN's decision not to hold internal elections to select its candidate until February put Vázquez Mota at a disadvantage compared to the two other major party candidates, who had been selected by their parties in November 2011. Despite that, excitement over her historic candidacy and her apparent ability to relate to Mexican voters led observers to predict that the race would become much more competitive as the campaign got underway. Vázquez Mota proposed to build an inclusive government capable of forming cross-party coalitions within the Mexican Congress to help the country complete its transformation into a just, competitive, and vibrant multi-party democracy. She warned voters not to support candidates who might represent a return to the authoritarianism or populism of the past because Mexico's transition has been incomplete, but she struggled to hone her own message and to disseminate it to voters. Distinguishing Vázquez Mota's proposals from those of the current Calderón government, particularly in the security realm, proved to be difficult. Vázquez Mota's platform included 400 concrete actions under four pillars. They included security (including violence reduction and combating street crimes); well-being (improving the quality of education and healthcare and expanding access to credit); productivity (boosting growth and competitiveness, supporting small businesses, diversifying export partners); and taking advantage of Mexico's natural assets to build a "better Mexico" that is a regional leader and global player. On July 1, 2012, Mexico held federal (presidential and congressional) and state elections in 14 states. Mexico's Federal Electoral Institute (IFE) conducted the elections with the oversight of the Federal Electoral Tribunal, which had to officially certify the election results by September 6, 2012. Despite prior fears, no significant violence occurred during an election day characterized by a record voter turnout. Domestic observers and an international electoral mission from the Organization of American States (OAS) monitored vote tabulation and polling station behavior. While some independent domestic observation groups—including a group affiliated with YoSoy132 — found that vote-buying, intimidation, and other irregularities marred the electoral process, observers accredited by IFE concluded that the isolated incidents they observed did not merit an annulment of the election. Although the OAS electoral mission has not released its final report, the head of the OAS mission praised the "calmness, respect, and order" present on election day and IFE's handling of the elections. As discussed below, the PRD-led coalition presented evidence to the Electoral Tribunal that the presidential election was inequitable and fraudulent and should therefore be annulled. It did not challenge the legitimacy of the legislative elections. The Electoral Tribunal dismissed the PRD coalition's case to annul the elections on August 30, 2012, and certified the election results on August 31, 2012. The Tribunal's ruling is final and cannot be appealed. As predicted, Enrique Peña Nieto won the presidential election, albeit by a narrower margin than the polls had predicted. According to preliminary results published by IFE on election day, Peña Nieto captured 38.2% of the vote, followed by López Obrador with 31.6%, Vázquez Mota with 25.4%, and Quadri with 2.3%. López Obrador appears to have benefitted from the YoSoy132 student protest movement; he also received support from voters who disapprove of the current PAN Administration of Felipe Calderón. However, as shown in Figure 1 below, Peña Nieto performed well throughout the country, winning in 21 of 32 states, while support for López Obrador and Vázquez Mota was concentrated in certain regions. Interestingly, the two states Vázquez Mota captured outside the PAN stronghold of Guanajuato were in the troubled northeast region of the country, where significant numbers of federal troops and police have been deployed. Based on the preliminary election results, President Calderón and world leaders, including U.S. President Barack Obama, began calling to congratulate Peña Nieto on his apparent victory throughout the evening of July 1. PAN presidential candidate Josefina Váquez Mota, who won just a quarter of the votes and placed third in the election, conceded. In contrast to PAN leaders' quick acknowledgement of Peña Nieto's victory, the second-place candidate, López Obrador, refused to concede the election, arguing that vote tabulation methods throughout the country were rife with inconsistencies. Partially in response to those concerns, IFE conducted a recount of more than 50% of polling stations and delayed publishing the official election results (which proved to be nearly identical to the preliminary results) until July 7, 2012. In his first speech as the presumptive winner of the presidential elections (given the evening of July 1), Peña Nieto asserted: "the Mexican people have given our party a second chance.... We are going to honor that with results." Peña Nieto used his address to try to reassure those political groups who remain concerned about his party's past corruption, claiming there was no going back to the PRI of the past. He also reaffirmed his commitment to fighting organized crime, a pledge that many observers had questioned. While the fight against organized crime remains of crucial importance to U.S. interests in Mexico, the average Mexican voter in the July elections seemed largely concerned over economic matters. Many voters felt the PRI were better equipped to encourage economic growth in the country than the PAN, a party whose tenure has been characterized until recently by lackluster growth rates. Peña Nieto hopes to accelerate the country's growth and competitiveness via key reforms, such as opening up PEMEX to private investment. He is scheduled to take office for a six-year term on December 1, 2012. Since the election, the PRD and the PAN have expressed concern that the PRI engaged in fraudulent electoral practices, such as vote-buying, campaign spending violations, and receiving extra radio and television beyond what was allotted by IFE. Both parties have also alleged that the PRI may have used illicit financing to support Peña Nieto's campaign and urged judicial authorities to investigate and punish anyone who has committed election-related crimes. After the elections, the PRD asserted that these practices should negate the election results, while the PAN did not. López Obrador and his PRD coalition then gathered evidence and submitted a formal petition to the Electoral Tribunal asking for the elections to be annulled. In contrast, the PAN recognized the official election results despite concerns expressed by Vázquez Mota and party leaders that there had been inequality in campaign spending, media bias, and serious faults in the elections. In response to these concerns, Enrique Peña Nieto rejected accusations of vote buying and defended his victory as legitimate, but also reportedly pledged to punish any members of his party found guilty of vote buying once he takes office. López Obrador's challenge of the most recent election results is reminiscent of similar challenges he made after the 2006 presidential election, which he lost to President Calderón by less than 1% of the vote. In 2006, López Obrador staged massive protests in Mexico City as he refused to concede defeat. Despite the close vote and a recount, the Electoral Tribunal refused to overturn the 2006 results. This year, the Electoral Tribunal examined the eight charges submitted by the PRD-led coalition, but found that the evidence submitted to back those charges was too "vague, generic, imprecise, inefficient, and insufficient" to warrant an annulment of the election. The Tribunal then certified Enrique Peña Nieto's presidential victory on August 31, 2012. While PRD leaders initially criticized the Tribunal's decision, they and the other leftist parties in their coalition have since pledged to abide by its decision. For his part, Andrés Manuel López Obrador continues to reject the Tribunal's ruling and has broken his ties with the PRD in order to transform the Movement for National Regeneration (Morena) into a peaceful resistance movement against the incoming Peña Nieto government. It is as yet unclear whether López Obrador intends to transform Morena into a political party or not. Even if he does not, Morena will join YoSoy132 and a number of other social movements that are likely to heavily scrutinize the actions of Enrique Peña Nieto and his administration. In addition to the presidential contest, all 128 seats in the Mexican Senate and 500 seats in the lower house of congress, known as the Chamber of Deputies, were up for election this year. Senators will serve six-year terms and deputies will serve three-year terms that began on September 1, 2012. There is no consecutive reelection for seats in either chamber. In Mexico, passing regular legislation requires a simple majority and passing constitutional reforms requires a two-thirds majority. Polls had been predicting that PRI might capture a simple majority in one or both chambers. Somewhat surprisingly, the PRI and the allied PVEM party fell short of capturing a simple majority in either house (see Figure 2 and Figure 3 below on how the Senate and Chamber of Deputies are comprised in 2012 as compared to in 2009). The PRI/PVEM's failure to capture a congressional majority means that President-elect Peña Nieto and the PRI will have to form cross-party coalitions in order to pass key reforms, particularly those requiring constitutional amendments. The PRI will most likely find support from the PANAL. If the PRI-PVEM coalition aligns with the PANAL (as it has in the past), together they would have 251 of 500 seats in the Chamber (a simple majority) and 62 of 128 seats in the Senate (2 seats short of a simple majority). The PAN, which lost seats in the Chamber but retained a powerful bargaining position, is another possible ally. PAN leaders, including President Calderón, have pledged to support aspects of Peña Nieto's reform agenda that they believe are in the best interest of the country, even proposals that have been previously blocked by the PRI. President Calderón has just re-submitted a proposal to the new Congress to reform Mexico's labor laws, a proposal which Peña Nieto has also supported, but which may encounter opposition from PRI legislators with close ties to labor unions. The PRD-led coalition, which will now have more seats in the Chamber than the PAN and remains the third-largest force in the Senate, could complicate labor reform efforts and initiatives aimed at increasing private participation in the energy sector, a key priority for Peña Nieto. Perhaps acknowledging the need to assuage the concerns of other parties, President-elect Peña Nieto has promised to push for laws to combat corruption and increase transparency at all levels and in all branches of government. In addition to the presidential and legislative elections, state and local elections were held in 14 states, including six gubernatorial elections and an election for the mayor of the Federal District that includes Mexico City. Prior to the 2012 elections, the PRI controlled 19 of 32 governorships in Mexico. The PRI retained control over Yucatán and picked up two additional governorships in the recent elections: Jalisco, formerly governed by the PAN, and Chiapas, formerly governed by the PRD. In addition to winning the mayoral office of the Federal District for another term, the PRD also won two additional gubernatorial seats. PRD candidates in Morelos and Tabasco defeated the PAN and PRI, respectively. Although the PAN successfully maintained control of Guanajuato, defeats in Morelos and Jalisco represented significant losses for the party. Some Members of Congress may be concerned that the leadership changes resulting from the July 1, 2012, Mexican elections will significantly impact U.S.-Mexican relations, particularly now that the party controlling the presidency has changed. However, few analysts are predicting that the transition from PAN to PRI rule will result in any seismic shifts in bilateral relations. Throughout the campaign, Enrique Peña Nieto sought to reassure U.S. policy makers that a PRI administration would continue to combat organized crime, combat corruption, and govern democratically. Peña Nieto also expressed support for increased bilateral and trilateral (with Canada) economic cooperation. Since the elections, President-elect Peña Nieto has said that he is committed to "having an intense, close relationship of effective [security] collaboration measured by results" with the United States. President Obama has congratulated Peña Nieto on his victory and Assistant Secretary of State for Western Hemisphere Affairs Roberta Jacobson has said that U.S. officials "look forward to working with him" after he takes office. During the campaign, Enrique Peña Nieto pledged to continue the fight against organized crime and said that maintaining some form of military involvement in antidrug operations will be necessary. He also vowed, however, to focus more on reducing violent crime in Mexico than on seizing drugs or arresting kingpins. Peña Nieto said he would increase the size of Mexico's Federal Police, create a national gendarmerie comprised of some military forces currently engaged in fighting organized crime that will be under civilian control, and establish 32 unified state police forces. He also announced that General Oscar Naranjo, former head of the Colombian National Police, would serve as one of his security advisors. Naranjo has reportedly recommended adopting a two-pronged strategy of using elite units of military and police forces to go after top DTO leaders (as Calderón has done), while focusing the rest of law enforcement efforts on reducing violence and street crime in six of the country's most violent cities. President-elect Peña Nieto is likely to pursue violence reduction as a key metric of the success of his government's security strategy, a goal that U.S. officials have said is "extremely logical." In his platform, Peña Nieto pledged to develop a National Strategy to Reduce Violence that will contain binding commitments for all levels of government, along with civil society. He also proposed focusing anticrime efforts and socioeconomic programs in the most violent cities. While some Members of Congress have expressed concerns about how Peña Nieto's victory may impact U.S.-Mexican security cooperation, Obama Administration officials have said that they expect to continue "strong counter-narcotics cooperation with the new president." Peña Nieto did not comment much on the Mérida Initiative during the campaign, but made general statements to the effect that he would continue security cooperation with the United States, albeit with a different focus than under Calderón. Peña Nieto appeared to give higher priority to increasing intelligence-sharing than to receiving larger amounts of U.S. assistance, but the four pillar strategy he outlined resembles the Mérida Initiative's four pillars with a more explicit emphasis on violence prevention and reduction. While Peña Nieto opposes allowing armed U.S. military or law enforcement agents to carry out operations in Mexico (as they have in Central America), he recently expressed an openness to allowing U.S. military trainers in Mexico. Peña Nieto has also expressed a desire to hasten implementation of the judicial reforms passed in 2008, a major focus of Mérida efforts. The state of Mexico (where Peña Nieto served as governor) is one of only three states operating under the new adversarial, oral criminal justice system. Peña Nieto has also mentioned the importance of both Mexico and the United States working more closely together to assist Central American governments, a proposal that U.S. Assistant Secretary of State for Western Hemisphere Affairs Roberta Jacobson has said is "incredibly encouraging." Enrique Peña Nieto and his advisers have stressed the importance of passing structural reforms to make the Mexican economy more competitive and deepen economic integration with the United States, but have also said that they aim to diversify Mexico's trade relationships. Peña Nieto acknowledges that the PAN has maintained macroeconomic stability, but criticized the past two administrations for failure to spur economic growth rates in Mexico similar to those of other developing countries in Asia and Latin America. He has identified several reasons why Mexico's economic growth has lagged: low productivity, insufficient access to credit, deficient investment in infrastructure, monopolies, a large and expanding informal sector, and a continued over-reliance on the U.S. market. To counter these deficiencies, Peña Nieto advocates a 10-point economic plan that includes, among other measures, implementing recently passed legislation to counter monopolistic practices, passing fiscal reform, opening up the oil sector to private investment, making farmers more productive, and doubling infrastructure investments. Peña Nieto also endorses an active international trade policy aimed at increasing Mexico's trade with Asia, South America, and other markets. His government is likely to take an active role in the negotiations for a Trans-Pacific Partnership (TPP). The proposed TPP would likely enhance the links Mexico already has with the United States and Canada under NAFTA, while also helping boost the country's trade ties with other fast-growing economies. Many U.S. observers are interested in whether the next Mexican administration will push for further reforms to increase private involvement in Pemex. Enrique Peña Nieto has endorsed such action, and has suggested that Pemex might follow the example of Petrobras in Brazil. Enacting energy reforms is a task which Peña Nieto's campaign manager has said would be an immediate priority for the new administration. However, constitutional reforms require a two thirds vote in the congress. And, the PRI-led coalition's failure to capture a majority in either chamber of the congress may mean that Peña Nieto will encounter the same type of opposition to his reformist agenda that Calderón has experienced, unless he is able to reach agreements with the PAN. President Calderón has reportedly pledged to encourage Mexican lawmakers to approve energy reforms before he leaves office, a move that Peña Nieto would welcome, but the PRD-led coalition and even some PRI legislators could block that effort. Some predict that Peña Nieto may move to implement reforms that have broad based support, such as making Pemex's budget more independent and reducing its tax burden as part of a larger fiscal reform effort, before pushing for greater private cooperation with Pemex. | U.S. policy makers have closely followed the 2012 elections in Mexico, a key ally with whom the United States shares a nearly 2,000-mile border and some $460 billion in annual bilateral trade. On July 1, 2012, Mexico held federal (presidential and legislative) elections. Turnout reached record levels as 63% of eligible voters cast their ballots. Mexico's Federal Electoral Institute (IFE) conducted the elections with the oversight of the Federal Electoral Tribunal (TEPFJ). Some election observers asserted that vote-buying and other irregularities marred the electoral process, while observers from the Organization of American States generally praised IFE's handling of the elections. After considering legal challenges to the results, the TEPFJ found insufficient evidence of vote-buying to warrant an annulment of the vote. The Tribunal declared Institutional Revolutionary Party (PRI) candidate Enrique Peña Nieto, a former governor of the state of Mexico, president-elect on August 31, 2012. Peña Nieto will take office on December 1, 2012. The centrist PRI that governed Mexico from 1929 to 2000 not only retook the presidency after 12 years of rule by the conservative National Action Party (PAN), but also won a plurality in the Senate and Chamber of Deputies. In the presidential contest, Enrique Peña Nieto captured 38.2% of the vote, followed by Andrés Manuel López Obrador of the Party of the Democratic Revolution (PRD) with 31.6%, Josefina Vázquez Mota of the PAN with 25.4%, and Gabriel Quadri of the National Alliance Party (PANAL) with 2.3%. The narrow margin of Peña Nieto's victory, coupled with the fact that López Obrador has refused to recognize the election results, could complicate the transition period. And, while PAN President Felipe Calderón has pledged to work with the incoming administration, his party has joined the PRD in calling on authorities to investigate whether the PRI used any illicit finances to fund Peña Nieto's campaign. Polls predicted that the PRI might also capture a simple majority in one or both chambers of the Mexican Congress, a feat not accomplished since 1994. The PRI and the allied Green Ecological Party (PVEM) party failed to capture a majority in either house, but could achieve a simple majority in the Chamber by aligning with the PANAL. For legislation to pass the Senate, and for any measures to amend the constitution (which require a two-thirds majority), the PRI will have to form cross-party coalitions. The PRI will most likely find support from the PAN, which lost seats in the Chamber but retained a powerful bargaining position. The PRD-led coalition, which will now have more seats in the Chamber than the PAN and remains the third-largest force in the Senate, could complicate some reform efforts, including those aimed at increasing private participation in the energy sector, a key priority for Peña Nieto. Some Members of Congress may be concerned that the leadership changes resulting from the July 1, 2012, Mexican elections will significantly impact U.S.-Mexican relations, particularly now that the party controlling the presidency has changed. However, few analysts are predicting that the transition from PAN to PRI rule will result in seismic shifts in bilateral relations. Enrique Peña Nieto has sought to reassure U.S. policy makers that his Administration will continue to combat organized crime, while also striving to reduce violence in Mexico. He also aims to increase bilateral and trilateral (with Canada) economic and energy cooperation. This report provides an overview of the parties and candidates who competed in the Mexican federal elections with a focus on the presidential contest, recaps the election results, and discusses some potential implications of the elections for U.S.-Mexican security cooperation, North American economic integration, and U.S. energy security. |
Kyrgyzstan is a small and poor country that gained independence in 1991 with the breakupof the Soviet Union. (1) Itwas long led by Askar Akayev, who initially was widely regarded as a reformer but in recent yearsappeared increasingly autocratic. Despite this, the country was still considered "the most open,progressive and cooperative in Central Asia," according to the U.S. Agency for InternationalDevelopment. (2) TheUnited States has been interested in helping Kyrgyzstan to enhance its sovereignty and territorialintegrity, increase democratic participation and civil society, bolster economic reform anddevelopment, strengthen human rights, prevent weapons proliferation, and more effectively combattransnational terrorism and trafficking in persons and narcotics. The United States has pursued theseinterests throughout Central Asia, with special strategic attention to oil-rich Kazakhstan andregional-power Uzbekistan, and somewhat less to Kyrgyzstan. The significance of Kyrgyzstan tothe United States increased after the September 11, 2001, terrorist attacks on the United States. TheU.S. military repaired and upgraded the air field at the Manas international airport for trans-shippingpersonnel, equipment, and supplies to support coalition operations in Afghanistan and the region. In early 2005, the base hosted about 800 U.S. and 100 Spanish troops. (3) Many people both inside and outside Kyrgyzstan were hopeful that the national legislativeelection on February 27, 2005 would strengthen political pluralism, easing the way for a peacefulhandover of executive power in late 2005 when President Akayev was expected to step down. Nearly 400 prominent politicians and businessmen and 40 parties (many united in blocs) ran for 75seats in the highly contentious race. Many in Kyrgyzstan thought it unseemly that the president'sand prime minister's children were running for seats, along with many other family members andfriends of high officials. Balloting resulted in the filling of less than half the seats, with run-offs heldon March 13 in districts where no one candidate received over 50% of the votes cast. On March 22,the Central Electoral Commission (CEC) announced that results for 71 districts were valid. Lessthan 10% of seats were won by opposition candidates, although there reportedly were many closeraces where they "lost" only by a few votes. These results incensed many in the opposition camp,who alleged massive vote fraud. An initial report by election observers from the Organization forSecurity and Cooperation in Europe (OSCE) and the European Parliament fueled this discontent bystating that serious irregularities had taken place, including the questionable exclusion of severalopposition candidates from running, biased state-controlled media and other heavy government useof administrative resources, and problematic voter lists. (4) After opposition candidates won only two seats in the first round, opposition party-leddemonstrators called for a new election and for Akayev to resign. In southern Kyrgyzstan, protestorsstormed and occupied government facilities, including in the regional centers of Osh and Jalalabad. Many of these southerners (including a majority ethnic Uzbek community) viewed themselves asdiscriminated against both economically and politically by a central government dominated bynortherners. (5) Somecounter-demonstrations in support of the government also were reported. Protests widenedthroughout both the north and south in the wake of the March 13 run-off. Akayev hastily convenedthe new legislature immediately after the CEC announced voting results on March 22, and urged thepublic to focus on the upcoming planting season rather than a past election. He blamed foreignNGOs and religious extremists for the protests, and his spokesman warned that the unrest markedefforts by drug lords and terrorists to take power. Kyrgyzstan's capital Bishkek remained relatively calm until an opposition rally on March 23was successfully dispersed by police and armed Akayev supporters. The next day, thousands ofangry demonstrators converged on government offices. According to one account, a violent attackon the protesters by some of Akayev's supporters enraged the demonstrators and they stormed andoccupied the presidential and other offices. Akayev fled the melee and he and his family soon flewto Moscow. Akayev's prime minister resigned. The protesters released opposition party leaderFeliks Kulov from prison, where he had been held on embezzlement charges that many observershad deemed politically motivated. Going to the occupied compound, he hailed the "revolution madeby the people." (6) Indicative of the chaotic legal situation, the Kyrgyz Supreme Court on March 24 recognizedthe former legislature as still duly empowered. Deputies from the former legislature met that night. They were shocked by rampant looting in Bishkek, and appointed Kulov to oversee the Security,Interior (police), and Defense ministries. They also appointed opposition figure Kurmanbek Bakiyevacting prime minister, and the next morning named him acting president as well. Bakiyev quicklyproposed a provisional government composed of opposition politicians, most prominently RozaOtunbaeva as acting minister of foreign affairs; Adakhan Madumarov, acting deputy prime minister;and Azimbek Beknazarov, acting prosecutor-general (for further information on selected politicians,see the Appendix ). The old legislature wrangled with Bakiyev over the appointments, perhapsspurring him to decide to dispense with it and endorse the powers of the new legislature. Over the weekend, the Constitutional Court, Bakiyev, Kulov, and a newly appointed headof the CEC proclaimed that the new legislature was constitutionally legitimate and should beempowered, although granting that twenty or more district races might need to be held again. Thenew legislature met on March 28 and elected Omurbek Tekebayev as speaker and reaffirmedBakiyev as prime minister and acting president. The interim government has announced that apresidential election will take place on July 10, 2005. Akayev's formal resignation as president on April 4, 2005, was a major boost to thelegitimacy of the interim government. The resignation agreement called for Akayev to foreswearrunning for president again and for the new Kyrgyz authorities to respect existing law that grantsretired presidents immunity from prosecution. Russia pledged to assist the parties in honoring theircommitments. The Kyrgyz legislature accepted Akayev's resignation on April 11. Among early policy decisions, Bakiyev on March 29 stated that he would combat corruptionthat siphons away investment capital and compromises the educational and legal systems. He alsoannounced that personnel in the former government responsible for electoral fraud and attacks ondemonstrators would be prosecuted, and that some property belonging to the Akayev family mightbe confiscated. Both Bakiyev and Otunbayeva stressed that Kyrgyzstan's foreign policy would notchange, including its close relations with Russia and the United States and the presence of theirmilitary bases in the country. Observers remain divided on prospects for Kyrgyzstan, with some suggesting that it willcontinue to democratize because it has a relatively vibrant civil society, compared to the rest ofCentral Asia. Others are less optimistic, pointing to the economic development challenges facingKyrgyzstan and the high level of disaffection among its population. They also point to the socialfragility of a country where the north and south have differing interests and where even groundtransport back and forth is difficult during the winter because of mountainous terrain. The main division among the groups vying for power and influence during the late Marchevents appeared to be between pro-Akayev regional, clan, and family groups -- which togetherconstituted the political and economic elite -- and other regional, clan, and family groups that feltdeprived of their share of political and economic power. Ethnic issues appeared at least initially lesssignificant, since many ethnic Uzbeks in southern Kyrgyzstan joined other southerners in topplingthe regime. However, ethnic tensions remain of concern. Beyond their anti-Akayev stance anddemands for redistributing political and economic power, the opposition parties mostly lackwell-developed policies and strategic plans for the future of Kyrgyzstan. Some observers have raisedconcerns that interim government leaders are engaging in nepotism and other corrupt practicesrather than combating them. Several commentators view the coup as involving two anti-regime groups, the dispossessedand the political opposition. To some degree, the former are younger and the latter are older. Theformer were the active agents in taking over government offices, and reportedly were motivatedmore by poverty and unemployment than by opposition politics. Otunbayeva stressed that "mainlypoor people" rather than party stalwarts stormed the government complex on March 24. Thesecommentators warn that if a new government fails to remedy economic distress, more violence couldoccur. (7) Other analystshave placed less credence on the "poor people" theory, suggesting that at least some of the politicalopposition may have planned to forcibly oust Akayev on March 24. (8) No one opposition leader appears to enjoy overwhelming public and elite support, althoughBakiyev's influence appears to have grown in recent months. (9) As was the case in Georgia,some of the most influential opposition leaders appear at least initially to be cooperating in runningthe government. However, the planned July presidential election appears to be accentuating tensionswithin the opposition camp, in particular between Bakiyev and Kulov. (10) Bakiyev, representingsouthern interests, seeks to enlarge his power base by wooing northern politicians (such asOtunbayeva and many of those elected to the new legislature). Such actions could reduce Kulov'sstrong appeal in the north. On the other hand, many of the oppositionists remain outside the Bakiyevgovernment, and at least some may unify to support Kulov in a prospective presidential race. Kulovalso is trying to woo former Akayev supporters by endorsing Akayev's immunity from prosecution. However, some pro-Akayev and northern interests have created the Akyykat (Justice) politicalmovement to challenge opposition candidates in the election. Some observers raise the specter of a highly contentious and problematic presidential electionthat may deepen civil disorder. Another source of likely disorder may then come to the fore later inthe year if the 15-20 or more disputed legislative seats are re-contested, or if a new election of thewhole legislature is carried out. Unless these elections take place, however, the legislature willremain illegitimate in the eyes of many Kyrgyzstanis. Calls by some in Kyrgyzstan for rewriting theconstitution to remove what are viewed as illegitimate changes made during Akayev-orchestratedreferenda create still more uncertainties about Kyrgyzstan's stability during the next few months. Some optimistic observers suggest that the relatively bloodless March coup (3 deaths were reported)and reduced public passions after Akayev's ouster may bode well for the avoidance of violence orpolitical instability in the near term. (11) Other observers who caution that political disorder may deepen suggest that Islamicextremists could bid to take power. They maintain that Hizb ut-Tahrir and other Islamic extremistgroups have gained members in Kyrgyzstan in recent years, and warn that such groups areanti-American and anti-Russian. (12) Before the coup, there appeared to be some cooperation among ethnic Kyrgyz and Uzbeksin protests in Kyrgyzstan's south, in contrast to inter-communal violence there in the early 1990s. Many ethnic Uzbeks and Kyrgyz joined in supporting ethnic Uzbek opposition leader Anvar Artykovin Osh. The emergence of such cooperation appeared buttressed by region-wide parades and othercelebrations to mark Akayev's overthrow. However, while some ethnic Uzbeks have supportedBakiyev, others have criticized him for appointing people to leading government posts whom theyregard as Kyrgyz nationalists and for not appointing enough ethnic Uzbeks. (13) The coup in Kyrgyzstan appears to have belied the views of some who asserted that therelatively authoritarian regimes in Central Asia would endure for the foreseeable future. The couphas galvanized opposition throughout the region and caused palpable unease among regional elites,who unanimously condemned it as a bloody putsch. Kazakh President Nursultan Nazarbayev, forexample, told his citizenry that the coup was the work of 5,000 convicts who had escaped from jailand were looting Kyrgyzstan. Some observers suggest that Kazakhstan might be the most likely candidate among theremaining Central Asian states where the opposition could influence political change, becauseNazarbayev has not completely crushed civil society. However, he appears to be taking measuresto head off a Kyrgyz-type coup. He has, for example, raised salaries and pensions. Among securitymeasures perhaps inspired by the Kyrgyz coup, the legislature quickly approved electoral lawchanges banning political rallies immediately after an election. Zamanbek Nurkadilov, a leader ofa newly formed opposition bloc, called in late March for Nazarbayev to step down when his termexpires in 2006, so that a democratic and non-violent leadership transition may occur. (14) In late 2005, Tajikistan faces a planned presidential election which the incumbentauthoritarian leader Emomali Rakhmanov is expected to win. Although some political oppositionparties were legalized as part of the 1997 settlement of Tajikistan's civil war, they have facedincreasing harassment. The OSCE and the Tajik opposition have criticized the Rakhmanovgovernment for gross interference in past elections, including the February 2005 legislative race, butthe opposition has not reopened the civil war. Following the events in Kyrgyzstan, however, theTajik opposition may consider the conduct of the 2005 presidential race as a decision point for itsfuture cooperation with the government. (15) In Uzbekistan, the government strictly censored news about the Kyrgyz coup, restrictedpublic gatherings in regions near Kyrgyzstan, and closed the border. President Islam Karimovharshly condemned the coup as an illegal act. Some Uzbek opposition leaders hailed events inKyrgyzstan as a call to arms in Uzbekistan, but most of the major opposition leaders are in exile andlittle political expression is allowed within the country. The coup in Kyrgyzstan at least temporarily set back the already limited cooperation amongthe Central Asian states, with Kazakhstan and Uzbekistan putting restrictions on cross-border tradeand travel, some of which remain in place. The regional presidents have contacted the interimleaders of Kyrgyzstan to establish working relations to replace initial strains. These strains at timesappeared to be exacerbated by statements made by the interim Kyrgyz leadership. While Otunbayevaat the end of March assured the regional leaders that "the guidelines of our diplomacy will notchange," it appeared that she may have been advocating the export of revolution when she added that"I hope that our neighbors will experience the same thing ... that the other countries in central Asiawill follow our path." (16) While opposition forces in the region include those espousing democratic principles, theyalso include Islamic extremists and ultra-nationalists. It appears unlikely that Islamic extremistssoon could come to power, many observers argue. More likely, Islamic extremists could use aweakened Kyrgyzstan as a base to support affiliated groups throughout the Fergana Valley (whichis shared by Kyrgyzstan, Uzbekistan, and Tajikistan), thereby enhancing threats to the regimes ofthese countries. (17) Another possibility could be the rise to power of an ultra-nationalist regime. It such a regime cameto power, many observers suggest, there might well be increased discrimination against ethnicUzbeks, Russians, and other minorities that could lead to violence. Kyrgyzstan's foreign relationswith neighboring countries could also suffer if it pressed sensitive border claims or stoppedcooperating as a critical source of water supply for the downstream countries of Kazakhstan,Uzbekistan, and Turkmenistan. The coup does not appear to have affected the operations of the U.S. base in Kyrgyzstan insupport of coalition actions in Afghanistan. A more democratic and stable Kyrgyzstan might beconsidered for longer term pre-positioning of military supplies or other enhanced use. The changeof government in Kyrgyzstan could result in greater efforts to combat cross-border criminal, terrorist,and drug smuggling activities that conceivably could have a positive effect on Afghanistan. Drugtraffickers, however, could switch to other routes out of Afghanistan. Kyrgyzstan and Afghanistanmight also cooperate in bolstering democracy in each other's countries and throughout the region. Some analysts view the coup in Kyrgyzstan as a harbinger of political transformations inother Soviet successor (Eurasian) states. Others view it as prompting tougher repression byauthoritarian leaders intent on retaining power. Russia quickly shifted in late March from harshcriticism of the Kyrgyz opposition to offers of aid to the interim government. This volte face wasmade easier after Bakiyev and others pledged that Kyrgyzstan would remain Russia's "strategicpartner." Some observers suggested that Russia had realized that its heavy-handed approach topolitical liberalization in Ukraine and Georgia was only making these countries more determined togravitate toward the West. Putin reflected this stance when he allowed that while "it is regretful thatonce more in a country in the post-Soviet area, political issues are decided by unlawful means," hehoped that he could work with the new leaders, many of whom he had amicably worked with in thepast. (18) Although Putin appeared to be putting the best face on the impact of the coup on Russia'sregional influence, others in Russia raised concerns that the coup marked a further decline in Russianinfluence in other former Soviet successor states. Nikolai Bordyuzha, General Secretary of theCollective Security Treaty Organization of the Commonwealth of Independent States, (19) raised concerns that theCSTO had proved impotent, since Akayev had refused an offer of help from the CSTO in the daysbefore the coup, and the interim leaders of Kyrgyzstan also were ignoring it. Perhaps portendinggreater tension in U.S.-Russia relations, some state-owned television commentators in Russia allegedthat the coup was simply another example, after similar coups in Georgia and Ukraine, of U.S.meddling in Eurasia. Reflecting an ultranationalist perspective, one private Russian newspaper evendarkly warned that the U.S. goal was "direct control over Eurasia," including Russia, and that Russiaappeared to lack the political will to resist. (20) Other authoritarian states in Eurasia have followed Uzbekistan's example and cracked downon civil society rather than liberalizing. In Belarus, President Aleksandr Lukashenka orderedmilitary exercises on March 28 that he stated would "make sure [that people] are afraid of replacingthe authorities" by attempted force. (21) In Azerbaijan, the government moved even before the Kyrgyzcoup (perhaps in response to democratization events in Ukraine) to restrict youth participation infuture electoral campaigns. Azerbaijan's opposition Musavat Party head Isa Gambar hailed theKyrgyz coup as proving that Muslim countries could roll back dictatorship, and called on oppositionparties to unite in bringing a "democratic revolution" to Azerbaijan by winning legislative electionsscheduled for November 2005. (22) Leaders of Moldova's Transnistria and Georgia's Abkhazia andSouth Ossetia regions in April appeared concerned about Russia's seeming impotence in influencingevents in Kyrgyzstan. Perhaps uncertain about Russia's continued de facto support for theirseparatism, they pledged to help one another militarily if they were attacked. (23) In contrast to these leaders, Ukrainian President Viktor Yushchenko and Georgian PresidentMikheil Saakashvili hailed the Kyrgyz coup and dispatched their foreign ministers to Bishkek at theend of March to offer advice and support to the interim leadership. The ministers proposed thatKyrgyzstan join a "Democratic Choice Coalition" just formed by the two presidents to cooperate ondemocratic reforms. Reportedly, democratic activists from both countries had traveled to Kyrgyzstanbefore the coup to give advice to activists there. (24) China is concerned that the coup could lead to a more democratic Kyrgyzstan that wouldinspire Chinese democrats and embolden some ethnic Uighurs (a Turkic people) who advocateseparatism in China's Xinjiang region bordering Kyrgyzstan. Groups such as the East TurkestanIndependence Movement (ETIM; designated by the United States as a terrorist group) have basesin Central Asia. Akayev had reached agreement with China in 2003 to step up cooperation incombating these groups, and China is anxious that such cooperation continue. China may also beconcerned that peaceful Uighurs within a democratic Kyrgyzstan might become more politicallyactive in advocating for their kin in Xinjiang. (25) Apparently, there were some attacks on Chinese businessmenin Kyrgyzstan during the coup that might be classified as hate crimes. China is also concerned thatinstability in Kyrgyzstan could result in increased cross-border smuggling and other crime. China's Foreign Ministry spokeman on March 29 stressed China's paramount concern thatlaw and order be re-established with Kyrgyzstan and that "good neighborly relations" continue,including cooperation in combating terrorists. (26) The latter includes work within the Shanghai CooperationOrganization (SCO; formed in by China, Russia, and most of the Central Asian states),headquartered in Bishkek. Matching in some respects Russian concerns about the CSTO, the coupreportedly raised questions in China about the effectiveness of the SCO's emergency consultationprovisions. The U.S. Administration has considered Akayev's government as less objectionable thanothers in Central Asian, and hoped that a planned late 2005 presidential race would become "a modelfor peaceful, democratic transfer of executive power in the region." (27) In line with these hopes,the Administration and others were focusing on civil society aid to facilitate a free and fairpresidential election late in the year, so Akayev's ouster caught the United States and virtually allobservers by surprise. Cumulative U.S. budgeted assistance to Kyrgyzstan for FY1992-FY2004 was $749.0 million(FREEDOM Support Act and other agency funds). Kyrgyzstan ranks third in such aid per capitaamong the Eurasian states, indicative of U.S. government and Congressional support in the early1990s for its apparent progress in making reforms and more recently for anti-terrorism and borderprotection. Of this cumulative aid, 14.6% supported democratization programs, including legal andjudicial training, legal support for NGOs, advice on party and electoral legislation, training forpolitical parties, support for independent media, and the dissemination of civics textbooks. (28) Estimated aid for FY2005(FREEDOM Support Act and other foreign aid, excluding Defense and Energy Department aid) was$36.4 million. The Administration requested $35.7 million for FY2006, and on March 24 stated thatit would "continue to support economic and democratic reform in Kyrgyzstan, including elections,humanitarian assistance, law enforcement, and security, and will carefully watch for emerging needs"as political developments there unfold. (29) Reportedly, opposition leaders Tekebayev and Otunbayeva have stated that U.S. democracyassistance was helpful to their endeavors. For example, both were participants in the InternationalVisitors Program to observe the 2004 U.S. presidential election. Other aid included a printing pressoperating since November 2003 that prints all opposition newspapers, which earlier had facedobstacles in obtaining services at state-controlled facilities. In the run-up to the legislative race, oneopposition newspaper did an expose on the alleged wealth of the Akayev family. Akayev denouncedthe article as libelous. A few days later, electricity mysteriously was shut off to the press. The U.S.Embassy strongly protested and lent generators to continue operations until power returned a weeklater. (30) Although accepting some credit for the role U.S. democratization aid has played infacilitating the development of civil society in Kyrgyzstan, the Administration has been careful tostress that it did not "mastermind" the coup. Secretary Rice also has tried to reassure Russia that theUnited States and the West are not attempting to "encircle" Russia by instigating democratic"revolutions" throughout Eurasia, but that these are indigenous developments that will benefit Russiaas these countries become more stable and prosperous. (31) The Administration at least initially appeared to follow the European Union and otherinternational institutions and governments in cautiously assessing developments in Kyrgyzstanduring the chaotic period leading up to the coup. Concerns that disorder and violence might increasewere foremost and the Administration urged peaceful negotiations between the Akayev governmentand opposition forces. Reportedly, U.S. Ambassador to Kyrgyzstan Stephen Young soon after thecoup told Bakiyev that the United States would provide added aid to bolster a democratic transition. Deputy Secretary of State Robert Zoellick on March 29 endorsed a significant role for the OSCE infacilitating talks among pro-Akayev and opposition leaders to ease the transition of power and infacilitating support for the transition among regional OSCE members, including Russia. (32) Some in the Administration have suggested that the Kyrgyz coup is part of a worldwide trendof democratization, following in the footsteps of those in Georgia, Ukraine, and elsewhere. Secretary of State Rice stated on March 24 that "the Kyrgyz people have a desire and an aspirationfor freedom and democracy, as do people around the world. The responsibility of the internationalsystem ⦠is to help people when they express this to channel this into a set of processes that thenlead to stable institutions." Deputy Secretary Zoellick similarly asserted that the Kyrgyz, like"people in very diverse parts of the world, whether it is Ukraine, Georgia, Iraq, Afghanistan or thePalestinian elections ... desire to be free...." (33) Indicating support for democratization and continued security ties, Defense Secretary DonaldRumsfeld briefly visited Kyrgyzstan on April 14. He thanked the interim leadership for Kyrgyzstan'ssupport for the Global War on Terror and stated that he told them that "the United States is wishingthem well in the important work that they're engaged in building a stable and modern and prosperousdemocracy." Bakiyev assured Rumsfeld that U.S. basing rights would be upheld. (34) While the Kyrgyz interim government has pledged to continue Akayev's foreign policy ofgood relations with both the United States and Russia, it is uncertain whether this might change inthe future. The interim leadership appears to support important U.S. interests in the region. Kulovseems to be strongly pro-U.S., but he also has argued that up to one million Kyrgyz (20% of thepopulation) may be working in Russia, that their repatriated earnings constitute a major portion ofthe Kyrgyz budget, and that Russia provides oil, so "we cannot quarrel with Moscow." (35) Some observers suggestthat even if Kyrgyzstan endeavors to maintain close relations with China, Russia, and the UnitedStates, a strong Kyrgyz state would serve U.S. interests in the region by more effectively combatingterrorism and drug and human trafficking emanating from Afghanistan. The United States has been building twenty troop barracks at the U.S. airbase at Manas toreplace tents, anticipating that the base will continue to be a major transhipment point for personneland equipment for operations in Afghanistan. According to a March 2005 report by Kyrgyzstan'sForeign Ministry (later denied by both U.S. and Kyrgyz authorities), the government had receivedrequests from the United States and NATO regarding the possibility of deploying airborne warningand control systems planes (AWACS) at Ganci. The government denied the requests, however,ostensibly because of its commitments to the CSTO and the SCO. Although the interim governmenthas stated that it will uphold the existing balance of security ties with Russia, China, and the UnitedStates, a more Western-oriented government might eventually reassess such ties. As Congress and the Administration consider how to assist democratic and economictransformation in Kyrgyzstan, several possible programs have been suggested by observers inKyrgyzstan, the United States, and elsewhere. At the same time, these observers have cautioned thatdevelopments in Kyrgyzstan remain fluid and that a democratic transformation is not assured. Theseobservers suggest that one sign that the new leaders are committed to democratization would be afree and fair presidential election. Among possible programs, former Kyrgyz foreign ministerMuratbek Imanaliyev has called for the creation of an advisory group of international experts toexamine how Kyrgyz politics might become more inclusive of both northern and southern interestsand how Kyrgyzstan might step up its pace of private sector economic transformation. In Congress,the newly established House Democracy Assistance Committee is examining possibleinter-parliamentary technical assistance to Kyrgyzstan. Other observers have called for Kyrgyzstanto soon be designated a country eligible for aid from the U.S. Millennium Challenge Corporation. The International Monetary Fund views Kyrgyzstan as making important recent progress in fiscalreforms, GDP growth, and poverty reduction, and calls for international financial institutions tocontinue to support the country in coming years. (36) Kurmanbek Bakiyev , prime minister 2000-2002. Then-President Askar Akayev blamed him for agovernment crackdown on a protest in the south that led to several deaths, and he was forced toresign. He became head of the opposition People's Movement of Kyrgyzstan (PMK) bloc in late2004. He lost his bid for a legislative seat in the March 2005 run-off. Azimbek Beknazarov , head of the nationalist Asaba Party. In 2001 he harshly criticized PresidentAkayev for agreeing to border adjustments deemed favorable to China and Kazakhstan, allegedlycontributing to his arrest in 2002. In late 2004, he became deputy head of PMK. He won alegislative seat in the March 2005 run-off. Murtabek Imanaliyev , foreign minister 1997-2002. He heads the Jany Bagyt (New Direction) Socialand Political Movement. Feliks Kulov , head of the Ar-Namys (Dignity) Party. He was imprisoned in 2001 on corruptioncharges that some observers viewed as politically motivated. His party is prominent in the north buthas members all over the country. He was released from prison during the demonstrations on March24, 2005, and the Supreme Court threw out all charges against him on April 11. Adakhan Madumarov , co-head of the Ata Jurt party bloc and For Fair Elections Movement. Hecontested his "loss" in the March 2005 run-off and was declared the winner by the CEC. Roza Otunbayeva , former deputy prime minister, foreign minister, ambassador to the UnitedKingdom and the United States, and U.N. emissary. In late 2004, she became co-chair of theAta-Jurt party bloc. The CEC refused to register her as a candidate in the recent legislative election. Omurbek Tekebayev , heads the Ata Meken Party. He won a legislative seat in the March 2005run-off. Figure 1. Map of Kyrgyzstan | Kyrgyzstan is a small and poor country that gained independence in 1991 with the breakupof the Soviet Union. It was long led by Askar Akayev -- who many observers warned was becomingincreasingly autocratic -- but the country was still considered "the most open, progressive andcooperative in Central Asia," according to the U.S. Agency for International Development. TheUnited States has been interested in helping Kyrgyzstan to enhance its sovereignty and territorialintegrity, increase democratic participation and civil society, bolster economic reform anddevelopment, strengthen human rights, prevent weapons proliferation, and more effectively combattransnational terrorism and trafficking in persons and narcotics. The significance of Kyrgyzstan tothe United States increased after the September 11, 2001, terrorist attacks on the United States. TheKyrgyz government permitted the United States to establish a military base that trans-shipspersonnel, equipment, and supplies to support coalition operations in Afghanistan. Many people both inside and outside Kyrgyzstan were hopeful that the national legislativeelection on February 27, 2005 would strengthen political pluralism, easing the way for a peacefulhandover of executive power in late 2005 when President Akayev was expected to step down. Thelegislative race proved highly contentious, however, and necessitated a second round of voting onMarch 13. The Organization for Security and Cooperation in Europe tentatively concluded thatserious irregularities took place in the first round. After the February 27 vote, protestors occupiedgovernment offices in the southern part of the country, and protests spread throughout the rest of thecountry after the second round of voting. On March 24, thousands of protesters stormed thepresidential and other offices in the capital of Bishkek and Akayev and his family fled. He resignedas president on April 4. Acting president Kurmanbek Bakiyev has pledged to focus on combatingcorruption that siphons away investment capital, and stressed that foreign policy would not change,including Kyrgyzstan's close relations with Russia and the United States. Looming challenges toKyrgyzstan's stability include a planned presidential election, possible legislative by-elections to fillseats under dispute, and a possible referendum to adopt democratic changes to the constitution. Indicating early support for democratization and continued security ties, Defense SecretaryDonald Rumsfeld briefly visited Kyrgyzstan on April 14. Cumulative U.S. budgeted assistance toKyrgyzstan for FY1992-FY2004 was $749.0 million (FREEDOM Support Act and agency funds). Kyrgyzstan ranks third in such aid per capita among the Soviet successor states, indicative of U.S.government and Congressional support in the early 1990s for its apparent progress in makingreforms and more recently for anti-terrorism and border protection. Of this aid, 14.6% supporteddemocratization programs. While this aid has bolstered the growth of civil society in Kyrgyzstan,the Administration also has stressed that the United States did not orchestrate the coup. As Congressand the Administration consider how to assist democratic and economic transformation inKyrgyzstan, several possible programs have been suggested, including those to buttress civil rights,construct a federal government, and bolster private sector economic growth. (See also CRS Issue Brief IB93108, Central Asia , updated regularly.) |
Historically, Central California's San Joaquin River supported large Chinook salmon populations. Since the Bureau of Reclamation's Friant Dam on the San Joaquin River became fully operational in the 1940s, much of the river's water has been diverted for agricultural uses. As a result, approximately 60 miles of the river is dry in most years, making it impossible to support Chinook salmon populations in the upper reaches of the river. In 1988, a coalition of conservation and fishing groups advocating for river restoration to support Chinook salmon recovery sued the Bureau of Reclamation (hereafter referred to as Reclamation), which owns and operates Friant Dam ( Natural Resources Defense Council v. Rodgers ). Most long-term water service contractors who receive the diverted water were added to the case shortly thereafter as defendant intervenors. A U.S. District Court judge has since ruled that operation of Friant Dam violates state law because of its destruction of downstream fisheries. Faced with mounting legal fees, considerable uncertainty, and the possibility of dramatic cuts to water diversions, parties agreed to negotiate a settlement instead of proceeding to trial on a remedy regarding the court's ruling. In September 2006, a Settlement Agreement was reached concerning operation of Friant Dam—one of the largest federal dams operated as part of Reclamation's Central Valley Project (CVP) in California. The Settlement calls for new releases of water from Friant Dam to restore fisheries in the San Joaquin River and for efforts to mitigate water supply losses due to the new releases. Full implementation of the Settlement would require congressional authorization and appropriations. Implementation legislation based on the Settlement ( H.R. 4074 , H.R. 24 and S. 27 ) is currently pending. Other San Joaquin water management bills have also been introduced (e.g., H.R. 3768 and H.R. 2498 ). Under the Settlement, increased water flows for restoring fisheries would reduce diversions of water for off-stream purposes, such as irrigation, hydropower, and municipal and industrial uses. The quantity of water used for restoration flows and the quantity by which water deliveries would be reduced are related, but the relationship would not necessarily be one-for-one. For instance, in some of the wettest years, flood water releases could provide a significant amount of the restoration flows, thereby lowering the reduction in deliveries to agricultural and municipal users. Under the Settlement, no water would be released for restoration purposes in the driest of years; thus, no reductions in deliveries to Friant contractors would be made due to the Settlement in those years. Additionally, in some years, the restoration flows released in late winter and early spring may free up space for additional runoff in Millerton Lake, potentially minimizing reductions in deliveries later in the year—assuming Millerton Lake storage is replenished. Consequently, how deliveries to Friant water contractors might be reduced in any given year would depend on many factors. Regardless of the specifics of how much water might be released for fisheries restoration vis-à-vis water diverted for off-stream purposes, there will be impacts to existing surface and groundwater supplies in and around the Friant Division Service Area and adjustments in local economies. Although some opposition to the Settlement and its implementing legislation remains, the largest and most directly affected stakeholders (i.e., the majority of Friant water contractors, their organizations, and environmental, fisheries, and community groups) support proceeding with the Settlement Agreement, in lieu of going to trial. For some groups, going to trial risks considerable uncertainty and expense. Congressional authorization and appropriations are required for full implementation of the Settlement. If Congress does not act on the legislation, some fear that the court will order a remedy, which may differ from the Settlement, and which may have more severe consequences for area water users and third parties. A key legislative issue is how to finance Settlement implementation, specifically how to resolve congressional Pay-As-You-Go (PAYGO) issues. Other challenges are how to achieve the Settlement's dual goals of fisheries restoration and water management, and how to address concerns of stakeholders not party to the Settlement, without disrupting the negotiated agreement. This report provides an overview of topics related to the Settlement that are relevant to congressional deliberations. The report includes a discussion of the San Joaquin River, the Settlement, its legal history, and pending legislation. It also provides a brief discussion of fisheries restoration, water management, funding, economic, and third party issues. The report concludes with a brief discussion of how the Settlement relates to other California water supply and resource management issues. The Settlement in the lawsuit Natural Resources Defense Council v. Rodgers, involves operation of Friant Dam on the San Joaquin River—one of the largest federal dams of the Bureau of Reclamation's Central Valley Project (CVP) in California. As shown in Figure 1 , Friant Dam and the Friant Division of the CVP are situated in the southern portion of the San Joaquin Valley (SJV); however, the San Joaquin River flows north to the San Joaquin and Sacramento Rivers Delta confluence with San Francisco Bay (Bay-Delta). Hydrologically, the Friant Division Service Area extends into the Tulare basin. Agriculture in these areas is highly dependent on irrigation; much of the irrigation water is surface water supplied by the Friant Division. Many growers also use groundwater, conjunctively managing their surface and groundwater supplies. This conjunctive management improves seasonal and multi-year water reliability for growers. The SJV, an eight-county region extending 250 miles from Stockton in the north to Bakersfield in the south ( Figure 1 ), is both rapidly growing and economically depressed. (For more information on challenges facing the SJV, see CRS Report RL33184, California ' s San Joaquin Valley: A Region in Transition , by [author name scrubbed] et al. (pdf)) Yet, the 27,280 square mile SJV is home to five of the nation's ten most agriculturally productive counties, as measured by value of total annual sales. The Friant Division Service Area includes four of these counties: Fresno, Tulare, Kern, and Merced. The SJV faces significant environmental and natural resource challenges, including the court-ordered restoration of the San Joaquin River discussed in this report. The CVP is a multi-unit, multi-purpose reclamation project administered by the Bureau of Reclamation (Reclamation) under federal law, including the Reclamation Act of 1902 and amendatory acts (known as Reclamation Law), the federal Endangered Species Act (ESA), various other federal environmental and administrative laws, and various state laws. The Friant Dam was built on the San Joaquin River by Reclamation in the early 1940s. It stores the San Joaquin River's flow in Millerton Lake, the reservoir behind the dam, from which water for irrigation and other purposes is diverted into two canals. Reclamation delivers the impounded water to 28 irrigation and water districts in the Friant Division pursuant to various types of water service contracts, many of which originated in the 1940s. The Friant Division serves irrigation and water districts in the Fresno, Kern, Madera, Merced, and Tulare counties ( Figure 2 ). Unlike most Reclamation projects, the Friant Division (dam and distribution facilities) is operated in a way that diverts nearly all the San Joaquin River's flow away from the River. By the late 1940s, Reclamation's operation of Friant Dam had caused long stretches of the river to dry up. Portions of the San Joaquin River upstream of its confluence with the Merced River remain mostly dry today, except during flood events. Reclamation's operation of Friant Dam largely destroyed numerous species of native fish from the Upper San Joaquin River, including spring- and fall-run Chinook salmon. The diverted water helped develop and continues to support a diverse agricultural economy from north of Fresno to Bakersfield—the Friant Division Service Area.(see Figure 2 ). While water diverted from rivers helped establish California's vibrant and valuable agricultural economy, some California fisheries have declined since the 1940s—particularly commercial salmon fisheries—due to water diversions and other factors. Historically, Central Valley spring-run Chinook were found throughout the Central Valley—from the northern Sacramento River drainage area to the southern portions of the San Joaquin drainage. The Middle and Upper San Joaquin River historically supported two or more independent populations of spring-run Chinook salmon. Most spawning by spring-run Chinook salmon in the San Joaquin River occurred upstream of the current location of Friant Dam. Historical spawning runs may have exceeded 200,000 fish annually, ascending the river as far as Mammoth Pool (about 1,000 meters elevation), which lies about 50 miles above Friant Dam. Today Central Valley spring-run Chinook salmon are listed as threatened under the ESA; however, Central Valley spring-run Chinook salmon have been entirely extirpated from the San Joaquin River drainage, and currently inhabit only the Sacramento River drainage. Native fall and late-fall-run Chinook salmon continue to spawn in small numbers in the San Joaquin River tributaries such as the Mokelumne, Stanislaus, Tuolumne, and Merced Rivers. These fish spawn at lower elevations in these tributaries and have been less affected by dam construction than were spring-run Chinook salmon. In addition, there is significant artificial production of fall-run Chinook salmon by California Department of Fish and Game hatcheries on the Tuolumne, Mokelumne, and Merced Rivers. Fall-run Chinook salmon are not listed under the ESA, but are identified as a species of concern. Litigation involving waters of the San Joaquin River spans several decades. Litigation resulting in the most recent Settlement, however, can be traced to a 1988 lawsuit. This lawsuit and the negotiated Settlement Agreement are discussed below. During the late 1980s the Friant Division water users sought renewal of their long-term water service contracts with Reclamation. Beginning in 1988, a coalition of environmental groups and anglers led by the Natural Resources Defense Council (NRDC) challenged the contract renewals in federal court on a number of environmental grounds. In addition to claims that the process under which Reclamation had begun contract renewals violated the National Environmental Policy Act (NEPA) (42 U.S.C. §§ 4321 et seq.) and that the lack of water in the river violated the ESA (16 U.S.C. §§ 1531-1544), the plaintiffs argued that Reclamation had violated Section 8 of the Reclamation Act of 1902 (43 U.S.C. § 383). That section provides that Reclamation will act in conformity with state laws "relating to the control, appropriation, use or distribution of water used in irrigation." The state law that is at issue here is California Fish and Game Code § 5937. Section 5937 provides as follows: "The owner of any dam shall allow ... sufficient water to pass over, around or through the dam, to keep in good condition any fish that may be planted or exist below the dam." The claims have been litigated in the U.S. District Court for the Eastern District of California. The district court has reviewed the application of § 5937 to the problem at hand on several occasions since 1988 and has issued several decisions. In 2004, the District Court issued another decision regarding the application of § 5937 to the San Joaquin River, finding that Reclamation had violated the state law. It stated: "There can be no genuine dispute that many miles of the San Joaquin River are now entirely dry, except during extremely wet periods, and that the historical fish populations have been destroyed." The court did not declare what amount of water was necessary to satisfy the law or declare any other type of relief; rather, it set a 2006 trial date to determine a proper remedy. Faced with the prospect of a court-imposed remedy, and mounting legal fees in preparation for trial, the parties (NRDC et al., Reclamation et al., and Friant long-term water service contractors) began a series of settlement negotiations in late 2005, and came to a tentative agreement in June 2006. The terms of the Settlement were then vetted with selected stakeholders, finalized, and presented to Congress in September 2006—the final Stipulation of Settlement was filed with the U.S. District Court, Eastern District of California, September 13, 2006. The Settlement Agreement was accepted by the District Court on October 23, 2006. The stated goals of the Settlement are twofold: (1) to restore and maintain fish populations in "good condition"—the § 5937 standard—in the main stem of the San Joaquin River below Friant Dam to the confluence of the Merced River; and (2) to reduce or avoid adverse water supply impacts to the Friant long-term water service contractors that may result from both interim flows and restorative flows provided in the Settlement. To accomplish these goals, the Settlement calls for numerous actions, some of which need congressional authorization and appropriations. Further, appropriations authorization is needed to finance settlement implementation as envisioned under the Settlement. The Settlement states that if legislation is not enacted by December 31, 2006, the Settlement may become void at the election of a party, at which point litigation might resume. While implementation legislation has been introduced ( H.R. 4074 , H.R. 24 and S. 27 ), it has not been enacted. To date, no party has elected to void the Settlement. In September 2006, the settling parties presented the Settlement, including its legislative proposal, to various Members of Congress. The parties hoped implementing legislation would be enacted prior to adjournment of the 109 th Congress. However, numerous entities who were not party to the Settlement (i.e., third parties ), objected to the legislative proposal included in the Settlement, as well as the swift time line imposed by the Settlement Agreement. Shortly thereafter, many third parties met with the Settlement parties and certain Members of the California delegation. An agreement was reached to address certain third party interests; in exchange, these third parties agreed to support new legislation. Although many parties who had opposed the draft legislation in September 2006 supported the new legislation, other parties emerged that were not part of the new agreement, resulting in further opposition to Settlement legislation. San Joaquin River restoration Settlement legislation was introduced in early December 2006 ( H.R. 6377 and S. 4084 ); however, no action was taken on the bills before adjournment of the 109 th Congress. The Settlement bills were reintroduced in the 110 th Congress as H.R. 24 and S. 27 . Hearings were held in both houses of Congress (before the House Natural Resources Water and Power Subcommittee, March 1, 2007; and the Senate Energy and Natural Resources Water and Power Subcommittee, May 3, 2007). On November 5, 2007, H.R. 4074 was introduced as implementing legislation with provisions addressing congressional PAYGO rules. Implementation of the Settlement calls for construction of numerous projects and other activities that could cost between $250 million and $1.1 billion. Federal funding for these projects and activities is sought by the parties and is contemplated under the Settlement. Federal budgetary and funding issues, as well as the viability of attaining the water management goal appear to be key points of contention at this stage. For example, funding mechanisms included in the current legislation would require a budgetary offset under congressional PAYGO rules—according to some, a difficult task in today's budget climate. An overall complication for Congress in considering San Joaquin Settlement legislation is that although the Settlement aims to end a 19-year lawsuit and comports with a court ruling, the Settlement would affect others outside the Friant Division Service Area. Another complication is the prospect that funding for the San Joaquin River Settlement may divert funds from salmon restoration projects in other river basins. Lastly, other recent events potentially limiting water exports from the Sacramento and San Joaquin Rivers Delta confluence could significantly affect implementation of the recirculation portion of the water management goal and has caused increased concern among some stakeholders. These issues, among others, are discussed below. If Congress does not act on the legislation, some fear that the court will order a remedy, which may differ from the Settlement, and which may have more severe consequences for some area water users and third parties. As noted above, the settling parties agreed that it would have two goals: (1) a Restoration Goal: "... to restore and maintain fish populations in 'good condition' in the mainstem of the San Joaquin River below Friant Dam to the confluence of the Merced River, including naturally-reproducing and self-sustaining populations of salmon and other fish..."; and (2) a Water Management Goal: "... to reduce or avoid adverse water supply impacts to all of the Friant Division long-term contractors that may result from the Interim Flows and Restoration flows provided for in this Settlement...". In agreeing to these goals, parties acknowledged that the historical operation of Friant Dam resulted in significant portions of the San Joaquin River drying up in most years, with detrimental consequences for fisheries downstream from Friant Dam. They also agreed that achievement of the Restoration Goal by 2025 may not accomplish all desired results, but that efforts to achieve such results would result in public benefits (e.g., improved downstream water quality and increased recreational opportunities). They further acknowledged that the implementation of the Settlement would occur over many years and agreed to cooperate in good faith to achieve the dual goals of the Settlement. Some obligations are spelled out in the Settlement; moreover, the Settlement establishes a "framework" for accomplishing Settlement goals through activities such as environmental review, design, and construction. Restoring San Joaquin River fisheries is the aim of the Restoration Goal and several details and obligations are included in the Settlement Agreement. Parties acknowledge that achievement of the Restoration Goal will require a combination of channel and structural improvements along the River below Friant Dam, as well as additional releases of water from the Dam. The Settlement lists several improvements to be implemented no later than December 13, 2013, with certain allowances for events beyond the control of the Secretary of the Interior. These "Phase I" improvements relate to modifying and improving the capacity of the San Joaquin River to accommodate new releases and range from creating a bypass channel around existing facilities to screening various canal entrances and modifying structures to provide fish passage. A second set of improvements—"Phase II"—would include further channel modifications, and/or isolation of certain gravel pits. This second set of improvements would be completed not later than December 31, 2016, also subject to appropriations and events beyond the control of the Secretary. The Settlement also calls for specific "Restoration Flows"—additional releases of water from Friant Dam in accordance with certain hydrographs included in the Settlement. The hydrographs establish certain "base flows" for each of six water year types (for a description of water year types see Appendix A ); however the Secretary may also make "buffer flows" available up to an additional 10% of restoration flows, based on recommendations of a Restoration Administrator. The Secretary may purchase from willing sellers water to achieve the restoration goal and to mitigate unexpected seepage losses downstream. After commencement of restoration flows (following a period of interim flows), spring and fall-run Chinook salmon would be reintroduced by no later than spring of 2012. Although significant sums have already been spent on ecosystem restoration activities in the San Joaquin River watershed, there is no comprehensive (including the Upper San Joaquin River) program for specifically restoring San Joaquin Chinook salmon such as that contemplated under the Settlement. Many of the founding principles of the Settlement rely on existing salmon restoration studies conducted over the last decade or more. These studies have been carried out by a variety of sources, including the federal government, local entities, academics, consulting groups, and expert witnesses, some of which have been hired by different parties to the Settlement. Studies and expert reports that focused on water flows for salmon restoration ultimately led to the restoration flow levels established under the Settlement; however, some uncertainties remain. For example, while there has been much discussion and study of historical spring-run Chinook salmon levels, and the potential for their reintroduction—some of which appears to be based on other relevant cases of salmon restoration in California—there appears to be still some uncertainty as to whether flows established under the Settlement and other Settlement efforts will be sufficient to successfully reestablish Chinook salmon populations in the Upper San Joaquin River. Expert reports and rebuttals prepared during litigation have identified and evaluated numerous factors relevant to the successful reintroduction of Chinook salmon to the San Joaquin River. Given the complexity in the species' life cycle, and the complexity of the factors which influence its survival, restoration success cannot be predicted nor guaranteed with certainty. Among the more important factors are the quantity water flow and its timing, fish passage and diversion entrainment, water temperature and levels of dissolved oxygen, water quality, holding habitat, spawning habitat, and stock selection and genetics. Because Chinook salmon in the Upper San Joaquin River would be at the extreme southern extension of their historical range, all or many factors may need to be favorable to permit this species to complete its migratory life cycle. While some contend that all these factors indeed can be favorable, others point out that all these factors, many beyond human control, may not be favorable in any single year, leading to population stress and decline, if not total failure in some years. The question could reasonably be asked whether factors will be favorable in enough years to allow periodic migratory success sufficient to sustain a Chinook salmon population in the San Joaquin River above its confluence with the Merced River. The San Joaquin River restoration will be complicated in several respects (e.g., size of area to be restored, southern limit of the species' range, potential lack of unique genetic stock, extreme degradation of existing habitat, and potential climate change). Concerted attempts to restore salmon habitat in the Sacramento and San Joaquin River basins have produced encouraging results and success in some cases, but total success has been hard to claim in the short time these restoration efforts have been underway. As many of these projects have been conducted on small drainage areas, it would seem there is little precedent in California for the major restoration effort contemplated for the San Joaquin River. On the other hand, it could be argued that extensive restoration efforts in the Klamath River Basin have in all but one case at least maintained runs and avoided listing under the federal ESA, while many other nearby populations have been listed. The water management goal as outlined in the Settlement includes two key parts: (1) an agreement to develop and implement a plan for the recirculation, recapture, reuse, and exchange or transfer of Restoration flows for the purpose of reducing or avoiding impacts to Friant long-term contractors; and (2) establishment of a "Recovered Water Account" to make up for water losses experienced by Friant long-term contractors. Water made available by the Secretary under the new account would be priced at a total cost of $10 per acre-foot. To implement the water management goal, the Settlement provides for a water accounting system, whereby the Secretary of the Interior is to monitor and record reductions in water deliveries to Friant Division long-term contractors that have not been made up by recirculation, recapture, reuse, exchange or transfer of Restoration flows or replaced or offset by other water programs or projects undertaken or funded to mitigate water delivery impacts caused by the restoration flows. Some fear that water deliveries for off-stream purposes will be reduced directly, in a one-for-one fashion, to create restoration flows. However, as anticipated under the Settlement, the relationship of increased restoration flows and water delivery diversions would not necessarily result in a 1:1 trade-off. For example, in some years much of the restoration flows might be met with floodwaters. Also, under the Settlement, no water would be released for restoration purposes in the driest of years; thus, no reductions in Friant deliveries would be made due to the Settlement. Additionally, it appears Friant managers may have considerable flexibility in managing supplies and balancing deliveries with other available sources. How much less water Friant contractors might receive will depend on several factors: how much is needed for restoration flows (based on specific water flow recommendations included in the Settlement); what type of water year is declared; what type of water contract water users have (i.e., how firm); what mitigation or conservation efforts might be instituted; and how much water might be available to make up losses from the Recovered Water Account. Further, the overall impact on individual water users will depend, in part, on their access to other available water supply sources (other than deliveries from Friant Dam.) Using two available data sources (which do not account for improvements in water management that may dampen the Settlement's impact on agricultural and municipal users), it appears that annual water supplies for the Friant Division Service Area would be, on average , 15% to 16% less under the Settlement, than average supplies under current operating protocols. (See Appendix A for an analysis of available estimates of water supply reductions and a description of data sources.) Although the average reduction could be 15% to16%, water supply reductions could range from no reduction, to as high as 34% reduction in some years. The total average annual reduction in the volume of water delivered under the Settlement is estimated to be 204 thousand acre-feet (taf) or 225 taf, depending on the source (Steiner 2005, and BOR 2006, respectively); these estimates include cutbacks in temporary water that is made available in wetter years (i.e., water that is not contracted for on a long-term basis). In other words, this estimate includes reduction in both contract water and temporary water delivered by the Friant Division. These estimates can probably be viewed as an upper limit to average reductions that might occur under the Settlement. The average annual reduction in the long-term water service contract deliveries (i.e., not including temporary deliveries) under the Settlement, is estimated at 144 taf less than average annual long-term contract supplies without the Settlement. Almost half of the Friant contractors have access to other, non-Friant surface water supplies (mostly from local river and stream sources) and 75% use groundwater supplies. Therefore, for three-quarters of the contractors, the reductions in Friant Division deliveries represent a reduction in one of multiple supplies. The level of reductions experienced by individual water districts would vary depending on their water service contracts. That is, the reduced delivery experienced in a given year by an individual water district would largely depend on how "firm" is the district's Friant water supply contract. Contracts with first priority delivery (known as Class I contracts) generally are held by the districts which serve municipalities and agricultural users without sources to other supplies—areas often in the foothills not underlain with adequate or reliable groundwater supplies. Existing data assume Reclamation reduces "supplemental" water deliveries before first priority deliveries. These data estimate that average annual reductions in the Friant Division long-term water service contract water deliveries for individual Friant water districts would range between 5% and 27%—the low range being cutbacks to contractors with relatively firmer Friant Division contract supplies (46% of contractors) and the high range applicable to those with only supplemental Friant Division contract supplies (7% of contractors). All districts with supplemental Friant Division contracts (known as Class II contracts) have groundwater or other surface water supplies, so the reduction in Friant deliveries under the Settlement would represent a reduction in one of their supplies. Regardless of the specifics of how much water might be released for fisheries restoration vis-a-vis water diverted for off-stream purposes, there will be impacts to existing surface and groundwater supplies in and around the Friant Division Service Area. Pertinent questions, to which there are no obvious answers, are how will water users adapt, how much water might be regained, and at what cost? Possibilities exist to partially offset lower off-stream deliveries through water conservation, efficiency measures, water transfers and marketing, groundwater storage, and new infrastructure. However, at this time, it is unclear to what extent these measures could mitigate the lower deliveries, at what cost, and which measures might occur as part of the Settlement's water management goal or as part of other state and local water development efforts (such as expanded groundwater banking and conjunctive use). The Settlement includes several new financing mechanisms. San Joaquin restoration legislation based on the Settlement ( H.R. 24 and S. 27 ) would authorize and direct the Secretary of the Interior to implement terms and conditions of the Settlement in cooperation with the State of California, and authorize appropriations to carry out federal responsibilities. While the legislation includes an authorization of $250 million in appropriations, it also includes several provisions involving new funding mechanisms which, once established, would not be subject to annual appropriations by Congress. Rather, funding via these mechanisms would provide sources of dedicated funding to implement the agreement. Although funding provision language, included in proposed legislation in Exhibit A of the Settlement, differs somewhat from the funding provisions in H.R. 24 and S. 27 , it appears the funding mechanisms themselves are not substantively different. Because the Settlement funding relies on redirecting existing federal revenues from the Friant Division into a new, permanent restoration account, among other financing mechanisms, the legislation has run into difficulties regarding its financing provisions. CBO has estimated the total federal share of the program as outlined in H.R. 24 to be $500 million; $430 million through 2017, and another $70 million through 2026. (See Congressional Budget Office, H.R. 24 , San Joaquin River Restoration Settlement Act , CBO Cost Estimate, April 18, 2007.) Because the bill includes new direct spending, it would require an offset for such spending under congressional PAYGO rules. Restoration sponsors have been working to reduce the bill's budget score, and therefore reduce the potential offset needed. However, any change in the Settlement's financing formulas would require new agreement among the settling parties and may prove difficult. Water supply impacts may also have both positive and negative economic consequences. A review of other water supply reduction studies suggest the Settlement would have the largest, and mostly negative effect on the agriculture industry—at least in the short term—because most of the water diverted from the San Joaquin River is currently used to irrigate crops. However, it is not clear how much efforts to reduce water supply losses will also mitigate agricultural production losses. On the other hand, the region may benefit from increased recreational expenditures and investment in San Joaquin River restoration activities, as well as increased downstream water supply and water quality benefits. The Settlement will also affect communities and interests not party to the Settlement. For example, Friant Division water users would likely experience reduced water deliveries, but the new water releases would affect downstream communities and landowners farther north who were not party to the lawsuit. The majority of the San Joaquin riverbed areas that would experience increased flows under the Settlement are not adjacent to, and are mostly distant from, the Friant Division Service Area. (See Figure 2 .) Similarly, communities and landowners adjacent to lands served by Friant Division water might experience changes in groundwater quality and availability, and increased prices for substitute water. Another complication is the prospect that funding for the San Joaquin River Settlement may divert funds from salmon restoration projects in other river basins. In particular, Trinity River restoration proponents are concerned that San Joaquin River restoration as contemplated under the Settlement and implementing legislation might result in less funding for Trinity River restoration. These "third party" concerns, including possible groundwater supply impacts, are discussed below. The San Joaquin Valley is among the nation's most productive farming regions. Ranked by value of production, four of eight San Joaquin counties—Fresno, Tulare, Kern, and Merced—are among the top five agricultural counties in the United States. These four counties, along with Madera County, are the five SJV counties containing lands that directly receive water from the Friant Division. The value of crop and livestock products sold across these five counties totaled $9.3 billion in 2002, accounting for 36% of the value of California's total agriculture production and 5% of all U.S. agricultural production. At least eight studies have attempted to identify impacts to the agricultural sector due to temporary or permanent water losses. However, there are substantial differences in reporting criteria and analytical approaches across each of the studies, making such estimates difficult to compare and/or validate. In addition, estimated economic, social, and environmental benefits are dispersed across broad segments of California's population; there is similarly a high degree of variability due to constraints related to methodology or data. As reported in the studies that use economic models to quantify the potential farm and regional economy effects, most studies agree that a reduction in available irrigation water supplies could lower gross farm revenue because of expected reductions in crop acreage and/or yield. Studies that most closely approximate proposed reductions under the Settlement—those focusing on estimated effects for reductions of up to 200,000 acre-feet annually in the SJV—often employ a similar methodological approach, but with differing underlying assumptions and data, spanning a range of possible scenarios and outcomes, and often resulting in a wide range of estimated costs and benefits. Accordingly, these studies report a range of estimated farm impacts. Some studies further project lower farm profits and higher operating costs, as well as negative economic impacts to the broader regional economy and job markets. Some studies report that these economic costs will likely be offset by other economic and societal benefits, or other mitigating gains in the farm support services or non-farm sectors. For example, estimates of the potential loss in gross farm revenue from reductions in acreage and/or yield range from about $40-$180 million per year, spanning possible outcomes during a full water year and a drought year (excluding one high-end drought year estimate under one of the studies examined). Only two of the studies reviewed by CRS provide estimates of changes in farm profits, but across very different scenarios: One study reports possible losses in farm profits reports ranging from 0.4% in a full water year to 6.7% in a drought year; another study reports profit losses of 2% with water trading compared to 3% without water trades between growing regions. Only two of the studies reviewed provide estimates of changes in farm costs, again across very different scenarios: One reports farm costs could increase by about $110 million during a drought year; another reports that additional costs to crop producers would be only $11 million, with other costs to dairies of $2 million (projected for the year 2025). A few of the studies reviewed by CRS estimate changes in regional economic conditions and employment, with varying results: One study estimates potential job losses ranging from 1,200 jobs in a full water year to 17,900 jobs in a drought year; two other studies estimate job losses ranging from 3,200 to 10,400. Finally, only two of the studies reviewed by CRS estimate the potential economic benefits or offsetting gains under the Settlement: One study reports substantial monetary benefits approaching $1.8 billion annually; another reports possible nonfarm gains that exceed estimated costs, with net gains to the broader economy of $12.6 million during a drought year. (See Appendix B for a summary of the studies.) The substantial differences in reporting criteria and analytical approaches across these studies, make such estimates difficult to compare and/or validate. As a result, the estimated adverse economic effects and costs to the agricultural sectors under the Settlement based on these studies should be viewed with caution. These estimated changes in farm economic indicators based on these studies also should not be assumed to be cumulative each year, since these results do not take into account for the likelihood that farmers would take steps to adjust to a permanent water reallocation and such studies do not take into account potential recirculation, recapture and reuse or other water supply mitigation efforts contemplated under the Settlement. There may be positive and negative economic consequences of implementing the Settlement other than those immediately related to Friant contractors concerned with agriculture, and those of potential "third parties." Possible economic effects include (1) potential costs to municipalities for replacing lost water supplies; (2) potential costs related to lost power generation; (3) potential benefits associated with enhanced recreational opportunities; (4) benefits associated with improvements in water quality; (5) public benefits associated with existence of environmental quality improvements; and (6) economic impacts related to restoration projects. There may also be positive or negative changes in land use values for land abutting the restored river. While experts testifying prior to the Settlement noted potential municipal water costs of approximately $78,000 and power costs of approximately $1.2 million annually, other experts have estimated increased recreational and scenic benefits ranging from $17.4 to $45.2 million annually. Further, existence values—the value that some place on a restored river regardless of whether they actually use the resource—are estimated in at least one study to range from $1.6 billion to $1.7 billion. In general, significant costs and benefits are expected to result from implementation of the Settlement. Costs of the Settlement are concentrated in agriculture and several other sectors, while the benefits related to existence and recreation are dispersed over broad segments of the California population. Ideally, comparisons of costs and benefits across all affected sectors and parties should be assessed to inform policy options. Yet, expert reports reflected uncertainties related to data and modeling, unstated or uncertain underlying assumptions, and insufficient information to replicate results. Costs and benefits cannot be readily compared because of the lack of standards and continuity in and among expert reports. Communities dependent on groundwater supplies are also concerned about potential effects on groundwater quantity and quality. While most communities in the area have adequate groundwater supplies, some do not. Similarly, downstream communities and water and power users outside the Friant Division Service Area are concerned about potential Settlement effects such as increased flooding, groundwater infiltration, competition with existing financial commitments, and management of threatened and endangered species and their effect on managing land and facilities. The Settlement Agreement states that the parties do not intend to adversely affect others who were not party to the Settlement. However, changes in water use in the area served by the Friant Division may affect resources and their use in other areas. Actions directly affecting a specific group or interest are also likely to affect neighboring interests through legal, market, and institutional interactions. When the Settlement was disseminated, some landowners and entities not party to the agreement expressed concern about the Settlement's potential effects on their interests. The House Resources Committee convened a hearing on September 21, 2006 in part to address many of the concerns brought forward by these "third parties." A list of potential third party concerns regarding implementation of the Settlement identified during the hearing included: potential flooding and loss of crops and property in areas without adequate river channels; possible operational constraints related to the protection of reintroduced salmon under the Endangered Species Act (ESA; 16 U.S.C. §§ 1531-1543); potential impacts on existing salmon populations in San Joaquin tributaries and associated water uses; potential effects on surface and groundwater supplies, and water rights; and adequate program funding for Settlement implementation and other non-San Joaquin restoration projects (e.g., Trinity River restoration). After the September 21, 2006 hearing, third parties were asked for suggestions to revise draft implementing legislation for the Settlement. Negotiations among the Settling Parties, the State of California, and several third parties resulted in an agreement to modify the draft legislation that had been included in the stipulated Settlement Agreement. At a subsequent hearing of the House Natural Resources Subcommittee on Water and Power on March 1, 2007, testimony of several third parties suggested that many of their previous concerns were resolved in the modified legislation, H.R. 24 and S. 27 , introduced in the 110 th Congress. While many third party issues appear to have been addressed, some others remain. For Friant Division contractors and nearby third parties who use groundwater, decreased Class II water supplies may be among the more important impacts from the Settlement. Class II supplies are often used by water users in lieu of groundwater pumping, or to recharge groundwater supplies. Some fear that increased groundwater pumping to replace the decreases in surface supplies may degrade groundwater quality, especially for water systems currently of marginal quality. Settlement participants anticipate that such impacts would be limited by the component of the Settlement that requires the development and implementation of a plan to recirculate, recapture, reuse, exchange, or transfer water released for restoration flows. Significant uncertainties exist, however, as key options—including some proposed projects to recapture and recirculate restoration flows—would be subject to regulatory limitations and existing water delivery commitments and priorities, as well as available funding. Others are concerned that restoration flows down the San Joaquin River may degrade shallow groundwater quality beneath the river, particularly in the lower reaches. Waterlogging of soils and leaching of salt already present in the soil are some key concerns. In addition, infiltration of restoration flows—especially in the upper reaches of the river—seems likely to be substantial. Underground diversions—groundwater pumping from wells near the river—of the infiltrated water may increase infiltration rates above the estimates in the Settlement. This potential was explicitly addressed by the Parties in the Settlement (Article 13(c)); however, it is unclear how it may progress in practice. Any actions taken to curtail increased infiltration from groundwater pumping may introduce conflict between groundwater users and parties to the Settlement charged with redressing underground diversions. This potential conflict, while beyond the scope of this report, may also raise legal questions regarding how the State of California views surface water and groundwater interactions. In sum, the possible impacts that Settlement implementation may have on groundwater quality and quantity are difficult to assess, as such effects will depend on a substantial set of variables and uncertainties. While it is certain that the restoration of flows from Friant Dam (Millerton Lake) to the San Joaquin River will lead to changes in the way water is managed in the region, what is not known is what specific water management changes might result and how water users might adapt to reductions in water deliveries. Increased dependence on groundwater as a water source in southern SJV potentially could worsen the quality of groundwater as shallow irrigation wells recirculate groundwater and further concentrate dissolved solids and other contaminants. This could degrade water quality in local drinking water wells and irrigation wells, many of which are already of marginal quality. There is expectation, however, that reduced surface water flows to the Friant Division ultimately will lead to more efficient use of water through continuing improvements in operations, infrastructure, and water management practices. At the same time, increased river flows could raise the groundwater table and improve groundwater quality outside the Friant Division Service Area beneath reaches of the river where groundwater quality is currently impaired. The Settlement Agreement and subsequent implementing legislation are the culmination of nearly two decades of discussion, argument, and study on whether and how to restore fisheries below Friant Dam, a federally owned and operated facility on the San Joaquin River. The most recent actions relate to a court decision that Reclamation is operating the dam in violation of California state fish and game code. The implications of this decision are far reaching for California water management and for both the directly affected water users and the indirectly affected communities, landowners, and water users. Several broad policy issues are raised by the Settlement. These issues partially derive from constraints imposed by the pressure to react to a settlement responding to a judicial ruling, as opposed to managing or legislating on an issue prior to, or absent, such a settlement. Another overarching issue is how San Joaquin River management ties into other CVP management decisions, as well as state and local water systems. Both the CVP and State Water Project (SWP)—a largely parallel state water supply system south of the Bay-Delta—are operating under regulations that limit the amount (and timing) of water that can be exported south out of the Bay-Delta. Recent court decisions regarding the health of threatened Delta Smelt may constrain such future exports. The degree to which some of the water management goals identified in the Settlement might rely on moving water in and out of the Bay-Delta could affect the ultimate ability to recapture, recirculate, and/or reuse San Joaquin River restoration flows. At minimum, it appears the restoration effort will necessitate multi-year water planning and investments, including having the funding on hand and infrastructure in place to buy and put to use surplus water (e.g., for groundwater recharge), and to buy water in dry years for those without sufficient access to groundwater, those with primarily Class II supplies, or in the driest of years. Therefore, the future of water resource management in the Central Valley is not just conjunctive water management, but multi-year conjunctive management with the financial resources to make it happen, in addition to integration of federal, state, local, and private infrastructure projects. Whether Congress addresses this issue—in California and elsewhere—given current water resource authorization and appropriations practices and a restrictive budgetary climate remains to be seen. While the issues discussed here have confronted prior Administrations and Congresses, a Settlement Agreement was not reached until the U.S. District Court acted, ultimately resulting in the difficult choices facing Congress today (e.g., budgetary, water delivery, and ecosystem health trade-offs). This is a common dilemma for resource agencies implementing projects and programs which are based on societal and political trade-offs made decades ago (e.g., agricultural industry over commercial and sport fishing industries, or timber harvest over species habitat). It is hard to say what is fair or just when such significant trade-offs were made decades ago, causing harm to some, but providing benefit to others who then made financial and livelihood decisions based on those policies. In the eyes of many, the San Joaquin river restoration is an effort to respond to fisheries economic and ecological damage begun 60 years ago; for others the potential of reduced water supplies for off-stream use is a breach of promises made 60 years ago. For the court, it is a matter of Friant Dam operations comporting with state law. Appendix A. Analysis of Existing Water Supply Impacts Data Introduction to the Analysis and Summary of Results The Settlement would use San Joaquin River water, which in recent history has been diverted and delivered to Friant Division contractors for off-stream uses, to maintain in-stream flows in the San Joaquin River for fish restoration. The Settlement would reduce Friant water deliveries to water districts absent offsetting measures. That is, the Settlement would redistribute a portion of the annual water supply away from agricultural and municipal water districts to achieve the restoration flows (based on hydrographs) agreed to under the Settlement. In a given year, how much less water would be available for off-stream uses in the Friant Division Service Area would depend largely on how much water would be released for fish restoration. Following a protocol established in the Settlement, the restoration flows would be determined annually based on the basin's estimated runoff for the year. Under the Settlement, restoration flows would be higher in wetter years and lower in drier years. The quantity of water used for restoration flows and the quantity by which water deliveries would be reduced are related, but the relationship would not necessarily be one-for-one. For instance, in some of the wettest years, flood water releases could provide a significant amount of the restoration flows, thereby lowering the reduction in deliveries to agricultural and municipal users. Under the Settlement, no water would be released for restoration purposes in the driest of years; thus in those years, no reductions in Friant deliveries would be made due to the Settlement. As part of its analysis of the Settlement Agreement, CRS collected and reviewed available information on the effects that proposed increased releases for fish restoration from Friant Dam could have on future deliveries by the Friant Division. Few data are available on what actions Reclamation or water users might take to mitigate reduced Friant water deliveries. Guidelines and other specifics regarding Settlement implementation remain to be determined. Although broad conceptual papers are available, decisions on one or more courses of action have not been made. Therefore, the analysis in this appendix is limited to existing data and estimates of water supplies, which do not account for water supply management measures that could reduce the effects of the Settlement on agricultural and municipal water users. The analysis largely relies on two available data sets on the estimated reductions to Friant water supplies under the Settlement: Expert report of Daniel B. Steiner, Effects to Water Supply and Friant Operations Resulting From Plaintiffs ' Friant Release Requirements , September 16, 2005 (hereafter referred to as Steiner 2005), prepared for Friant Water Users Authority; and U.S. Department of the Interior, Bureau of Reclamation, Friant Division Allocations Based on SJR-Settlement Exhibit B Hydrographs for Restoration Releases, table released December, 2006 (hereafter referred to as BOR 2006). The two data sets are not identical, and both have some limitations for purposes of this analysis. CRS used the most comparable elements of the data sets for the analysis presented herein. The analysis herein was performed using both data sets when possible. However, many of the figures in this appendix present information from only one data set. Even though the data are imperfect—the estimates were made assuming no changes in Friant Dam or other Central Valley Project (CVP) operations, no changes in water use efficiency, and no other actions that might mitigate reduced Friant water supplies—they give some idea of the range of changes that water users might experience under the Settlement. Using available data (which does not account for any improvements in water management that may reduce the Settlement's impact on agricultural and municipal users), it appears that annual water supplies for the Friant Division Service Area would be, on average , 15% to 16% less under the Settlement, than average supplies under current operating protocols. Although the average reduction could be 15 to 16%, water supply reductions could range from no reduction, to as high as a 34% reduction in some years. The total average annual reduction in the volume of water delivered (i.e., reduction in both contract water and temporary water delivered by the Friant Division) under the Settlement is estimated to be 204 thousand acre-feet (taf) or 225 taf, depending on the source (Steiner 2005, or BOR 2006, respectively) less than average annual supplies without the Settlement. These average estimates include cutbacks in temporary water that is made available in wetter years (but that is not contracted for on a long-term basis), and thus these estimates can be viewed as an upper limit to average reductions that might occur under the Settlement. The average annual reduction in long-term water service contract water deliveries (i.e., not including temporary deliveries) under the Settlement, is estimated at 144 taf less than average annual long-term contract supplies without the Settlement (Steiner 2006). Almost half of the Friant contractors have access to other, non-Friant surface water supplies (mostly from local river and stream sources) and 75% use groundwater supplies. Therefore, for at least three-quarters of the contractors, the reductions in Friant Division deliveries represents a reduction in one of multiple supplies. However, because it is difficult to get reliable data on all non-federal water supply source, the extent of other supplies and their accessability and reliability is unclear. In some cases both other surface and groundwater supplies appear to be substantial, in other cases not. Table A -1 shows the diversity of water supplies; however, non-federal supplies are not quantified. The level of reductions experienced by individual water districts would likely vary depending on their water service contracts. That is, the reduced delivery experienced in a given year by an individual water district would largely depend on how "firm" is the district's Friant water supply contract. Contracts with first priority delivery (known as Class I contracts) generally are held by the districts which serve municipalities and agricultural users without sources to other supplies—areas often in the foothills not underlain with adequate or reliable groundwater supplies. Existing data assumes Reclamation would reduce "supplemental" water deliveries (known as Class II water) before first priority deliveries. These data estimate average annual reductions in Friant Division long-term water service contract deliveries for individual Friant water districts would range between 5% and 27%—the low range being cutbacks to contractors with relatively firmer Friant Division contract supplies (46% of contractors) and the high range applicable to those with only supplemental Friant Division contract supplies (7% of contractors). All districts with supplemental Friant Division contracts have access to groundwater or other surface water supplies. Possible actions that may partially offset reduced off-stream deliveries include water conservation, efficiency measures, water transfers and marketing, groundwater storage and banking, water pricing (e.g., the Recovered Water Account), and new infrastructure. However, at this time, it is unclear to what extent these measures could mitigate the lower deliveries, at what cost, and which measures might occur as part of the Settlement's water management goal or as part of other state or local water development efforts. Further, some Class II supplies are used in lieu of pumping groundwater, to recharge groundwater, and to conjunctively manage seasonal or yearly water supplies. Because of this complexity, it is unclear what effect water conservation and efficiency measures (which could reduce inflows to groundwater) might have on long-term water demands and supply management. The first part of this appendix provides an overview of water supplies in the Friant Division Service Area, including not only releases from Friant Dam but also other surface water and groundwater supplies. The next part of this appendix discusses how water needs for restoration flows under the Settlement might affect Friant Division water supplies. It addresses potential effects of the Settlement on aggregate Friant Division contract water supplies; it then analyzes estimates of the reduction in supplies for individual water districts (contractors). This appendix attempts to present data that illustrate not only the average annual water supply reductions under the Settlement, but also the variation that might be experienced annually. This appendix does not discuss specific effects of the Settlement on groundwater supplies and potential economic impacts of water reductions and increased restoration flow. Where reductions in water supply are discussed, they are relative to long-term average water deliveries, not the full amount of water supply contracts. Water Supplies in the Friant Division Service Area The Friant Division Service Area of the CVP extends from just north of the Merced/Madera County line north of the San Joaquin River, southeast to Bakersfield, CA. (See Figure 2 .) Much of the area is naturally well-endowed with both surface and groundwater supplies, and has benefitted from extensive federal investment in the development of surface water supplies, as well as investment in private and public groundwater recharge projects. The waters of the service area support a substantial farm and food processing economy, as well as a growing population. The area is bisected by several large rivers and streams; the largest surface water source for the Friant Division Service Area is the San Joaquin River, which lies in the northern part of the service area. San Joaquin River water is stored behind Reclamation's Friant Dam in Millerton Lake and is delivered to long-term contractors (also referred to as water users or water districts) via the Madera Canal and Friant-Kern Canal. Friant Dam and the two canals are managed as part of the federal CVP. Even though the area is relatively rich in water resources compared to much of the West, groundwater overdraft has been a perennial problem since the area was intensely developed for agriculture early in the 20 th Century. Runoff entering Millerton Lake (i.e., the Millerton Lake drainage area) averages 1,700 taf, but can vary widely; from 1922 through 2004, runoff has varied from a low of 362 taf in 1977, to a high of 4,642 taf in 1983 (Steiner 2005). This large variation can lead to management difficulties, particularly in extremely dry and extremely wet years. Millerton Lake has a capacity of approximately 500 taf, which is insufficient to provide multi-year storage. As a consequence of its capacity, the reservoir is operated on an annual basis and may refill multiple times in a wet year. Because the lake does not have multi-year storage, the quantity of water available for delivery in a given year is largely a function of that year's runoff. In non-flood years, all but sufficient flows to satisfy water right holders below the dam (i.e., riparian releases representing approximately 117 taf annually in recent years) is diverted away from the San Joaquin riverbed into the Friant-Kern Canal and Madera Canal just below the dam. These canals transport the water for delivery to Friant water users. Once the riparian water rights holders (Reach 1) remove their water, the river generally runs dry or with little flow for most of the year in the 24-mile stretch between Gravelley Ford and Mendota Pool (Reach 2). (See Figure A -1 for a map of the river reaches.) Except when there are flood releases, the water in the San Joaquin River between Mendota Pool and Sack Dam (Reach 3) is not San Joaquin River water; it is CVP water imported from northern California through the Bay-Delta. A group of CVP contractors known as the San Joaquin River Exchange Contractors removes this imported Delta water from the river over the course of Reach 3. After this stretch, the river is generally dry again for 46 miles from Sack Dam to Bear Creek (Reach 4) except for inflows from groundwater and agricultural runoff. Reclamation historically has operated Friant dam to maximize water deliveries in the Friant Division while first meeting water right obligations downstream—i.e., releasing water to the river only as necessary to meet downstream water right obligations—and to manage flood waters. Because water deliveries to the Friant Division (after downstream water right obligations are met) are maximized each year, some reaches of the riverbed remain dry during portions of many years. According to the 2004 ruling of the U.S. District Court, Eastern District, California, this management regime has resulted in untenable effects on downstream resources, particularly anadromous fish, under California state law. Surface Water Supplies: Friant Dam Releases In January each year, Reclamation makes a preliminary projection of how much runoff is expected in the Millerton Lake drainage area. A formal estimate is made each February, and re-calculated monthly throughout the spring and summer. In most years, approximately 70% of the runoff occurs in spring and early summer (April - July). Using these projections, Reclamation decides how to "allocate" Friant water supplies. Water releases at Friant Dam fall into several categories: Riparian flow releases are made to supply water to water right holders below the dam who are not part of the Friant Division Service Area and are not party to the Settlement. These releases have been approximately 117 taf annually in recent years, and would not change under the Settlement Agreement or proposed implementing legislation. Flood releases may be necessary when forecast runoff is excessive or when water inflow exceeds the capacity of the reservoir. When additional releases above the minimum (riparian water rights releases) need to be made, portions of the flood releases may be used for temporary water contracts. Releases for diversion to canals that deliver project water to long-term water service contractors in the Friant Division Service Area of the CVP. Surface Water Supplies: Friant Division Water Supplies Twenty-eight water districts in the Friant Division Service Area have long-term water service contracts with Reclamation for the delivery of water stored behind Friant Dam (see Table A -1 ). This water supplies approximately 1 million acres of farmland and several cities and towns, including the City of Fresno. Water is delivered northwest via the 36-mile Madera Canal, and south via the 152-mile Friant-Kern Canal. (See Figure 2 .) Annual deliveries are reported to average around 1,300 taf. In total, approximately 15,000 farms are served by Friant water supplies. Friant water supply deliveries and allocations fall into several categories: Class I water, sometimes referred to as the "firm" supply, is the first 800 taf of storable water (if available) in the Millerton Lake drainage area in excess of instream rights; it is allocated to Friant long-term water service contractors. It is delivered under contract to districts with limited or no access to groundwater supplies, and as a base supply to other districts. Class I supplies are insufficient to meet the base supplies of all districts. Class II supplies are "supplemental" supplies. Class II water is allocated and delivered only when Class I demands can be fully met. Class II water often is used for irrigation supplies. In wetter years, Class II water also is used to directly recharge groundwater supplies through various means or used in lieu of groundwater (i.e., contractors use Class II surface water instead of pumping groundwater when it is available), thereby meeting water demands and partially restoring groundwater supplies. § 215 "temporary" water may be made available when flood waters must be released from Friant Dam. Under § 215 of the Reclamation Reform Act of 1982 ( P.L. 97-293 ), normal ownership and full cost pricing limitations of reclamation law are waived for lands that receive only a temporary (not to exceed one year) water supply. Under § 215, the Secretary also is authorized to waive payments for such supplies. Class II and § 215 demands and deliveries are highly variable depending on runoff quantity and timing and Reclamation operating and contracting procedures. For example, there exists considerable financial incentive to take § 215 water in lieu of Class II deliveries when § 215 fees are waived. When declaration of § 215 water availability is made early in the season, many contractors reduce or sometimes forego Class II deliveries. This complexity makes it difficult to estimate the impacts of water supply reductions under the Settlement on Class II contractors. Table A -1 lists the average annual Class I and Class II water supplies for the 28 Friant water districts, and the average § 215 delivery for all districts. (See bottom of Table A -1 .) Total Class I water supplies ranged from 200 taf to 800 taf between 1962 and 2003 (Steiner 2005); combined Class II and § 215 allocations ranged from zero to 1,401 taf (BOR 2006). Average annual Class I, II, and §215 water supplies in Table A -1 total to 1,281 taf. Table A -1 shows a Class I average of slightly less than the full contract amount of 800 taf largely because runoff was insufficient in drought years to allow Reclamation to fully meet Class I contracts. Other Surface Water Supplies Many parts of the Friant Division Service Area, particularly the southeast areas, have access to non-Friant surface water supplies. Several other rivers and streams bisect the area, including the Kings River, Cottonwood Creek, Johns River, Kaweah River, Tule River, Deer Creek, White River, and Poso Creek. The Kern River terminates near the southernmost portion of the Friant Division Service Area. As previously noted, according to Reclamation water needs assessment data, many (43%) of the Friant districts have access to other, non-Friant surface water supplies, mostly from local river and stream sources. In most cases, local sources are a much smaller percentage of total supplies than Friant surface water or groundwater supplies; however, in a few cases (e.g., City of Fresno and Fresno Irrigation District), it appears that other surface sources may supply more than 50% of their water supply. Water imports into the service area have been relatively modest; however, these may increase if Friant water deliveries are reduced. At the same time, limited water availability, cost of alternate supplies, and regulatory constraints on water transfers may restrict efforts to import water into the service area. Table A -1 (above) shows the diversity of water supply sources of the Friant long-term water contractors. Columns 2 and 3 show average water supplies for the Friant Division; columns 4 and 5 show other water supply indicators, such as whether a district has access to other surface or groundwater supplies. Groundwater Supplies Drawdown of groundwater levels in the Friant Division Service Area as a result of pumping in the early 20 th Century motivated both Friant Dam construction in the early 1940s and efforts to reduce groundwater demand. Deliveries from Friant Dam reduced demands on the aquifer as Friant water, in lieu of groundwater, was used for irrigation. Reduced pumping slowed the rate of water table decline, but water table levels in the southern San Joaquin Valley have not returned to pre-development elevations. Land subsidence, which occurred as a result of groundwater pumping, slowed considerably as additional surface water supplies became available and demand for groundwater dropped. Facilities to pump groundwater are available throughout most of the Friant Division. (See Table A -1 .) The limited estimates of groundwater pumping that are available indicate that water users in the Arvin-Edison Water Storage District, Fresno Irrigation District, Tulare Irrigation District, Madera Irrigation District, Lower Tule River Irrigation District, and Chowchilla Water District generally pump the largest volumes of groundwater in the Friant Division Service Area. In contrast, water users in the Garfield Water District, International Water District, Lewis Creek Water District, Tea Pot Dome Water District, and Stone Corral Irrigation District typically pump the smallest amounts of groundwater annually. Total volumes pumped in the Friant Division between 1987 and 2003 range from a peak of over 2,000 taf in 1990 to a low of 450 taf in 1998, nearly a five-fold difference. Other groundwater resources have the potential to also be available for use by Friant contractors. Groundwater banking—using dewatered aquifer space to store water during wet years, so it can be pumped and used during dry years—is increasingly being discussed and pursued in California. The water transport system in the state increases the possibilities for beneficial use of groundwater banking. Those connected to the transport system potentially could use banked groundwater regardless of their own access to groundwater supplies. Groundwater banking, while an opportunity, also has its costs and constraints. In California, pumping and canal capacity and species-related operational issues may limit some groundwater banking opportunities; further, the costs to bank and move water, or purchase banked water may be higher than some users are willing to pay. Contract Water Supplies Under the Settlement The Settlement establishes a framework for achieving both restoration and water management goals. The viability of attaining both goals is uncertain and will depend upon many factors. Currently, the annual volume of water diverted for off-stream uses by Friant water contractors is a function of water availability (which depends on precipitation, storage capacity, and flood flow management), minus the riparian releases for water right holders below the dam. Under the Settlement, the quantity of water available for diversion to Friant contractors would be a function of water availability, minus the riparian releases for downstream water right holders and releases for restoration flows. Under the Settlement Agreement as specified in Exhibit B, paragraph 2, Reclamation would categorize runoff conditions for each year into one of six water year types based on runoff conditions. Wet (wettest 20% of years) and Normal-Wet (the next wettest 30% of years) are used to define the years with above average runoff. Normal-Dry (the next 30%) and Dry (the next 15%) capture the years with below average runoff, but not the years with the lowest runoff (i.e., the bottom 5%). The bottom 5% are classified into Critical High or Critical Low . Critical low are the driest of years; those years with less than 400 taf of runoff . Critical High are all other years with runoff in the bottom 5%. Figure A -2 provides a graphical presentation of the relative frequency of each of the water year types. Because only one year had a runoff of less than 400 taf in the 1922 to 2004 data set, the frequency of a Critical Low runoff year is shown as 1% in Figure A -2 . The water year type is determined by comparing the runoff predictions for the year to past annual runoff volumes in the Millerton Lake drainage area. These runoff categories are used to select the restoration hydrograph to be used for a given year, which forms the basis for monthly water releases. Paragraph 13, Section j, in the Settlement states that the Secretary of the Interior shall develop guidelines for "procedures for determining water year types..." which may affect how the designation of water year type is implemented. Each water year type is associated with an annual restoration flow regime (i.e., a hydrograph) in Exhibit B of the Settlement. In other words, each year the quantity of water to be released from Millerton Lake for restoration would be determined by the designation of the basin's runoff as one of the six water year types. Under the Settlement, Reclamation would release water to achieve the target restoration flows. Multiple hydrographs were considered during litigation; the Settlement's hydrographs are based on the expert testimony of G. Mathias Kondolf prepared on behalf of the Natural Resources Defense Council (plaintiffs) and are often referred to as the Kondolf hydrographs. The restoration flows in the Settlement are higher in wetter years and lower in drier years. The quantity of water used for restoration flows and the quantity of water by which Friant water deliveries would be reduced are related, but the relationship is not necessarily one-for-one. Many of the tables and figures in this appendix depict estimates of lower Friant water deliveries under the Settlement. The data come from two sources that make estimates based on the water quantities required to create the flows in the six Kondolf hydrographs: Steiner 2005 and BOR 2006. Limitations of Water Supply Estimates and Mitigation for Reductions Figures A-3 and A-4 show graphically the estimated reduced annual Friant water supplies using the Steiner 2005 and the BOR 2006 data sets, respectively; Table A -2 provides much of the same information in a tabular format. Both sources used historic conditions as proxies for estimating the future effect of the Settlement. The two figures and the table are ordered according to annual runoff, with 1983 having the highest runoff and 1977 the lowest in the 1962 to 2003 period. There are limits to these data sets due to a number of factors, explained below. Thus, ultimate impact on Friant water contractors is anticipated to be different than the available estimates if the Settlement is implemented. For example, the Settlement, in Paragraph 16, calls for measures to mitigate lower Friant water supplies as restoration releases are implemented; these include establishing a Recovered Water Account, and efforts to recirculate, recapture, and reuse the restoration releases. The Friant Water Users Authority in February 2007 developed a report, titled San Joaquin River Restoration Program Water Management Goal: Potential Programs & Projects, which briefly outlines numerous projects that could be undertaken to mitigate or offset reduced water supplies. However, no specific water management projects are identified as part of the Settlement, nor is it clear how funding under the Settlement would be divided between efforts to achieve the restoration goal and efforts to achieve the water management goal. Consequently, the analysis in this appendix cannot estimate potential savings and how these savings may reduce the magnitude of the reductions in water supplies of the Friant water contractors. There are additional reasons why available estimates could differ from the future supplies of Friant water contractors operating under the Settlement. Guidelines on how the Settlement would be implemented remain to be established and numerous provisions in the Settlement provide for implementation flexibility. For example, Paragraph 13, Section j of the Settlement Agreement states that the Secretary of the Interior shall develop guidelines, including "procedures for determining and accounting for reductions in water deliveries to Friant Division long-term contractors...," which will affect how Reclamation makes operational decisions at Friant Dam, and thus allocation decisions. Both BOR 2006 and Steiner 2005 adopt a reduction protocol (similar to the current protocol) for how to reduce contractor water supplies to obtain water for the restoration flows. Both data sets presume eliminating deliveries to § 215 contracts and Class II water before reducing Class I water supplies. However, the guidelines to be established pursuant to the Settlement Agreement could differ from the reduction protocol used by BOR 2006 and Steiner 2005. Further, districts may try to negotiate a different allocation for water supply reductions. Another example of flexibility provided in the Settlement Agreement, which could result in contract water supplies varying from the BOR 2006 and Steiner 2005 estimates, is found in Paragraph 3 of Exhibit B of the Settlement. This paragraph states that: The Parties agree to transform the stair step hydrographs to more continuous hydrographs prior to December 31, 2008 to ensure completion before the initiation of Restoration Flows, provided that the Parties shall mutually-agree that transforming the hydrographs will not materially impact the Restoration or Water Management Goal. This process may or may not materially impact Friant deliveries. The intent of the process is to provide smooth operation of dam releases and to avoid large fluctuations on a daily basis. Table A -2 also illustrates the challenge of using estimates; it shows in italics that the two data sources—Steiner 2005 and BOR 2006—do not agree on how the water year type classifications would be applied to historic runoff conditions. Four discrepancies in their classifications are shown: 1989 (Dry/Normal Dry), 1993 (Normal Wet/Wet), 1999 (Normal Dry/Normal Wet), and 2003 (Normal Dry/Normal Wet). (Footnote 12 describes the potential significance of these discrepancies.) In summary, numerous factors (e.g., operational changes, water transfers and acquisitions, recirculation, recapture, and reuse projects) would affect the ultimate change experienced in diversions, water deliveries, and water availability for the water districts in the Friant Division Service Area. Thus, estimates of water reductions contained herein are simply estimates of the magnitude of how contract supplies might be reduced based on best available information. Because of the lack of available information and specific plans on possible operational changes, efforts to mitigate reduced Friant deliveries, and the viability of offsetting reduced deliveries, these estimates assume no change in operations and no water supply mitigation projects. Friant Contract Water Supplies—The Big Picture Estimated Water Supply Reductions Under the Settlement Table A -3 displays average district water supplies for Class I and Class II water. The table shows the water supply without the Settlement (which is also shown in Table A -1 ) and the Steiner 2005 and BOR 2006 estimates for how much, on average, the annual water supplies might be reduced under the Settlement. These figures are averages, however, and do not represent the full range of reductions that might be experienced in any given water year. The historical variation is depicted in Figures A-3 and A-4 (above). Figure A -5 uses the BOR 2006 data to show the relationship between the volume of water released for restoration (in green) and the average annual reduction in water deliveries to contractors (in red). The figure illustrates that the restoration flows under the Settlement are higher in wetter years and lower in drier years. As one can see from the figure, the quantity of water for restoration flows and the quantity of water by which deliveries would be reduced are related, but the relationship is not necessarily one-for-one. For instance, in some of the wettest years, much of the restoration flows would be met by flood water releases, not reduced deliveries. Under the Settlement, no water would be released for restoration purposes in the driest of years. The last column in Table A -3 provides the estimates of the average reductions as a percentage of the average contractor's Friant water supply (not contract amount)—a range of 5% to 27%. These percentages represent reduction estimates only for Friant Dam releases, not reduction as a percentage of all the water supply sources (e.g., groundwater sources, other surface water supplies) that a district may have available. The two previous columns in Table A -3 illustrate that a district's average annual reductions would largely be a function of its ratio of Class I and Class II supplies. Districts with higher volumes of Class I water might experience less average reductions, assuming future guidelines developed by the Secretary of the Interior are based on the same or similar assumptions used in BOR 2006 and Steiner 2005 (i.e., eliminating Class II and §215 supplies before reducing Class I supplies). Steiner 2005 and BOR 2006 estimates of average percentage reductions by water year type, which are shown in Table A -2 and Figures A-3 and A-4 , are more fully discussed below. As noted earlier, these figures represent estimates based on no changes in CVP operations or completion of other water management goals and objectives. As such, they are likely to represent the high end of what, on average , might be expected. As previously noted and as seen in Figures A-3 and A-4 , within each water year category, there exists substantial potential variation in the magnitude of the reduction in contract water supply. Figures A-6 through A-8 represent average estimated annual water supplies (in blue) and reductions (in red) using the Steiner 2005 data for the period 1962 to 2003. (See Footnotes 1 and 12 for an explanation of the selection of the 1962 to 2003 period.) Figure A -6 shows in graphic form by water year type the estimated annual reduction in water deliveries under the Settlement, with the red representing the reduction from the water supply without the Settlement and the blue representing the quantity that would be available to contractors under the Settlement. For each water year type, one can see the proportion of water projected to be reduced. Figure A -7 builds on Figure A -6 by displaying the proportion of Class I, Class II, and §215 supplies. Figure A -8 is a blowup of the red portion of Figures A-6 and A-7 , depicting the estimated reductions in the three types of supplies. Average Annual Impact on Friant Water Supplies According to available data for 1962 through 2003, annual water contractor supplies are estimated to be reduced, on average, 204 taf (Steiner 2005) or 225 taf annually (BOR 2006) (see Table A-2 ) , which would represent between 15% and 16% of total average annual water supplies (i.e., including temporary deliveries) for Friant Division contractors. Annual Impact on Friant Water Supplies by Water Year Type Wet. Based on data for Wet years between 1962 and 2003, estimated average annual reductions in contract water supplies could be 148 taf (Steiner 2005, Figure A-8 ) and 176 taf (BOR 2006), which could represent an average reduction of 8% or 9% of contractor annual water supplies. The 1962-2003 data in Table A-2 shows that the variation in the volume of the reduction and the significance of the reduction as a percentage of water supply would vary for Wet years, from 35 taf to 344 taf and from 2% to 17%. In Wet years, Class I supplies generally would be unchanged. Normal-Wet. Based on data for Normal-Wet years (which have lower runoff than Wet years) between 1962 and 2003, estimated average annual reductions in contract water supplies could be 302 taf (Steiner 2005, see Figure A-8 ) or 320 taf (BOR 2006), which could represent an average reduction of 18% or 19% of annual contract water supplies. The Steiner 2005 data in Table A-2 shows that the variation in the volume of the reduction and the significance of the reduction as a percentage of water supply would vary for Normal-Wet years, from 154 taf to 397 taf and from 9% to 29%. In Normal-Wet years, Class I supplies generally would be unchanged. Normal-Dry. Based on data for Normal-Dry years between 1962 and 2003, estimated average annual reductions in contract water supplies could be 225 taf (Steiner 2005, see Figure A-8 ) or 239 taf (BOR 2006) , which could represent an average reduction of 22% or 23% of annual contract water supplies. The Steiner 2005 data in Table A-2 shows that the variation in the volume of the reduction and the significance of the reduction as a percentage of water supply would vary for Normal-Dry years, from 85 taf to 279 taf and from 8% to 34%. Dry. Based on data for Dry years between 1962 and 2003, estimated average annual reductions in contract water supplies for like years could be 136 taf (Steiner 2005, see Figure A-8 ) or 181 taf (BOR 2006), which could represent an average reduction of 18% or 25% of annual contract water supplies. The Steiner 2005 data in Table A-2 shows that the variation in the volume of the reduction and the significance of the reduction as a percentage of water supply would vary for Dry years, from 9 taf to 238 taf and from 2% to 33%. Critical High . There was only one Critical High year between 1962 and 2003—1976; based on the limited available data, estimated contract water supplies reductions could be 71 taf (BOR 2006) or 108 taf (Steiner 2005, see Figure A-8 ) , which could represent 12% or 17% of annual water supplies. In Critical High years, Class I water might be reduced on average by 12% to 17%. Generally no Class II water is supplied in Critical High years with or without the restoration flows called for in the Settlement. Therefore, for Critical High years, generally there is no expected reduction in Class II water resulting from the Settlement. (See Figure A-8 ). Some Critical High years without the Settlement could have § 215 water according to Steiner 2005; these § 215 deliveries generally would not be made under the Settlement. Steiner 2005 modeled 1976 to have 11 taf of § 215 water without the Settlement, and no § 215 water with the Settlement. Critical Low. No restoration releases are to be made in Critical Low years, thus there generally would be no changes to Friant Division water supplies under the Settlement (see Figures A-3 , A-4 , and A-8 ). To summarize, within each water year type, variation could exist in the quantity and percent reduction in Friant Division water supplies for different contract types (see Table A -2 and Figure A -8 ). It is unknown whether Reclamation would try to (or could) limit this annual variation. Friant Water Supplies: The Contractor-Level Picture The analysis in this section is based on data from Steiner 2005. BOR 2006 provides no estimates of the impact of the Settlement on individual long-term contractors. The longer data set available in Steiner 2005 allows the contractor-level analysis to encompass a longer period—1922 to 2003—than much of the previous section's analysis. Steiner 2005 contractor-level data are available for both Class I and Class II water. Data for §215 water at the contractor-level are not included in Steiner 2005. Therefore, unlike the previous section, the analysis in this section is limited to Class I and Class II water. As noted earlier, reductions of individual contractors' water supplies under the Settlement depend largely on the contractor's proportion of Class I to Class II contracts and the water year type, which depend on the runoff in a given year. The average reduction for Class I contract deliveries is estimated at 5%; the estimated average reduction for Class II deliveries is 27% (see Table A-3 ). The estimated average reduction for §215 deliveries is 47% (Steiner 2005). Many districts have both Class I and Class II contracts. Average annual reductions in average annual Class I and Class II water supplies are estimated at —5% for the districts with only Class I contracts, representing 46% of the contractors (i.e., 13 of the 28 districts); —6% to 15% for 36% of the districts (i.e., 10 of the 28); —16% to 20% for 11% of the districts (i.e., 3 of the 28); and —27% for the remaining 7% of districts (i.e., 2 of the 28, which are Fresno ID and Gravelley Ford WD) with only Class II contracts. (See Table A -3 .) Under the Settlement, Class I water supplies would not be reduced in Wet and most Normal-Wet years (see Figure A-8 for no Class I reduction on average); that is, 800 taf generally could be delivered to Class I contractors both currently and under the Settlement. Currently, Class I contracts often (but not always) are fully met in Normal-Dry years; with the Settlement, estimates are that Class I contracts would not be fully met in almost half (46%) of the Normal-Dry years (Steiner 2005). Currently, Class I contracts generally are not fully met in Dry, Critical High, and Critical Low years (see Figure A-7 for average Class I deliveries below 800 taf). Under the Settlement, estimates are that Class I water supplies would be lower in Normal Dry, Dry, and Critical High years. (See Figure A-8 .) The Class I deliveries in Critical Low years generally would be unchanged by the Settlement because no restoration releases are made. Under the Settlement, estimates are that Class II and §215 water supplies would be lower in Wet, Normal-Wet, and most Normal-Dry years, and somewhat lower in Dry years. (See Figure A-8 .) Class II water generally is not supplied in most Dry and all Critical High and Critical Low years (Steiner 2005); under the Settlement, this would not change. In Summary The ultimate effect of increased releases for fish restoration efforts from Millerton Lake on Friant water deliveries is difficult to predict. Using available data (which does not account for any improvements in water management that may dampen the Settlement's impact on agricultural and municipal users), it appears that annual water supplies for the Friant Division Service Area would be, on average , 15% to 16% less under the Settlement, than average supplies under current operating protocols. Although the average reduction could be 15-16%, water supply reductions could be as little as no reduction, to as high as 34% reduction in some years. For three-quarters of the Friant contractors, the reductions in Friant Division deliveries represents a reduction in one of multiple supplies. The level of reductions experienced by individual water districts would vary depending on their water service contracts. Existing data assumes Reclamation reduces "supplemental" water deliveries before first priority deliveries. These data estimate average annual reductions in the Friant Division long-term water service contract deliveries for individual Friant water districts range to vary between 5% and 27%—the low range being cutbacks to Class I contract supplies (46% of contractors) and the high range applicable to those with only Class II contract supplies (7% of contractors). All districts with supplemental Friant Division contracts (known as Class II contracts) have groundwater or other surface water supplies. It remains unclear to what extent water reductions might be offset by projects and programs implemented pursuant to the Settlement, and at what cost. It is possible that a portion of the cutbacks could be mitigated via efficiency gains, water marketing (including voluntary sales and transfers), water pricing, groundwater storage and banking, or new infrastructure development. However, the viability of further improving efficiencies in the Friant Division, securing funding, and attaining both the restoration and water management goals is uncertain and would depend on many factors. Appendix B. | Historically, Central California's San Joaquin River supported large Chinook salmon populations. Since the Bureau of Reclamation's Friant Dam on the San Joaquin River became fully operational in the 1940s, much of the river's water has been diverted for off-stream agricultural uses. As a result, approximately 60 miles of the river bed is dry in most years. Thus, the river no longer supports Chinook salmon populations in its upper reaches. In 1988, a coalition of conservation and fishing groups sued Reclamation (Natural Resources Defense Council v. Rodgers). A U.S. District Court judge has ruled that operation of Friant Dam violates state law because of its destruction of downstream fisheries. Faced with mounting legal fees, uncertainty, and the possibility of dramatic cuts to water diversions, parties negotiated a settlement instead of proceeding to trial. In September 2006, an agreement, commonly called the Settlement, was reached. It calls for new releases of water from Friant Dam to restore fisheries, as well as for efforts to mitigate reductions in off-stream deliveries lost to restoration flows. Congressional authorization and appropriations are required for full Settlement implementation. Legislation based on the Settlement (H.R. 4074, H.R. 24 and S. 27) is pending. Related bills have also been introduced. A key legislative issue is how to finance the Settlement, specifically how to resolve congressional pay-as-you-go (PAYGO) issues. Other challenges are how to achieve the Settlement's dual goals of fisheries restoration and water management, and how to address concerns of stakeholders not party to the Settlement, without disrupting the negotiated agreement. The amount of water projected for restoration flows and the volume of reduced Friant water deliveries are related, but the relationship would not necessarily be one-for-one. Available estimates for total annual Friant water supplies (including both contract and temporary water) are, on average, 15% to 16% less under the Settlement than under current operations; but such estimates do not account for improvements in water management that might reduce the impact on water users. For three-quarters of water contractors, the reduction would represent a reduction in one of their available sources of water. The impacts of such reductions will vary by contractor depending on the firmness of existing surface water supplies and the reliability of groundwater supplies. How to offset the decrease and who would pay for investments in other water sources and improved efficiency has not been determined. Although the region may benefit from increased recreational expenditures and investment in river restoration activities under the Settlement, studies suggest its largest and mostly negative economic impact would be on the agriculture industry, at least in the short term. In addition, downsteam interests not party to the Settlement have been concerned about increased flooding, groundwater infiltration, and competition with existing federal financial commitments. Nearby communities fear harm to groundwater quantity and quality. Some of these concerns have been addressed in the legislation, but some remain. On the other hand, some communities and interests believe restoration will bring other benefits to the river, such as improved surface water quality in lower San Joaquin River reaches. Ultimate Settlement costs and benefits are very difficult to predict. |
Congress has at times expressed concern regarding ballistic missile and nuclear programs in Iran, North Korea, and Syria. For decades, most in Congress have viewed these three countries with unease because these programs, coupled with the governments' strong anti-U.S. positions and their antagonism toward U.S. regional friends and allies, pose what are widely regarded as threats to U.S. national security interests. Congress has held numerous hearings and passed laws designed to slow and deter Iran, North Korea, and Syria from developing ballistic missiles and nuclear weapons. Congress has also established reporting requirements concerning these countries' missile and nuclear programs. This report focuses primarily on unclassified and declassified U.S. Intelligence Community (IC) assessments and reports over the past two decades. These assessments indicate that no public evidence exists that Iran and North Korea have engaged in nuclear-related trade or cooperation with each other, although ballistic missile technology cooperation between the two is significant and meaningful, and Syria has received ballistic missiles and related technology from North Korea and Iran and also engaged in nuclear technology cooperation with North Korea. It should be noted that nonofficial assessments, including journal articles, foreign and domestic media reports, and Internet commentaries, are not always consistent with the official assessments summarized in this report. Although such unofficial sources allege a fairly significant and persistent level of cooperation among these three countries on their ballistic missile and nuclear programs, such reports lack the credibility of official assessments because they are often unsourced or attributed to anonymous government officials, frequently at odds with each other, and unverifiable. This report begins with a description of the key elements of a nuclear weapons program. It then explains the available information regarding cooperation among Iran, North Korea, and Syria on ballistic missiles and nuclear technology. Last, the report discusses some specific issues for Congress. An effective nuclear weapons program has three major elements, each of which presents its own unique challenges. Each of these elements must work together to create an operational and effective system. 1. The program must produce fissile material in sufficient quantity and quality for a nuclear device. Plutonium and weapons-grade highly enriched uranium (HEU) are the two types of fissile material used in nuclear weapons. Plutonium is obtained by separating it from spent nuclear reactor fuel—a procedure called "reprocessing." Weapons-grade HEU is produced by enriching uranium—a process that increases the concentration of uranium-235 (the relevant fissile isotope). Both Iran and North Korea are in various stages of pursuing and producing different kinds of nuclear material. Syria does not appear to be producing fissile material. 2. The program must produce an effective and reliable means of delivering a nuclear weapon, such as a ballistic missile. Both Iran and North Korea have medium-range ballistic missiles, which have been assessed as capable of delivering a nuclear warhead should such a warhead capability be developed and deployed. Moreover, both countries have demonstrated the capability to launch an object into space orbit, but neither country currently has an intercontinental ballistic missile (ICBM) capability. Syria possesses only short-range ballistic missiles (SRBMs). 3. The program must produce a nuclear warhead that can be delivered to its intended target, especially at long range. The IC does not assess that any of the three countries discussed in this report has produced such a warhead, although North Korea has conducted several nuclear tests. Iran has developed a close working relationship with North Korea on many ballistic missile programs, starting with acquisition of Scud missiles from North Korea in the 1980s. In the mid-1980s, North Korea developed the 300-kilometer range Scud B ballistic missile "from prototypes obtained from Egypt" and subsequently began to export them. Pyongyang developed the 500-kilometer range Scud C in 1991. North Korea sold both types of missiles, as well as missile production technology, to several countries in the Middle East, including Iran and Syria. In 1992 testimony, then-Director of Central Intelligence (DCI) Robert Gates identified Iran and Syria as recipients of North Korean Scud missiles. In 1993, then-DCI R. James Woolsey provided more detail, stating that North Korea had sold Syria and Iran extended range Scud C missiles and apparently agreed to sell other forms of missile technology. A Russian intelligence report, which the U.S. IC deemed "credible," stated that Iran's missile potential during this period was confined to Scud B SRBMs received from Syria and North Korea. During the 1990s, IC annual threat assessments described several recurring trends between Iran and North Korea. First, North Korea's ongoing export of ballistic missiles provided a qualitative increase in capabilities to countries such as Iran. Second, Iran was using North Korean ballistic missile goods and services to achieve its goal of self-sufficiency in the production of medium-range ballistic missiles. Third, Iran's acquisition of missile systems or key missile-related components, including potentially significant inputs of space launch vehicle technology and support, could significantly improve Iran's ability to produce an ICBM. In the latter 2000s, the IC continued to assess that North Korean cooperation with Iran's ballistic missile programs was ongoing and significant. More recently, 2013, 2014, and 2015 Department of Defense reports to Congress on North Korea's military capabilities and proliferation activities identified Iran as a past recipient of North Korean ballistic missiles and associated technology. "Of late ... there has not been a great deal of interchange" between Iran and North Korea, Clapper told the Senate Armed Services Committee on February 9, 2016. In 2006, Iran publicly acknowledged for the first time that it had obtained missiles from North Korea during the Iran-Iraq war in the 1980s, but added that it no longer needed Pyongyang's assistance: "We received these [Scuds] from foreign countries like North Korea but 17 years after the war we were able to design all of these pieces and even their fuel," said the chief commander of the Islamic Revolutionary Guard Corps. Iran has likely exceeded North Korea's ability to develop, test, and build ballistic missiles. But Tehran may, to some extent, still rely on Pyongyang for certain materials for producing Iranian ballistic missiles, Iran's claims to the contrary notwithstanding. For example, some observers argue that Iran may not be able to produce even its Scud B and Scud C equivalents (Shahab-1 and Shahab-2, respectively) without some foreign support for key materials or components. Nevertheless, Director of National Intelligence (DNI) James Clapper stated during a February 11, 2014, Senate Armed Services Committee hearing that Iran is not currently receiving assistance with its ICBM program. Syria acquired both Scud B and Scud C missiles from North Korea, according to a 1995 CIA assessment. Damascus has also produced missiles with North Korean-supplied equipment, according to official U.S. accounts; a 1997 State Department document indicated that Syria had received missile "production technology" from North Korea and was producing "Scuds with North Korean assistance." Furthermore, a State Department report to Congress covering 2008 explained that: Over the past decade, Syria has focused on enhancing the capabilities of this [SRBM] force while also achieving self-sufficiency in indigenous missile production. With North Korean assistance, Syria has made progress toward domestic production of Scud missile variants. Syria continues to rely on North Korean and Iranian assistance for its missile programs, according to official U.S. accounts. Defense Intelligence Agency Director Michael Flynn testified on April 18, 2013, that "Syria's liquid-propellant missile program"—apparently a reference to Syria's Scud B, Scud C, and Scud D missiles—"depends on essential foreign equipment and assistance, primarily from North Korean entities." Flynn also stated that "Damascus relies on foreign help, mainly from Iran, to advance its solid-propellant rocket and missile development and production capability." According to official sources, Iran, North Korea, and Syria have engaged in various forms of clandestine nuclear cooperation possibly related to nuclear weapons. North Korea and Iran obtained designs and materials related to uranium enrichment from a clandestine procurement network run by former Pakistani nuclear official Abdul Qadeer Khan. The CIA expressed concern in 2004 that the network could also have transferred nuclear "expertise or technology" to Syria, but there appears to be no public official evidence that this potential transfer is still a matter of concern. Syrian President Bashar al Asad stated in a 2007 newspaper interview that his government had been approached by the Khan network but had conducted no transactions with it. North Korea assisted Syria with building a nuclear reactor that may have been part of a Syrian nuclear weapons program, according to U.S. official accounts. Both the United States and the International Atomic Energy Agency (IAEA) assessed that Damascus was building a nuclear reactor; Israel destroyed the facility in a September 2007 air strike. According to a May 2011 IAEA report, the agency assessed that the destroyed Syrian structure "was very likely a nuclear reactor," a claim Syria denied. The IC assessed that the reactor's purpose was to produce plutonium for nuclear weapons, a senior intelligence official stated during an April 2008 briefing, but added that the IC had "low confidence" in this judgment. According to a 2013 State Department report, the United States assessed that "the reactor's intended purpose" was to produce plutonium, rather than to conduct research or produce electricity, "because the reactor was not configured for power production, was isolated from any civilian population, and was ill-suited for research." Syria was constructing the reactor with "North Korean assistance," the same 2013 report said. A senior U.S. intelligence official stated during the 2008 briefing that "North Korea has assisted Syria with this reactor," citing similarities between the Syrian reactor and the North Korean reactor that has produced plutonium for that country's nuclear weapons program. The official also cited the "involvement of nuclear-related North Koreans in a project somewhere in the area," as well as "evidence of cargo being transferred from North Korea, most likely to [the] reactor site, in 2006." More recently, 2014 and 2015 Defense Department reports stated that North Korea "provided Syria with nuclear reactor technology until 2007." It is worth noting that an IAEA investigation discovered Syrian uranium conversion activities that the government had failed to declare to the IAEA. Uranium conversion is the process by which uranium hexafluoride (the feedstock for centrifuges) is produced. However, the IAEA has apparently resolved its concerns regarding these activities. Secretary of Defense Ashton Carter stated during an April 2015 interview that North Korea and Iran "could be" cooperating to develop a nuclear weapon. Moreover, U.S. intelligence officials have expressed concern that North Korea might export its nuclear technology or fissile material. According to testimony from DNI Clapper before Congress in February 2012, North Korea's export of "ballistic missiles and associated materials," as well as its assistance to Syria's nuclear reactor, "illustrate the reach of the North's proliferation activities." The IC "remain[s] alert to the possibility that North Korea might again export nuclear technology," he added. North Korea's nuclear weapons program has been based on plutonium produced in a nuclear reactor located at Yongbyon. North Korea also has a gas centrifuge uranium enrichment program. North Korea tested nuclear explosive devices in October 2006, May 2009, February 2013, and January 2016. The first device contained plutonium; whether the others contained plutonium or HEU is still unclear. Iran has a gas centrifuge uranium enrichment program and is building a heavy-water moderated nuclear reactor. However, the reactor program is a lesser proliferation concern because Iran does not have a reprocessing facility, which, as noted, is required to produce plutonium for weapons. A November 2007 National Intelligence Estimate assessed that Iran "halted its nuclear weapons program" in 2003. The estimate, however, also assessed that Tehran is "keeping open the option to develop nuclear weapons." The intelligence community has reaffirmed this conclusion on several occasions. Then-DNI Dennis Blair discussed in 2009 the circumstances under which North Korea might transfer nuclear weapons or fissile material: Pyongyang is less likely to risk selling nuclear weapons or weapons-quantities of fissile material than nuclear technology or less sensitive equipment to other countries or non-state actors, in part because it needs its limited fissile material for its own deterrent. Pyongyang probably also perceives that it would risk a regime-ending military confrontation with the United States if the nuclear material was used by another country or group in a nuclear strike or terrorist attacks and the United States could trace the material back to North Korea. It is possible, however, that the North might find a nuclear weapons or fissile material transfer more appealing if its own stockpile grows larger and/or it faces an extreme economic crisis where the potentially huge revenue from such a sale could help the country survive. Nuclear-related cooperation could also include sharing technology related to nuclear weapons material production, or data from nuclear or explosive testing. Some analysts have argued that both Pyongyang and Tehran could benefit if the former were to provide nuclear test data to the latter in exchange for Iranian information about enrichment, missile, or other nuclear-related expertise. Iran could also pay for North Korean nuclear assistance with currency or petroleum. Some press reports have pointed to alleged instances of nuclear-related cooperation, such as the possibility of Iranian officials witnessing North Korean nuclear tests. However, this information remains speculative and unconfirmed by official sources. Furthermore, U.S. intelligence assessments have not mentioned nuclear cooperation between the two countries, even though such assessments have described cooperation on ballistic missiles. For example, although the 2013, 2014, and 2015 Defense Department reports did, as noted, describe North Korean nuclear assistance to Libya, they did not indicate that North Korea had provided or received nuclear assistance to or from Iran. Moreover, U.S. officials have stated publicly that there is no nuclear cooperation between Iran and North Korea. During a February 27, 2007, Senate Armed Services Committee hearing, U.S. officials stated that there is "no evidence" that Iran and North Korea are cooperating to develop nuclear capabilities. Furthermore, senior U.S. intelligence officials stated during an April 24, 2008, background briefing that the two countries are not cooperating on "nuclear issues." More recently, Assistant Secretary of State Thomas Countryman indicated in June 2013 that North Korea and Iran were not engaged in nuclear cooperation, but added that "it's a valid reason to be concerned and we keep an eye on it." Similarly, when asked during a February 20, 2014, press briefing about nuclear cooperation between Iran and North Korea, a senior Administration official responded only by noting that the United States "is always concerned about reports of shared technology and proliferation of technology and of nuclear weapons technology." Lastly, knowledgeable current and former U.S. officials contacted by CRS said that they were unaware of official unclassified U.S. government evidence of nuclear cooperation between Iran and North Korea. In a September 2014 interview, Iran's ambassador to South Korea denied that Tehran and Pyongyang had cooperated on nuclear weapons. The two countries may not have recently engaged in nuclear cooperation because Iran has, according to the IC, apparently halted its nuclear weapons program. Furthermore, the extent to which Iran and North Korea could benefit from nuclear-related cooperation is uncertain. Although some analysts have argued that Pyongyang could provide nuclear test data to Tehran, the extent to which Iran could benefit from such data is unclear. North Korea's nuclear weapons program to date has apparently been based on plutonium; Iran would most likely use weapons-grade HEU, rather than plutonium, as fissile material in nuclear weapons, at least in the short term. Although Tehran could provide Pyongyang with access to Iran's enrichment technology, such access would be of limited benefit to North Korea because North Korea's centrifuge appears to differ from the two types of centrifuges that Iran has installed. It is also possible that, rather than collaborating, the two countries may be competing with each other in their efforts to circumvent international sanctions by obtaining dual-use technologies from the same supply networks, particularly via trading companies in China. Both Tehran and Pyongyang remain dependent on foreign suppliers for their nuclear program, and some components may be in demand by both countries. The Institute for Science and International Security has concluded from examining procurement data that both countries have well-established supply chains in China, but North Korea is able to secure shipments with greater ease than is Iran. The two countries may be reluctant to export components to one another that they themselves have difficulty procuring. Moreover, involved Chinese trading companies would have a financial interest in maintaining business with both Iran and North Korea. Congress has passed legislation providing for sanctions on countries whose entities assist Iran, North Korea, and Syria to obtain weapons of mass destruction (WMD) and missile delivery systems. For example, the Iran, North Korea and Syria Nonproliferation Act (INKSNA, P.L. 106-178 ) imposes penalties on countries whose companies assist the efforts of Iran, North Korea, and Syria to acquire WMD and missile delivery systems. Congress originally targeted only Iran's proliferation activities, but amended the law in 2005 to address Syria ( P.L. 109-112 , the Iran Nonproliferation Amendments Act). In 2006, Congress added North Korea ( P.L. 109-353 ). INKSNA requires a biannual report from the President to Congress on any transfers of controlled items from any foreign person to Iran, North Korea, or Syria. INKSNA and other sanctions laws are aimed at discouraging foreign entities from assisting any WMD and missile programs of these three countries. Congress also authorizes U.S. nonproliferation programs, such as export control assistance, that are meant to bolster the ability of other countries to detect and interdict such transfers. In addition, U.N. sanctions on Iran and North Korea prohibit the transfer of nuclear or ballistic missile technology to them. It is also worth noting that international export control regimes, such as the Nuclear Suppliers Group and Missile Technology Control Regime, restrict the transfer of nuclear and missile technologies. Congress may wish to consider requiring additional reporting from the executive branch on WMD proliferation. The number of unclassified reports to Congress on WMD-related issues has decreased considerably in recent years. Most recently, Section 310 of the Intelligence Authorization Act for Fiscal Year 2013 ( P.L. 112-277 ) repealed the requirement for the IC to provide an unclassified annual report to Congress regarding the "Acquisition of Technology Relating to Weapons of Mass Destruction and Advanced Conventional Munitions." The report had been required by Section 721 of the Intelligence Authorization Act for Fiscal Year 1997 ( P.L. 104-293 ). Congress also may wish to consider requesting information from the executive branch, through hearings or reports, regarding the extent to which entities in countries other than Iran, North Korea, and Syria aid those three countries' unconventional weapons programs. | Congress has at times expressed concern regarding ballistic missile and nuclear programs in Iran, North Korea, and Syria. This report focuses primarily on unclassified and declassified U.S. Intelligence Community (IC) assessments over the past two decades. These assessments indicate that there is no evidence that Iran and North Korea have engaged in nuclear-related trade or cooperation with each other, although ballistic missile technology cooperation between the two is significant and meaningful, and Syria has received ballistic missiles and related technology from North Korea and Iran and also engaged in nuclear technology cooperation with North Korea. All three countries discussed in this report have short-range ballistic missiles. Iran and North Korea also have medium-range ballistic missiles; North Korea has intermediate-range ballistic missiles as well. North Korea has tested nuclear weapons on three occasions; Iran and Syria's nuclear programs have raised suspicions that those countries are pursuing nuclear weapons. However, Iran has, according to the IC, halted its nuclear weapons program, and Syria does not appear to have an active nuclear weapons program. Congress has held numerous hearings regarding these countries' nuclear and missile programs. It has also passed legislation providing for sanctions on countries whose entities assist Iran, North Korea, and Syria to obtain weapons of mass destruction (WMD) and missile delivery systems. For example, the Iran, North Korea and Syria Nonproliferation Act (INKSNA, P.L. 106-178) imposes penalties on countries whose companies' exports assist the efforts of Iran, North Korea, and Syria to acquire WMD and missile delivery systems. Congress has also established reporting requirements concerning these countries' missile and nuclear programs. Congress may wish to consider requiring additional reporting from the executive branch on WMD proliferation because the number of unclassified reports to Congress on WMD-related issues has decreased considerably in recent years. This report describes the key elements of a nuclear weapons program; explains the available information regarding cooperation among Iran, North Korea, and Syria on ballistic missiles and nuclear technology; and discusses some specific issues for Congress. |
T his report contains two main parts: a section describing recent events and a longer background section on key elements of the U.S.-Japan relationship. Shinzo Abe has been Japan's prime minister since December 2012, and in 2017 he succeeded in extending the LDP's term-limit rules for party president from two consecutive three-year terms to three consecutive terms. In September 2018, Abe's Liberal Democratic Party (LDP) held an internal party leadership vote in which Abe defeated former Defense Minister Shigeru Ishiba, securing a three-year term as party president. With the LDP and its coalition partner, the much smaller Komeito party, firmly in control of Japan's legislature, Abe's victory in the LDP leadership contest means that he will continue serving as premier. If Abe remains in power beyond November 2019, he will become the longest-serving prime minister in the history of modern Japan. Shortly after his victory, Abe appointed a new Cabinet, retaining the members in charge of foreign affairs and U.S. relations, a likely indication of continuity in Japanese foreign and trade policy. Abe's new Cabinet includes one woman, down from two, despite Abe's campaign to increase women's representation in government and participation in the workforce. (See " Emphasis on "Womenomics" '" section below.) Abe's next electoral test will come in July 2019, when half the seats of Japan's Upper House of the bicameral legislature (called the Diet) will be chosen. In a reflection of the disarray of Japan's opposition parties, the LDP's approval ratings in most early October 2018 polls were between 40% and 50%, while none of Japan's other parties received more than 10% support. The September 2018 LDP vote exposed a gap between the LDP's Diet members, over 80% of whom voted for Abe, and the LDP's rank-and-file members, over 55% of whom voted for Abe's opponent, Ishiba. (For background on Japanese politics, see the " Japanese Politics " section.) At the outset of the Trump presidency, a shared approach to confronting the North Korean threat appeared to cement the U.S.-Japan relationship. Beginning at their first summit in Mar-a-Lago in February 2017, Abe and Trump presented a united front on dealing with Pyongyang's nuclear weapon test and multiple missile launches. The two leaders met multiple times and spoke often by phone, and Abe wholeheartedly endorsed the Trump Administration's "maximum pressure" strategy. Since the beginning of 2018, Trump has pursued a rapprochement with Pyongyang and held a friendly summit with North Korean leader Kim Jong-un. Many Japanese are unconvinced that North Korea will give up its nuclear weapons or missiles and fear that Tokyo's interests vis-à-vis Pyongyang will be marginalized if U.S.-North Korea relations continue to warm. Chief among those issues are the abduction of Japanese citizens by North Korean agents in the 1970s and 1980s, an issue on which Abe built his political career. Abe has said he would be willing to meet with Kim to resolve the abduction issue but analysts doubt that Kim has reason to conciliate Abe given his newfound stature in international diplomacy. Trump's shift on North Korea—including his decision to suspend U.S.-South Korean military exercises to obtain greater concessions from Pyongyang—and his statements critical of the value of alliances generally and Japan specifically have increased questions among Japanese policymakers about the depth and durability of the U.S. commitment to Japan's security. U.S. trade policy under the Trump Administration has focused partly on reducing U.S. bilateral trade deficits. This has strained U.S. trade relations with Japan, which accounted for $70 billion or 9% of the total U.S. goods trade deficit in 2017, with a deficit in auto trade alone of over $50 billion. As part of its focus on reducing the trade deficit and encouraging domestic manufacturing, among other rationales, the Administration has proclaimed increased tariffs and other import restrictions under rarely used U.S. trade laws. In addition to raising concerns over potential economic costs in the United States, these tariff actions have heightened tensions with U.S. trading partners. Japan, given its longstanding close alliance with the United States, has taken particular issue with the steel and aluminum tariffs imposed under Section 232 of the Trade Act of 1962, which are based on an investigation into the potential threat to national security posed by the imports. An ongoing Section 232 investigation on motor vehicles may pose a larger threat to the Japanese economy. U.S. imports of Japanese autos and parts were nearly $56 billion, about one-third of total U.S. imports from Japan in 2017. On September 26, 2018, the United States and Japan announced their intent to start new formal bilateral trade negotiations. On October 16, the United States Trade Representative (USTR) gave Congress official notification to that effect, allowing negotiations to start under Trade Promotion Authority (TPA) procedures after 90 days. Japan was reluctant to agree to such negotiations, but likely saw the talks as a way to avoid the possible increased U.S. motor vehicle tariffs. As it did in talks with the EU, the Trump Administration has agreed not to impose new tariffs while bilateral negotiations remain ongoing. The agreement may be negotiated in stages and be less comprehensive than a typical U.S. free trade agreement (FTA), though the scope of talks is unclear. Instead of bilateral talks, Japan had urged the Trump Administration to return to the regional Trans-Pacific Partnership (TPP). After the U.S. withdrawal from TPP in 2017, Japan took the lead in negotiating revisions to the agreement among the remaining 11 members, suspending certain commitments largely sought by the United States. The new deal, called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or TPP-11, was signed in July 2018 and requires ratification by six participants to take effect. Australia, Japan, Mexico, and Singapore have ratified the agreement to date, and Canada's parliament is in the final stages of ratification. Despite an ongoing territorial dispute in the East China Sea, Japan and China appear to be seeking stability in their bilateral relationship, a trend that has accelerated in the past several months. Abe is scheduled to visit Beijing in late October, the first dedicated leaders' summit between the two countries since 2011. On the agenda is deepening economic cooperation and increasing people-to-people exchanges. The emphasis on economic issues has emerged as the two sides have sought to manage tensions in the security realm. In May 2018, Tokyo and Beijing established a hotline for senior defense officials to avoid an unintended escalation in the event of a crisis over maritime disputes in the East China Sea. (See " Territorial Dispute with China in the East China Sea " for more background.) Abe's government has reversed its initial opposition to China's Belt and Road Initiative, which calls for building infrastructure projects in various regions around the world, saying that under the proper conditions it will cooperate with Beijing in providing infrastructure development. Some analysts posit that the mutual interest in improving relations may be driven by both countries' trade friction with the United States and more general sense of uncertainty about the durability of U.S. presence in the region. Although deep-seated historical distrust and regional rivalry are likely to endure in the long-run, relations appear to be on the upswing. Japan's relations with South Korea remain precarious despite a rapprochement in 2016. Koreans hold strong grievances about Japan's colonial rule over the peninsula (1910-1945), particularly on the issue of Korean comfort women who were forced to provide sex to Japanese soldiers in the World War II era. (See " Japan's Ties with South Korea " section.) After South Korea's progressive president, Moon Jae-in, was elected in May 2017, Seoul said it would uphold a U.S.-supported 2015 agreement on how to resolve the comfort women issue, but public mistrust suggests that it will remain a diplomatic irritant. Moon also has continued to participate in a 2016 ROK-Japan military intelligence-sharing agreement, which the United States helped to broker, but trilateral defense cooperation has flagged. Even when official relations are steady, historical grievances are just beneath the surface and can flare unexpectedly. In early October 2018, the Japanese Maritime Self Defense Force pulled out of an international fleet review in South Korea after the hosts asked Japan to refrain from hoisting its ensign, which is identical to Japan's pre-World War II imperial "rising sun" flag. In addition, Moon has suggested that his government plans to shut down the foundation established to oversee compensating comfort women after the 2015 agreement was signed, likely in response to public opinion that is critical of the arrangement. Recently, Abe has emphasized publicly that he wants to improve ties with South Korea, possibly reflecting the central role that Seoul has taken in driving international diplomacy with North Korea. The warming of relations between North and South Korea since early 2018 presents additional challenges to the relationship between the two U.S. allies. The North Korean threat has traditionally driven closer U.S.-Japan-South Korea trilateral coordination, and North Korea's consistent provocations in the past have provided both the motivation and the political room for South Korea and Japan to expand security cooperation. Japan is wary of Seoul's outreach to North Korea and Pyongyang's "smile diplomacy," however, particularly if it is not accompanied by significant tangible reductions in North Korean nuclear and missile capabilities. Although candidate Donald Trump made statements critical of Japan during his campaign, relations have remained strong on the surface throughout several visits and leaders' meetings. After Trump's victory, Abe was the first foreign leader to visit the President-Elect, and the second leader to visit the White House after the U.S. inauguration. Abe and Trump displayed a strong personal rapport and issued a joint statement that echoed many of the previous tenets of the bilateral alliance. However, Trump's long-standing wariness of Japan's trade practices and skepticism of the value of U.S. alliances abroad may have unnerved Tokyo. With Abe's political position ensured, he has looked to hedge against Japan's strong dependency on the United States by championing regional trade deals, stabilizing relations with China, and reaching out to other partners such as Russia, India, Australia, and the European Union. Japan remains committed to the alliance with the United States, and security cooperation at the working level continues to be robust. In some ways, U.S. pressure to provide more in the security realm may boost Abe's efforts aimed at increasing the flexibility and capabilities of Japan's military. The Japanese public remains somewhat wary of moving away from a strictly self-defense armed force, as well as of altering Japan's constitution to allow for more offensive capabilities. As a baseline, the Trump Administration has reaffirmed several key statements seen as crucial to Japan. Tokyo was likely reassured by the joint statement from the leaders' first summit, in February 2017. The United States provided a three-fold affirmation on the Senkaku Islands (the small islands are also claimed by China and Taiwan, and known as Diaoyu and Diaoyutai, respectively): recognizing Japanese administration of the islands, stating that Article 5 of the mutual defense treaty applies to the islands, and stating that it opposed "any unilateral action that seeks to undermine" Japan's administration of the islands. The Secretaries of State and Defense further affirmed the United States' "steadfast commitment" to Japan, and President Trump called the alliance "the cornerstone of peace and stability in the Pacific region." Some analysts have expressed concern about the differences in approach to global issues between the Trump Administration and Tokyo. Internationally, the two countries traditionally have cooperated on scores of multilateral issues, from nuclear nonproliferation to climate change to pandemics. Japan is a firm supporter of the United Nations as a forum for dealing with international disputes and concerns. In the past Japan and the United States have worked closely in fora such as the East Asia Summit and the Association of Southeast Asian Nations (ASEAN) Regional Forum. The shared sense of working together to forge a rules- and norms-based international order has long been a key component of the bilateral relationship. The Trump Administration, however, has expressed skepticism of multilateral organizations. To cite one example, several Japanese cabinet members expressed disappointment in the Trump Administration's decision to withdraw from the Paris climate accord. Additionally, under the President's "America First" approach, a shift away from the United States' role as the guarantor of regional stability raises broader questions for Japan and other countries in the region about the durability of the alliance. If Japan perceives the United States is moving away from its traditional security role, many experts believe Japan may decide to form other partnerships with like-minded countries and adjust its foreign policy to allow more flexibility to independently pursue its own national interests. If Abe remains in office through November 2019, as expected, he will become the longest-serving prime minister in post-war Japan. After his first stint as premier in 2006-2007, Abe led the conservative LDP back into power in late 2012 following a six-year period in which six different prime ministers served. Since then, he appears to have stabilized Japanese politics and emphasized strong defense ties with the United States. Under Abe's leadership, the government increased the defense budget after a decade of decline, passed a set of controversial bills that are reforming Japanese security policies, and won approval from a previous Okinawan governor for the construction of a new U.S. Marine Corps base on Okinawa. Abe also led Japan into the TPP FTA negotiations and has attempted to revitalize Japan's economy, including seeking a number of economic reforms favored by many in the United States. Historical issues have long colored Japan's relationships with its neighbors, particularly China and South Korea, which argue that the Japanese government has neither sufficiently "atoned" for nor adequately compensated them for Japan's occupation and belligerence in the first half of the 20 th century. Abe's selections for his cabinet posts over the years include a number of politicians known for advocating nationalist, and in some cases ultra-nationalist, views that many argue appear to glorify Imperial Japan's actions. Some of Abe's positions—such as changing the interpretation of Japan's constitution to allow for Japanese participation in collective self-defense—largely have been welcomed by U.S. officials eager to advance military cooperation. Other statements, however, suggest that Abe embraces a revisionist view of Japanese history that rejects the narrative of Imperial Japanese aggression and victimization of other Asians. He has been associated with groups arguing that Japan has been unjustly criticized for its behavior as a colonial and wartime power. Among the positions advocated by these groups, such as Nippon Kaigi Kyokai , are that Japan should be applauded for liberating much of East Asia from Western colonial powers, that the 1946-1948 Tokyo War Crimes tribunals were illegitimate, and that the killings by Imperial Japanese troops during the 1937 "Nanjing massacre" were exaggerated or fabricated. In December 2013, Abe paid a highly publicized visit to Yasukuni Shrine, a shrine that was established to house the "spirits" of Japanese soldiers who died during war, but also includes 14 individuals who were convicted as Class A war criminals after World War II. The U.S. Embassy in Tokyo directly criticized the move, releasing a statement that said, "The United States is disappointed that Japan's leadership has taken an action that will exacerbate tensions with Japan's neighbors." Since then, despite the U.S. statement, sizeable numbers of LDP lawmakers have periodically visited the Shrine on ceremonial days, including the sensitive date of August 15, the anniversary of Japan's surrender in World War II. Abe has refrained from visiting since 2013, although LDP lawmakers and cabinet ministers have periodically paid respects at the shrine. Since 2013, Abe himself has largely avoided language and actions that could upset regional relations. After some waffling on key government statements made by past Japanese leaders—chief among them the 1995 "Murayama Statement" that apologized for Japan's wartime action and the 1993 "Kono Statement" that apologized to the "comfort women" (see the "Japan and the Korean Peninsula" section below)—Abe reaffirmed the official government expressions of remorse after pressure from many forces, including U.S. government officials and Members of Congress. Abe appears to have responded to criticism that his handling of these controversial issues could be damaging to Japan's and—to some extent—the United States' national interests. Japan and China have engaged in a diplomatic and at times physical struggle over a group of uninhabited land features in the East China Sea known as the Senkaku Islands in Japan, Diaoyu in China, and Diaoyutai in Taiwan. The territory, administered by Japan but also claimed by China and Taiwan, has been a subject of contention for years, despite modest attempts by Tokyo and Beijing to jointly develop the potentially rich energy deposits nearby, most recently in 2008-2010. China and Japan also dispute maritime rights in the East China Sea more broadly, with Japan arguing for a "median line" equidistant from each country's claimed territorial border dividing the two countries' exclusive economic zones in the East China Sea; China rejects Japan's claimed median line, arguing it has maritime rights beyond this line. The Senkakus dispute has been in a state of varying tension since 2010, when the Japan Coast Guard arrested and detained the captain of a Chinese fishing vessel after it collided with two Japan Coast Guard ships near the Senkakus. The incident resulted in a diplomatic standoff, with Beijing suspending high-level exchanges and restricting exports of rare earth elements to Japan. In August 2012, the Japanese government purchased three of the five land features from a private landowner in order to preempt their sale to Tokyo's nationalist governor at the time, Shintaro Ishihara. Claiming that this act amounted to "nationalization" and thus violated the tenuous status quo, Beijing issued sharp objections. Chinese citizens held massive anti-Japan protests, and the resulting tensions led to a drop in Sino-Japanese trade. In April 2013, the Chinese Ministry of Foreign Affairs said for the first time that China considered the islands a "core interest," indicating to many analysts that Beijing was unlikely to make concessions on this sensitive sovereignty issue. Starting in the fall of 2012, China began regularly deploying maritime law enforcement ships near the islands and stepped up what it called "routine" patrols to assert jurisdiction in "China's territorial waters." In 2013, near-daily encounters occasionally escalated: both countries scrambled fighter jets, and, according to the Japanese government, a Chinese navy ship locked its fire-control radar on a Japanese destroyer and helicopter on two separate occasions. The number of Chinese vessels entering the territorial seas surrounding the islands decreased to a steady level of 7-10 vessels per month in 2014 and 2015, spiked to over 20 in August of 2016, before shifting to the 8-12 vessels per month range for most of the January-August 2017 period and decreasing again to 6-8 vessels per month in the first eight months of 2018. Most of these patrols are conducted by the China Coast Guard, which has been instrumental in advancing China's interests in disputed waters in the East and South China Seas. In 2016, for example, several China Coast Guard vessels escorted between 200 and 300 Chinese fishing vessels to waters near the Senkakus in an apparent demonstration of Chinese sovereignty. China-Japan tensions have played out in the airspace above and around the Senkakus as well. Chinese aircraft activity in the area contributed to an eightfold increase in the number of scramble takeoffs by Japan Air Self Defense Force aircraft between Fiscal Year 2010 (96 scrambles) and 2016 (842 scrambles); the number of scrambles decreased somewhat to 602 in 2017, and there were 278 in the first half of 2018. In November 2013, China abruptly established an air defense identification zone (ADIZ) in the East China Sea covering the Senkakus as well as airspace that overlaps with the existing ADIZs of Japan, South Korea, and Taiwan. China's announcement of the ADIZ produced indignation and anxiety in the region and in Washington for several reasons: the ADIZ represented a new step to pressure—to coerce, some experts argue—Japan's conciliation in the territorial dispute over the islets; the requirements for flight notification in China's proclaimed ADIZ go beyond international norms and impinge on the freedom of navigation; and the overlap of ADIZs could lead to accidents or unintended clashes, thus raising the risk of conflict in the East China Sea. Tensions have subsided somewhat after peaking in 2016, with Beijing and Tokyo seemingly committed to preventing a crisis or armed clash over the Senkakus. For example, in May 2018, China and Japan announced the establishment of a "hotline" for senior defense officials from both countries to communicate and deescalate in the event of a maritime clash. In addition, Chinese authorities in August 2018 reportedly banned Chinese fishermen from operating near the Senkakus. Efforts by both countries to defend their claims have played out primarily in the "gray zone," or the ambiguous space between peace and conflict, with non-military actors like coast guards, fishermen, and China's maritime militia on the front lines. China's approach to the dispute (as well as its disputes in the South China Sea) appears to be aimed at exploiting the gray zone to gradually consolidate its control and influence over contested space without escalating to armed conflict. In response, Japan has prioritized enhancing its ability to counter gray zone activities, in addition to strengthening its traditional military capabilities. Japan's administration of the Senkakus is the basis of the U.S. treaty commitment to defend that territory. U.S. administrations going back at least to the Nixon Administration have stated that the United States takes no position on the territorial disputes. However, it also has been U.S. policy since 1972 that the 1960 U.S.-Japan Security Treaty covers the Senkakus, because Article 5 of the treaty stipulates that the United States is bound to protect "the territories under the Administration of Japan," and Japan administers the Senkakus. In its own attempt to address this perceived gap, Congress inserted in the FY2013 National Defense Authorization Act ( H.R. 4310 , P.L. 112-239 ) a resolution stating, among other items, that "the unilateral action of a third party will not affect the United States' acknowledgment of the administration of Japan over the Senkaku Islands." The conflict in the East China Sea in many ways embodies Japan's security challenges. The maritime confrontation with Beijing is a concrete manifestation of the threat Japan has faced for years from China's rising regional power. It also brings into relief Japan's dependence on the U.S. security guarantee and its anxiety that Washington will not defend Japanese territory if Japan goes to war with China, particularly over a group of uninhabited land features. In contrast to Japan's and China's inability to reach an agreement on sharing undersea resources in the disputed area, in April 2013 Japan and Taiwan agreed to jointly share and administer the fishing resources in their overlapping claimed EEZs Senkakus (Diaoyu/Diaoyutai). The agreement, which had been discussed for 17 years, addressed neither the two sides' conflicting sovereignty claims, nor the question of fishing rights in the islands' territorial waters. On July 29, 2013, the Senate passed S.Res. 167 , which described the pact as a "model for other such agreements." In the 21 st century, Japan's relationship with South Korea has fluctuated between troubled and tentatively cooperative, depending on external circumstances and the leaders in power. Washington has generally encouraged closer ties between Tokyo and Seoul as two of its most important alliance partners; the two countries have shared security concerns, developed economies, and a commitment to open markets, international rules and norms, and regional stability. A poor relationship between Seoul and Tokyo jeopardizes U.S. interests by complicating trilateral cooperation on North Korea policy and on responding to China's rise. Tense relations also complicate Japan's desire to expand its military and diplomatic influence as well as the potential creation of an integrated U.S.-Japan-South Korea ballistic missile defense system. The North Korean threat has traditionally driven closer trilateral coordination, even when Tokyo and Seoul have faced political tension. Under North Korean leader Kim Jong-un, North Korea's consistent provocations from 2011 to 2017 provided both the motivation and the political room for South Korea and Japan to forge more cooperative stances, despite lingering mutual distrust. For example, in late June 2016, the three countries held their first joint military training exercise with Aegis ships that focused on tracking North Korean missile launches by sharing intelligence. The persistent Japan-Korea discord centers on historical issues. Officials in Japan have referred to rising "Korea fatigue" among their public and expressed frustration that for years South Korean leaders have not recognized and in some cases have rejected the efforts Japan has made to acknowledge and apologize for Imperial Japan's actions during the 35 years following its annexation of the Korean Peninsula in 1910. In addition to the comfort women issue (see below), the perennial issues of how Japan's behavior before and during World War II is depicted in Japanese school textbooks and a territorial dispute between Japan and South Korea continue to periodically rile relations. A group of small islands in the Sea of Japan, known as Dokdo in Korean and Takeshima in Japanese (the U.S. government refers to them as the Liancourt Rocks), are administered by South Korea but claimed by Japan. Japanese statements about the claim in defense documents or by local prefectures routinely spark official criticism and public outcry in South Korea. Similarly, Seoul expresses disapproval of some of the history textbooks approved by Japan's Ministry of Education that South Koreans claim diminish or whitewash Japan's colonial-era atrocities. The most prominent stumbling block to better Japan-South Korean relations involves the "comfort women," a literal translation of the Japanese euphemism referring to women who were forced to provide sexual services for Japanese soldiers during the imperial military's conquest and colonization of several Asian countries in the 1930s and 1940s. The long-standing controversy became more heated under Abe's leadership. In the past, Abe supported the claims made by many conservatives in Japan that the women were not directly coerced into service by the Japanese military. In 2015, Abe and then-President Park Geun-hye of South Korea concluded an agreement that included a new apology from Abe and the provision of 1 billion yen (about $8.3 million) from the Japanese government to a new Korean foundation that supports surviving victims. The two governments' foreign ministers agreed that this long-standing bilateral rift would be "finally and irreversibly resolved" pending the Japanese government's implementation of the agreement. Although the main elements of the agreement appeared to be implemented in 2016, the deal remains deeply unpopular with the South Korea public. The issue continues to be an irritant in bilateral relations: Japan objects to a comfort woman statue that stands in front of the Japanese Embassy in Seoul, and in 2018 Seoul suggested it would disband the foundation established by the agreement. The issue of the so-called comfort women has gained visibility in the United States, due in part to Korean-American activist groups. These groups have pressed successfully for the erection of monuments in California and New Jersey commemorating the victims, passage of a resolution on the issue by the New York State Senate, the naming of a city street in the New York City borough of Queens in honor of the victims, and approval to erect a memorial to the comfort women in San Francisco. In 2007, U.S. House of Representatives passed H.Res. 121 (110 th Congress), calling on the Japanese government to "formally acknowledge, apologize, and accept historical responsibility in ... an unequivocal manner" for forcing young women into military prostitution. Since 2009, Washington and Tokyo have been largely united in their approach to North Korea, driven by Pyongyang's string of missile launches and nuclear tests. In February 2017, North Korea launched the first of many missiles of that year during Abe's summit with Trump, setting the stage for the two leaders to bond over the North Korean threat. Japan has employed a hardline policy toward North Korea, including a virtual embargo on all bilateral trade and vocal leadership at the United Nations to punish Pyongyang for its human rights abuses and military provocations. When the Six-Party Talks were active, Japan was considered a key actor in a possible resolution of problems on the Korean peninsula, but the multilateral format has been dormant since 2009 and appears to be all but abandoned. Japan is directly threatened by North Korea given the demonstrated capability of Pyongyang's medium-range missiles; in 2017, North Korea twice tested missiles that flew over Japanese territory. North Korea has long-standing animosity toward Japan for its colonialism of the Korean peninsula in the early 20 th century. In addition, U.S. bases in Japan could be targeted by the North Koreans in any military contingency. Aside from these direct security concerns, Japan has prioritized the long-standing issue of Japanese citizens kidnapped by North Korean agents decades ago. In 2002, then-North Korean leader Kim Jong-il admitted to the abductions and returned five survivors, claiming the others had perished from natural causes. Japan officially identifies 17 individuals as abductees. Abe, then serving as Chief Cabinet Secretary to then-Prime Minister Junichiro Koizumi, has since been a passionate champion for the abductees' families and pledged as a leader to bring home all surviving Japanese. President Trump mentioned the abductee issue during his 2017 U.N. General Assembly address, and said that he also raised the issue with Kim Jong-un during the Singapore Summit in 2018. The Abe Administration's foreign policy has displayed elements of both power politics and an emphasis on democratic values, international laws, and norms. Shortly after returning to office in 2012, Abe released an article outlining his foreign and security policy strategy titled "Asia's Democratic Security Diamond," which described how the democracies of Japan, Australia, India, and the United States could cooperate to deter Chinese aggression on its maritime periphery. In Abe's first year in office, Japan held numerous high-level meetings with Asian countries to bolster relations and, in many cases, to enhance security ties. Abe had summit meetings in India, Russia, Great Britain, all 10 countries in the Association of Southeast Asian Nations (ASEAN), and several countries in the Middle East and Africa. Japan has particularly focused on issues of freedom of navigation in the South China Sea, in part because of the implications for Japan's trade flows and for the East China Sea dispute. Since 2012, even before Abe came into office, Japan had been working to strengthen the maritime capabilities of Southeast Asian countries such as Vietnam and the Philippines, and Abe has accelerated these efforts, which the Obama Administration supported as part of its "Asia Rebalance" strategy. This energetic diplomacy indicates a desire to balance China's growing influence with a loose coalition of Asia-Pacific powers, but this strategy of realpolitik is couched in the rhetoric of international laws and democratic values. Abe's international outreach has yielded positive results, according to many observers. Despite a failed submarine deal, bilateral ties with Australia are robust. Abe's highly publicized July 2014 visit to Canberra yielded new economic and security arrangements, including an agreement to transfer defense equipment and technology. Japan-India ties have blossomed under Abe and Prime Minister Narendra Modi, including expanded military exercises and negotiations on defense export agreements. Even as cracks have appeared in the U.S.-Philippines alliance, Abe has made efforts to maintain Japan-Philippines defense relations. Part of Abe's international diplomacy push has been to reach out to Russia. Japan and the Soviet Union never signed a peace treaty following World War II due to a territorial dispute over four islands north of Hokkaido in the Kuril Chain. The islands are known in Japan as the Northern Territories and were seized by the Soviets in the waning days of the war. Both Japan and Russia face security challenges from China and may be seeking a partnership to counter Beijing's economic and military power. Particularly in the past several years, however, China and Russia have developed closer relations and cooperate in multiple areas. Tokyo's ambitious plans to revitalize relations with Moscow, including resolution of the disputed islands, however, do not appear to have made progress. Russia's aggression in Ukraine in 2014 disrupted the improving relationship. Tokyo signed on to the subsequent G7 statement condemning Russia's action and implemented sanctions and asset freezes. Japan attempted to salvage the potential breakthrough by imposing only relatively mild sanctions despite pressure from the United States and other Western powers. With many countries in the West isolating Moscow, Russia and China appear to have grown closer. For decades, U.S. soldiers who were held captive by Imperial Japan during World War II have sought official apologies from the Japanese government for their treatment. A number of Members of Congress have supported these campaigns. The brutal conditions of Japanese POW camps have been widely documented. In May 2009, the Japanese Ambassador to the United States attended the last convention of the American Defenders of Bataan and Corregidor to deliver a cabinet-approved apology for their suffering and abuse. In 2010, with the support and encouragement of the Obama Administration, the Japanese government financed a Japanese/American POW Friendship Program for former American POWs and their immediate family members to visit Japan, receive an apology from the sitting Foreign Minister and other Japanese Cabinet members, and travel to the sites of their POW camps. Annual trips were held from 2010 to 2017. In the 112 th Congress, three resolutions— S.Res. 333 , H.Res. 324 , and H.Res. 333 —were introduced thanking the government of Japan for its apology and for arranging the visitation program. The resolutions also encouraged the Japanese to do more for the U.S. POWs, including by continuing and expanding the visitation programs as well as its World War II education efforts. They also called for Japanese companies to apologize for their or their predecessor firms' use of un- or inadequately compensated forced laborers during the war. In July 2015, Mitsubishi Materials Corporation (a member of the Mitsubishi Group) became the first major Japanese company to apologize to U.S. POWs on behalf of its predecessor firm, which ran several POW camps that included over 1,000 Americans. In addition, they made a one-time grant of $50,000 to a library in West Virginia to maintain a collection of POW materials. Under the Obama Administration, Japan and the United States cooperated on a wide range of environmental initiatives both bilaterally through multiple agencies and through multilateral organizations, such as the UNFCCC, the International Energy Agency (IEA), the Asia-Pacific Economic Cooperation (APEC), the Clean Energy Ministerial (CEM), the International Energy Forum (IEF), and the East Asian Summit (EAS). Japan was generally regarded by U.S. officials as closely aligned with the Obama Administration in international climate negotiations in its position that any international climate agreement must be legally binding in a symmetrical way, with all major economies agreeing to the same elements. However, because of the shutdown of Japan's nuclear reactors (see below), international observers raised concerns about losing Japan as a global partner in promoting nuclear safety and nonproliferation measures and in reducing greenhouse gas emissions. President Trump's 2017 decision to withdraw the United States from the UNFCCC Paris Agreement, an international climate accord designed to reduce global emissions, removed one channel through which the United States and Japan cooperated closely. Japanese officials expressed dismay when the United States withdrew from the Agreement, with the Japanese Ministry of Foreign Affairs calling the decision "regrettable"; the then Minister for the Environment had a stronger response, saying, "It's as if they've turned their back on the wisdom of humanity…. In addition to being disappointed, I'm also angry." Although Japanese officials—including Abe—emphasize the importance of acting on climate change both domestically and in coordination with the international community, some experts assess Japan's greenhouse gas emissions reduction plan is insufficiently ambitious, particularly in light of Japan's expansion of coal power plants. Nevertheless the two countries continue to cooperate on energy issues under a Japan-United States Strategic Energy Partnership established in November 2017. The partnership focuses on advanced nuclear energy technologies, clean coal technologies, natural gas market development, and energy infrastructure in the developing world. This effort dovetails with the Trump Administration's Asia-EDGE (Enhancing Development and Growth through Energy) initiative, one of the economic and commercial pillars of the Administration's Indo-Pacific strategy announced in July 2018. Among other things, Asia-EDGE aims to strengthen energy security in the region and grow Asian markets for U.S. energy products, particularly liquefied natural gas (LNG); Japan is the world's largest LNG buyer and has become a destination for U.S. LNG exports. Japan is undergoing a national debate on the future of nuclear power, with major implications for businesses operating in Japan, U.S.-Japan nuclear energy cooperation, and nuclear safety and nonproliferation measures worldwide. Prior to 2011, nuclear power was providing roughly 30% of Japan's power generation capacity, and the 2006 "New National Energy Strategy" had set out a goal of significantly increasing Japan's nuclear power generating capacity. However, the policy of expanding nuclear power was abruptly reversed in the aftermath of the March 11, 2011, natural disasters and meltdowns at the Fukushima Daiichi nuclear power plant. Public trust in the safety of nuclear power collapsed, and a vocal antinuclear political movement emerged. This movement tapped into an undercurrent of antinuclear sentiment in modern Japanese society based on its legacy as the victim of atomic bombing in 1945. As the nation's 54 nuclear reactors were shut down one by one for their annual safety inspections in the months after March 2011, the Japanese government did not restart them for several years (except a temporary reactivation for two reactors at one site in central Japan). No reactors were operating from September 2013 until August 2015. As of October 2018, only eight reactors are in operation. The drawdown of nuclear power generation resulted in many short- and long-term consequences for Japan: rising electricity costs for residences and businesses; heightened risk of blackouts in the summer, especially in the Kansai region near Osaka and Kyoto; widespread energy conservation efforts by businesses, government agencies, and ordinary citizens; significant losses for and near-bankruptcy of major utility companies; and increased fossil fuel imports. Japan's Ministry of Economy, Trade, and Industry estimated the direct cost of the decommissioning of the Fukushima Daiichi plant and compensation of victims to be $187 billion, and the cost of fossil fuel imports to replace power from subsequently shutdown reactors to be $31.3 billion in FY2013 alone. The Institute of Energy Economics, Japan, calculated that the nuclear shutdowns led to the loss of 420,000 jobs in 2012. The LDP has promoted a relatively pronuclear policy, despite persistent antinuclear sentiment among the public. The Abe Administration released a Strategic Energy Plan in April 2014 that identifies nuclear power as an "important base-load power source," and in 2015 announced it would seek for nuclear energy to account for 20-22% of Japan's power supply by 2030. In the coming years, the government likely will approve the restart of many of Japan's existing 42 operable nuclear reactors, but as many as half, or even more, may never operate again. Approximately 55% of the Japanese public opposes the restart of nuclear reactors, compared to approximately 25% in favor. The Abe Cabinet faces a complex challenge: how to balance concerns about energy security, promotion of renewable energy sources, the viability of electric utility companies, the health of the overall economy, and public concerns about safety. And if Japan closes down its nuclear power industry, some analysts wonder whether it will continue to play a lead role in promoting nuclear safety and nonproliferation around the world. The U.S.-Japan alliance has long been an anchor of the U.S. security role in Asia. Forged in the U.S. occupation of Japan after its defeat in World War II, the alliance provides a platform for U.S. military readiness in the Pacific under the 1960 Treaty of Mutual Cooperation and Security between the United States and Japan. About 50,000 U.S. troops are stationed in Japan and have the exclusive use of approximately 90 facilities (see Figure 2 ). In exchange, the United States guarantees Japan's security, including through extended deterrence, known colloquially as the U.S. "nuclear umbrella." The U.S.-Japan alliance, which many believe was missing a strategic rationale after the end of the Cold War, may have found a new guiding rationale in shaping the environment for China's rise. In addition to serving as a hub for forward-deployed U.S. forces, Japan provides its own advanced military assets, many of which complement U.S. assets. During the 2016 presidential campaign, candidate Trump repeatedly asserted that Tokyo did not pay enough to ease the U.S. cost of providing security for Japan. In response, Japanese and U.S. officials have defended the system of host nation support that has been negotiated and renegotiated over the years. Defenders of the alliance point to the strategic benefits as well as the cost saving of basing some of the most advanced capabilities of the U.S. military in Japan, including a forward-deployed aircraft carrier. The question of how much Japan spends, particularly when including the Japanese government's payments to compensate base-hosting communities and to shoulder the costs of U.S. troop relocation in the region, remains a thorny area with few easily quantifiable answers. Japan appears to anticipate new demands from the United States, and Abe has already stated that Japan will no longer cap its defense spending at the customary 1% of GDP. Since the early 2000s, the United States and Japan have taken strides to improve the operational capability of the alliance as a combined force, despite political and legal constraints. Japan's own defense policy has continued to evolve, and its major strategic documents reflect a new attention to operational readiness and flexibility. The original, asymmetric arrangement of the alliance has moved toward a more balanced security partnership in the 21 st century, and Japan's 2014 decision to engage in collective self-defense may accelerate that trend. Unlike 25 years ago, the Japan Self-Defense Force (SDF) is now active in overseas missions, including efforts in the 2000s to support U.S.-led coalition operations in Afghanistan and the reconstruction of Iraq. Japanese military contributions to global operations like counter-piracy patrols relieve some of the burden on the U.S. military to manage security challenges. Due to the colocation of U.S. and Japanese command facilities in recent years, coordination and communication have become more integrated. The joint response to the March 2011 tsunami and earthquake in Japan demonstrated the interoperability of the two militaries. The United States and Japan have been steadily enhancing bilateral cooperation in many other aspects of the alliance, such as ballistic missile defense, cybersecurity, and military use of space. Alongside these improvements, Japan continues to pay nearly $2 billion per year to defray the cost of stationing U.S. forces in Japan. (See " Burden-Sharing Issues " section below.) In late April 2015, the United States and Japan announced the completion of the revision of their bilateral defense guidelines, a process that began in late 2013. First codified in 1978 and later updated in 1997, the guidelines outline how the U.S. and Japanese militaries will interact in peacetime and in war as the basic framework for defense cooperation based on a division of labor. The new guidelines account for developments in military technology, improvements in interoperability of the U.S. and Japanese militaries, and the complex nature of security threats in the 21 st century. For example, the revision addresses bilateral cooperation on cybersecurity, the use of space for defense purposes, and ballistic missile defense, none of which were mentioned in the 1997 guidelines. The 2015 guidelines lay out a framework for bilateral, whole-of-government cooperation in defending Japan's outlying islands. They also significantly expand the scope of U.S.-Japan security cooperation to include defense of sea lanes and, potentially, Japanese contributions to U.S. military operations outside East Asia. The Abe Administration pushed through controversial legislation in fall 2015 to provide a legal basis for these far-reaching defense reforms, despite vocal opposition from opposition parties and the Japanese public. Japan's implementation of the new guidelines and related defense reforms has been slow and incremental, perhaps because of the controversy that surrounded passage of the new security legislation. The bilateral defense guidelines also seek to improve alliance coordination. The guidelines establish a new standing Alliance Coordination Mechanism (ACM), which will involve participants from all the relevant agencies in the U.S. and Japanese governments, as the main body for coordinating a bilateral response to any contingency. This new mechanism removes obstacles that had inhibited alliance coordination in the past. The previous ACM only would have assembled if there was a state of war, meaning that there was no formal organization to coordinate military activities in peacetime, such as during the disaster relief response to the March 2011 disasters in northeast Japan. The U.S. and Japanese governments have convened the ACM to coordinate responses to North Korea's January 2016 nuclear weapon test, the earthquakes near Kumamoto, on Japan's western island of Kyushu in April 2016, and other episodes affecting East Asian regional security. Perhaps the most symbolically significant—and controversial—security reform of the Abe Administration has been Japan's potential participation in collective self-defense. Dating back to his first term in 2006-2007, Abe has shown a determination to adjust this highly asymmetric aspect of the alliance: the inability of Japan to defend U.S. forces or territory under attack. According to the traditional Japanese government interpretation, Japan possesses the right of collective self-defense, which is the right to defend another country that has been attacked by an aggressor, but under Article 9 of the Japanese constitution, Japan has given up that right. However, Japan has interpreted Article 9 to mean that it can maintain a military for national defense purposes and, since 1991, has allowed the SDF to participate in noncombat roles overseas in a number of U.N. peacekeeping missions and in the U.S.-led coalition in Iraq. In July 2014, the Abe Cabinet announced a new interpretation, under which collective self-defense would be constitutional as long as it met certain conditions. These conditions, developed in consultation with the LDP's dovish coalition partner Komeito and in response to cautious public sentiment, are rather restrictive and could limit significantly Japan's latitude to craft a military response to crises outside its borders. The security legislation package that the Diet passed in September 2015 provides a legal framework for new SDF missions, but institutional obstacles in Japan may inhibit full implementation in the near term. However, the removal of the blanket prohibition on collective self-defense will enable Japan to engage in more cooperative security activities, like noncombat logistical operations and defense of distant sea lanes, and to be more effective in other areas, like U.N. peacekeeping operations. For the U.S.-Japan alliance, this shift could mark a step toward a more equal and more capable defense partnership. Chinese and South Korean media, as well as some Japanese civic groups and media outlets, have been critical, implying that collective self-defense represents an aggressive, belligerent security policy for Japan. Due to the legacy of the U.S. occupation and the island's key strategic location, Okinawa hosts a disproportionate share of the U.S. military presence in Japan. About 25% of all facilities used by U.S. Forces Japan (USFJ) and over half of USFJ military personnel are located in the prefecture, which comprises less than 1% of Japan's total land area. The attitudes of native Okinawans toward U.S. military bases are generally characterized as negative, reflecting a tumultuous history and complex relationships with both "mainland" Japan and with the United States. Because of these widespread concerns among Okinawans, the sustainability of the U.S. military presence in Okinawa remains a critical challenge for the alliance. The United States and Japan have faced decades of delay in an agreement to relocate a Marine Air Base. The new facility, slated to be built on the existing Camp Schwab in the sparsely populated Henoko area of Nago City, would replace the functions of Marine Corps Air Station (MCAS) Futenma, located in the center of a crowded town in southern Okinawa. The encroachment of residential areas around the Futenma base over decades has raised the risks of a fatal aircraft accident, which could create a backlash on Okinawa and threaten to disrupt the alliance. Most Okinawans oppose the construction of a new U.S. base for a mix of political, environmental, and quality-of-life reasons. A U.S. military official testified to Congress in 2016 that the expected completion of the new base at Henoko had been delayed from 2022 to 2025. Tokyo and Okinawa agreed in March 2016 to a court-recommended mediation process, suspending construction of the Futenma replacement facility while central government and Okinawan prefectural officials resumed ultimately fruitless negotiations. A December 2016 Japanese Supreme Court decision ruled that then-Okinawa Governor Takeshi Onaga could not revoke the previous governor's landfill permit needed to build the offshore runways at Camp Schwab. Also in December 2016, the United States returned nearly 10,000 acres of land in the northern part of the island to Japan. Onaga passed away in August 2018, triggering a special election to replace him. Denny Tamaki, son of an Okinawan woman and U.S. Marine, won by a large margin and vowed to pursue further obstruction tactics to prevent the construction. Calculating how much Tokyo pays to defray the cost of hosting the U.S. military presence in Japan is difficult and depends heavily on how the contributions are counted. Further, the two governments present estimations based on different data depending on the political aims of the exercise; because of the skepticism among some Japanese about paying the U.S. military, for example, the Japanese government may use different baselines in justifying its contributions to the alliance when arguing for its budget in the Diet. Other questions make it challenging to assess the value and costs of the U.S. military presence in Japan. Is the U.S. cost determined based strictly on activities that provide for the defense of Japan, in a narrow sense? Or is the system of American bases in Japan valuable because it enables the United States to more quickly, easily, and cheaply disperse U.S. power in the Western Pacific? U.S. defense officials often cite the strategic advantage of forward-deploying the most advanced American military capabilities in the Asia-Pacific at a far lower cost than stationing troops on American soil. Determining the percentage of overall U.S. costs that Japan pays is even more complicated. According to DOD's 2004 Statistical Compendium on Allied Contributions to the Common Defense (the last year for which the report was required), Japan provided 74.5% of the U.S. stationing cost. In January 2017, Japan's Defense Minister provided data that set the Japanese portion of the total cost for U.S. forces stationed in Japan at over 86%. Other estimates from various media reports are in the 40-50% range. Most analysts concur that there is no authoritative, widely shared view on an accurate figure that captures the percentage that Japan shoulders. One component of the Japanese contribution is the Japanese government's payment of nearly $2 billion per year to offset the cost of stationing U.S. forces in Japan. All Japanese contributions are provided in-kind. The United States spends $2.7 billion per year (on top of the Japanese contribution) on nonpersonnel costs for troops stationed in Japan. Japanese host nation support is composed of two funding sources: Special Measures Agreements (SMAs) and the Facilities Improvement Program (FIP). Each SMA is a bilateral agreement, generally covering five years, which obligates Japan to pay a certain amount for utility and labor costs of U.S. bases and for relocating training exercises away from populated areas. Under the current SMA, covering 2016-2020, the United States and Japan agreed to keep Japan's host nation support at roughly the same level as it had been paying in the past. Japan will contribute ¥189 billion ($1.6 billion) per year under the SMA and contribute at least ¥20.6 billion ($175 million) per year for the FIP. Depending on the yen-to-dollar exchange rate, Japan's host nation support likely will be in the range of $1.7-$2.1 billion per year. The amount of FIP funding is not strictly defined, other than the agreed minimum, and thus the Japanese government adjusts the total at its discretion. Tokyo also decides which projects receive FIP funding, taking into account, but not necessarily deferring to, U.S. priorities. In addition to host nation support, which offsets costs that the U.S. government would otherwise have to pay, Japan spends approximately ¥128 billion ($1.2 billion) annually on measures to subsidize or compensate base-hosting communities. These are not costs that would be necessarily passed on to the United States, but U.S. and Japanese alliance managers may argue that the U.S. bases would not be sustainable without these payments to areas affected by the U.S. military presence. Based on its obligations defined in the U.S.-Japan Mutual Security Treaty, Japan also pays the cost of relocating U.S. bases within Japan and rent to any landowners of U.S. military facilities in Japan. Japan pays for the majority of the costs associated with three of the largest international military base construction projects since World War II: the Futenma Replacement Facility in Okinawa (Japan provides $12.1 billion), construction at the Marine Corps Air Station Iwakuni (Japan pays 94% of the $4.8 billion), and facilities on Guam to support the move of 4,800 marines from Okinawa (Japan pays $3.1 billion, about a third of the cost of construction). Japan also procures over 90% of its defense acquisitions from U.S. companies. Japan's annual U.S. Foreign Military Sales are valued at about $11 billion. Recent major acquisitions include Lockheed Martin F-35 Joint Strike Fighters, Boeing KC-46 Tankers, Northrup Grumman E2D Hawkeye airborne early warning aircraft, General Dynamics Advanced Amphibious Assault Vehicles, and Boeing/Bell MV-22 Ospreys. The growing concerns in Tokyo about North Korean nuclear weapons development and China's modernization of its nuclear arsenal in the 2000s garnered renewed attention to the U.S. policy of extended deterrence, commonly known as the "nuclear umbrella." The United States and Japan initiated the bilateral Extended Deterrence Dialogue in 2010, recognizing that Japanese perceptions of the credibility of U.S. extended deterrence were critical to its effectiveness. The dialogue is a forum for the United States to assure its ally and for both sides to exchange assessments of the strategic environment. The views of Japanese policymakers (among others) influenced the development of the 2010 U.S. Nuclear Posture Review. Reportedly, Tokyo discouraged a proposal to declare that the "sole purpose" of U.S. nuclear weapons is to deter nuclear attack. Tokyo also reportedly discouraged the Obama Administration from declaring a "no first use" policy on the rationale that it would weaken deterrence against North Korea. A lack of confidence in the U.S. security guarantee could lead Tokyo to reconsider its own status as a non-nuclear weapons state. As discussed above, as a presidential candidate Donald Trump in spring 2016 stated that he was open to Japan developing its own nuclear arsenal to counter the North Korean nuclear threat. Japanese leaders, however, have repeatedly rejected developing their own nuclear weapon arsenal. Analysts point to the potentially negative consequences for Japan if it were to develop its own nuclear weapons, including significant costs; reduced international standing in the campaign to denuclearize North Korea; the possible imposition of economic sanctions that would be triggered by leaving the global nonproliferation regime; and potentially encouraging South Korea to develop nuclear weapons capability. For the United States, analysts note that encouraging Japan to develop nuclear weapons could mean diminished U.S. influence in Asia, the unraveling of the U.S. alliance system, and the possibility of creating a destabilizing nuclear arms race in Asia. Japan also plays an active role in extended deterrence through its ballistic missile defense (BMD) capabilities. The United States and Japan have cooperated closely on BMD technology development since the earliest programs, conducting joint research projects as far back as the 1980s. Japan's purchases of U.S.-developed technologies and interceptors after 2003 give it the second-most potent BMD capability in the world. The U.S. and Japanese militaries both have ground-based BMD units deployed on Japanese territory and BMD-capable vessels operating in the waters near Japan. In February 2017, the joint program achieved a significant milestone in a test off of Hawaii, when a new interceptor from a guided-missile destroyer hit a medium-range missile for the first time. U.S. trade and economic ties with Japan are viewed by many experts and policymakers as highly important to the U.S. national interest. By the most conventional method of measurement, the United States and Japan are the world's largest and third-largest economies (China is number two), accounting for nearly 30% of the world's gross domestic product (GDP) in 2017. Furthermore, their economies are closely intertwined by two-way trade in goods and services, and by foreign investment. Japan is a significant economic partner of the United States. Japan was the United States' fifth-largest export market for goods and services (behind Canada, Mexico, China, and the United Kingdom) and the fourth-largest source of U.S. imports (behind China, Canada, and Mexico) in 2017. Japan accounted for 5% of total U.S. exports in 2017 ($115 billion) and 6% of total U.S. imports ($171 billion). The United States was Japan's largest goods export market and second-largest source of goods imports (after China) in 2017. Japan is also a major investor in the United States accounting for more than 10% of the stock of inward U.S. direct investment in 2017 ($469 billion). The relative significance of the bilateral economic relationship, however, has arguably declined as other countries, including China, have become increasingly important global economic actors. Over the past decade, U.S. goods exports to the world grew by nearly 20%, while exports to Japan grew by less than 2%. Similarly, U.S. goods imports from the world grew by 10% while U.S. imports from Japan fell. Some of this shift stems from structural changes in the global economic landscape, including the growth of global supply chains. U.S. import numbers probably underestimate the importance of Japan in U.S. trade since, in particular, Japanese firms export intermediate goods to China and other countries that are then used to manufacture finished goods that Chinese enterprises export to the United States. Major economic events also have influenced U.S.-Japan trade patterns over the past decade. The global economic downturn stemming from the 2008 financial crisis had a significant impact on U.S.-Japan trade: both U.S. exports and imports declined in 2009 from 2008. Although trade flows recovered quickly, they peaked in 2012 and have declined or grown only modestly in most years since that time, as measured in U.S. dollars. (See Table 1 .) The decline in the value of the Japanese yen since 2012, tied to aggressive monetary stimulus in Japan as part of "Abenomics" (described below) has likely affected both the value and quantity of trade—measured in yen. U.S. trade with Japan has largely risen over the same time period. Under the Trump Administration, U.S. trade policy has increasingly focused on "unfair" trading practices, U.S. import competition, and bilateral trade deficits, leading to greater strain in U.S. economic relations, including with Japan. Issues of ongoing U.S. attention include concerns over market access for U.S. products such as autos and agricultural goods, and various nontariff barriers, which U.S. companies argue favor domestic Japanese products over U.S. goods and services. Despite this recent shift, the major trend in bilateral economic relations over the past two decades has largely been an easing of tension, in contrast with the contentious and frequent trade frictions at the fore of the bilateral relationship in the 1980s and early 1990s. A number of factors may have contributed to this trend: Japan's slow economic growth—beginning with the burst of the asset bubble in the 1990s—has changed the general U.S. perception of Japan from one as an economic competitor to one as a "humbled" economic power; significant Japanese investment in the United States including in automotive manufacturing facilities has linked production of some Japanese branded products with U.S. employment; the successful conclusion of the multilateral Uruguay Round agreements in 1994 led to further market openings in Japan, and established the World Trade Organization (WTO) and its enhanced dispute settlement mechanism, which has provided a forum used by both Japan and the United States to resolve trade disputes; the rise of China as an economic power and trade partner has caused U.S. policymakers to shift attention from Japan to China as a primary source of concern; and the growth in the complexity and number of countries involved in global supply chains has likely diffused or shifted concerns over import competition as many Japanese products are now imported into the United States as components in finished products from other countries, thereby reducing the bilateral trade deficit. Between the end of World War II and 1980s, Japan experienced high levels of economic growth. It was dubbed an "economic miracle" until the collapse of an economic bubble in Japan in the early 1990s brought an end to rapid economic growth. Many economists have argued that, despite the government's efforts, Japan has never fully recovered from the 1990s crisis. For decades Japan's economy suffered from chronic deflation (falling prices) and low growth. In the late 2000s, Japan's economy was also hit by two economic crises: the global financial crisis in 2008 and 2009, and the March 2011 earthquake, tsunami, and nuclear reactor meltdowns in northeast Japan. As a result, since the 1980s, Japan's average GDP growth has been consistently lower than that of the United States ( Figure 3 ). In sharp contrast to the booming years of the 1980s, this decades-long history of economic stagnation coupled with, and in part a result of, the demographic challenge of a shrinking and ageing population has led to a narrative in the media and elsewhere of Japan as a nation in decline, particularly vis-à-vis the rapid economic growth and growing global influence of neighboring China and South Korea. In the face of domestic anxiety caused by this shift, Prime Minister Abe came into office in 2012 with a goal to reinvigorate the Japanese economy. Specifically, the Abe Administration made it a priority to boost economic growth and to eliminate deflation. Abe has promoted a three-pronged, or "three arrow," economic program, nicknamed "Abenomics." The three arrows include monetary stimulus, fiscal stimulus, and structural reforms to improve the competitiveness of Japan's economy. Most economists agree that progress across the three arrows has been uneven. The first arrow of Abenomics, monetary stimulus to reverse deflation, has been implemented most aggressively. In the spring of 2013, Japan's central bank (Bank of Japan, or BOJ) announced a continued loose monetary policy with interest rates of 0%, quantitative easing measures, and a target inflation rate of 2%. The BOJ began a second round of quantitative easing in October 2014, after the economy slipped back into recession. The BOJ continued adopting new expansionary monetary policies in 2016, including negative interest rates for a portion of bank reserves and targeting 0% interest rates on 10-year government bonds. In July 2018, BOJ Governor Kuroda announced the BOJ would maintain Japan's loose monetary policy, acknowledging that the BOJ's 2% inflation target would not be reached before 2021. Japan's inflation rate was 0.5% in 2017 and the International Monetary Fund (IMF) predicts inflation of 1.2% in 2018. The BOJ actions contrast the Federal Reserve's steady tightening of U.S. monetary policy over the past year. The Japanese government has taken some steps to use fiscal policy to stimulate the economy (the second arrow), initially implementing fiscal stimulus packages worth about $145 billion, aimed at spending on infrastructure, particularly in the areas affected by the March 2011 disaster. The Abe government has also approved additional supplementary budget packages, including $32 billion in 2016. The government's willingness to use expansionary fiscal policies has been constrained by concerns about its public debt levels, the highest in the world at nearly 240% of GDP. To address fiscal pressures, the government raised the sales tax from 5% to 8% in April 2014. However, many economists argued that the sales tax increase was responsible for pushing Japan into recession in 2014. The government twice has postponed a planned second sales tax increase, to 10%, which now is scheduled to occur in October 2019, four years later than originally planned. The IMF urges Japan to implement mitigating fiscal policies to minimize the short-term downward pressure on demand expected from the tax hike. Progress on the third arrow, structural reforms, has been more uneven. The government has advanced measures to liberalize energy and agriculture sectors, promote trade and investment, reform corporate governance, and improve labor market functions. The IMF argues, however, that more reforms are needed, particularly: (1) labor market reforms to increase productivity and boost wages (such as reforming Japan's two-tier labor market system by implementing complementary measures to make recent equal pay for equal work legislation more effective); (2) reforms to increase private investment and long-term growth (such as deregulation and encouraging business investment); and (3) measures to diversify and enhance the labor supply (such as encouraging more female participation in the work force including by increasing availability of childcare). Abenomics had a difficult start, when Japan's economy slipped back into recession in 2014. This was Japan's fourth recession since 2008, and was largely attributed to the April 2014 sales tax increase. The lackluster performance of Japan's economy in 2015 and the first half of 2016 led some analysts to question whether Abenomics had run its course. More recently, Japan's economy has been building momentum, and increasingly analysts view the program as moderately successful though in need of additional productivity-enhancing measures to produce long-term growth. The IMF in its most recent evaluation of Japan's economic policies, for example, argued that "while the strategy of Abenomics remains appropriate, reinvigorated policies are needed to reflate the economy." The IMF urges Japan to make further progress on implementing structural reforms, particularly in the labor market; ensure fiscal policy space by establishing a feasible long-term plan for debt consolidation; and maintain patience in pursuing inflation targets with accommodative policy while closely watching the financial system for increased risk taking in the low-interest environment. In 2017, Japan's economy grew at 1.7% and unemployment, at 2.9%, reached its lowest point in over two decades. A key component of the third arrow in Abe's economic reform focuses on "womenomics," or boosting economic growth through reforms and policies to encourage the participation and advancement of women in the workforce. Japan lags behind many other high-income countries in terms of gender equality, with one of the lowest rates of female participation in the workforce among Organization for Economic Cooperation and Development (OECD) countries. In 2014, a strategist with Goldman Sachs in Japan estimated that closing the gender employment gap could boost Japan's GDP by nearly 13%. To advance its "womenomics" initiative, the government has proposed, and is in various stages of implementing, a number of policies, such as expanding the availability of day care, increasing parental leave benefits, and allowing foreign housekeepers in special economic zones, among other measures. Progress has been made by some measures, but a dearth of women in top positions has left many disappointed in the results. Japan's overall female participation rate in the labor force has increased sharply, to a record high of 66% in 2016, surpassing the United States (64%). The uptick is attributed to high demand for workers in Japan, as well as specific "womenomics" initiatives, including expanded day care capacity and more generous parental leave. Some observers, however, question whether the Abe government is truly working to promote gender equality in the workplace or simply looking to fill gaps in the workforce created by the shrinking population. Efforts to increase the number of women in management positions have stalled, and in 2017, Japan ranked 114 th out of 144 countries according to the World Economic Forum's national rankings of gender equality. Japan fared worst in political empowerment rankings (123 rd ), reflecting the relatively low number of female legislators and lone female Cabinet minister. The Abe government has scrapped its target of getting women in 30% of senior positions by 2020, now aiming for 15% in the private sector, and 7% in government. Analysts note that additional policy reforms could continue to encourage women to join and remain in the workforce, including reforms to Japan's tax and social security programs that discourage married women from working outside the home. Japan's work culture, which demands long hours, also makes it difficult for women and men to balance work and family. The Trump Administration has imposed tariffs on several significant U.S. imports from Japan. In March 2018, President Trump announced tariffs of 25% and 10% on certain U.S. steel and aluminum imports, respectively. The tariffs have drawn criticism from Japan (the sixth largest supplier of U.S. steel imports in 2017, worth $1.7 billion), which argues it should be exempt from tariffs imposed for national security reasons given its close security relationship with the United States. The tariffs were imposed under Section 232 of the Trade Expansion Act of 1962, based on two investigations by the Commerce Department that found steel and aluminum imports threaten to impair U.S. national security. Unlike South Korea, Japan has not negotiated a quota arrangement with the United States in exchange for tariff exemptions. Japan notified its intent to retaliate with comparable tariffs in the WTO, but has not yet announced a date for such retaliation or a list of affected tariff lines. Japanese exports of washing machines and solar panels are also subject to additional temporary U.S. tariffs. These safeguard tariffs were imposed under Section 201 of the Trade Act of 1974 to address serious or threatened serious injury from these imports to domestic industries. Japan has also announced retaliation in the WTO in response to these safeguard measures, and in line with WTO commitments on safeguard actions, this retaliation is scheduled to become effective in 2021. Unlike several other countries, Japan has not initiated WTO dispute settlement procedures with regards to either the U.S. Section 201 or Section 232 tariff measures, but is participating as a third party in disputes initiated by other countries. The Trump Administration has initiated an additional national security (Section 232) investigation into U.S. auto and auto parts imports. The Trump Administration has agreed to not proceed with tariffs on Japanese auto imports while new bilateral trade negotiations are ongoing—a similar agreement was reached with the EU. If the Administration were to increase tariffs on these products it could have a more significant negative economic effect for Japan, as well as the U.S. economy. Autos and auto parts are consistently the largest U.S. import from Japan (nearly $56 billion), accounting for roughly one-third of U.S. goods imports from Japan in 2017. The tariffs could also potentially disrupt Japan's numerous auto production facilities in the United States, which rely on parts supplied from Japan. On September 26, President Trump and Prime Minister Abe announced their intent to start formal bilateral trade agreement negotiations. This follows two informal rounds of bilateral trade and investment discussions that had produced few concrete outcomes. Japan had been hesitant to engage in formal bilateral trade talks as it remains committed to the regional Trans-Pacific Partnership (TPP) and through which it had already agreed to politically sensitive concessions, particularly in agriculture, to the United States, who withdrew from the agreement in 2017. Japan announced it would not open its agriculture market in the new talks beyond its commitments in TPP and other existing trade agreements, while the United States signaled its intent to increase U.S. production and employment in the motor vehicle industry through the negotiations. During the negotiations, U.S. imports from Japan are to be exempt from increased U.S. motor vehicle tariffs, which the Trump Administration is considering as part of an ongoing Section 232 investigation. The full scope of the new negotiations is currently unclear. In their public announcement the two leaders stated they will focus on goods and services negotiations initially and then proceed to discussions on investment and other trade issues, suggesting the agreement could be negotiated in stages. An agreement limited in coverage would represent a shift in approach from recent U.S. trade agreements, which typically aim to be more comprehensive in addressing trade barriers and disciplines on goods, services, agriculture, investment, labor, environment, and intellectual property rights, among other issues. This may raise questions about the extent to which it may meet U.S. trade negotiating objectives as set by Congress in legislation enacted in 2015 to renew U.S. Trade Promotion Authority (TPA). TPA potentially provides for the expedited consideration of trade agreement implementing legislation, if the agreement makes progress towards achieving negotiating objectives and the Administration adheres to certain notification and consultation requirements. These include that the Administration gives Congress written notification 90 days before beginning new trade talks: USTR Lighthizer provided such notification to Congress on October 16. TPA also requires that the Administration make available to Congress and the public the specific objectives for the new negotiation, 30 days before it commences. The Trump Administration also recently released the proposed modifications to the North American Free Trade Agreement (NAFTA), renamed as the U.S.-Mexico-Canada Agreement (USMCA), which was also notified to Congress under TPA procedures. Unlike the U.S.-South Korea (KORUS) FTA modifications, the USMCA is expected to require implementing legislation for entry into force. If the Trump Administration sees USMCA as its template moving forward, some commitments in that agreement could prove politically challenging for Japan, particularly enforceable commitments on currency. USMCA also includes tightened auto rules of origin, requiring 75% North American content to qualify for duty-free treatment under the deal. Such strict origin rules could prove difficult for both U.S. and Japanese automakers in a bilateral deal given their extensive supply chains in North America and Southeast Asia, respectively. U.S. interest in the new talks with Japan are, in part, a response to trade negotiations Japan recently concluded. Japan led efforts among the remaining 11 TPP countries to conclude the Comprehensive and Progressive TPP (CPTPP or TPP-11), which was signed on March 8, 2018, and does not include the United States. Japan was the second country to ratify the TPP-11. (Australia, Mexico, and Singapore have also ratified the new agreement, which requires ratification by six of the signatories to take effect.) On July 17, Japan signed an FTA with the EU, which would eventually remove nearly all tariffs between the parties, including elimination of the EU's 10% auto tariff, and elimination or reduction of most Japanese agricultural tariffs. If entered into force, both agreements have the potential to disadvantage U.S. exporters in Japan's market, a major concern of some U.S. sectors, particularly agriculture. Prime Minister Abe's LDP enjoys a dominant position in the Japanese political world. With its coalition partner, the smaller party Komeito, it holds two-thirds of the seats in the Lower House of Japan's Diet, and nearly that proportion of the Upper House. (See Figure 4 and Figure 5 for a display of major parties' strength in Japan's parliament.) These margins theoretically give Abe's coalition the votes to amend Japan's Constitution, including the war-renouncing clauses that Abe has said he would like to change. Following his September 2018 victory in the LDP's leadership vote, Abe said he would like to submit a constitutional amendment proposal to the Diet within the coming year. Any attempt to change the constitution would have to surmount formidable political and procedural hurdles. Abe likely would have to overcome opposition from Komeito, which is torn between its pacifist leanings and its desire to support the coalition. Decisions about priorities also will take time because there are calls to amend a number of other provisions of the constitution, which was written by the United States during the U.S. occupation of Japan in 1946 and has never been changed. Furthermore, any constitutional changes passed by the Diet also must be approved by a majority in a nationwide referendum, and many opinion polls show the Japanese public to be skeptical about the need for a revision. From 2007 to 2012, Japanese politics was plagued by instability. The premiership changed hands six times in those six years, and no party controlled both the Lower and Upper Houses of the parliament for more than a few months. The Abe-led LDP coalition's dominant victories in five consecutive parliamentary elections, in December 2012, July 2013, December 2014, July 2016, and October 2017 have ended this period of turmoil. The first event, the 2012 elections for Japan's Lower House, returned the LDP and its coalition partner, the Komeito party, into power after three years in the minority. Since 1955, the LDP has ruled Japan for all but about four years. Abe has benefitted from disarray among Japanese opposition parties, which in the fall of 2018 struggled to surpass 10% in public opinion polls (compared to 40%-50% for the LDP). Some Japanese and Western analysts argue that another factor contributing to Abe's strength is his government's and the LDP's success in managing the Japanese media. According to these sources, the government and the LDP have attempted to influence Japanese news outlets through measures such as hinting at revoking licenses of broadcasters, pressuring business groups not to purchase advertisements in certain media outlets, and shunning reporters from critical broadcasters and print publications. In 2013, the Diet passed an Act on Protection of Specially Designated Secrets that has been criticized for criminalizing the publication of information that the government had disclosed to the public. Since Abe came to power in December 2012, the nongovernmental organization Reporters without Borders has moved Japan down twenty-one places, to 72 nd place, in its rankings of global freedom of the press. Abe government officials deny that they have attempted to unduly influence the press or restrict press freedoms. Japan's combination of a low birth rate, strict immigration practices, and a shrinking and rapidly ageing population presents policymakers with a significant challenge. Polls suggest that Japanese women are avoiding marriage and child-bearing because of the difficulty of combining career and family in Japan; the fertility rate has fallen to 1.25, below the 2.1 rate necessary to sustain population size. Japan's population growth rate is -0.2%, according to the World Bank, and its current population of 125 million is projected to fall to about 95 million by midcentury. Concerns about a huge shortfall in the labor force have grown, particularly as the elderly demand more care. The ratio of working age persons to retirees is projected to fall from 5:2 around 2010 to 3:2 in 2040, reducing the resources available to pay for the government social safety net. Japan's immigration policies have traditionally been strictly limited, closing one potential source of new workers. | Japan is a significant partner of the United States in a number of foreign policy areas, particularly in security concerns, which range from hedging against Chinese military modernization to countering threats from North Korea. The U.S.-Japan military alliance, formed in 1952, grants the U.S. military the right to base U.S. troops—currently around 50,000 strong—and other military assets on Japanese territory, undergirding the "forward deployment" of U.S. troops in East Asia. In return, the United States pledges to protect Japan's security. Although candidate Donald Trump made statements critical of Japan during his campaign, relations have remained strong, at least on the surface, throughout several visits and leaders' meetings. Bilateral tensions have arisen in 2018, however. On North Korea policy, Tokyo has conveyed some anxiety about the Trump Administration's change from confrontation to engagement, concerned that Japan's priorities will be marginalized as the United States pursues negotiations with North Korea. More broadly, Japan is worried about the U.S. commitment to its security given Trump's skepticism about U.S. alliances overseas. Contentious trade issues have also resurfaced as the two governments look to negotiate a bilateral accord. In addition, Japan has expressed disappointment about the Trump Administration's decision to withdraw from the Trans-Pacific Partnership (TPP) agreement and the United Nations Framework Convention on Climate Change (UNFCCC) Paris Agreement on addressing climate change. Japan is the United States' fourth-largest overall trading partner, Japanese firms are the second largest source of foreign direct investment in the United States, and Japanese investors are the second largest foreign holders of U.S. treasuries. Tensions in the trade relationship have increased under the Trump Administration. The U.S.-Japan announcement on September 26, 2018, of their intent to begin formal bilateral trade agreement negotiations has eased concerns over potential U.S. import restrictions on motor vehicle and parts trade, but certain U.S. steel and aluminum imports from Japan remain subject to increased U.S. tariffs. The trade talks could prove challenging given the Trump Administration's focus on the bilateral U.S. trade deficit, particularly in autos—Japan's largest export to the United States in 2017. Japan had been hesitant to pursue bilateral negotiations as it remains committed to the TPP. After years of turmoil, Japanese politics has been relatively stable since the December 2012 election victory of Prime Minister Shinzo Abe and his Liberal Democratic Party (LDP), and further consolidated in the LDP's subsequent parliamentary gains. With the major opposition parties in disarray, the LDP's dominance does not appear to be threatened. Abe could become Japan's longest serving post-war leader if he remains in office throughout this term. However, Abe may struggle to pursue the more controversial initiatives of his agenda, such as increasing the Japanese military's capabilities and flexibility, because of his reliance on a coalition with a smaller party. With his political standing secured, Abe continues his diplomatic outreach, possibly hedging against an over-reliance on the U.S alliance. Since 2016, Abe has sought to stabilize relations with China, despite an ongoing territorial dispute and Japanese concerns about China's increasing assertiveness in its maritime periphery. Relations with South Korea, while stable, remain fraught with sensitive historical issues and differences in how to approach North Korea. Elsewhere, Abe has pursued stronger relations with Australia, India, Russia, and several Southeast Asian nations. In the past decade, U.S.-Japan defense cooperation has improved and evolved in response to security challenges, such as the North Korean missile threat and the confrontation between Japan and China over disputed islands. Abe accelerated the trend by passing controversial security legislation in 2015. Much of the implementation of the laws, as well as of U.S.-Japan defense guidelines updated the same year, lies ahead, and full realization of the goals to transform alliance coordination could require additional political capital and effort. Additional concerns remain about the implementation of an agreement to relocate the controversial Futenma base on Okinawa, particularly after the September gubernatorial election of a politician opposed to the relocation. |
Four major principles currently underlie U.S. policy on legal permanent immigration: the reunification of families, the admission of legal permanent residents (LPRs) with needed skills, the protection of refugees, and the diversity of admissions by country of origin. These principles are embodied in federal law, the Immigration and Nationality Act (INA) first codified in 1952. The Immigration Amendments of 1965 replaced the national origins quota system (enacted after World War I) with per-country ceilings. The Immigration Act of 1990 was the last law to significantly revise the statutory provisions on employment-based permanent immigration to the United States. Currently, permanent immigrants (or LPRs) enter the United States based on a preference system. Nonimmigrants, who are admitted into the United States temporarily, are not admitted through this preference system. There are five preference categories for employment-based LPRs and each has its own eligibility requirements and numerical limitations, and at times different application processes. Per-country ceilings are an additional numerical limitation placed on permanent immigration in order to prevent any one country from taking too large of a share of the visas. Interest has grown in the per-country ceilings, which limit the number of employment-based LPRs coming from specific countries each year. While no one is arguing for a return to the country-of-origin quota system that was the law from 1921 to 1965, some assert that the current numerical limits on employment-based LPRs are not working in the national interest. To inform this debate, this report analyzes the impact of the per-country ceilings on the employment-based immigration process. The Departments of State (DOS) and Homeland Security (DHS) each play key roles in administering the law and policies on the admission of migrants. Although DOS Consular Affairs is responsible for issuing visas, the U.S. Citizenship and Immigrant Services (USCIS) in DHS must first approve immigrant petitions. DOS is responsible for the allocation, enumeration, and assignment of all visas. In addition, the Department of Labor (DOL) is responsible for ensuring that employers seeking to hire employment-based LPRs are approved to do so. The prospective immigrant must maneuver this course through these federal departments and agencies to obtain LPR status. The report opens with brief explanations of the employment-based preference categories and the per-country ceilings governing annual admissions of LPRs. The focus is on the five major employment-based preference categories. The report continues with a statistical analysis of the pending caseload of approved employment-based LPR petitions. The same analyses of approved pending employment-based petitions are performed on two different sets of data: approved pending petitions with the DOS National Visa Center; and approved pending petitions with USCIS, known by the petition number as the I-485 Inventory. The report concludes with a set of legislative options to revise per-country ceilings that are meant to serve as springboards for further discussions. The INA provides for a permanent annual worldwide level of 675,000 LPRs, which is further broken down by specific levels for each preference category. However, the worldwide level is flexible and certain categories of LPRs are permitted to exceed the limits. The permanent worldwide immigrant level consists of the following components: family-sponsored immigrants, including immediate relatives of U.S. citizens and family-sponsored preference immigrants (480,000 plus certain unused employment-based preference numbers from the prior year); employment-based immigrants (140,000 plus certain unused family preference numbers from the prior year); and diversity immigrants (55,000). Immediate relatives of U.S. citizens as well as refugees and asylees who are adjusting to LPR status are exempt from direct numerical limits. As a result, roughly 1 million LPRs are admitted or adjusted annually. In addition to preference category numerical limitations, the INA specifies that each year countries are held to a numerical limit of 7% of the worldwide level of U.S. immigrant admissions, known as per-country limits or country caps. The actual number of immigrants that may be approved from a given country, however, is not a simple percentage calculation, as certain types of LPRs (such as immediate relatives) are exempt from the country caps. Employment-based immigrant visas (and family-sponsored visas) are issued to eligible immigrants in the order in which petitions have been filed under that specific preference category for that specific country. Spouses and children of prospective LPRs are entitled to the same status, and the same order of consideration as the person qualifying as the principal LPR, if accompanying or following to join the LPR (referred to as derivative status). When visa demand exceeds the per-country limit, visas are prorated according to the preference system allocations (detailed in Table 1 ) for the oversubscribed foreign state or dependent area. The INA bars the admission of any migrant who seeks to enter as a 2 nd or 3 rd preference LPR to perform skilled or unskilled labor, unless it is determined that (1) there are not sufficient U.S. workers who are able, willing, qualified, and available; and (2) the employment of the migrant will not adversely affect the wages and working conditions of similarly employed workers in the United States. The foreign labor certification program in the U.S. Department of Labor (DOL) is responsible for ensuring that foreign workers do not displace or adversely affect wages or working conditions of U.S. workers. Therefore, employers applying for foreign workers under the 2 nd and 3 rd preference categories must first get a foreign labor certification from DOL before filing a visa petition with USCIS. As mentioned previously, the INA establishes per-country levels, or country caps, at 7% of the worldwide level. The annual worldwide level for permanent immigration is 675,000 LPRs. For a dependent foreign state, the per-country ceiling is 2%. The per-country level is not a "quota" set aside for individual countries, as each country in the world could not receive 7% of the overall limit. As the State Department describes it, the per-country level "is not an entitlement but a barrier against monopolization." In addition to being a worldwide ceiling of 7% per country, the 7% per-country ceiling applies within the family-based preference system and did apply within the employment-based preference system prior to FY2001. The American Competitiveness in the Twenty-First Century Act of 2000 ( P.L. 106-313 ) enabled the per-country ceilings for employment-based immigrants to be surpassed for individual countries that are oversubscribed as long as visas are available within the worldwide limit for employment-based preferences. Employment-based preference allocations may exceed the 7% per-country limit within the overall level of 140,000 annually. The total number of employment-based LPR admissions notably increased from 123,291 in FY1994 to 246,865 in FY2005. Employment-based LPRs dipped to 140,903 in 2009 and rose to 151,596 in FY2014. They comprised 15% of the total 1,016,518 LPRs in FY2014. As noted in Table 1 above, the INA allocates the bulk of the employment-based visas—almost 86%—to the 1 st through 3 rd preference categories. Figure 1 presents the trends from 1994 to 2014 by preferences. Over this period, the 1 st preference LPRs have increased by 93% and the 2 nd preference LPRs have increased by more than 200%. The admission of 3 rd preference "professional, skilled, and unskilled workers" and 4 th preference "special immigrants" has dropped by 44% and 20% from FY1994 through FY2014, respectively. With respect to the 5 th preference, from FY1994 to FY2014, admissions increased by more than twenty-fold (from 444 to 10,723). Petitions for employment-based LPR status are first filed with USCIS in DHS by the sponsoring employer in the United States or, in some cases, the individual can self-petition. Petitions are sent to the National Visa Center (NVC) at DOS and individuals are assigned a priority date which represents their place in line. Individuals must then wait for their priority date to become current before they can proceed to the next steps. Once an individual's priority date becomes current, the next steps they take will depend on whether they are already in the United States or are abroad. If the prospective immigrant is already residing in the United States, the individual must apply for an adjustment of status (with Form I-485), which involves the individual, who is currently in the country, switching from a temporary category (e.g., an individual with an F-1 student temporary visa) to a permanent category. USCIS handles the processing of applications for adjustment of status. If the prospective LPR does not have legal residence status in the United States or is living abroad, the National Visa Center will handle the processing of the petition and will then forward the petition to the DOS Bureau of Consular Affairs in the applicant's home country. Regardless of whether the potential LPR is adjusting status with USCIS in the United States or obtaining a visa abroad from Consular Affairs, DOS assigns the visa priority dates and allocates the visa numbers. Most foreign nationals who become LPRs were already living in the United States. For example, approximately 86% of employment-based LPRs adjusted to LPR status in FY2014 and only 14% arrived from abroad. Figure 2 shows that over the last decade, within almost all employment-based LPR preference categories, most individuals were adjusting from within the United States, typically as nonimmigrants. The 5 th preference immigrant investors were the exception and had a majority of individuals being admitted as new arrivals (82% from FY2004-FY2014). The implications of this difference—whether the LPR is "arriving" or "adjusting"—are significant, in that it requires two separate departments to take charge of processing employment-based immigrant visas. Therefore, there are two different sources for data. Data from DOS's NVC caseload of approved pending petitions reflects visa petitions that DOS has received and therefore excludes adjustment of status I-485 applications (processed by USCIS). In addition, USCIS publishes data on their inventory of pending adjustment of status applications (I-485 applications). As mentioned above, DOS assigns visa priority dates to both individuals adjusting status and those applying from abroad. DOS issues a monthly Visa Bulletin that provides information on how the visa queue translates into waiting times for immigrants. The Visa Bulletin issues cutoff dates for numerically limited employment-based preference categories. Individuals with filing dates, or priority dates, earlier than the cutoff dates in the Visa Bulletin are currently being processed. According to DOS's Visa Bulletin for August 2016, the 1 st preference "extraordinary workers" visa category was current, except for China and India, as Table 2 shows. When a category is current, it means an approved petition is now ready for either adjustment of status or consular processing, regardless of priority date. With respect to the 2 nd preference "advanced degree" visa category, all countries had a priority date of February 1, 2014, except for China and India. Visas for 3 rd preference "professional, skilled, and unskilled workers" visas had a March 15, 2016, priority date, but China, India, and the Philippines had longer waits. For the 4 th preference "special immigrants" visa and 4 th preference "religious workers" visa, all countries were current except for El Salvador, Guatemala, Honduras, Mexico, and India. The 5 th preference "non-regional center immigrant investors" visa and "immigrant investors" visa were current for all countries except China. At the end of each fiscal year, the Department of State publishes a tabulation of approved visa petitions pending with the National Visa Center. These data do not constitute a backlog of petitions to be processed; rather, these data represent persons who have been approved for visas that are not yet available due to the numerical limits in the INA. The data only reflect petitions that DOS has received and therefore excludes adjustment of status I-485 applications (processed by USCIS). As apparent from the visa retrogression discussion above, these data offer a potentially incomplete account of all prospective employment-based LPRs. There were 100,747 approved petitions for employment-based LPR visas pending with the National Visa Center as of November 1, 2015. This number reflects persons registered under each respective numerical limitation (i.e., the totals represent not only principal applicants or petition beneficiaries, but their spouses and children entitled to derivative status under the INA). Of those approved petitions, there were 82,706 that were in the 1 st through 3 rd employment-based LPR preference categories. Figure 3 presents the 100,368 approved employment-based visa petitions pending as of November 1, 2015, by date of submission and by preference category for the 1 st through 3 rd and 5 th preference categories. In other words, Figure 3 represents these 100,368 approved pending petitions by the year they were submitted. Most of the 3 rd preference approved petitions pending were submitted several years ago. The 1 st , 2 nd , and 5 th preference approved petitions pending are more recent. The sharp decline in approved 3 rd preference category petitions pending that were submitted after 2007 is reportedly due to the visa retrogression that year. Petitions do not appear to be coming forward. Although the economic recession in the United States had no doubt affected the number of employers petitioning for foreign workers, some immigration officials and practitioners maintain that many petitions filed after 2007 are not yet appearing in the approved caseload. Overall, the majority of approved employment-based LPR visas pending at the National Visa Center as of November 1, 2015, were those of 3 rd preference "professional and skilled workers"—61,584—as shown in Figure 3 . There were also 6,208 approved 3 rd preference visas pending for "unskilled workers." In addition, there were 17,662 approved 5 th preference "immigrant investor" visas pending. For the 2 nd preference, those with advanced degrees, another 11,440 visas were pending. There were also 3,474 approved 1 st preference "extraordinary" visas and 379 4 th preference "special immigrant" visas pending. As Figure 4 makes clear, India leads as the source country for most of the approved petitions pending for employment-based LPR visas at the National Visa Center. Almost a third (30%) of the approved pending petitions are from the India (30,281). Philippines follows at 29% or 29,297. China is third at 22% or 22,114. South Korea and Mexico round out the top five source countries with 3% and 2%, respectively, of the approved pending visas. Figure 5 shows that India's approved visas pending at the National Visa Center are mostly in the 3 rd preference "professional, skilled, and unskilled worker" category (21,590); however, India has a noteworthy portion of approved pending visas in the 2 nd preference category for those with advanced degrees (7,646). The 3 rd preference category also dominates for the Philippines (28,102). A majority of approved visas pending from China are in the 5 th preference "immigrant investor" category (15,830). These figures representing the approved employment-based LPR visas pending at the National Visa Center as of November 1, 2015 illustrate that the caseload varies by source country and by preference category. It also reveals that while the India is the largest source country of approved employment-based visas, the Philippines and China make up a noteworthy portion of the approved pending visas. Approved visa petitions that are pending at the NVC are not the only source of pending employment-based LPR petitions. USCIS also maintains a system of approved employment-based I-485 petitions (i.e., the Application to Register Permanent Residence or Adjust Status) that are pending, which provides another source of data on the number of approved employment-based LPRs. Known as the I-485 Inventory, these data are available by preference category and by top countries. These I-485 data include the employment-based petitioners who plan to adjust status within the United States. The prospective employment-based LPRs who would be new arrivals from abroad are not included in the I-485 Inventory, because they would not need to file I-485 petitions, and they are processed by DOS. Figure 6 (similar to Figure 3 ) presents the 117,731 pending approved I-485 petitions as of April 2016, broken down by preference category and the year the petition was submitted to USCIS. The 2 nd preference category had the most approved I-485 petitions pending as of April 2016 (46,765) and Figure 6 indicates that many of those I-485 petitions were submitted several years ago. As noted earlier, the sharp decline in approved 3 rd preference category petitions submitted after 2007 is likely due to the visa retrogression in that year. There are 30,457 approved I-485 petitions pending in the 1 st preference category and 37,971 approved I-485 petitions pending in the 3 rd preference category. Similarly to the approved visa petitions with the National Visa Center, the 1 st and 5 th preference approved I-485 petitions pending were filed more recently. The approved I-485 petitions pending in the USCIS Inventory are more numerous in the 1 st and 2 nd preference categories than the approved visas pending in the 1 st and 2 nd preference categories at the National Visa Center. However, the 1-485 approved petitions pending in the USCIS inventory are smaller in the 3 rd and 5 th preference categories than the approved visas pending in the 3 rd and 5 th preference categories at the National Visa Center. With 46,336 approved I-485 petitions pending, India leads as the top source country with 39% of the approved I-485 petitions pending. China is second with 12% or 13,795. The Philippines (5,596) makes up 5%, and Mexico (3,645) has 3%, as Figure 7 shows. India dominates the 1 st "extraordinary," 2 nd "advanced degree," 3 rd "professional, skilled, and unskilled worker," and 4 th "special immigrant" categories of approved I-485 petitions pending. Figure 8 illustrates that again China is second for the 1 st and 2 nd preference categories, though China does have the highest number of approved I-485 petitions pending for the 5 th "immigrant investor" category. Table 3 and Figure 9 provide a comparative set of perspectives from which the effects that the per-country limits on legal immigration have on the oversubscribed countries may be assessed. Each depicts the pending caseload of approved employment-based LPR petitions in the 1 st through 5 th preference categories for both the National Visa Center's approved visa pending and the USCIS's I-485 Inventory of approved petitions. Figure 9 shows the data by top source country, and Table 3 presents the data by visa category. The data presented in Table 3 demonstrates that the I-485 inventory holds more pending visa applications for adjustments of status (117,731) compared to the NVC pending applications for new arrivals (100,747). The I-485 inventory has higher numbers of pending visas for the 1 st , 2 nd , and 4 th preference categories than the NVC. These patterns are consistent with the earlier analysis of "new arrivals" and "adjustments" showing that more employment-based migrants were adjusting status rather newly arriving. However, the 3 rd and 5 th preference categories have a higher number of pending visa applications in the NVC for new arrivals than they do in the I-485 inventory. The data in Figure 9 , along with the previous analyses, suggest that the majority of Indians are waiting to adjust status in the United States, while the majority of Filipinos are waiting to immigrate from abroad. Those with approved pending petitions from China seem to be more evenly split among those who might be adjustments and those who might be new arrivals. It is also evident that policy options aimed at advancing approved petitions from India and China would also bear on approved petitions pending from the Philippines. Employment-based immigration often raises concerns about foreign workers competing with or displacing U.S. workers. The concerns were especially prevalent during the past decade when economic indicators showed that the economy went into a recession. Although some economic indicators suggest modest growth, unemployment levels remained high long after the end of the recession and only fell back to their pre-recession level in late 2015. The Bureau of Labor Statistics reported that in May 2016 there were 7.4 million unemployed persons, compared with 5.5 million job openings (a ratio of 13 job seekers for every 10 job openings). Even as the number of unemployed individuals outnumbers the number of open positions, some employers assert that they continue to need the "best and the brightest" workers, regardless of their country of birth, to remain competitive in a worldwide market and to keep their firms in the United States. While support for the option of increasing employment-based immigration may be dampened by economic conditions, proponents argue it is an essential ingredient for economic growth. Those opposing increases in employment-based LPRs in particular assert that there is no compelling evidence of labor shortages and cite the rate of unemployment across various occupations and labor markets. They argue that recruiting foreign workers while many Americans remain unemployed would have a deleterious effect on salaries, compensation, and working conditions in the United States. With this economic and political backdrop, the option of lifting the per-country caps on employment-based LPRs has gained attention. Some observers contend that the elimination of the per-country caps would increase the flow of high-skilled immigrants without increasing the total annual admission of employment-based LPRs. The presumption is that many high-skilled people (proponents cite those from India and China, in particular) would then move closer to the head of the line to become LPRs. Legislative options that have been suggested include the following: a targeted lifting of the country caps on the top two preference categories of priority workers and those who are deemed exceptional, extraordinary, or outstanding individuals; a categorical lifting of the country caps on all employment-based preference categories, up to the 140,000 worldwide ceiling on employment-based LPRs; or a complete lifting of the country caps on all employment-based preference categories as well as excluding employment-based LPRs from the calculation of the family-based and worldwide per-country ceilings. While this report is expressly focused on the per-country ceilings in the INA, revising the country caps is just one of many ways to foster high-skilled immigration to the United States. Several possible alternatives include the following: reallocate the employment-based preferences: If the objective is to increase the number of the highest-skilled immigrants without raising the worldwide level, then reallocating additional visas to the 1 st and 2 nd preference categories is another option. In doing so, it would increase the flow of employment-based immigrants. This alternative, however, would not address the sheer number of approved LPR petitions from China, India, Mexico, and the Philippines. Many advanced-degree workers and all professional and skilled workers who have approved petitions have employers who have already been certified to hire them and have offered jobs to them. reallocate the diversity visas: Some have observed that the 50,000 diversity visas would be better used for high-skilled immigrants. permit selected nonimmigrants to adjust to LPR status outside the numerical limits: This alternative would be establishing an employment-based LPR category for foreign students who have obtained a graduate degree at the level of master's or higher in a science, technology, engineering, or mathematics (STEM) field from a U.S. institution. It is not possible to statistically project the effects of revising the per-country limits for several reasons. Foremost, it is not known whether approved petitions may be counted in both the National Visa Center data and the USCIS I-485 Inventory. If so, how is the number of approved employment-based petitions affected? Secondly, the full effect that the 2007 visa retrogression has had on the processing of employment-based visas is not known. More precisely, if the visa priority dates meaningfully advanced, would a substantial number of post-2007 petitions be approved and advance to the pending caseload? How many petitions are in the pipeline? It is quite likely that additional people would seek employment-based LPR visas if the wait times were shorter. Employers as well as prospective foreign workers may be more likely to file petitions if the delays were shortened. In other words, the reduction in the number of approved petitions pending might be short-lived. Finally, if the per-country ceilings were eliminated for employment-based LPRs without any other revisions to permanent legal immigration, it would likely have "ripple" effects on family-based immigration as well as other potential employment-based LPRs. Some observe that the per-country ceilings are arbitrary and argue that country caps should not be applied to employment-based preference categories. They maintain that employability has nothing to do with country of birth and that U.S. employers are not allowed to discriminate based on nationality or country of origin. They further opine that it is discriminatory to have laws that limit the number of employment-based LPRs according to country of origin. Proponents of per-country ceilings maintain that the statutory per-country ceilings restrain the dominance of high-demand countries and preserve the diversity of the immigrant flows. The Immigration Amendments of 1965 ended the country-of-origin quota system that overwhelmingly favored European immigrants, and subsequent amendments to the INA included immigrants from Western Hemisphere countries within the worldwide and per-country limits. Supporters of current law maintain that U.S. immigration policy has been more equitable and less discriminatory in terms of country of origin as a result of these reforms, because the INA puts country of origin on an equal playing field. Appendix A. Further Breakdowns of Employment-Based Petitions Pending by Top Countries Further analysis that compares the distributions of the employment-based preference categories reveals additional differences among the top countries. Even more striking, however, are the country differences between those approved visa petitions pending with the National Visa Center (NVC) and those approved I-485 petitions pending with the USCIS. Approved Visa Petitions Pending at the National Visa Center The number of approved 1 st , 2 nd , 4 th , and 5 th preference visas pending is small in contrast to the 3 rd preference category. Table A-1 presents the data for the different preference categories' top five countries. China makes up the largest portion of the approved visas pending at the NVC for the 1 st and 5 th preference categories. India has the largest number of approved visas pending with the NVC for the 2 nd and 3 rd preference categories combined and the Philippines is responsible for the largest portion within 3 rd preference category. Approved I-485 Petitions Pending The following table looks at the portion of approved I-485 petitions pending from select countries for each of the five employment-based preference categories. India has the largest number of approved pending I-485 petitions for all categories, except the 5 th preference, where China is responsible for the largest portion. China also has the 2 nd largest number of approved pending I-485 petitions for the 1 st and 2 nd preference categories. | The Immigration and Nationality Act (INA) specifies a complex set of numerical limits and preference categories for admitting lawful permanent residents (LPRs) that include economic priorities among the criteria for admission. Employment-based immigrants are admitted into the United States through one of the five available employment-based preference categories. Each preference category has its own eligibility criteria and numerical limits, and at times different application processes. The INA allocates 140,000 visas annually for employment-based LPRs, which amount to roughly 14% of the total 1.0 million LPRs in FY2014. The INA further specifies that each year, countries are held to a numerical limit of 7% of the worldwide level of LPR admissions, known as per-country limits or country caps. Some employers assert that they continue to need the "best and the brightest" workers, regardless of their country of birth, to remain competitive in a worldwide market and to keep their firms in the United States. While support for the option of increasing employment-based immigration may be dampened by economic conditions, proponents argue it is an essential ingredient for economic growth. Those opposing increases in employment-based LPRs assert that there is no compelling evidence of labor shortages and cite the rate of unemployment across various occupations and labor markets. With this economic and political backdrop, the option of lifting the per-country caps on employment-based LPRs has become increasingly popular. Some argue that the elimination of the per-country caps would increase the flow of high-skilled immigrants without increasing the total annual admission of employment-based LPRs. The presumption is that many high-skilled people (proponents cite those from India and China, in particular) would then move closer to the head of the line to become LPRs. To explore this policy option, analyses of approved pending employment-based petitions are performed on two different sets of data: approved pending petitions with the Department of State (DOS) National Visa Center (NVC), and approved pending petitions with U.S. Citizenship and Immigrant Services (USCIS). Because DOS and USCIS play different roles in the visa application process, their datasets represent different populations. DOS's data from the NVC contains individuals who apply for a visa while residing outside of the United States. They are considered new arrivals once they are issued a visa and enter the United States. USCIS's data contains individuals who are already residing in the United States and are applying to change their immigration status from a temporary status to a permanent LPR visa. This process is referred to as an adjustment of status. As of November 2015, there were 100,747 approved employment-based LPR petitions pending at the National Visa Center. The 3rd preference category of "professional, skilled, and unskilled" workers had the highest number of pending approved petitions (67,792). The 5th preference category of "immigrant investors" had 17,662 approved petitions pending and the 2nd preference category of "advanced degree" workers had 11,400 approved petitions pending. There were also 3,747 approved petitions pending for the 1st preference category of "extraordinary" workers and 379 for the 4th preference category for "special immigrants." In terms of the USCIS data, there were a total of 117,731 approved I-485 petitions pending as of April 2016, and most were for the 2nd preference "advanced degree" workers (46,765). There were 37,971 approved I-485 petitions pending in the 3rd preference "professional, skilled, and unskilled" category and 30,457 pending in the 1st preference "extraordinary" category. In addition, there were 1,409 5th preference "immigrant investor" and 1,129 4th preference "special immigrant" approved I-485 petitions pending. The top four countries in the National Visa Center data set were (in descending rank order) India, the Philippines, China, and South Korea. The top four countries in the USCIS data sets were (in descending rank order) India, China, the Philippines, and Mexico. The data indicates that more Indians and Mexicans are waiting to adjust status in the United States, while more Filipinos and Chinese are waiting to immigrate from abroad. Some argue that the per-country ceilings are arbitrary and observe that employability has nothing to do with country of birth. Others maintain that the statutory per-country ceilings restrain the dominance of high-demand countries and preserve the diversity of immigrant flows. |
The report is intended to provide a brief summary and analysis of major legislative provisions in bills related to reauthorization of the Federal Aviation Administration and related aviation programs that were considered during the 110 th Congress. While Federal Aviation Administration (FAA) reauthorization legislation was considered at length during the 110 th Congress, and a FAA reauthorization bill ( H.R. 2881 ) was passed by the House, the only related legislation enacted consisted of several short term extensions for aviation trust fund revenue collections and aviation program authority. The Federal Aviation Administration Extension Act, Part II ( P.L. 110-330 ) extends these authorizations until March 31, 2009, thus carrying the issue of FAA reauthorization over to the 111 th Congress. This report discusses major provisions in the bills and selected policy issues discussed during the legislative debate over FAA reauthorization that took place during the 110 th Congress. The report is organized into six major program areas: aviation system finance; airport finance; FAA management and organizational issues; system capacity and safety; environmental issues; and miscellaneous programs and provisions. In several cases, provisions that appear in various unrelated sections of proposed legislation have been rearranged in this report in an effort to group and discuss related items in an issue-driven or programmatic context. Since this report is primarily written as a means of communicating key legislative provisions under consideration in the ongoing FAA reauthorization process, it does not go into detail regarding the specific policy issues behind these legislative proposals. CRS has prepared two separate reports that provide discussion of the policy context for the current FAA reauthorization debate. For an overview of various selected issues related to the current FAA reauthorization debate, see CRS Report RL33789, Federal Aviation Administration: An Abridged Look at Reauthorization Issues in the 110 th Congress ; for more detailed background on these issues, see CRS Report RL33698, Reauthorization of the Federal Aviation Administration: Background and Issues for Congress , both by [author name scrubbed], et al. Funding authorization for aviation programs set forth in Vision 100—Century of Aviation Reauthorization Act ( P.L. 108-176 , hereafter referred to as Vision 100) expired at the end of FY2007. Also, authorization of the existing tax and fee structure that provides revenue for the aviation trust fund expired at the end of FY2007. During the first session of the 110 th Congress, the House passed the FAA Reauthorization Act of 2007 ( H.R. 2881 ). While H.R. 2881 , along with the Aviation Investment and Modernization Act of 2007 ( S. 1300 ) and aviation financing provisions in American Infrastructure Investment and Improvement Act of 2007 ( S. 2345 ) have all been placed on the Senate legislative calendar, they have not yet been debated on the Senate floor. In early May 2008, the Senate attempted, but failed, to take up consideration of H.R. 2881 . Revenue collections and the operation of the FAA and its programs have continued, however, as a result of continuing and consolidated appropriations legislation ( P.L. 110-92 , P.L. 110-116 , and P.L. 110-161 ). The program was further extended until June 30, 2008, by the Airport and Airway Extension Act of 2008 ( P.L. 110-190 ). On June 30, 2008, the Federal Aviation Administration Extension Act of 2008 ( P.L. 110-253 ) was signed by the President, further extending Airport and Airway Trust Fund (AATF) tax authorization and Airport Improvement Program (AIP) expenditure authority through the end of FY2008. On September 30, 2008, the President signed the Federal Aviation Administration Extension Act of 2008, Part II ( P.L. 110-330 ), which provides a six-month extension for revenue collections, AIP obligation and grant authority, and authorizations for FAA programs. On September 30, 2008, the President also signed the Continuing Appropriations Resolution for FY2009, which provides funding for the FAA and other federal programs through March 6, 2009. The resolution increases funding for FAA operations to an annualized rate of $8,757 million, $17 million above the FY2008 level. The law stipulates that roughly $1,099 million of this must be expended on activities tied to aviation safety. Under the terms of the resolution, FAA's other programs are limited to spending at an annualized rate equivalent to FY2008 appropriations. The legislative process toward reauthorizing the FAA began in February 2007 with the submittal to Congress of a legislative proposal by the Bush Administration and initial congressional hearings regarding FAA reauthorization. On February 14, 2007, the FAA transmitted proposals to reauthorize funding of FAA functions and related aviation programs and reform the financing of the national airspace system. The text of these proposals were introduced as bills in the House ( H.R. 1356 ) and in the Senate ( S. 1076 ) at the FAA's request. The FAA's proposed bill ( H.R. 1356 / S. 1076 , hereafter referred to by bill number or as the FAA proposal), entitled the Next Generation Air Transportation System Financing Reform Act of 2007, proposes a new system for financing aviation system operations and capital improvements that includes various fee-for-service charges (user fees), directed primarily at commercial system users, and excise taxes (primarily fuel taxes) for general aviation system users. The FAA proposal also includes several modifications to airport revenues, including increases in the maximum passenger facility charges (PFCs) that airports can impose on passengers, and initiatives intended to modify and simplify the apportionment of grants to airports. The FAA proposal also recommends several management and organizational reforms, most notably the proposed establishment of an air transportation system advisory board, and the authority to create a commission, similar to the military's Base Realignment and Closure (BRAC) commissions, to make independent recommendations regarding the realignment and consolidation of various FAA facilities and services. The proposal also includes proposed statutory language intended to better integrate the work of the Joint Planning and Development Office (JPDO) on the Next Generation Air Transportation System (NGATS) design and implementation into the FAA's ongoing planning and acquisition activities. Also, the proposal includes language to increase the flexibility in delivering various air traffic services and capabilities to system users by allowing airports and private entities to play a more direct role in acquiring, deploying, and maintaining facilities and services to augment the FAA's air traffic communications, navigation, and surveillance capabilities. With regard to addressing system and airport capacity and safety, the FAA proposal seeks statutory authority to control congestion at certain airports through market-based mechanisms, such as slot auctions and peak-period pricing. The proposal would direct the Department of Transportation (DOT) to study the appropriateness of a market-based system at New York's LaGuardia Airport (LGA), and if deemed appropriate, would permit the airport operator to implement a market-based approach to controlling congestion. The FAA proposal also seeks to establish a pilot program to evaluate market-based mechanisms to relieve congestion at up to 15 other airports. With regard to addressing the environmental impacts of aviation, the FAA proposal includes language that seeks to provide funding for research into technology or processes that would reduce noise, air emissions, and water quality impacts; provide grants for programs or projects intended to mitigate or minimize regulated environmental impacts; and provide grants or specify regulatory procedures to assist airports in complying with environmental requirements. The FAA proposal also recommends establishing a consortium for fostering innovation to develop cleaner, quieter, and more efficient next-generation aircraft. Further, the FAA proposal seeks to limit the scope of the Air Tour Management Program, designed to mitigate noise and other adverse impacts from air tours over national park units, to those parks where air tour impacts have been identified as a concern or could become a more substantial issue. The FAA proposal also includes language that would significantly modify the existing Essential Air Service Program (EAS) that subsidizes air carrier service to small and isolated communities, primarily by setting more stringent criteria for program eligibility and restricting further expansion of the program. On May 3, 2007, Senator Rockefeller introduced the Aviation Investment and Modernization Act of 2007 ( S. 1300 ). On May 16, 2007, the Senate Committee on Commerce, Science, and Transportation convened a markup session and ordered that the bill be reported favorably with amendments. The reported bill, along with an accompanying committee report ( S.Rept. 110-144 ), was ordered printed on August 3, 2007 and placed on the Senate Legislative Calendar under General Orders. S. 1300 proposes a four-year reauthorization, including modest increases to the FAA's authorized spending levels through FY2011. S. 1300 , as amended, offers an alternative to the FAA-proposed user fee structure, proposing to create a separate treasury fund, called the Air Traffic Modernization Fund, that would be financed through the collection of $25 surcharges imposed on certain flights for air traffic control costs. The surcharge would be principally collected from airlines and high-performance business jet operators, as all piston-engine powered aircraft would be exempt from paying the surcharge. The bill language specifies that more than $400 million toward the FAA's Facility and Equipment (F&E) account is to be derived from these surcharges each year from FY2009 through FY2011. The bill gives the FAA specific authority to collect these surcharges and impose sanctions upon those who don't pay, but leaves it up to the FAA to devise a collection system. The surcharge would be in addition to the existing tax and fee system, although proposals to modify that tax and fee structure may be considered by the Senate through separate legislation considered by the Senate Committee on Finance or possible floor action. To further support the modernization of air traffic facilities and services, S. 1300 authorizes the Department of Transportation to issue obligations, such as bonds, totaling up to $5 billion. These instruments would be repaid, with interest through revenues derived from the collection of the $25 per flight surcharges. Interest yields on these instruments would be set at rates of comparable treasury obligations. S. 1300 includes several provisions for FAA management and organizational reform. The bill includes an alternate to the FAA-proposed board, by creating a smaller seven-member Air Traffic Control Modernization Oversight Board that would have greater oversight authority over FAA's planning, budgeting, and implementation of facilities and equipment modernization. The proposed board would have approval authority over large scale acquisition programs (those of $100 million or greater), and would be responsible for approving the FAA's capital improvement program, operational evolution plan, facilities and equipment budget, and key leadership positions in the Air Traffic Organization (ATO) and Joint Planning and Development Office (JPDO). S. 1300 proposes $100 million annual increases to the Airport Improvement Program (AIP) through FY2011, but does not include any increases to the maximum Passenger Facility Charge (PFC) that can be levied by airports. The bill does, however, propose a pilot program at up to six airports allowing airports to collect PFCs directly from passengers without any statutory ceiling on the amount that could be charged. The bill includes other technical modifications to the AIP program primarily aimed at increasing the eligibility of smaller passenger service airports to qualify as primary airports and extend the 95% federal share of airport project funding for smaller-sized airports. S. 1300 includes several provisions addressing customer service for passenger airlines. These provisions endeavor to provide assurances of adequate food, water, and restroom facilities when flights are substantially delayed. These provisions would also require airlines to provide consumer rights information and airline customer service policies on their Internet websites, and would require airlines to publish customer service and flight delay history information. S. 1300 would also expand DOT's consumer complaint investigations, subject to the availability of appropriations. With regard to systems planning for next generation air traffic technologies, S. 1300 would require all agencies involved in the NGATS initiative to establish implementation offices and enter into multiagency agreements outlining their respective responsibilities and budgetary commitments to supporting NGATS. Like the FAA proposal, S. 1300 would make the JPDO director a voting member of the FAA's Joint Resources Council (JRC) and the ATO's Executive Council. The bill would extend the authorization of $50 million annually to JPDO through FY2011. However, unlike the FAA proposal, S. 1300 would not establish a BRAC-like commission to examine FAA facility and services consolidation and realignment. Rather, under S. 1300 , the Air Traffic Control Modernization Oversight Board would be tasked with reviewing the FAA's recommendations for realignment and proposing alternative recommendations, but gives the Board no specific power to influence the actions related to FAA realignment in the manner proposed in the FAA bill. With regard to the FAA's personnel management system, S. 1300 includes a provision that would involve the Federal Services Impasses Panel (FSIP) in cases where the FAA and bargaining units cannot reach an agreement during collective bargaining. The provision would allow the FSIP to order binding arbitration in such cases and outlines a specific process for conducting such binding arbitration proceedings. S. 1300 includes numerous provisions related to system capacity and safety including provisions designed to: improve runway safety; expedite progress on rulemaking to improve airliner fuel tank safety and reduce flammability risk; conduct research and improve regulations pertaining to pilot fatigue, flight time, and rest requirements; implement several NTSB recommendations pertaining to the safety of helicopter emergency medical service (HEMS) operations; address unmanned flight operations in the National Airspace System (NAS); and examine ways to improve capacity and safety by improving wake turbulence prediction, detection, and avoidance. The bill also seeks to expand the number of flights operating to and from Washington Reagan National Airport. With regard to environment and energy issues, S. 1300 includes several of the FAA-proposed provisions regarding research and mitigation grants. Additionally, the bill seeks to establish a research grant program and center of excellence to examine the development of synthetic jet fuel from clean coal sources. The bill also includes a provision that would prohibit all aircraft under 75,000 pounds maximum weight that do not conform to Stage 3 noise standards five years after enactment. Heavier aircraft would be required to conform to Stage 3 noise standards by December 31, 1999. S. 1300 also seeks changes to the Air Tour Management Program that include allowing modifications to interim operating authority without further environmental review; allowing transfers of operating authority to conduct commercial air tours over national parks; establishing an annual reporting requirement for commercial air tour operators; and authorizing fee collections from air tour operators tied to the cost of carrying out the Air Tour Management Program. S. 1300 also proposes changes to the Essential Air Service Program (EAS) including a requirement that DOT allow EAS airlines to code share with other carriers, extension of the existing statutory highway mileage criteria for EAS eligibility through FY2011, the creation of financial incentives for improvements to EAS service, and a program to aid the conversion of former EAS airports to general aviation status. The bill would allow additional overflight fee collections in excess of the $50 million level identified in the FAA proposal to be put toward the EAS program. Under S. 1300 , the additional amount authorized in addition to the $50 million base, would rise from $77 million to $83 million. On November 13, 2007, the Senate Committee on Finance reported S. 2345 , the American Infrastructure Investment and Improvement Act of 2007, incorporating the committee's recommendations for what is likely to be the revenue title of the Senate FAA reauthorization bill. Its proposal makes some changes to elements of the existing tax and fee structure, but does not create new user fees. As can be seen in Table 3 , the committee has increased the general aviation jet fuel tax, increased the international departure/arrival tax, and created a new tax system for a particular segment of the aviation industry—fractionally owned aircraft. The Senate Finance bill provides what is viewed by many as a possible alternative to the surcharge proposal contained in S. 1300 . Representative Oberstar introduced the FAA Reauthorization Act of 2007 ( H.R. 2881 ) on June 27, 2007. On June 28, 2007 the House Committee on Transportation and Infrastructure held a markup session on the bill and ordered the bill reported favorably with amendments. While the bill was ordered to be reported favorably with amendments by the committee, the amended bill and accompanying committee report has not yet been made publicly available. Also, on June 13, 2007, Representative Udall introduced The Federal Aviation Research and Development Reauthorization Act of 2007 ( H.R. 2698 ), covering research, engineering, and development programs of the FAA which fall under the jurisdiction of the House Committee on Science and Technology. That committee held a markup session on that bill on June 22, 2007, and ordered that it be reported favorably with amendments. Funding authorization levels for FAA Research, Engineering, and Development (RE&D) and selected provisions contained in H.R. 2698 were incorporated into the version of H.R. 2881 considered on the House floor as Title IX of the bill (see H.Res. 664 ; H.Rept. 110-335 ). Also, the text of H.R. 3539 as ordered reported by the House Committee on Ways and Means, providing for the extension and modification of Airport and Airway Trust Fund (AATF) taxes, was adopted and incorporated into the version of H.R. 2881 considered by the House. On September 20, 2007, the House passed H.R. 2881 , agreeing to several miscellaneous amendments to the bill. This report discusses H.R. 2881 as passed by the House. H.R. 2881 proposes a boost in F&E spending to support NGATS initiatives. Also, funding authorization levels specified in H.R. 2698 , and incorporated into funding authorization levels specified in H.R. 2881 , would substantially increase the available funding for FAA Research, Engineering, and Development (RE&D) activities that fall under the jurisdiction of the House Committee on Science and Technology. The House Committee on Ways and Means reported H.R. 3539 , the Airport and Airway Trust Fund Financing Act of 2007, on September 18, 2007. Title X of H.R. 2881 as passed by the House, adopted from the Ways and Means bill ( H.R. 3539 ), follows the general intentions communicated by the House Committee on Transportation and Infrastructure (the T&I Committee), which sought a modest increase in federal aviation fuel taxes. Specifically, the T&I Committee called for increasing jet fuel taxes from 21.8 cents per gallon to 30.7 cents per gallon (roughly a 40% increase) and aviation gasoline taxes from 19.3 cents per gallon to 24.1 cents per gallon (about a 25% increase). The House Committee on Ways and Means, however, agreed to raise the jet fuel taxes even further, to 35.9 cents per gallon (roughly a 65% increase), while accepting the gasoline tax proposal at the 24.1-cent-per-gallon level. These levels were included in the House-passed version of H.R. 2881 . With regard to airport financing, H.R. 2881 would fund the AIP program at the same levels specified in S. 1300 . H.R. 2881 would additionally allow for increased passenger facility charge (PFC) collections, but large hub airports that increase PFCs above the current $4.50 per passenger level would have their AIP apportionments reduced by an amount equal to the projected PFC revenue increases derived from the fee increase. H.R. 2881 would allow for PFCs to increase, up to $7 per passenger and would raise the PFC cap on a round trip ticket from $18 to $28. The bill also calls for a study to assess the impact of proposing different PFC rates for connecting passengers versus origin and destination passengers. H.R. 2881 would set state apportionments for AIP at 10% of total apportioned amounts, with a $300 million minimum provided total AIP funding remains above $3 billion. Apportionments for nonprimary airports would remain at $150,000 or one fifth of the estimated five year development costs. The bill also would raise the required air carrier approval for airport privatization amounts from 65% to 75% and airports participating in the privatization pilot program would not be eligible for AIP funds. Like the FAA proposal and S. 1300 , H.R. 2881 would exempt proceeds from the sale of a privatized airport to a public authority from AIP assurances that require all airport revenue be expended for capital and operating costs. H.R. 2881 includes several provisions regarding passenger airline service, including a requirement that DOT review and adjust denied boarding compensation regulations every two years. The bill would establish additional carrier monthly reporting requirements to provide DOT with data on diverted flights and flights cancelled after leaving the gate. H.R. 2881 would also require contingency plans for providing food, safe drinking water, restrooms, cabin ventilation, and medical care to passengers during excessive ground delays to be developed and submitted to DOT. Airports would also be required to devise plans for sharing facilities and making gates available for such situations, and would require DOT to set up a consumer complaints hotline. The bill would also require airlines to inform passengers at the time of ticket purchase of the names of any insecticides it intends to use while passengers are on board. The bill requires DOT to establish an advisory committee for airline passenger consumer protection. The bill also directs the DOT Inspector General to conduct an audit of air carrier flight delays and cancellations, and requires a GAO assessment comparing passenger rights in the United States to those in the European Union. With regard to next generation modernization initiatives, H.R. 2881 , like the FAA proposal and S. 1300 , would increase the stature of the JPDO director, and would require each JPDO supporting agency to designate a senior official and establish an office to oversee agency efforts supporting the NGATS planning and development initiatives. The bill would also require a multiagency integrated work plan describing annual objectives, milestones, and delineation of responsibility among federal agencies, and to tie these plans to the budgetary process. H.R. 2881 would also require GAO to review the progress and challenges associated with air traffic modernization initiatives under NGATS. The bill also authorizes additional appropriations specifically designated for airspace redesign initiatives to enhance aviation system capacity and reduce delays. H.R. 2881 proposes to establish an FAA working group on facility and service consolidation, consisting of the FAA Administrator and representatives from sectors of the aviation industry as well as labor representatives representing FAA field employees. The working group's functions, however, would largely be advisory in capacity, and it could not by itself prevent any FAA consolidation actions from moving forward. An amendment agreed to and incorporated into House-passed H.R. 2881 would require that FAA regional office consolidation be included in the scope of the working group's oversight, and would require that the working group include representation for regional office employees. H.R. 2881 would create a public-private partnership including a university with expertise in air traffic management to serve as an airport-based test facility for NGATS technologies. The bill would also establish a NextGen Research and Development Center of Excellence to provide educational, technical, and analytical assistance regarding NGATS technologies. The bill would also require the FAA to establish a process for including affected employees, such as air traffic controllers and airways system specialists, in the NGATS process and other modernization initiatives. With regard to FAA personnel management, the House Committee on Transportation and Infrastructure adopted an amendment offered by Representative Costello that, like S. 1300 , would require binding arbitration to resolve impasses in contract negotiations. H.R. 2881 , however, would invalidate FAA contract actions taken after July 10, 2005, thus appearing to have the effect of undoing the FAA contract with air traffic controllers adopted June 5, 2006, and subjecting the prior impasse with controllers to the terms of the binding arbitration provision. Pending the outcome of the binding arbitration, the provision would allow affected employees to receive "back pay" of any additional salary increase that may be included in the negotiated settlement, and it authorizes $20 million for this purpose. H.R. 2881 includes language requiring a GAO study of FAA technical training of system specialists that service air traffic and navigation infrastructure, and a study by the National Academy of Sciences on FAA inspector staffing levels and workload as well as air traffic controller staffing. The bill authorizes increased funding for increasing inspectors, safety technicians, and operational support staffing. H.R. 2881 also calls for an FAA study of front line manager staffing requirements for air traffic control facilities, and would establish a university center of excellence for aviation employment. The bill also seeks to create a 12-member task force to conduct a study assessing the conditions of FAA air traffic control facilities and recommend steps for rehabilitation, remediation, and programmatic changes to prevent unsafe building conditions. H.R. 2881 provides for 10 additional beyond perimeter slots from Washington Reagan National Airport (DCA), but would reduce within perimeter slots by an equal amount. The bill does not specifically address slot issues at New York's LaGuardia Airport where statutory slot controls have expired, nor at any other congested airports besides DCA. However, the bill includes a general provision that would allow the FAA to hold meetings among air carriers to voluntarily negotiate schedule reductions at any airport experiencing arrival and departure rates exceeding maximum hourly rates that is likely to have a significant adverse effect on a regional or national level. If air carriers were unwilling to voluntarily agree to schedule reductions, then the provision would authorize the FAA administrator to take appropriate action to reduce arrivals and departures to reflect available airport capacity. Also, an amendment agreed to by the House would require GAO to assess the use of market-based strategies for reducing airspace congestion, such as peak-period pricing, slots, or quotas, and compare the effects of such initiatives to the improvements in congestion attainable through airspace redesign initiatives. H.R. 2881 contains language similar to S. 1300 requiring the FAA to report on its progress to install systems to mitigate runway incursions. H.R. 2881 would authorize dedicated funds for runway incursion reduction programs and runway status lights. Additionally, H.R. 2881 would require the FAA to develop a strategic runway safety plan. H.R. 2881 includes language identical to S. 1300 calling on the FAA to finalize rulemaking regarding fuel tank flammability reduction on large transport aircraft. H.R. 2881 , like S. 1300 , also directs the National Academy of Sciences to carry out a study of pilot fatigue and requires the FAA to implement recommendations of an FAA study on flight attendant fatigue. The bill would also require the FAA to rewrite current flight and duty time regulations for air carrier, commuter airline, and charter pilots to count flight time accumulated conducting non-revenue flight assignments for the operator toward pilot flight and duty time totals. The bill would also require the FAA to establish occupational safety and health standards for flight attendants, and would require flight attendants, as well as gate agents, to receive specific training in serving alcohol, recognizing intoxicated individuals, and handling disruptive passengers. With regard to airline maintenance, H.R. 2881 includes a provision that would restrict the use of non-certified maintenance providers, allowing only airline employees or employees of FAA-certified repair stations to carry out substantial and routine maintenance and complete required inspections of aircraft used in airline service. Air carriers would also be required to provide complete lists of their non-certificated maintenance providers, whose activities would be restricted to non-routine, non-substantial maintenance and repair work under this provision. The bill also adopts an amendment agreed to by the House that would extend the requirement for drug and alcohol testing programs to safety-critical positions at foreign repair stations working on air carrier aircraft or components. With regard to unmanned aircraft, H.R. 2881 would require the FAA to develop a comprehensive plan to safely integrate commercial unmanned aircraft in the national airspace system as soon as possible but not later than the end of FY2012. It also calls for expediting authorization of public-use unmanned aircraft, and implementing interim regulations to allow certain commercial unmanned aircraft to have access to airspace prior to completion of the comprehensive plan. H.R. 2881 also would authorize funding for wake vortex mitigation technologies, including advisory systems. The bill identifies specific funding amounts totaling more than $45 million over the four year reauthorization period for wake turbulence-related research and development. An amendment agreed to by the House would also require the FAA to study the feasability of creating a publicly-searchable Internet database of acceptable height and distance from aviation sites for the installation of wind turbines. The bill would also require the FAA to update standards for aircraft rescue and firefighting (ARFF) personnel and equipment at commercial airports based on national voluntary consensus standards, but does not specifically expand the scope of these standards to all-cargo operations as some aviation safety experts have argued for. H.R. 2881 includes a provision, similar to that in the FAA proposal, to establish a consortium to develop Continuous Low Energy, Emissions and Noise (CLEEN) engine and airframe technology. The bill includes proposed sense of Congress language asserting that the European Union's proposed emissions trading scheme is inconsistent with International Civil Aviation Authority (ICAO) practices of establishing consensus-based international standards and recommended practices, and urges the European Union and others to work cooperatively through ICAO to develop "a consensual approach to addressing aircraft greenhouse gas emissions." The bill also calls for research to promote development of alterative jet fuels and calls for the JPDO to establish environmental standards for NextGen technologies. Like the FAA proposal and S. 1300 , the H.R. 2881 also includes a provision to fund environmental mitigation grants under a proposed pilot program. Unique to H.R. 2881 is a provision for a pilot program for aircraft departure queue management to decrease fuel consumption and emissions, and a provision requiring the FAA and the EPA to examine how engine noise and emissions standards development could be better integrated across the two agencies. Similar to S. 1300 , H.R. 2881 includes a provision that would prohibit operations of non-Stage 3 compliant jets under 75,000 pounds after 2012. An amendment agreed to by the House also adds language stating that it is the sense of the House of Representatives that the Port Authority of New York and New Jersey should conduct noise compatibility planning studies (referred to as Part 150 studies) at John F. Kennedy International Airport and LaGuardia Airport in New York and Newark Liberty and Teterboro Airports in New Jersey. Additionally, the bill would increase funding for the Airport Cooperative Research Program (ACRP) to examine airport environmental issues and calls for an interagency study on the effects of aviation on climate change. The bill would also require the FAA to study the use of lead-free fuels for piston aircraft. With regard to the Air Tour Management Program and curtailing aircraft noise in national parks, the modifications proposed in H.R. 2881 are similar to the FAA proposal initiatives to streamline and expedite agency actions. H.R. 2881 reserves $50 million in overflight fees for funding the Essential Air Service (EAS) program and increases the authorization for additional EAS funds to $83 million. The bill encourages financial incentives and long-term contracts for EAS, but would eliminate the local participation program created by Vision 100. The bill would also create an Office of Rural Aviation within DOT to monitor and improve air service to small communities. The bill also includes language allowing state and local governments to restore an airport's EAS eligibility status by offering proposals, developed in cooperation with the air carrier, to reduce subsidies to below statutory per passenger maximums and allows DOT to increase negotiated EAS subsidies to adjust for any significant increases in air carrier fuel costs. The bill also seeks to clarify the statutory definitions related to the actual control of the operations of U.S. airlines that are owned in part by foreign entities. The House Committee on Transportation and Infrastructure has also agreed to an amendment offered by Representative Oberstar to limit express carrier employees covered under the Railway Labor Act (RLA) to those performing certain aviation-related functions, leaving other express carrier employees, like delivery truck drivers, to be covered under provisions of the more broadly defined National Labor Relations Act (NLRA), which allow them to organize and collectively bargain at the local level and according to less formal standards for affiliation. The measure is supported by labor unions and United Parcel Service (UPS) whose employees are already primarily covered under the NLRA, but is opposed by FedEx, whose employees fall under the RLA guidelines. Funding authorization levels for the FAA have been historically split among four principal accounts: Operations and Maintenance (O&M); the Airport Improvement Program (AIP) or Grants in Aid for Airports; Facilities and Equipment (F&E); and Research, Engineering, and Development (RE&D). However, beginning in FY2008, the FAA proposes a restructuring of these accounts, largely to separate operational activities carried out by the Air Traffic Organization (ATO) from FAA's regulatory functions in the FAA's accounting structure. S. 1300 , however, proposes to reauthorize the four existing FAA accounts. Therefore, the bills are not directly comparable with regard to funding authorizations. The FAA also proposes new user-fee funding mechanisms, under which much of the revenue to be used for air traffic services and regulatory functions would be determined through fee-setting activities carried out by the FAA Administrator, rather than through traditional congressional funding authorizations. This further complicates any effort to make comparisons among the bills with regard to funding levels. Funding mechanisms and levels identified in the bills are generally described below, and more detailed treatment of the FAA-proposed revenue system is provided later in the section titled " Proposed Tax and Fee Structure ." Funding authorization levels in the FAA proposal cannot be compared to historical funding in the FAA's four accounts—O&M, AIP, F&E, and RE&D. This is because the FAA has proposed to restructure these accounts, and also because the FAA proposes to establish a user fee collection authority under which the FAA Administrator would set fees that would be deposited into separate Treasury accounts as offsetting collections. The proposed new accounts under the FAA plan include the Air Traffic Organization (ATO) account and the Safety and Operations account. These would replace the current O&M and F&E accounts, but there is not a one-to-one relationship between the current accounts and the proposed accounts. Specifically, some O&M and F&E functions would map into the Safety and Operations account while others would map into the Air Traffic Organization account. One goal of this new accounting structure is to fully separate the FAA regulatory responsibilities from its operational functions on the books as has been done organizationally with the creation of the Air Traffic Organization (ATO). Under the FAA plan, the proposed Safety and Operations and ATO accounts would be funded primarily through user fee collections, while RE&D would continue to be funded through a combination of Airport and Airway Trust Fund (AATF) and General Fund contributions. The AIP program would continue to be funded by the AATF. Table 1 Shows the FAA proposed funding authorizations coming out of the existing Airport and Airways Trust Fund (AATF) and the proposed limits or caps on General Fund contributions over the proposed three-year authorization period. Because the proposed fee collection authority would not fully take effect until FY2009, larger contributions from the AATF would be required in FY2008 during the transition to the user fee based system. For FY2009 and FY2010, the proposal assumes that these user fees would cover a large part, but not all, of the FAA's costs for the ATO and Safety and Operations accounts. The AIP program account would continue to receive its revenue from the AATF, and the FAA's RE&D account would still rely primarily on the AATF for its revenue source, with additional funding coming from the General Fund contribution. Maximum General Fund contributions would remain flat at around $2.5 billion under the FAA proposal. This level of General Fund contribution is particularly troubling to critics of the FAA proposal because it is lower than contribution levels from recent years, which have already been declining. Also, because the proposed maximum General Fund contribution is flat across the proposed three-year authorization period, it will comprise a smaller percentage contribution to the FAA's total budget if costs continue to rise. These increased costs would be covered instead by user fees under the FAA proposal. However, because the FAA proposal would give the FAA administrator fee setting authority, the anticipated revenue generated from fee collections is not discussed in the bill or supporting documentation provided by the FAA. This proposal is discussed in further detail in the section titled " Proposed Tax and Fee Structure . " Under S. 1300 , the FAA's O&M account would see an increase of about 7.7% in authorized levels for FY2008 compared to FY2007 appropriated amounts. This is notable because FY2007 appropriated amounts for O&M already slightly exceed authorized amounts, a situation largely attributed to unanticipated increases in labor costs within the FAA. Beyond FY2008, increases to the O&M account are more modest, averaging slightly above a 3% annual rate, which tracks closely with inflation and employment cost index projections for the broader economy. Under S. 1300 , the authorized levels for the Airport Improvement Program (AIP) would continue the trend of $100 million annual increases through FY2011. Perhaps the most notable increase in S. 1300 would be for the Facilities and Equipment (F&E) account. While this account would only see about a 3.7% increase in authorized funding levels in FY2008 compared to FY2007 appropriations, the authorization would then be increased by slightly more than 13% for FY2009. This would be the largest percentage increase on an annual basis for this account, and would be followed by more modest percentage increases to F&E of slightly more than 5% for FY2010, followed by a larger increase of almost 8% for FY2011. This schedule likely reflects the Senate committee's views on the needed spending schedule to keep the acquisition of next generation technologies to modernize the national airspace system on track to meet stated objectives of fully implementing the next generation or NextGen air traffic system by 2025. S. 1300 also proposes a substantial increase to FAA Research, Engineering, and Development (RE&D) authorized funding levels starting in FY2009. Authorized funding for RE&D would increase by 36% in FY2009 compared to both the FY2008 request and the proposed FY2008 authorized amount in the bill. Under S. 1300 , this would be followed by essentially flat funding of about $190 million annually for RE&D through FY2011. Like the proposed increase to the F&E account authorized levels, this proposed increase to RE&D likely reflects the Senate committee's views on the increased funding for research and development needed to support progress on NextGen development efforts. H.R. 2881 would provide funding for the FAA's O&M account and the AIP program at the same levels specified in S. 1300 . With regard to the F&E account, however, H.R. 2881 proposes to set higher funding levels than specified in S. 1300 . H.R. 2881 proposes an increase of almost 25% in FY2008 authorizations for F&E spending compared to FY2007 appropriated amounts. This would be followed by smaller annual increases from FY2009 through FY2011. The House Committee on Science and Technology, which has jurisdiction over the FAA's research functions and components, has proposed substantial increases to available funding for the FAA's RE&D account. Specifically, H.R. 2881 would triple the available funding for RE&D activities in FY2008 compared to FY2007 appropriated amounts. Available funding for RE&D would be further increased by 44% in FY2009. Authorized funding levels for RE&D would increase over the proposed authorization period to $515 million in FY2011, compared to current appropriated levels of $131 million. Over the last reauthorization period there has been considerable discussion about the long term health of the existing trust fund based FAA financing system. The FAA, and others, believe the existing system will have difficulty providing the funding that the agency will need in the years ahead and that a new funding system more closely tied to aviation industry activity should be adopted. Other aviation interests, especially those representing the GA portion of the industry believe the existing funding system is adequate at least for the next reauthorization cycle. As Congress considers reauthorization it will likely need to weigh these opposing viewpoints. For a detailed examination of the existing aviation finance system and the proposed changes to this system see CRS Report RL33913, Aviation Finance: Federal Aviation Administration (FAA) Reauthorization and Related Issues , by [author name scrubbed]. The Next Generation Air Transportation System Financing Reform Act of 2007 ( H.R. 1356 / S. 1076 ), proposes the most significant change in FAA aviation finance since the federal program was created by the 1970 Act. The FAA proposal provides for a three year authorization period (FY2008-FY2010) during which the FAA would transition from its existing trust fund/general fund based financing system to a system based on new direct fees and existing excise taxes, as well as general fund monies. Although the trust fund would be continued, its overall role in funding the agency is significantly reduced. The proposal uses a mix of direct fees (referred to as user fees by the FAA and throughout this section), excise taxes, and general funds, to pay for the FAA's ATO related activities. The proposal funds the FAA's safety activities primarily from general funds, but also allows the FAA to collect user fees related to its registration and certification activities for this purpose. Excise taxes would be used to support the continued aviation trust fund which is dedicated primarily toward funding AIP, but also supports part of RE&D and Essential Air Service (EAS) programs. The FAA proposal does not set new user fee rates for ATO services. Rather it enunciates a framework for how fees can be set and creates an Air Transportation System Advisory Board (Board) to assist the FAA Administrator in establishing appropriate fee levels and mechanisms. Ultimately, however, the Administrator would be the sole decision maker on fee setting issues. The proposal adopts a new financial structure for the FAA that would correspond to the new program funding regime. To facilitate this structure: it would create two new accounts in the Treasury to receive the newly imposed user fees; allows for the establishment of a reserve fund; and allows the FAA to issue bonds to speed-up F&E equipment acquisition. Agency funding would still be subject to annual congressional appropriations. The FAA proposal is controversial, and several aviation interest groups came out against it almost as soon as it was introduced. The proposal, however, has supporters, especially the Air Transport Association (ATA), which views it as a positive step forward. Congressional hearings on H.R. 1356 / S. 1076 , which embodies the FAA proposal, have been held in both the House and the Senate. As mentioned above, the principal feature of the FAA proposal is the creation of a direct user fee system to pay for the majority of the Agency's costs associated with its ATO activities. The FAA proposal, however, does not recommend a specific user fee structure. Instead, it lists the criteria that must be considered in setting fee levels and leaves it to the Board and ultimately the FAA Administrator to actually set the fees. The proposal requires that the Administrator consult with affected parties prior to establishing a fee structure, but gives the affected parties no further role in the process. Specific ATO user fees can be set for enroute, oceanic, and terminal area flight activity. Enroute and oceanic fees can be based on "distance traveled or any other method that is consistent with the treaties and international agreements to which the United States is a party." Since much of the rest of the world uses aircraft weight and the distance flown as part of its fee setting process, it would appear that a similar fee setting regime could be implemented here. Overflight fees (for aircraft transiting U.S. airspace) would be eliminated and these flights would be subject to the enroute and oceanic fee system. Fee setting for terminal area activities could be somewhat more complicated because the proposal would allow for fees to be differentiated at various locations and at different times of the day. Factors that could be included in the terminal fee structure can include aircraft takeoffs/landings (at airports with over 100,000 passenger boardings per year), aircraft weight, operations at a large hub airport (1% of total U.S. enplanements), time of day or day of week at congested large hubs, and different fees for daytime and nighttime operations. User fees would be imposed on all commercial users of ATO services irrespective of aircraft type. For the purposes of determining which tax certain aircraft might pay, the applicability of IRS regulations would delineate between commercial and noncommercial users. Although GA aircraft operate outside of the ATO user fee system most of the time, they would be subject to terminal-related fees at congested large hub airports. The FAA proposal would require that fees be set in relation to the costs incurred for providing ATO services. In setting the fees mentioned above the FAA would be prohibited from using flight altitude as a fee setting factor. Under the proposal, it could offer incentives, by way of reduced fees, for the purchase and use of equipment that enhances an aircraft's safe and efficient operation in the air traffic system. In addition, it could seek sufficient user fee revenues to establish a reserve fund to be available if system revenues fail to reach projected levels. The ATO would also receive funding from excise taxes. The proposal suggests that a 70-cent-per-gallon fuel tax be imposed on all GA users (kerojet or aviation gasoline). Of this, 56.4 cents per gallon is dedicated to ATO activities and 13.6 cents is reserved for the aviation trust fund. These fees are to be indexed to inflation beginning in 2009 and can be modified by the Administrator in future years. The FAA believes that it is no longer necessary to differentiate the tax rate for turbine (avgas) and piston (aviation gasoline) aircraft users because of the much higher fuel use rates of turbine aircraft. Safety and non-ATO operations activities would be primarily funded by Treasury general funds. In addition, however, the FAA is to impose registration fees for specified services at rates detailed in the proposed legislation. By way of example, aircraft registration would be subject to a $130 fee and issuing an airman medical certificate would cost $42. Many of the activities listed here were previously provided at nominal fee levels. Fees are also to be imposed for FAA certification activities. Specific fees for activities such as certification of a large foreign repair station or a maintenance technical school are not enumerated in the legislation. Rather, the Administrator is to set fees at levels that correspond to the costs imposed on the FAA for providing the certification service in question. The largest source of revenues for the trust fund would come from a 13.6-cent-per-gallon tax on all aircraft irrespective of fuel type. These taxes are to be adjusted for inflation and can also be adjusted, up or down, if the FAA cost allocation process so dictates. The other principal source of funding for the trust fund is by continuation of the international arrivals/departure fee which is set at $6.39 per event. This tax can also be adjusted for inflation and/or cost allocation reasons. Although the FAA proposal is based primarily on direct user fees, there is a transition period during which the trust fund would continue to provide some funding for ATO and all other FAA activities, albeit at a diminishing level. The FAA proposal would create a 13 member Board charged with advising the Administrator on user fee and other issues at his or her request. The Board's membership would include the Administrator, a Department of Defense representative, three members representing "the public interest," an airport member, three airline members representing different size air carriers, a cargo airline member, a GA member, a business aviation member, and a representative of the aviation manufacturing industry. Appointment of all members is made by the Secretary of Transportation. In addition, the proposal would prescribe the Board members' terms and provides guidance on its administrative functioning. The Board can advise the Administrator on a wide range of FAA programs and activities. At the outset, however, it would appear that the Board's principal duty is to help with the creation of the new user fee system. According to provisions of the FAA proposal, "prior to establishing or modifying fees ... the Administrator shall consult with and seek the recommendations of the type and level of such fees." A procedure is established whereby the Administrator, who has ultimate fee setting responsibility, can disagree with the Board's recommendations and establish fees by publishing the reasons for disagreement in the Federal Register. It would be up to the Administrator to determine how, and how much, they might wish to use the Board's expertise. There is nothing in the legislation as proposed that automatically gives the Board any power to exercise its advisory role, especially in a public forum. This is because the Board's actions would not be subject to the public meeting and other administrative provisions of Title 5 U.S.C. Further, it is not clear that the Board would have access to information about cost allocation and other subjects, except to the extent that the Administrator wishes to make this material available to the Board. As suggested by the new tax and fee proposal, the FAA would be reorganized from a budgetary perspective. ATO assessed user fees are to be deposited into a newly created Treasury ATO account. Similarly, registration and certification fees are to be deposited in a newly created Treasury safety and operations account. The trust fund, however, remains intact. The new user fees would require a new collection system to insure that they are deposited in the appropriate account. The Administrator would be charged with developing this system, perhaps with the help of the Board. The FAA proposal would give the Administrator some enforcement powers to assist in the collection effort long term. FAA spending would still require annual appropriation by Congress. The relationship between the FAA and congressional appropriations committees would apparently be unchanged. From a budgetary standpoint, however, it appears that the offsetting collections process created by the proposal would remove FAA spending from the discretionary part of the budget. At least one outside source has suggested that the new funding arrangement could run afoul of the newly created pay-as-you-go rules adopted by the House of Representatives. In short, it is unclear at this point how the new funding arrangement proposed here would play out as part of the congressional budget and appropriations process. Congressional finance committees (House Ways and Means and Senate Finance) could lose their existing jurisdiction over some aspects of the FAA tax and fee setting. These committees would likely retain their jurisdiction over the excise taxes to be deposited in the aviation trust fund, but could have no role or oversight over the newly established user fees. Authorizing committees normally have jurisdiction over offsetting collection programs of the type that would be created for the ATO, and for safety and operations. As proposed, however, all fee-setting powers would reside with the Administrator, meaning that a specific oversight role for the authorizing committees is not defined in the legislation. The Secretary of Transportation would have the ability to issue Treasury bonds to facilitate a rapid implementation of the NGATS program. Up to $5 billion could be issued at interest rates established by the Treasury. To finance the bonding the Secretary could increase user fees by an amount needed to repay the bonds with interest. These additional revenues would not go into the new Treasury accounts mentioned earlier, but would flow directly to the Treasury. Full repayment would be required by the end of FY2017. The concept of using bonds to speed up the acquisition of F&E capital items has been discussed for years. The dedicated revenue stream to the ATO account would make bonding possible as part of the FAA's program for the first time. It has been argued that having this authority would allow the FAA to better program its acquisition requirements over an extended period of time, as opposed to the potential uncertainty of the annual appropriations process. In addition, access to additional funds should give the Agency the ability to pursue a number of technology and equipment upgrades at the same time. The main argument against bonding is that the interest payments make it a more expensive way to pay for infrastructure than direct appropriations would be. The FAA proposal provides overall authorization levels for the FY2008-FY2010 period of nearly $28 billion. This number, however, cannot be meaningfully compared to previous legislation because it excludes much of the funding required by the prospectively user-fee funded ATO, and safety and operations activities. These activities would now be linked to actual system costs which cannot be determined this far in advance. To the extent that the authorized levels can be compared they suggest a significant cut in AIP and EAS funding. S. 1300 as reported by the Senate Committee on Commerce, largely ignores the Bush Administration proposal and maintains the existing funding structure for the FAA with a couple of important caveats. First, the Commerce Committee lacks jurisdiction over taxes and fees which are in the domain of the Senate Committee on Finance. This being the case, Commerce Committee-reported bill does not include tax and fee provisions though, as will be discussed subsequently, it does include a significant revenue raising element. In addition, the committee has proposed an oversight Board and provided for bonding authority. In each instance S. 1300 differs from provisions in the FAA proposal. On September 21, 2007 the Senate Committee on Finance ordered an original bill to be reported that makes some changes to the existing aviation tax and fee structure. The Finance Committee proposal declines to adopt a user fee system for aviation system finance. It is expected that the differing views of the two committees will be reconciled before or during floor consideration of S. 1300 in the weeks ahead. The most contentious element of S. 1300 is a proposal to levy a $25 surcharge on flights operating in the national airspace system. The surcharge is designed to pay for a significant portion of FAA costs associated with the NGATS modernization program. Revenues collected by the surcharge are to be treated as "offsetting collections" for congressional budgetary purposes and are to be deposited in a new Treasury created air traffic modernization fund. As an offsetting collection the surcharge is under the jurisdiction of the authorizing committee, in this case Senate Commerce. Spending of these funds is subject to authorization and to subsequent annual appropriation. Although the bill provides for broad industry collection of the surcharge, it exempts a large segment of annual flight activity from the fee. The major exemptions are for all piston powered aircraft, and for all turboprop and turbojet aircraft operating outside of controlled airspace. Other exemptions are provided for certain intrastate flights (Alaska and Hawaii) where neither a terminal radar approach control (TRACON) or other FAA ATC facility is involved in servicing the flight. Other exemptions apply to military and public aircraft (U.S. and foreign), air ambulance aircraft, agricultural aircraft, and Canada-to-Canada flights. The surcharge is to be payable to the Administrator of the FAA. The Administrator is also charged with implementing the surcharge collection process. Limited guidance is provided in the bill as to how the collection process might work leaving it largely to the Administrator and Treasury to establish a workable process. The bill provides for penalties for non-payment of the surcharge. As reported the provision would provide a portion of the annual F&E budget beginning in FY2009 at a level of $412 million. Funding for the subsequent two years of the authorization period is provided at $423 million and $436 million respectively. A related provision in the bill requires that all aircraft filing flight plans with the FAA, including those exempt from the surcharge, include information as to whether or not the flight is being operated for commercial purposes (for compensation or for hire). Collecting this information is apparently directed toward filling what many industry observers see as a large gap in existing industry data (i.e., determining what portion of GA flights is for commercial rather than personal purposes). The surcharge is viewed by the GA community as a user fee and is opposed for the same reasons that GA opposes the user fee portions of the Administration proposal (i.e., GA believes that it creates marginal demands on the ATC system and that its contribution to funding the FAA is best handled by the already existing fuel tax system). Conversely, the airline industry generally supports the surcharge proposal and views it as a positive move toward getting all system users, and especially corporate aviation, to pay for their fair share of ATC system costs. Within the Senate Commerce Committee support for the surcharge proposal was closely split. An attempt to strike the surcharge from the reported version of the bill failed on a vote of 12 to 11. Senator Ted Stevens, having voted initially to abstain on the amendment, later changed his vote in order to provide a majority for moving the surcharge provision for future consideration on the Floor. In addition to the philosophical questions about the desirability of user fees the question can also be raised about whether a $25 surcharge would be sufficient in and of itself to provide the amount of designated modernization funding authorized in S. 1300 . The answer, based on a simple analysis of industry data is that this might not be the case. As a result, supplemental revenues for the modernization fund may be considered by the Senate Committee on Finance. There has already been an open discussion in industry circles about the need to consider possible fuel tax and/or other fee increases in order to meet both modernization needs and additional funding needs for other FAA activities. S. 1300 , like the FAA proposal, would provide the FAA with up to $5 billion in bonding authority to facilitate expedited spending for NGATS-related capital projects. Other administrative aspects of the bonding proposal differ, however. For example, funds would be available for the period FY2009 through FY2025, instead of FY2009 through FY2017. Bonds could be used to pay for NGATS projects listed as part of the FAA's Capital Improvement Program (CIP) at the discretion of the Secretary of Transportation, with the approval of the Office of Management and Budget (OMB). Interest rates would be set by the Treasury. Repayment would be made from the surcharges deposited in the modernization fund, on which repayment would have priority over other types of modernization spending. Bonding, for capital improvements, as opposed to using appropriated funds, remains a controversial concept for the same reasons enunciated in the earlier discussion of the Bush Administration's proposal. The Oversight Board that would be created by this bill, unlike the Board proposed by the Administration, has real power and, some might argue, some unusual powers as well. S. 1300 creates a seven member Oversight Board appointed by the President and confirmed by the Senate. Membership consists of: the Administrator of the FAA, a representative of DOD, a representative of the "public interest," the chief executive officer (CEO) of an airport, the CEO of an airline, a representative from one of the FAA's labor organizations, and a representative of the GA segment of the industry. The Oversight Board is assigned a number of functions, some advisory in nature and some that give the Oversight Board approval authority over FAA actions. As stated in the bill these functions are as follows: Review and advise on FAA modernization, budget, and cost accounting activities. Review the FAA strategic plan. Provide recommendations on non-safety elements and advice on safety elements. Review ATC efficiency and make recommendations based on its performance. Approve all capital expenditures of over $100 million related to the ATC system modernization. Approve the FAA's F&E budget prior to its submission to OMB. Approve the CIP prior to its submission to Congress. Annually approve the Operational Evolution Plan (OEP). Approve the Administrator's choice of a chief operating officer (COO) for the Air Traffic Organization (ATO). Approve the selection of the Head of the Joint Planning Development Office (JPDO). The bill requires that Oversight Board members have certain types of expertise in aviation and organizational subject areas. They also must not have a pecuniary or financial interest (defined by the provision), and not be a member of a group that lobbies on aviation-related legislation. From an administrative perspective the bill allows the Oversight Board to choose its own chairman and vice chairman, makes a simple majority of members a quorum, and allows a majority vote of members present to be sufficient for Oversight Board action. Also, Oversight Board members are exempt from personal liability laws as concerns their official activities. The proposed make-up of the Oversight Board and its role in the NGATS implementation process are likely to raise several questions during further congressional consideration of this reauthorization proposal. One very notable provision here is that the bill gives equal status vis-a-vis Oversight Board activity to the FAA Administrator and to the representative of FAA's labor unions. This arrangement certainly raises questions about executive branch authority. Given the proposed structure of the Oversight Board, given its ability to choose its own Chairman, it is not out of the realm of possibility that the FAA labor representative could have certain powers that are normally associated with the executive branch, especially as regards budget issues. Another unusual provision is the requirement that the Administrator seek Oversight Board approval before submitting the F&E portion of the annual FAA budget to OMB. This provision can be viewed as an extra step that could potentially slow down the annual agency budget approval process. Hence, the Oversight Board sign-off is likely to require certain accommodations in terms of deadlines, etc. Questions can be raised about the desirability/likelihood of certain of the conditions to be met by potential Oversight Board members. For example, it seems unlikely that the CEO of an airline would not have a disqualifying financial interest in his/her airline. The same type of question could certainly be raised for the airport CEO member and potentially for the GA member. Further, the member representing the public interest is to have a "fiduciary responsibility" to represent the public, although how this charge is defined is not detailed in the proposed legislation. The bill allows the Administrator to withhold certain information and documents from the Oversight Board if they reveal proprietary or commercial information. The members of the Oversight Board, having gone through the congressional confirmation process, would normally be viewed as officers of the United States in the same manner as other FAA employees. Certain FAA, and other designated federal employees, routinely deal with this type of information in the normal performance of their duties. It, therefore, seems unusual that such an exclusion of information, especially if it provided substantive information relevant to capital improvement projects, could be denied to the Oversight Board. On November 13, 2007 , the Senate Committee on Finance reported an original bill, S. 2345 , the American Infrastructure Investment and Improvement Act of 2007, incorporating the committee's recommendations for what is likely to be the revenue title of the Senate FAA reauthorization bill. Its proposal makes some changes to elements of the existing tax and fee structure, but does not create new user fees. As can be seen in Table 3 the committee has increased the general aviation jet fuel tax, increased the international departure/arrival tax, and created a new tax system for a particular segment of the aviation industry—fractionally owned aircraft. At the moment, passengers on fractionally owned aircraft are treated by the tax code in the same manner as airline passengers, subject to the airline ticket tax, the segment fee, and international departure/arrival tax. The Committee bill would instead treat this industry segment as if it were part of the general aviation industry for the purposes of the aviation jet fuel tax, but would also impose a flat fee departure tax on the aircraft, rather than on the passenger. All of the additional revenues collected by the changes in taxation would be deposited in a newly created account within the Treasury and reserved for NGATS related activities. The Finance Committee bill does not deal exclusively with airline financial issues. Provisions in the bill seek to remedy an expected FY2009 shortfall in the highway trust fund and creates a new bonding authority program for intercity passenger rail service. It remains to be seen whether the Senate will consider these provisions as part of the FAA reauthorization bill or consider them separately. There is a difference of opinion as to the need for a surcharge between Members of the Finance Committee and the Commerce Committee that will need to be resolved before work on the FAA reauthorization bill is completed in the Senate. The two bills can be viewed as competing proposals on how additional financing of the FAA should be accomplished. The leadership of Commerce's Aviation Subcommittee strongly favors the surcharge approach to increasing FAA modernization financing and is opposed to the idea of stripping this provision out of the final bill, which is the position favored by several Members of the Finance Committee. In effect, the Finance Committee has largely taken the GA industry position against user fees. The full Senate, therefore, will decide the ultimate fate of the surcharge proposal. Like the Senate Commerce and Finance Committees, the House bill rejects the Bush Administration's financing proposal outright. H.R. 2881 , as reported by the House, increases the general aviation gasoline tax to 24.1 cents-per-gallon and the general aviation jet fuel tax to 35.9 cents-per-gallon, Table 3 . The existing 4.3-cent-per-gallon tax on commercial jet fuel is unchanged by the bill, as are all other existing aviation taxes and fees. The bill also reserves the increased revenue to be collected by the fuel tax increases for funding of NGATS-related programs. The bill also includes a provision calling for the adjustment of existing overflight fees (flights that do not take off or land in the U.S.) (these fees are currently used primarily to fund a portion of the EAS program). The FAA is to adjust these fees by expedited rulemaking to insure that the fees are reasonably related to the cost of providing air traffic services for overflights. The bill, however, specifically excludes altitude as a factor that can be used in the adjustment of the overflight fees. The bill includes fees for aircraft registration, airman certificates, and other types of FAA provided documentation at the same levels proposed by the Administration. It also provides that these fees may be adjusted over time if the FAA's cost accounting system indicates that the cost of providing these services to the aviation sector are higher/lower than the fee levels established in the bill. The House bill does not, however, follow the lead of the Administration bill and impose a new fee structure for FAA's new large aircraft certification programs and for other activities such as certification of foreign repair stations. Unlike the FAA proposal and S. 1300 , H.R. 2881 is notable primarily for what it does not do. The House ultimately decided not to recommend major tax and fee changes to the existing aviation finance system. The modest increases in fuel taxes suggested by the bill, indicates that a majority of the House Members believe that the existing tax system needs only minor tweaking in order to support more robust FAA spending in the years ahead. This view is largely shared by the GA industry, but not by other sectors of the industry, especially the airlines and airports. The Airport Improvement Program (AIP) provides federal grants for airport development and planning. AIP funding is usually limited to capital improvements related to aircraft operations. Commercial revenue-producing portions of airports and airport terminals are improvements that are generally not eligible for AIP funding. AIP money cannot usually be used for airport operational expenses or bond repayments. AIP funds are distributed either as formula grants or as discretionary grants. Small airports are much more dependent on AIP grants than large and medium hub airports. The larger airports can more easily generate revenue from user fees and have historically had the financial wherewithal to successfully access the bond market. For background and legislative history of federal aid to airports, including a description of the AIP program, as well as an overall discussion of AIP issues, see CRS Report RL33891, Airport Improvement Program: Issues for Congress , by [author name scrubbed]. The Passenger Facility Charge (PFC) program provides a source of non-federal funds intended to complement AIP spending. The PFC is a local tax imposed, with federal approval, by an airport on each boarding passenger. PFC funds can be used for a broader range of projects than AIP grants and are more likely to be used for "ground side" projects. PFCs can also be used for bond repayments. The AIP and PFC programs are the sources of funds for airport capital development that have the most federal involvement. Other sources are bonds, state and local grants, and airport revenue. The FAA proposal ( H.R. 1356 / S. 1076 ), would make major changes in both the AIP and PFC programs. In effect, the proposal would reduce the size and scope of the AIP program, while increasing the role of PFCs in airport finance. The proposal would broaden allowable costs under both programs. The distribution of AIP grants would undergo major changes and the local matching share for AIP grants would be changed for some airports. S. 1300 , as reported, retains the basic AIP program size, structure, and funding distribution. It would increase the program's overall year-over-year authorization level by $100 million for each of the four years covered by the bill. S. 1300 does not raise the PFC cap. Consequently, under S. 1300 , the significance of the AIP and PFC programs relative to each other's role in airport finance would remain roughly the same as it is under current law. H.R. 2881 also retains the basic AIP program size, structure, and funding distribution. As does S. 1300 , it would increase the program's overall year-over-year authorization level by $100 million for each of the four fiscal years covered by the bill. Unlike S. 1300 , however, H.R. 2881 would raise the PFC cap to $7. Consequently, the bill would raise the significance of the role of the PFC relative to that of AIP within the context of airport finance. Neither S. 1300 , as reported, nor H.R. 2881 , as passed, restructure the AIP or PFC programs substantially but they do make a significant number of what may be seen as perfecting changes. The authorization for FY2007, the final year of funding under Vision 100 was $3.7 billion, the amount actually made available through the appropriations process (i.e., the obligation limitation under P.L. 110-5 ) for AIP was $3.515 billion. The funding levels for AIP, under the FAA proposal, reflect a reduction of AIP's role in airport finance. The proposal recommends $2.75 billion for FY2008, $2.9 billion for FY2009, and $3.05 billion for FY2010. The FAA's section-by-section analysis suggests that the recommended increase in the PFC ceiling and the elimination of the AIP entitlements for large and medium airports (discussed later in this report) reduces the need for AIP funding. In recent years, the George W. Bush Administration annual budget proposals have consistently recommended reduced spending on AIP only to have it just as consistently restored to near its authorized level by Congress. Some observers in the transportation community have suggested that cutting the popular AIP program is also a way of keeping down the annual totals set forth in the FAA's reauthorization proposal. Given that the Administration's financing proposal for the Airport and Airway Trust Fund would support AIP spending directly through aviation fuel taxes, the lower spending for AIP, meant that the Administration could propose a smaller increase in their aviation fuel tax proposal than they would have had to if they had supported continuing the funding of AIP at the higher current FY2007 authorized level of $3.7 billion. Over time, the link of the AIP spending level to the fuel tax could make it difficult to increase the program's funding because this could require raising the fuel taxes that support the program. Also, should AIP be authorized at the current authorization level or higher it could change the implications of the programmatic changes in AIP proposed by the Administration, should they be enacted. S. 1300 recommends an increasing authorization for AIP over the life of the bill, as follows: $3.8 billion for FY2008; $3.9 billion for FY2009; $4.0 billion for FY2010; and $4.1 billion for FY2011. The $100 million per year growth in the program extends the pattern of funding growth in Vision 100. Over the four-year life of the bill's authorization this would provide an aggregate additional authorization of $1 billion for AIP (i.e., compared to freezing the AIP authorization for FY2008-FY2011 at the $3.7 billion level authorized for FY2007, the final year of Vision 100). H.R. 2881 , as passed, would provide the same amounts as recommended in S. 1300 . The FAA proposal would make a number of changes in the distribution of AIP funds that airports are entitled (hence the term entitlements) to based on administrative formulas. S. 1300 would make few changes to the AIP entitlements. Under current law the formula apportionments (also referred to as entitlements) fund two levels of entitlements: a lower entitlement level when the overall AIP funding is below $3.2 billion and a higher level when the program is funded at $3.2 billion or more. Basically the FAA proposal eliminates the lower entitlement level in favor of the higher formula distribution levels and higher minimum and maximums (the general aviation apportionment is treated somewhat differently, see below). The proposal would also eliminate the $3.2 billion trigger itself. The trigger mechanism was designed, in part, to encourage funding of AIP above the $3.2 billion level. Since the FAA proposes funding AIP below the $3.2 billion level, not making this change would, in effect, cut most primary airports' entitlement funding in half and would reduce general aviation entitlements also. During the life of the trigger, AIP funding has always been above $3.2 billion, making the lower entitlement formulas existence a moot point since FY2001. S. 1300 does not include a provision to eliminate the $3.2 billion trigger. Given that the bill's recommended authorization levels would be from $600 to $900 million above the trigger, some would argue that the trigger would continue to be a moot issue. On the other hand, the increasing gap between the recommended authorizations and the trigger provides more room for possible AIP reductions during the appropriations process (i.e., reductions that would not trigger the distribution of entitlements based on the lower below-trigger formula levels). As is true with S. 1300 , H.R. 2881 does not include a general provision to eliminate the $3.2 billion trigger. The FAA proposal would phase out the formula funding that is provided for large and medium hub airports under current law by FY2010. To provide a transition period for these airports, their formula funding is continued at 50% of the calculated level for FY2008 and FY2009. The FAA's section-by-section analysis of the FAA proposal notes that this reduction is more than offset by the increase in the PFC ceiling (discussed later in this report). In addition, large and medium airports that impose PFCs above the $4.50 level are to forego or "turnback" 100% of their AIP entitlement funding during FY2008-FY2009. In FY2010, large and medium hub airports would receive no entitlement funds and therefore the turnbacks would end. S. 1300 does not include provisions altering the primary airport formulas. H.R. 2881 also does not include provisions altering the primary airport formulas. Unlike S. 1300 , the bill does, however, include a provision related to the reduction of apportionments at large hub airports that charge PFCs above the $4.50 level. These airports would have their formula apportionments (entitlements) reduced by 100% of the projected PFC revenues for the fiscal year, but not more than 100% of the amount that otherwise would be apportioned. A special rule, enacted after the September 11, 2001 terrorist attacks, allowed some airports (referred to as virtual primary airports), whose annual passenger boardings fell below the required minimum passenger levels needed to maintain their primary airport status, to continue receiving their annual primary airport entitlements (generally $1 million vs. the GA entitlement, which is generally $150,000). Earlier, the FY2006 Transportation/Treasury Appropriations Act ( P.L. 109-115 ) extended the virtual primary airport eligibility through FY2006 but at a reduced entitlement of $500,000. The explanatory language in the conference report expressed the Appropriations conferees' intent that FY2006 be the last year for virtual primary airport entitlements. Paying the higher entitlements to the virtual primary airports reduces the amount of funding remaining available for discretionary spending after all the entitlement requirements are satisfied. The FAA proposal would repeal the special rule. The FAA's section-by-section analysis argues that seven years after the attack it is unlikely that these airports (currently 44) will again attain primary airport status. S. 1300 would authorize the special rule for FY2008-FY2011, in effect, extending the virtual primary category with some modifications. The virtual primary determination would be made based on the airports having an average annual passenger boardings for calendar years 2004-2006 below 10,000 but passenger boardings that were 10,000 or above in calendar year 2003. S. 1300 also includes provisions that could, in effect, also include a new group of virtual primary airports. The bill does this by amending the provision in 49 U.S.C. 47114(c)(1) that deals with using the previous year's apportionment level to retain primary airport status. S. 1300 would drop the provision that limits the determination of eligibility to airports where passenger boardings fell below 10,000 boardings to airports had a "temporary but significant interruption of service due to an employment action, natural disaster or other event unrelated to demand for air transportation at the affected airport," and allow it for: Essential Air Service airports whose passenger boardings fall below 9,700; commercial service airports that can meet the 10,000 boardings by counting nonscheduled service; or single carrier airports that suffer from a 4% decline in scheduled flights due to severe weather conditions. The bill also includes a related provision that for FY2009-FY2011 would allow DOT to use the last year that an airport's passenger boardings exceeded 10,000 to determine its primary status for these years. The bill also includes a provision that appears to be written for an unnamed airport that is served by a large certificated carrier that began scheduled service at the airport in May 2006 and ceased scheduled service at the airport in October 2006. Under the bill this airport would retain its primary airport entitlement. As of this writing, CRS has been unable to determine the number of airports that would be eligible under S. 1300 for virtual primary entitlements. However, the difference for an airport between primary and GA entitlement funding is usually $850,000, so the provisions could have a significant impact on entitlement spending as well as the amount left over for discretionary grants once all the required entitlement distributions are satisfied. H.R. 2881 includes no provisions regarding virtual primary airports. The House bill provides a minimum entitlement for Puerto Rico which guarantees that Puerto Rico shall receive at least 1.5% of the total amounts apportioned to all airports under 49 U.S.C. 47114 (c) and (d) for commercial service and general aviation airports. There are two components of the general aviation entitlements: the State Apportionment and the General Aviation apportionment (sometimes referred to as the Nonprimary Entitlement). Under current law 20% of AIP funds are to be apportioned for both components. The FAA proposal would separate the underlying funding sources of the two components and make a number of other changes. Under current law the nonprimary entitlement is apportioned from the designated 20% of AIP funds first and then the remaining funds are used for the State Apportionment. State Apportionment . The FAA proposal would provide 10% of the amounts made available for apportionment under AIP for the state apportionment distribution only. The state apportionment distribution would be determined as they are now (according to a state-based population and area formula). The proposal would also provide for a $300 million minimum apportionment. If the $300 million minimum could not be met, the nonprimary entitlements (see discussion below) would be reduced on a prorated basis to make funds available for the state apportionment. The Nonprimary Entitlement . Under current law all nonprimary airports receive the lessor of $150,000 or one fifth the estimated five year development costs estimated in the most recent NPIAS. The FAA proposal would change this to providing three tiers of entitlement funding distribution based on the number of registered aircraft based at the airport: $400,000 for airports having 100 or more based aircraft; $200,000 for airports having 50 to 99 based aircraft or three or more jet aircraft; and $100,000 for airport having 10 to 49 based aircraft. NPIAS airports with fewer than 10 aircraft would not be eligible for a nonprimary entitlement but could still qualify for state apportionment funds and could compete for discretionary grants and these grants would retain a 95% federal share. The nonprimary entitlements would not be funded from the 10% of available funds reserved for the state apportionment but would be funded from the general amounts available for apportionment under AIP (these amounts also fund the primary airport and cargo entitlements). The below-trigger language is eliminated. S. 1300 does not include a similar provision. GA entitlements would remain essentially the same as under current law. The general aviation entitlements provision of H.R. 2881 is a combination of the FAA proposal on the state apportionment and current law on nonprimary entitlements. The state apportionment would be 10% of the amounts available for apportionment under AIP with a $300 million minimum. The nonprimary airport entitlement would remain $150,000 or one fifth the estimated five year development costs published in the most recent NPIAS. Should the 10% of amounts available for apportionment to the states fall below $300 million in a fiscal year (for this to happen the amounts available for apportionment for all of AIP would have to fall below $3 billion) the nonprimary entitlements would be reduced on a prorated basis to provide the funds to bring the state apportionment up to its $300 million minimum. Under the FAA proposal, the "above trigger" level of funding would be provided. S. 1300 does not address the Alaska entitlement. H.R. 2881 does not address the Alaska entitlement. Cargo service airports would continue to receive 3.5% of AIP funding (the existing, above-trigger percentage) and the landed weight-based formula would be retained. The below-trigger provision is eliminated. Cargo Service Airports apportionment would increase to 4% of AIP funding. H.R. 2881 makes no changes in the Cargo Service Airport apportionment. No provision. S. 1300 requires FAA to establish a pilot program allowing local airport operators that have submitted a noise compatibility program to FAA to use their AIP formula funds, in partnership with neighboring jurisdictions to support planning and site preparation for the consolidation and redevelopment of property purchased with noise mitigation funds or passenger facility charges (PFCs), to encourage airport-compatible land uses and "generate economic benefits" to the local airport authority and adjacent community. The grant could only be made if it were made to expedite redevelopment efforts and if the grant is subject to a requirement that the local jurisdiction governing the property has adopted zoning regulations that permit airport compatible redevelopment. As passed, the House bill includes a provision of similar intent. Section 818 of the house-passed bill establishes a pilot program for redevelopment of airport properties. This would allow for AIP grants to up to four airports to support joint planning, engineering design, and environmental permitting for the assembly and redevelopment of real property purchased with AIP or PFC noise mitigation funds to encourage compatible land uses with the airport and to generate economic benefits to the airport operator and an affected local jurisdiction. The discretionary fund includes the AIP funding that is not distributed under the apportioned entitlements as well as the forgone PFC revenues that are not directed to the small airport fund. Related PFC changes are discussed later in this report. 49 U.S.C. 47115 requires that a minimum amount ($148 million plus any outstanding pre-January 1, 1997, letters of intent) remains available for the discretionary fund after all apportionments and set-asides are satisfied. If less money remains, the apportionments are reduced pro rata to bring the discretionary funding up to the required level. Because AIP has been funded since FY2001 at historically high levels, the minimum discretionary fund provision has not recently been a factor in AIP funding. The FAA proposal would set the minimum that can be made available for discretionary grants at $520 million per year (the letter of intent language is dropped). S. 1300 also sets the minimum amount to be credited to the discretionary fund at a flat $520 million per year and drops the letter of intent language. H.R. 2881 also sets the minimum amount to be credited to the discretionary fund at $520 million per year and drops the letter of intent language. The FAA proposes to replace the discretionary fund 35% noise set-aside with a broader environmental set-aside that would be 8% of all AIP apportioned funds. Examples of projects that would be eligible are water quality mitigation projects and environmental research. Based on FY2005 AIP funding distribution the a set-aside based on 8% of apportioned funds would have provided less than the 35% discretionary fund set-aside. S. 1300 would provide for a flat $300 million annual discretionary set-aside for AIP noise program costs. It would, however, also make water quality mitigation projects eligible under the set-aside. H.R. 2881 's provision is the same as S. 1300 . The FAA proposal would eliminate the small airport fund. The revenues supporting the fund are derived from the forgone entitlement funding from medium and large hub airports that they forego in return for permission to impose PFCs. Since the FAA is proposing to phase out the entitlements for these airports, the funding source for the Small Airport Fund would no longer exist in FY2010. Small Airport Fund monies are used in a manner similar to discretionary funds. Instead the FAA proposal would set-aside 20% of discretionary funds for small hub, nonhub, nonprimary commercial service, reliever, or general aviation airports. The set-aside is to compensate for the loss of the Small Airport Fund. S. 1300 does not include a similar provision. The small airport fund would continue. H.R. 2881 does not include a similar provision. Both of these set-asides would be eliminated. The special AIP eligibilities for MAP would continue. S. 1300 includes no proposal similar to the FAA proposals. Adds whether or not a grant to the airport would be critical to the safety of commercial, military, or general aviation in trans-oceanic flights to MAP program selection considerations. H.R. 2881 retains the MAP program and reliever set asides as they are under current law. The FAA proposal would redefine "revenue producing aeronautical support facilities" in a way to make "fuel farms, new hangar buildings, self-service credit card aeronautical fueling systems, airplane wash racks, major rehabilitation of a hangar owned by a sponsor, or other aeronautical support facilities" clearly AIP-eligible for nonprimary airports. The construction of mobile refueler parking within a fuel farm at a non primary airport would be made eligible on condition that it meets the EPA's requirements regarding oil spill prevention, control, and countermeasures under 40 CFR 112.8. Up to $10 million in AIP grants could be made to make grants for commercial space infrastructure development. The cost of environmental review of airport-proposed environmentally-beneficial aircraft flight procedures would be AIP eligible. Relocation of airport-owned facilities that must be moved because of design standards beyond the sponsor's control would be eligible for AIP funding. The required passenger aircraft size required to meet the eligibility requirements for purchasing firefighting and rescue equipment would be reduced from aircraft designed for more than 20 passenger seats to aircraft designed for more than nine passenger seats. The proposal also includes language consolidating the definition of terminal development. In addition, "general aviation airport" is defined as a public airport that does not have scheduled service or has scheduled service with fewer than 2,500 passenger boardings each year. S. 1300 includes language identical to the FAA proposal on eligibility of the cost of environmental review for environmentally-beneficial (i.e., mostly noise-related) aircraft flight procedures and also for the relocation of airport-owned facilities. It does not include most of the other FAA proposed changes, including provisions similar to the FAA proposal's regarding revenue producing aeronautical support facilities and does not include language for commercial space infrastructure development grants. H.R. 2881 makes a number of definitional and other changes that would impact AIP project eligibility. The bill includes the FAA proposed provisions regarding eligibility of "revenue producing aeronautical support facilities" at nonprimary airports and the lowering of the passenger aircraft size required to meet the eligibility requirements for purchasing firefighting and rescue equipment. Terminal development is redefined to include development of an airport passenger terminal building, including gates and access roads and walkways servicing exclusively airport traffic that leads directly to or from the airport passenger terminal building. It also includes the FAA's proposal regarding the construction of mobile refueler parking and the clarifying definitions of general aviation airport and terminal development. As does S. 1300 , H.R. 2881 includes the FAA proposed language regarding the relocation of airport-owned facilities. Under H.R. 2881 repaying borrowed money for terminal development under 49 U.S.C. 47119(a) is clarified as an "airport development" and made eligible under certain circumstances. Projects to provide air conditioning, heating or electric power from terminal facilities to parked aircraft to reduce energy use and "harmful emissions," would be eligible. Airport planning would be redefined to include "developing an environmental management system." The cost of environmental review of airport-proposed environmentally-beneficial aircraft flight procedures would also be AIP eligible. The FAA proposal makes two changes to AIP grant assurances under 49 U.S.C. 47107. The proposal allows for the use of AIP entitlement funds to replace or move a facility at an airport if the cause of the need was beyond the owner's control, for example, a new design standard that could make the facility a safety hazard. The second proposed change deals with the disposition of profits made from the sale of land that was originally acquired for a noise compatibility purpose but is no longer needed for noise compatibility. Current law requires that the federal share of the proceeds, proportional to the federal share of the original land acquisition cost, be deposited in the trust fund. The proposed change would allow the proceeds to be reinvested in another project, for, in preferential order: 1) an approved noise compatibility project at the airport; 2) an environmentally related project at the airport; 3) another eligible AIP project at the airport; 4) transfer to another airport for a noise compatibility project; or 5) payment to the trust fund. S. 1300 includes the same two grant assurance proposals as described above. H.R. 2881 includes language similar to the two grant assurance proposals in the FAA proposal and S. 1300 . Under current law, the federal government share for AIP projects is as follows: 75% for large and medium hub airports (80% for noise compatibility projects); 95% for other airports; and "not more than" 95% for airport projects in states participating in the state block grant program; 70% for projects funded from the discretionary fund at airports receiving exemptions under 49 U.S. C. Section 47134, the pilot program for private ownership of airports. Vision 100 included a sunset clause that returns the federal share of the projects eligible for 95% share to 90% after FY2007. The increase in share to 95% was established to provide relief to operators of small airports after the 9/11 terrorist attacks. The FAA proposal would make a number of changes in the federal-local matching share requirements. The proposal would change current law to add the phrase "may not exceed" to all federal share percentages. Under current law some airports' project shares were fixed percentage shares. FAA argues that this change would allow it to "leverage AIP funds more efficiently and provide support for a broader number and type of projects." Some small airport advocates may be concerned that this provision could allow FAA to routinely offer discretionary grants at less than the maximum allowable federal share on some projects. The FAA proposal would also lower the maximum federal share for runway, taxiway and apron (ramp) projects at large and medium hub airports from 75% to 50%. Other AIP eligible projects at these airports would retain their 75% maximum federal share. A special rule is proposed for airports recently reclassified a medium hub because of increased passenger enplanements that allows them to retain their eligibility for up to 90% federal share for two years. The FAA proposal would allow the 9/11 related increase 95% federal share for AIP grants to small airports to lapse. The federal maximum share at these airports would be 90%. As mentioned earlier, general aviation airports that have lost their nonprimary minimum entitlements because they have fewer than 10 based aircraft (approximately 800 airports) would be allowed an up to 95% federal share on their discretionary or state apportionment grants. S. 1300 would set the federal share for airports smaller than medium hub and state block grant program states at 95% for FY2008-FY2011, in effect extending the post-9/11 federal share increase for the life of the bill. It also provides a special rule for small hub airports that because of passenger growth are becoming medium hub airports (which would drop their federal share to 75%). These airports have for two years a federal share not to exceed 95% of allowable project costs. As would be the case in the FAA proposal and S. 1300 , H.R. 2881 would provide a special rule to allow airports recently classified as medium hub (which would drop their federal share to 75%) to retain their eligibility for an up to 90% federal share for a two year transition period. H.R. 2881 also includes a special rule for "Economically Depressed Communities." The rule would maintain the 95% federal share for projects at airports that are receiving subsidized service under the Essential Air Service (EAS) program that meet one or more of the criteria established in 42 U.S.C. 3161(a) as determined by the Secretary of Commerce. 42 U.S.C. 3161(a) sets forth three criteria for eligibility: 1) the area has a per capita income of 80 percent or less of the national average; 2) the area has an unemployment rate that is, for the most recent 24-month period for which data are available, at least 1 percent greater than the national average unemployment rate; and 3) the area is an area that the Secretary of Commerce determines has experienced or is about to experience a special need arising from actual or threatened severe unemployment or economic adjustment resulting from severe short-term or long-term changes in economic conditions. Given the variety of eligibility criteria and the rural location of EAS airports it is likely that many EAS airports could retain their 95% federal share under H.R. 2881 . Non-EAS airports (smaller than medium hub) would revert to 90% federal share under the bill. The FAA proposes to make eligible any capital cost that an airport could pay for with airport revenue eligible. The proposal would specifically make fixed-guideway ground access-related projects, including rail mass transit projects (whether publically or privately owned), eligible for PFC funding. The FAA proposal would also ease the current so called "limitations" on the use of PFCs (i.e., the requirement that the project would preserve or enhance capacity, safety, or security, reduce noise, or provide an opportunity for enhanced competition among carriers at the airport). It also eliminates the limitation that, in regard to surface transportation or terminal projects, for an airport to impose a PFC above the $3 level for this purpose, that the airport has made adequate provision for financing the airside needs of the airport. These transit projects would require DOT approval, however. Airlines may object to this broadening of PFC eligibility. The FAA proposal also includes a change in the language of the written assurance on the use of revenues which would appear to allow for use of AIP and PFC grants on facilities that are "directly and substantially related to the air transportation of passengers or property," but are not "owned or operated" by the sponsoring airport, as is now required. S. 1300 does not include the FAA language broadening PFC project eligibility to virtually any capital cost that an airport could pay for with airport revenue. It also does not broaden the definition of "intermodal ground access" project which, whether publically or privately owned (or also, not for exclusive airport use), under the FAA proposal would have been eligible for PFC funding. S. 1300 also does not change the language of the assurance on the use of revenue as the FAA proposed. PFCs could be used for planning or redevelopment activities of property acquired for noise compatibility purposes. S. 1300 does, however, include language similar to the FAA proposal that would make major changes to section 40117 (d), which sets certain "limitations on approving applications." The bill would restrict the limitations to intermodal ground access projects, thereby freeing PFC applications for other types of projects from the limitations. The bill then also eliminates some of the current law limitations that would otherwise still apply to ground access projects. Among the limitations eliminated for all PFC applications are a finding by the Secretary of DOT that the project will: preserve or enhance capacity, safety, or security of the national air transportation system; reduce noise from an airport; or provide an opportunity for enhanced competition between or among air carriers and foreign air carriers. In addition, the bill would eliminate the precondition that for an airport to impose a fee above the $3 level the Secretary must find that the airport has made adequate provision for financing the airside needs of the airport, including runways, taxiways, aprons, and aircraft gates. The bill does not include the changes proposed in the FAA proposal or S. 1300 . H.R. 2881 does, however, include PFC eligibility provisions that are in neither the FAA proposal nor S. 1300 . One provision would make eligible projects to construct secure bicycle storage facilities for use by passengers at the airport and that are in compliance with applicable security standards. One year after enactment FAA is to submit a report on progress made by airports to install bicycle parking. Another provision would make noise mitigation for certain schools in Los Angeles eligible for PFC funding. In addition, H.R. 2881 proposes a pilot program that would make available PFC funds for eligible intermodal ground access projects at 5 airports. The projects do not have to be on property owned or controlled by the sponsoring airport. The PFC project cost share would be limited to the projected ratio of airport bound passengers to the total number of passengers using the ground access facility. The FAA proposal would increase the maximum charge to $6 per passenger boarding. Any charge over $4.50 would require medium and large hub airports to forego 100% of their AIP entitlement funding. Airports participating in the pilot program for the transfer of navigational equipment to airport control would be able to adopt a $7 PFC. The bill does not increase the PFC cap (see pilot program discussion, below). The bill would allow for PFCs above the existing $4.50 cap at the $5, $6, and $7 levels. As is true under current law only two PFCs could be charged for any one-way trip for a round-trip maximum of $28 (the current maximum is $18). As mentioned earlier, large hub airports imposing a PFC above the $4.50 level would forego from their AIP formula entitlements an amount equal to their projected PFC revenues but not more than 100% of the entitlement funding that, otherwise, would have been apportioned. H.R. 2881 includes a provision requiring a study of the impacts on airports of accommodating connecting passengers. The study is to include a recommendation as to whether different levels of PFCs should be imposed on connecting passengers versus origin and destination passengers. Some have argued that the PFC structure favors large hub airport's PFC revenues because the costs to an airport of a connecting passenger is less than at airports that are primarily originating airports. The proposal includes no provision similar to S. 1300 . Would establish a pilot program at up to six airports that would allow them to collect a PFC with no statutory ceiling on the fee. The fee, however, must be collected by the airport from the passenger. Under current law the PFCs are collected for the airports by the airlines during the ticketing process. The bill includes no similar program proposal. The FAA proposes changing the requirement that no AIP or PFC grant may be approved for a large or medium hub airport unless the airport has submitted a written competition plan to the FAA. The FAA proposal would eliminate the requirement that the competition plans include information on patterns of air service and comparative airfare levels. There is no provision similar to the FAA proposal in S. 1300 . The bill extends the competition plan requirement. The proposal includes an extensive provision to streamline the PFC review and approval process. Instead of seeking approval on a project-by-project basis, for existing projects, an airport would be required to submit to air carriers at the airport, the FAA, and make available to the public, an annual PFC status report that sets forth the airport's PFC revenues, spending, PFC funded projects, the next year's projected revenues, and a description of the consultation and public notice process. Once the status report is submitted no further action is required and implementation could continue. For new projects, the airport would have to provide for a notice and comment period for carriers operating at the airport and a public notice and comment period before they file their PFC status report. Once the report is filed the airport could begin collecting the new PFC. Stakeholders could, however, file objections and, if the FAA agrees with the objection, the FAA may terminate the airport's authority to collect PFC revenues for the project. The proposal also provides that DOT may investigate whether a PFC charge is excessive or whether PFC revenue is being diverted to non-allowable uses. The bill's streamlining language closely mirrors the FAA bill. The bill also includes revenue diversion language. The bill does not include language similar to the FAA proposal or S. 1300 . The FAA proposal would make changes to the Airport Privatization Pilot Program. The number of airports that could participate would be increased from 5 to 15 and there would be no restrictions by airport category (the existing program allows for only one large airport to participate and Chicago Midway airport has reserved that authority). Since the program was enacted in 1996 (Section 149 of the Federal Aviation Reauthorization Act of 1996, P.L. 104-264 ), only one airport has been privatized, Stewart International Airport (New York). The FAA and others supportive of the pilot program have argued that the current program gives airlines effective veto power over privatization transactions. Current law requires that the airport sponsor may only recover from the sale or lease the amount that may be approved by at least 65% of the air carriers serving the airport; and by air carriers that account for 65% of the total landed weight at the airport for the year. The FAA proposal would eliminate these requirements and only require that the airport show the FAA that they had consulted with: for primary airports, each air carrier and foreign air carrier serving the airport and, for non-primary airports, consulted with at least 65 percent of the owners of aircraft based at the airport. The proposal eliminates the airline approval requirement of airport fee increases that exceed inflation and eliminates the provision that requires that the percentage general aviation fee increases not be larger than the percentage increases for air carriers. Also eliminated would be the existing prohibition on the abrogation of a labor agreement in consequence of the sale or lease of an airport under the program. Finally, the private operator could set fees to recover all capital and operating costs except for the sale or lease price, which would require air carrier approval. The bill does not include a similar provision. The bill would raise the required air carrier approval percentages from 65% to 75%. Airports participating in the pilot program would not be eligible for AIP funds. The FAA proposal would allow this Vision 100 initiated program to expire at the end of FY2007. The pilot program allows for the purchase of a privately owned public use airport's development rights as a means of keeping the airport open and operating. FAA argues that the program has not been a success and suggests a better strategy would be to find a public sponsor to purchase the airport rather than just the development rights. Some general aviation supporters may still be supportive of the pilot program. The bill does not include a sunset provision for the Airport Development Rights Pilot Program. The bill includes a sunset provision that would end the Airport Development Rights Pilot program on September 30, 2007. This FAA-proposed program would allow for AIP state/insular area formula entitlement funds (at a 90% federal share) to be used for airport purchase of Automatic Dependent Surveillance-Broadcast (ADS-B) equipment. The ground stations where this equipment would be installed are not airport specific (most AIP projects are required to be within airport boundaries). ADS-B is part of FAA's air traffic modernization system. The use of AIP funds would supplement other FAA funding sources for ADS-B ground station deployment. The FAA argues that "states, regions and airports would benefit because the program would provide ADS-B coverage to areas that would not be reached under the FAA's direct procurement." Project sponsorship would be limited to states, metropolitan planning organizations (MPOS), or consortiums of two or more airports. Not more than 10 airports could apply. In the past, the use of AIP funds for air traffic equipment has met resistance by some program supporters, usually on the grounds that air traffic control capital costs are not within the AIP's original programmatic intent and should be paid for elsewhere in the FAA budget. The bill includes language identical to the FAA proposal. The bill does not include the FAA proposal. Recent incidents where passengers were held in aircraft for eight or more hours awaiting take off, as well as reports of deterioration of on-time arrival performance by airlines have led to increasing interest in airline passenger consumer issues. Currently, most passenger rights are set forth in the airlines' "contract of carriage" language. The contract of carriage is the legal contract between the airline and the ticket holder which describes the rights and responsibilities of both the air carrier and the passenger. Passengers may take legal action in federal courts based on these contracts. Historically, the Department of Transportation's (DOT) role in consumer protection is limited. The existing law does provide procedures and compensation rules for "bumping" and lost or damaged baggage, however. The main power DOT has to protect consumers is the department's power to take action against air carriers for "deceptive trade practices." The definition and interpretation of deceptive trade practices can significantly impact the scope of DOT's enforcement authority. Staffing of DOT's Office for Aviation Enforcement and Proceedings has also been an issue in the past. This DOT office also deals with passenger discrimination issues. No provisions. S. 1300 includes several airline customer service provisions. Section 401 would add a new, "Sub-chapter IV—Airline Customer Service," to Chapter 417 of 49 U.S.C. The new sub-chapter includes provisions on contingency services and the posting of consumer rights. An additional provision directing DOT to investigate certain types of consumer complaints was also added during committee mark-up. Requires that no later than 60 days of enactment each air carrier must provide in any case in which a flight is substantially delayed, adequate food, potable water, and restroom facilities during the delay. Each air carrier must develop a plan to ensure that passengers are provided a clear time-frame under which they will be permitted to deplane. In absence of such a plan, after 3 hours air carriers are to provide passengers with the option to deplane safely before the departure of the air carrier. Exceptions are provided for a pilot decision that the flight will depart within 30 minutes after the 3 hour limit or if the pilot believes that allowing a passenger to deplane would jeopardize passenger safety or security. DOT is to promulgate regulations to carry out this provision within 60 days. Air carriers would be required to publish conspicuously and update monthly on their Internet websites their customer service policies and air carriers' consumer rights under federal and state law. This provision would require air carriers that provide scheduled service to publish and update monthly on their Internet website or provide, on request, a list of chronically delayed flights operated by the air carrier. When customers are in the process of purchasing tickets, air carriers must prominently disclose, prior to the booking of the ticket on the air carrier's Internet website, to the individual, 1) the on-time performance for the flight if it is a chronically delayed flight, 2) the cancellation rate for the flight if it is a chronically canceled flight. DOT is directed to define "chronically delayed flight" and "chronically canceled flight." This provision requires that DOT, "subject to the availability of appropriations," investigate consumer complaints regarding: flight cancellations; compliance with federal overbooking regulations; lost/damaged or delayed baggage, and problems with baggage-related airline claims procedures; ticket refund problems; incorrect or incomplete information regarding fares, discount fare conditions and availability, overcharges, and fare increases. In addition, the provision requires DOT to include in its annual budget request an estimate of the resources that would have been sufficient to investigate all such claims DOT received in the previous fiscal year. The bill would require airlines to file monthly reports on flights that are diverted from their scheduled destination to another airport and on flights that depart from the originating airport gate but are cancelled before takeoff. The data must be compiled in a single monthly report and be made available on the DOT website. The IG is ordered to update its 2000 report "Audit of Air Carrier Flight Delays and Cancellations." In conducting the review the IG is directed to assess: 1) the need for an update on delay and cancellations statistics such as chronically delayed flights and taxi-in and out times; 2) air carrier scheduling practices; 3) the need to reexamine the FAA's airport capacity benchmarks; 4) the impact of flight delays and cancellations on passengers and recommendations to address these impacts. The bill would require, no later than 90 days after the date of enactment, that airlines and operators of large or medium hub airports submit to DOT an emergency contingency plan for each of these airports. The plans must describe how the airline plans to provide food, water, restroom facilities, cabin ventilation, and access to medical treatment for passengers on aircraft that are on the ground for extended time without access to the terminal and how they plan to share facilities and make gates available at the airport during an emergency. Airport operators must also submit an emergency plan describing how the airport operator will provide for the sharing of facilities and make gates available during an emergency. The Secretary of DOT is to establish an advisory committee for aviation consumer protection to advise the Secretary in carrying out passenger service improvements. Within one year of enactment, the Secretary of DOT is to issue a final regulation to modify title 14 of the Code of Federal Regulations, section 250, to appropriately adjust the amount of denied-boarding compensation. Within two years of the date of issuance of the final regulation, and every two years thereafter, shall evaluate the amount provided. Requires that, subject to the availability of appropriations, the Secretary of DOT is to investigate consumer complaints regarding: flight cancellations; compliance with federal regulations regarding the overbooking of seats on flights; lost, damaged, or delayed baggage (and problems with air carrier claim procedures); problems with refunds for unused or lost tickets; incorrect or incomplete information on fares, discount fare conditions and availability, overcharges, and fare increases; rights of frequent flier miles holders; and deceptive or misleading advertising. DOT is to provide in an annex to its budget request and estimate of the resources needed to investigate all such claims received by DOT in the previous year. DOT shall establish a consumer complaints hotline telephone number for use by airline passengers. The bill prohibits the selling of tickets for a flight on which an insecticide is planned to be used in the aircraft while passengers are on board unless the ticket purchasers are informed of the planned use and insecticide name. Since the 1971 creation of the user-supported airport and airway trust fund there has been disagreement over the appropriate use of the trust fund's revenues. This led, beginning in 1976, to the enactment of a series of legislative mechanisms designed to assure that federal capital spending for U.S. airports and airways (i.e., AIP and F&E) would be funded at their fully authorized levels. For a detailed discussion of the history and impact of the various spending guarantee mechanisms, see CRS Report RL33654, Aviation Spending Guarantee Mechanisms , by [author name scrubbed]. The current mechanism dates back to 2000 and includes two spending guarantees. One makes it out-of-order in the House or Senate to consider legislation that fails to use all aviation trust fund receipts and interest annually. The second makes it out-of-order to consider any bill that provided any funding for RE&D or O&M if the bill fails to fully fund AIP and F&E at their fully authorized levels. The current guarantees will lapse at the end of FY2007 if no action is taken to extend them. The FAA proposal includes no provisions regarding the spending guarantees. S. 1300 would extend the current spending guarantees through FY2011. H.R. 2881 would amend the airport and airway trust fund guarantee that requires that the total amounts made available from the trust fund be equal to the level of receipts plus interest for the year. Under H.R. 2881 , for each year FY2008-FY2009, the amounts made available would equal 95% of the estimated level of receipts plus interest on the fund for each respective fiscal year. For FY2010 and FY2011, the guaranteed level would be 95% for each respective year plus the difference between the actual receipts and total amounts made available for obligation from two years before (i.e., FY2008 and FY2009, respectively). The bill would retain the point-of-order enforcement mechanisms. This change would have a number of possible implications. First, the change could lessen the demands on trust fund revenues for the first two years of the reauthorization allowing a modest accumulation in the unexpended balance of the trust fund during these years. Second, it would reduce the likelihood that overly optimistic revenue projections could lead to spending at rates that exceed the actual revenues accruing to the trust fund (as has happened in recent years), at least in the first two years of the bill. Finally, by limiting trust fund spending, the change could, in the minds of some, increase the likelihood that the general fund contribution percentage for the FAA budget could be set at a higher level. Management and organizational reform at the FAA has been a central focus of both legislative and administration initiatives over the past several years. Major provisions of the FAA proposal and S. 1300 addressing management and organizational issues include: Measures designed to achieve better integration of NGATS planning and implementation into the FAA's ongoing planning and acquisition activities; Measures to establish a mechanism for considering possible realignment and consolidation of various FAA facilities and services; and Provisions to increase the flexibility in the design and implementation of NGATS by allowing airports and private entities to play a more direct role in acquiring, deploying, and maintaining facilities and services to augment the FAA's air traffic communications, navigation, and surveillance capabilities. These issues, and the related legislative proposals under consideration in the current FAA reauthorization debate are discussed in further detail below. A central issue permeating the current reauthorization debate is the adequacy of management and organizational processes to facilitate development of the NGATS. The NGATS is being developed to address system-wide capacity needs, and is scheduled to be completed prior to 2025. A provision in Vision 100 created the multi-agency Joint Planning and Development Office (JPDO) and charged it with the task of defining, developing, and implementing the NGATS plan. Over the past three years, the JPDO has collaborated with governmental and industry partners to draft a concept for NGATS development. Some critics have argued that the pace of this effort has been too slow, while others have voiced concern that the scope of the JPDO concept—encompassing "curbside-to-curbside" movement of airline passengers, rather than just block to block handling of all aircraft types within the national airspace system—may be inappropriate. Still others have raised concerns over the organizational and management structure of the JPDO, specifically regarding the JPDO potential lack of influence over management and budgetary processes of participating agencies. While these agencies are ultimately charged with the task of carrying out the engineering work to build the NGATS as well as the operational responsibilities to run and maintain the national airspace system and its many components, including, but not limited to air traffic control services and airport security functions, the link between their respective budgets and the NGATS program is not clearly defined. Various options to address these concerns that have been identified include establishing a lead systems integration (LSI) entity to oversee the engineering of the NGATS systems, and possibly establishing specific reporting requirements, perhaps through the budget and appropriations process, in which the various agencies involved could identify how budgetary elements would support NGATS development and how cross-agency efforts would be coordinated and aligned. Addressing the overarching objective of facilitating implementation of the NGATS engineering effort, the FAA proposal includes language designed to give the JPDO greater input into FAA systems development and operational decision making, by making the JPDO director a voting member of the FAA's Joint Resources Council as well as the Air Traffic Organization's (ATO's) Executive Council. The FAA proposal also includes language that would more closely integrate the JPDO's plans and progress on the NGATS with the FAA's ongoing modernization and capacity enhancement initiatives. Specifically, the FAA proposal would require an annual Operational Evolution Partnership (OEP) plan to be developed to provide details of how the FAA is implementing next generation concepts, and would also include in the FAA's annual report to Congress details on how each of the JPDO participating agencies' respective budgets will support NGATS development. S. 1300 also addresses facilitation of NGATS development, but proposes instead to establish implementation offices within the various federal agencies involved in the NGATS program. The bill language specifically directs the FAA, the Department of Defense, the National Aeronautics and Space Administration (NASA), the Department of Commerce, the Department of Homeland Security, and any other federal agency asked by the Department of Transportation to assist with NGATS development to each establish an implementation office. Each implementation office, or system planning office (SPO) as they are referred to in the title of the provision, would be charged with the task of overseeing agency implementation activities related to NGATS, and would serve as a liaison and coordinator between the agency or department it represents and other federal departments and agencies involved in the NGATS effort. Each SPO would also be responsible for managing all NGATS-related programs including management of budgetary and staff resources. S. 1300 further requires that each participating federal department or agency would enter into a memorandum of understanding with the JPDO and other departments and agencies involved in the NGATS initiative describing respective responsibilities, budgetary commitments, and staff resources committed to the NGATS project. This memorandum, as well as Department and agency budget requests, are to be revised as needed to reflect any changes in responsibilities and commitments of the agencies involved. Like the FAA proposal, S. 1300 would establish the JPDO director as a voting member of the FAA's Joint Resources Council and the Air Traffic Organization's (ATO's) Executive Council. S. 1300 also includes language amending current requirements for an NGATS integrated plan, requiring that a multiagency implementation plan, including a schedule of regulatory activities (rulemakings), be developed and updated on an annual basis. The bill would extend authorization of $50 million annually for the JPDO through 2011. H.R. 2881 includes sense of Congress language recognizing that modernizing the air transportation system is a national priority. To address this need to prioritize investment in the Next Generation Air Transportation System (NGATS), the bill includes several provisions designed to improve the management and implementation of this effort. Like the FAA proposal and S. 1300 , H.R. 2881 would establish the JPDO director as a voting member of the FAA's Joint Resources Council. The bill would give the JPDO director the title Associate Administrator for the Next Generation Air Transportation System, a position that would report directly to the FAA Administrator. To the extent possible, the JPDO director would be required to oversee development of the integrated NGATS plan, ensuring that each federal agency involved has requested sufficient funds in the annual budget process to carry out its responsibilities under the plan. The JPDO director would also be responsible for making sure that the development and implementation of NGATS stays on schedule, and identify and justify in the President's budget submission any inconsistencies between the NGATS plan and the budget request. Similar to S. 1300 , H.R. 2881 would also require each component agency involved in the NGATS initiative to designate a senior official responsible for carrying out NGATS-related activities of the agency, serving as a liaison for the agency in matters involving NGATS support, and ensuring that the agency meets its obligations set forth in memoranda of understanding regarding NGATS development and support. The bill further requires that the JPDO work with the OMB to develop a process for identifying projects tied to the NGATS program across all affiliated federal agencies and consider the NGATS as a cross-agency, unified program. Further, H.R. 2881 would require a multiagency integrated work plan for NGATS including an outline of activities required to achieve the end-state architecture defined in the program's concept of operations (CONOPS); year-by-year details of accomplishments, activities, research, requirements, rulemakings, policy decisions, and other milestones; an outline of annual objectives and responsible agencies; an estimate of year-by-year funding requirements for each development stage; and "a clear explanation of how each step in the development of [NGATS] will lead to the following step and the implications of not successfully completing a step in the time period described in the integrated work plan." The bill would also require the FAA to issue the "Operational Evolution Partnership," detailing how the agency is implementing NGATS, on an annual basis as well as annual reports to the Congressional oversight committees detailing progress made in carrying out the multiagency integrated NGATS work plan. Also, under H.R. 2881 , the NGATS Senior Policy Committee would be required to meet twice each year and prepare an annual report to coincide with the President's budget request detailing progress made on the multiagency integrated NGATS work plan and any changes to that plan, detailing the impact of those changes. H.R. 2881 would also require GAO to review the progress and challenges of transforming the national airspace system to NGATS, and review ongoing air traffic modernization projects and progress on NGATS component systems including En Route Automation Modernization (ERAM); Standard Terminal Automation Replacement System/Common Automated Radar Terminal Systems (STARS/CARTS); Traffic Flow Management Modernization (TFM-M); System Wide Information Management (SWIM); and ADS-B. The bill would also task the National Research Council with performing a review of the enterprise architecture for the NGATS examining technical activities, program risk, and opportunities to mitigate risk based on experiences with other complex, software-intensive systems. The bill would also require the FAA, in consultation with other agencies such as NASA, to initiate a research program on methods to improve and streamline the process of certifying new technologies for introduction into the national airspace system. The bill also authorizes additional appropriations, totaling $56.8 million over the four year authorization period, specifically for airspace redesign initiatives to enhance aviation system capacity and reduce delays. The FAA proposal includes language giving the FAA authority to establish a commission, to be known as the Realignment and Consolidation of Aviation Facilities and Services Commission, that would be tasked with making independent recommendations to the President regarding the realignment and consolidation of FAA facilities and services. The commission would be comprised of five members appointed by the Secretary of Transportation to serve three-year terms, with one serving as a member-elected chairperson of the commission. In order to conduct its work, the commission would be permitted to hire experts and consultants on either a temporary or intermittent basis, subject to DOT approval. The proposal outlines a process for evaluating and implementing recommended FAA facility and service consolidation in a manner designed to minimize political influence on the process, much like the military BRAC process which it is closely modeled after. The overall objective would be to identify and implement recommended realignment and consolidation activities that would help reduce FAA capital, operating, maintenance, and administrative costs without adversely impacting system safety. The FAA proposal includes details of the process and a timeline for carrying out a systemwide review and implementation of realignment and consolidation of FAA facilities and services. First, within six months after establishing the commission, the commission would be required to publish its final criteria for making recommendations regarding realignment and consolidation. Thereafter, the FAA would be required to publish a list of recommendations to the commission for realignment and consolidation. The commission would subsequently review the FAA's recommendations and consider public comments on these recommendations. Based on this review, the commission would then make its own independent recommendations and justify these recommendations in a report to the President. If the President concurs with the commission's recommendations, the President would transmit the recommendations, along with a presidential certification of approval, to Congress. If, on the other hand, the President disapproves, the President would be required to transmit to the commission and to Congress the reasons for disapproval. The commission may then address the President's report and make revised recommendations. If the President still disapproves, the entire process would then be terminated. If the President approves of all of the revised recommendations, the President would then forward them, along with indication of presidential approval to Congress. Congress, in turn, would have the opportunity to review the recommendations and would have 60 days to disapprove of the plan through passage of a joint resolution. If Congress does not disapprove, then the FAA would be statutorily required to carry out the realignment and consolidation activities detailed in the presidentially approved commission plan. The FAA would be required to initiate implementation of the approved actions within two years and would be required to complete the realignment and consolidation activities within six years. While the proposed process closely follows the military BRAC process, which has generally been regarded as a successful approach to realignment and consolidation of military bases and units, the prospect of implementing such a process to assess FAA facilities and services may be regarded as controversial during the reauthorization debate, particularly in local regions that may stand to lose FAA facilities and jobs as an outcome of the process. Consideration of the process in legislation may also be opposed by labor organizations representing FAA employees, although nothing in current statute generally prohibits the FAA from engaging in organizational consolidation and realignment, as evidenced by the FAA's recent consolidation of its regional service areas in 2006. S. 1300 does not include the Administration proposal to establish a BRAC-like commission and process to examine FAA facility realignment and consolidation. Rather, the bill proposes an alternative process for realigning FAA services and facilities. Under S. 1300 , within nine months of enactment, the Administrator would be required to establish final criteria for the realignment of services and facilities to assist in the transition to next generation operations and to reduce costs, after providing an opportunity for public comments on proposed criteria. After the final realignment criteria are published, the FAA would be required to identify those services and facilities recommended for realignment, including a justification for these recommendations and the anticipated costs and savings for each recommended realignment action. The Air Traffic Control Modernization Oversight Board would then have the opportunity to study the FAA's recommendations for realignment, and provide an opportunity for public comment on the recommendations. Based on its review of the FAA's recommendations and related public comments, the Board would then be required to make independent recommendations of its own and report these recommendations to the President and to the congressional oversight committees having jurisdiction over the FAA. In this report, the Board would be required to explain and justify any recommendations that differ from those recommendations offered by the FAA. S. 1300 does not discuss what would happen next, nor does it require any specific further action once the recommendations of the Board are received by the President and Congress. Unlike the Administration's proposal which would limit the ability to take action on any recommendation unless it was supported by the proposed commission and would require the FAA to implement approved recommendations within two years, S. 1300 does not limit the FAA's ability to take action on its own recommendations, nor does it require the FAA to implement any recommendation. So, in contrast to the commission proposed under the FAA proposal which would play a direct role in the realignment process, the Board's role under S. 1300 would only be advisory in nature. While the bill does not require the FAA to implement any specific actions regarding its proposals for realignment or consolidation, planned consolidations of terminal radar approach control (TRACON) facilities in Southern California, Houston, TX, and Memphis, TN, would be put on hold until the above described process is completed and the Board completes its recommendations. In contrast to the FAA proposal and S. 1300 that seek more formal entities and processes for reviewing FAA consolidation initiatives, H.R. 2881 proposes to establish an FAA working group, similar to an advisory group, to develop criteria and make recommendations for realignment of services and facilities. Members of the nine-member working group would consist of the FAA Administrator, two airline representatives, two airport representatives, two representatives from the general aviation community, and two labor organization representatives representing FAA regional office or field employees. An amendment agreed to and incorporated into the House-passed version of the bill would require that FAA regional office consolidation be included in the scope of the working group's oversight. That provision also stipulates that the working group members from labor unions representing FAA employees may be selected from unions representing employees working at either field facilities or regional offices. The FAA would be required to form the working group within nine months of enactment, and once established, the working group would have six months to develop criteria and recommendations for realignment and present those findings to the appropriate congressional oversight committees. The working group's report is to include justifications for each recommendation to consolidate or realign specific facilities and services, including associated costs and savings estimates. In addition to providing the report to the congressional committees, the report would be published in the Federal Register allowing 45 days for public comments and written objections to the recommendations contained in the report. Sixty days after the close of the public comment period, the FAA Administrator would be required to submit a second report to the congressional oversight committees detailing the Administrator's recommendations for consolidation and realignment, along with copies of any public comments and objections received. The statute would bar the Administrator from implementing any consolidation or realignment of facilities or services until this report is submitted. However, once the report is submitted, this does not otherwise limit the Administrator's authority to initiate proposed actions or require that these actions be subject to any further review. One option under consideration is to allow private sector investment in communications, navigation, surveillance and other services provided within the context of the national airspace system. For example, under such provisions, telecommunications providers may opt to deploy technologies to augment in-cockpit air traffic surveillance, capabilities and datalink weather and other flight-related information to airborne aircraft. Under such a scheme, these providers may be able to offer certain fee-for-service capabilities to aircraft to augment a core set of required aircraft communication, navigation, and surveillance capabilities. Another option being considered is to allow for airport ownership and control of certain communications, navigation, and surveillance equipment that has been historically acquired, deployed, and maintained by the FAA. In the FAA proposal, the Administration has offered language addressing these various proposals. Specifically, language in the FAA proposal would permit non-government entities to provide communications, navigation, surveillance, or other services to the extent that such arrangements would improve safety and efficiency, reduce regulatory burdens on system users, encourage competition, make these services available to the largest feasible number of users, and take into consideration the unique role served by general aviation. Further, a provision of the bill proposes that a pilot program be established at up to ten large or medium hub airports under which the FAA would transfer, without cost, ownership of terminal area navigation equipment to the airport. The participating airport would, in turn, be responsible for operation and maintenance of the equipment. Under this pilot program, airports would be required to agree that they would maintain the equipment according to FAA standards, allow the FAA to conduct periodic inspections, and upgrade facilities and equipment when they become obsolete. Airports would be permitted to recoup costs associated with operating and maintaining such equipment through PFCs, and pilot program airports would be authorized to impose a PFC of up to $7, $1 greater than the proposed PFC maximum level. Another proposed pilot program, outlined in the FAA proposal, would be established to promote airport acquisition and deployment of Automated Dependent Surveillance—Broadcast (ADS-B) ground stations to supplement the FAA's own acquisition of these facilities (see " ADS-B Support Pilot Program ," above). Under the pilot program, airports would be eligible to receive AIP grant money to fund the acquisition and installation of ADS-B ground equipment, even though it is acknowledged that such equipment is not airport-specific. The FAA envisions ADS-B—a technology through which aircraft could transmit their precise position, direction of flight, and speed to ground stations and other aircraft—as a potential replacement for radar as the primary means for air traffic surveillance and control. The FAA also views ADS-B as a possible safety system for improving pilot situation awareness of air traffic, thereby mitigating the risk of midair collisions, particularly among general aviation aircraft. While such provisions may expand FAA's options and flexibility with regard to deploying and maintaining next generation air traffic equipment, these approaches may raise operational issues regarding ownership and operational control of these facilities, which are anticipated to be networked and highly integrated into the NGATS. These provisions may also raise liability issues regarding cases of equipment failures and failures to perform to technical specifications. S. 1300 includes the language from the Administration proposal regarding the pilot program for airport takeover of certain navigation facilities, the ADS-B Support Pilot Program, and the provision allowing non-government providers to provide communications, navigation, surveillance or other services to airspace users. In addition to these provisions, S. 1300 requires that, within 90 days of enactment, the FAA submit a report to its congressional oversight committees detailing progress on implementing ADS-B ground stations, and plans and schedules for disseminating advanced operational procedures using ADS-B and ADS-B air-to-air applications. Additionally, S. 1300 would require the FAA to issue guidelines and regulations regarding requirements for ADS-B avionics equipage, including a schedule indicating when certain types of aircraft would be required to install such equipment, the expected costs to operators, and the expected uses and benefits operators will derive from these avionics. The FAA would be required to issue this guidance and rulemaking within one year of enactment. S. 1300 would also impose a requirement designed to accelerate the FAA's operational certification and dissemination of improved instrument approach capabilities using advanced precision navigation capabilities using satellite-based navigation technologies. The bill specifies that the FAA should set a target of adding 200 additional precision approach procedures, known as Required Navigation Performance or RNP procedures, each fiscal year through FY2012. The provision further specifies that the FAA should set a goal of 25% of the target number, or at least 50 procedures per year, meeting the criteria for use in low visibility conditions. The provision would also allow the FAA to authorize third parties to design, flight check, and implement RNP procedures. H.R. 2881 authorizes the creation of a public-private partnership that includes a "university component with significant aviation expertise in air traffic management, simulation, meteorology, and engineering and aviation business" to serve as an airport-based testing site for existing NGATS technologies. The provision stipulates that the testing site should serve a mix of both commercial and general aviation traffic. Also, a provision of the so-called "manager's amendment" agreed to by the House and incorporated into H.R. 2881 would establish a NextGen Research and Development Center of Excellence. The center would be responsible for leveraging the FAA's centers of excellence program, a program that relies on several university consortia to address ongoing FAA research and development challenges, to enhance the development of NGATS technologies within academia and industry. The NextGen Research and Development Center of Excellence would be responsible for providing educational, technical, and analytical assistance to the FAA and other agencies involved in NGATS development, such as NASA and the DoD, to aid in the research and development of NGATS technologies. H.R. 2881 also includes language that would require the FAA to establish a process for including certain FAA employees, selected by their respective collective bargaining units, that are likely to be impacted by the NGATS development and other modernization initiatives in the planning, development, and deployment of ATC modernization projects. This may include air traffic controllers and airway system specialists that maintain ATC infrastructure, who have expressed concern that they have not been adequately included in the planning and conceptualization of NGATS and in the development of other modernization initiatives. These employees would serve in a collaborative, advisory capacity and, in addition to regular compensation and benefits, would receive travel and per diem expenses in accordance with FAA travel policies while serving in this capacity. H.R. 2881 would also require the FAA to prepare a report on the program and schedule for integrating ADS-B into the national airspace system. The report is to include detailed information on protections and contingencies that would be included in any FAA contracts to cover the event of a contractor's default, bankruptcy, acquisition, or other event that may jeopardize the uninterrupted delivery of ADS-B services. The provision further specifies that any FAA contract for ADS-B services contain contingencies requiring: FAA Administrator approval of any assignment of the contract or assumption of the contract vendor by another entity; designation of ADS-B assets as critical national infrastructure for security purposes; continuation of ADS-B broadcast services for a reasonable period following a contract termination or in the event of material nonperformance, until another vendor can begin providing these services; and permission for the federal government to acquire or utilize the ADS-B contractor assets to ensure uninterrupted ADS-B services, provided that reasonable compensation for use of such assets is made. H.R. 2881 would require the Department of Transportation's Office of Inspector General (DOT OIG) to conduct a review of the effectiveness of FAA oversight in connection with third party development of flight procedures, such as instrument approaches to airports. The review would include an assessment of the degree to which the FAA is relying or plans to utilize third parties for developing flight procedures, and whether there is adequate FAA staff and processes to assess the safety of these third party activities. The report is to also assess whether the FAA has sufficient internal staffing and resources to meet the needs for safely and efficiently developing flight procedures without the use of third party resources. In 1995, Congress authorized the Administrator of the FAA to develop a new personnel management system for the agency's workforce. Section 347(a) of the Department of Transportation and Related Agencies Appropriations Act, 1996, provided for the development and implementation of a new personnel management system following consultation with FAA employees and any non-governmental experts in personnel management systems employed by the Administrator. The new system was to provide for "greater flexibility in the hiring, training, compensation, and location of personnel." As enacted originally, chapter 71 of Title 5 of the U.S. Code, relating to labor-management relations in most federal agencies, did not apply to the new personnel management system. However, in March 1996, Congress amended section 347 to make chapter 71 applicable to the new system. In October 1996, Congress considered additional requirements for the FAA personnel management system. Section 253 of the Federal Aviation Reauthorization Act of 1996 amended title 49 of the U.S. Code to add a new section involving consultation and negotiation with respect to the new system. 49 U.S.C. § 40122(a) provides, in relevant part: (1) Consultation and Negotiation.—In developing and making changes to the personnel management system initially implemented by the Administrator of the Federal Aviation Administration on April 1, 1996, the Administrator shall negotiate with the exclusive bargaining representatives of employees of the Administration certified under section 7111 of title 5 and consult with other employees of the Administration. (2) Mediation.—If the Administrator does not reach an agreement under paragraph (1) with the exclusive bargaining representatives, the services of the Federal Mediation and Conciliation Service shall be used to attempt to reach such agreement. If the services of the Federal Mediation and Conciliation Service do not lead to an agreement, the Administrator's proposed change to the personnel management system shall not take effect until 60 days have elapsed after the Administrator has transmitted the proposed change, along with the objections of the exclusive bargaining representatives to the change, and the reasons for such objections, to Congress. In the report that accompanied the Senate version of the 1996 act, the Senate Committee on Commerce, Science, and Transportation indicated that "[i]n negotiating changes to the personnel system, the Administrator and the exclusive bargaining representatives would be required to use every reasonable effort to find cost savings and to increase productivity within each of the affected bargaining units, as well as within the FAA as a whole." The House version of the act did not include a provision on consultation, negotiation, and mediation. The Senate provisions were incorporated into the final version of the legislation during conference. In 2005, a federal district court considered the impact of 49 U.S.C. § 40122 on labor-management relations at the FAA. After reaching bargaining impasses with the FAA, the National Air Traffic Controllers Association ("NATCA") and the Professional Airways Systems Specialists ("PASS") sought the assistance of the Federal Service Impasses Panel ("FSIP"), an entity within the Federal Labor Relations Authority ("FLRA") that provides assistance with resolving negotiation impasses between federal agencies and unions. In 2004, unclear about whether it had the authority to resolve impasses involving the FAA in light of 49 U.S.C. § 40122, FSIP declined to provide assistance. After reviewing the development of the FAA personnel management system and the enactment of 49 U.S.C. § 40122, the district court concluded that complaints related to an agency's participation in FSIP's impasse resolution procedures could be deemed an unfair labor practice. Consequently, the court declared that "[w]hen agency action constitutes an arguable unfair labor practice, jurisdiction rests exclusively with the Authority and the Courts of Appeals.... For these reasons, the [court] concludes that it is without jurisdiction and should defer to the FLRA." Although the FLRA did not address the matter, the U.S. Court of Appeals for the District of Columbia Circuit did review the district court opinion in February 2006. In National Air Traffic Controllers Association v. Federal Services Impasses Panel , the D.C. Circuit affirmed the district court decision, concluding that FSIP did not have a clear and specific statutory mandate to assert jurisdiction over the parties' bargaining impasses. The court did observe, however, that the FAA's refusal to participate in proceedings before FSIP could form the basis of an unfair labor practice charge before the FLRA. On April 5, 2006, the FAA announced formally that it had reached an impasse in its negotiations with NATCA regarding its agency-wide contract covering the air traffic controller workforce. In accordance with 49 U.S.C. § 40122(a)(2), the FAA Administrator indicated that the agency would send its last, best offer to Congress. On June 5, 2006, the FAA imposed a new labor contract on NATCA. FAA maintained that the new contract would save the government approximately $1.9 billion over five years through various measures, including the creation of a separate, lower pay scale for new employees. The FAA Proposal does not include provisions that would alter the agency's existing personnel management system. Section 313 appears to respond to the events involving NATCA and PASS in 2006. The section would amend 49 U.S.C. § 40122(a)(2) to allow for the involvement of FSIP if the Administrator and a bargaining representative fail to reach agreement under 49 U.S.C. § 40122(a)(1). Under the amended 49 U.S.C. § 40122(a)(2), FSIP would be permitted to assist the parties by ordering binding arbitration by a private arbitration board consisting of three members. Each party would select one arbitrator from a list of not less than 15 arbitrators with federal sector experience provided by the director of the Federal Mediation and Conciliation Service. The two arbitrators would then select a third arbitrator from the list. If the two arbitrators are unable to agree on the third person, the parties will select the third person by alternately striking names from the list until only one name remains. The arbitration board would be required to give the parties a full and fair hearing, including the opportunity to present evidence in support of their claims, and an opportunity to present their case in person, by counsel, or by another representative. The arbitration board would be required to render its decision within 90 days of its appointment. The costs of the arbitration would be shared equally by the parties. Like section 313 of S. 1300 , section 601 of H.R. 2281 would permit the involvement of FSIP and the use of binding arbitration to resolve impasses. Unlike section 313, however, section 601 would permit an enforcement action under the amended 49 U.S.C. § 40122 to be brought in any U.S. district court in the state in which a violation has allegedly been committed, the state in which the FAA has its principal office, or in the District of Columbia. Under section 313, enforcement actions would have to be brought in the U.S. District Court for the District of Columbia. In addition, section 601(b) would invalidate any changes that were implemented by the FAA Administrator on and after July 10, 2005, without the agreement of the exclusive bargaining representative. The parties would be governed by their last mutual agreement until a new contract was adopted. Thus, section 601(b) would appear to have the effect of undoing the new contract that was imposed on June 5, 2006. With an aging workforce and an increasing percentage of FAA employees becoming eligible for retirement over the reauthorization period, there has been growing concern among some regarding the FAA's ability to maintain adequate technical skills and knowledge within its workforce. The FAA proposal does not include language directly addressing technical training and staffing issues. While the FAA proposal does not include any provisions addressing FAA technical training and staffing issues, S. 1300 includes a provision directing GAO to conduct a study of FAA technical specialists, specifically airway transportation system specialists, examining the types of training provided to these individuals, the training needs for maintaining the latest air traffic system technologies, FAA actions that have been taken to ensure that these specialists receive up-to-date training, and recommendations regarding the most cost-effective approaches to providing such training. S. 1300 would also require the National Academy of Sciences to conduct a study to assess workload and staffing needs for FAA air traffic controllers and system specialists. The bill also directs the FAA to come up with a staffing model for its aviation safety inspectors, within 18 months of enactment, that is to be developed through consultation with representatives of aviation safety inspectors and other interested parties. The FAA has had a similar staffing model for air traffic controllers for some time; however, this model has been the subject of considerable scrutiny and criticism over the past few years in response to the FAA's strategy for handling the increasing number of controller retirements. Recently, there has been growing concern that similar trends in retirements could impact the FAA's aviation safety inspector workforce. The National Research Council recently published a book detailing a model for aviation safety inspector staffing standards in response to a congressional mandate for such a study that was included in Vision 100. H.R. 2881 contains similarly worded language tasking GAO with completing a study on airway transportation system specialist training, and directs the National Academy of Sciences to study the methods and assumptions used by the FAA in gauging workload and setting system specialist staffing levels. H.R. 2881 would also require the FAA to develop a staffing model for aviation safety inspectors by October 31, 2009. The bill also calls for an increase in the number of FAA safety inspectors, safety technical specialists, and operational support positions and sets specific inspector staffing levels throughout the authorization period. The bill specifies authorizations, in addition to the overall amounts provided for Operations and Maintenance (O&M), in the following amounts to increase safety inspector and operational support staffing levels: $58 million in FY2008; $134 million in FY2009; $170 million in FY2010; and $208 million in FY2011. The bill also allows for such sums as may be necessary to implement the numbers of aviation safety inspectors, safety technical specialists, and operational support positions specified as necessary to support the flight standards mission as determined by the staffing model. A safety-related provision of the bill would require FAA inspectors to inspect foreign repair stations that service air carrier aircraft or components at least two times per year. In addition, H.R. 2881 calls for a GAO report on the status of previously made GAO recommendations regarding the FAA's use of designees and oversight and management of the FAA designee programs. H.R. 2881 would also task the National Academy of Sciences with carrying out a study examining the assumptions and methods used by the FAA to estimate air traffic controller staffing needs. In carrying out the study, the National Academy of Sciences would be required to consult with FAA labor groups, the FAA administrator, and CAMI, and consider human factors, traffic activity, and available technology and equipment in developing recommendations and cost and schedule estimates for the FAA to develop an objective staffing standard. The FAA has maintained a controller staffing standard for several years, and has revised this standard in recent years to address pending controller turnover, although the existing staffing standard has been criticized by FAA labor organizations and by some Members of Congress. H.R. 2881 would also require the FAA to assess the adequacy of training programs for air traffic controllers, and also study options for training graduates from Collegiate Training Initiative (CTI) programs, and assess alternatives to training newly hired controllers from such programs through the current training provided at the Mike Monroney Aeronautical Center in Oklahoma City, OK. H.R. 2881 also contains a provision that would require the FAA to carry out a study of the front line manager staffing requirements in air traffic control facilities. The study would address the number of supervisory positions for watch coverage in each ATC facility in relation to traffic demand and complexity, facility type, managerial responsibilities, proficiency and training requirements, and other related factors. The ongoing use of the controller-in-charge (CIC) program to supplement line managers in ATC facilities has been an ongoing controversy. H.R. 2881 also calls for establishing a center of excellence in aviation employment. The center would conduct applied research and provide training on: human performance in the aviation environment; air transportation personnel including air traffic controllers, pilots, and technicians; and other aviation human resource issues. System capacity and safety remain as overarching issues behind much of the reform sought in the proposed FAA reauthorization. However, in terms of requested statutory changes specifically addressing system capacity and safety issues, major provisions offered in the FAA's proposal have focused on obtaining the authority to implement market-based approaches to controlling congestion at selected high-density airports. Specifically, the FAA proposal seeks statutory authority to control congestion at certain airports through market-based mechanisms, such as slot auctions and peak-period pricing. The proposal would direct DOT to study the appropriateness of a market-based scheme at New York's LaGuardia Airport (LGA), and if deemed appropriate, would permit the airport operator, the Port Authority of New York and New Jersey, to implement a market-based approach to controlling congestion. The FAA proposal also seeks to establish a pilot program to evaluate market-based mechanisms to relieve congestion at up to 15 other airports. S. 1300 does not contain any provisions addressing this issue, but does seek to increase the number of flights to and from Washington Reagan National Airport which are tightly controlled through a statutorily defined slot system. The bill also contains numerous provisions addressing assorted aviation safety and capacity issues including runway incursions; airliner fuel tank safety; pilot fatigue; helicopter emergency medical service operations; age limits for airline pilots; unmanned aircraft operations; and wake turbulence prediction, detection, and avoidance. A statutory provision that set specific capacity controls in the form of "slots" at LaGuardia Airport (LGA) expired on January 1, 2007. Statutory slot controls at other airports had previously expired, leaving Washington Reagan National Airport (DCA) as the only airport in the country with statutorily imposed slots. In response to the sunset of the statutory slot provision for LGA, the FAA issued an order establishing temporary limits to prevent congestion-related delays at LGA. The FAA imposed similar restrictions at Chicago's O'Hare airport (ORD) to alleviate congestion and delay and maintain operational safety. In the FAA proposal, the Administration has drafted language that would authorize DOT to determine whether the use of a market-based mechanism for controlling access to LGA, such as a slot auction or congestion pricing, would be an appropriate means for allocating takeoffs and landings among the airport's users. If such a mechanism is determined to be appropriate, then DOT shall permit the Port Authority of New York and New Jersey to implement a market-based approach to controlling flights at LGA under guidelines that would be established by DOT rulemaking. The FAA proposal, however, raises some potential intergovernmental relations questions. These concern the ability of the FAA to delegate what could be considered air traffic rationing authority to the airport operator. These issues may need to be addressed before this section could be implemented. S. 1300 does not contain any language addressing congestion, slots, or market-based mechanisms for addressing congestion and capacity issues at LGA. H.R. 2881 also does not contain any language addressing flight operations at LGA. As airline operations become increasingly concentrated at a relatively small number of airports throughout the nation, market-based approaches have been viewed favorably by aviation experts as a means for controlling congestion. Critics, however, remain concerned that the cost of operating under these market-based schemes could negatively affect service to smaller communities. Specifically, routes to smaller communities may have more difficulty being profitable if a market-based price associated with connections to major hubs is factored into the cost of service. This may result in a loss of service to some communities if the costs of implementing market-based mechanisms make these routes unprofitable. In addition to the authority sought to implement market-based congestion controls at LGA, the FAA proposal also seeks to establish a pilot program to evaluate market-based mechanisms to relieve congestion at up to 15 other airports. As previously mentioned, besides LGA, the FAA has imposed temporary restrictions on air carrier flight operations at ORD in an effort to mitigate congestion and delay and maintain operational safety. The FAA proposal, however, does not make any special accommodations for service to small communities in the context of these market-based approaches, although such options may be considered during congressional debate. S. 1300 does not include any provisions for implementing market-based strategies or techniques for alleviating congestion at any airports. H.R. 2881 includes a general provision—included as part of the "manager's amendment" which was agreed to by the House—that would allow the FAA to hold meetings among air carriers for the purposes of reducing schedules at a capacity constrained airport under a defined set of conditions. These meetings would be for the purpose of voluntarily negotiating schedule reductions in cases where an airport is experiencing arrival and departure rates that exceed maximum hourly rates and these delays are likely to have a significant adverse effect on a regional or national level. If air carriers are unwilling to voluntarily agree to schedule reductions, then the provision would authorize the FAA administrator to take appropriate action to reduce arrivals and departures to reflect available airport capacity. Also, an amendment agreed to by the House would require GAO to assess the use of market-based strategies for reducing airspace congestion, such as peak-period pricing, slots, or quotas, and compare the effects of such initiatives to the improvements in congestion attainable through airspace redesign initiatives. The total number of flights that can be handled in a given period of time at Washington Reagan National Airport is set by federal statute (landings and takeoffs are referred to in industry parlance as slots). This system has existed for over two-decades, although the statutory limitations on the number of slots available has been modified over that period by congressional action, especially since 2000. In addition, flights at Reagan National are further restricted by what are known as perimeter rules. These rules, which date to the opening of Dulles Airport in the late 1950s, were designed to move most long distance airline traffic to the new airport. Again these perimeter rules have been modified over time. At present, flights of 1,250 miles or less are referred to as being within the perimeter. Prior to congressional action in 2000, all slots for flights arriving or departing Reagan National were required to operate within the perimeter. Since 2000, Reagan National has accommodated additional flights, using newly created slots providing service to destinations outside the perimeter, so-called beyond perimeter slots. Many Members of Congress and their constituents were long unhappy with the perimeter restrictions, wishing to be able to fly to more distant locations from Reagan National. In 2000, and again in 2003, Congress acceded to this view in a limited fashion allowing the aforementioned beyond perimeter slots. In the same pieces of legislation Congress also added additional slots for service within the perimeter, thereby increasing the absolute number of flights allowed per day at the airport. Certain other Members of Congress, Washington metro area local governments, and local residents living near the airport or in its flight paths have opposed increased traffic at Reagan National for any reason. Although this opposition focuses primarily on the noise impacts of additional traffic, opponents of increased flights have also cited other reasons to hold this view. In February 2007, the Government Accountability Office (GAO) produced a study that suggested that additional flights could be handled at Reagan National. Although the operator of the airport, the Washington Metropolitan Airports Authority, agreed that additional capacity could be added, it did not support additional slots. In its proposed legislation the Bush Administration did not propose any changes in the Reagan National slot rules. S. 1300 envisions the creation of 20 new slots at the airport on a daily basis, 12 of these for beyond perimeter operations and eight for within perimeter operations. During Senate Commerce mark-up an amendment to strike the additional slots failed on a 12-11 vote. H.R. 2881 provides for an additional 10 beyond perimeter slots, but does so by reducing existing slot allocations at the airport by an equal number. Runway incursions—events where aircraft, vehicles, or pedestrians stray onto active runways and pose a collision hazard to landing or departing aircraft—remain a central safety concern. The FAA's major technology initiatives to mitigate runway incursions include the deployment of advanced surface radar capabilities (Airport Surface Detection Equipment, Model X or ASDE-X) and controller alerting to warn of impending incursions (the Airport Movement Area Safety System or AMASS) at busy airports. However, ASDE-X has been scaled back and delayed. Also, the utility of the AMASS system has been questioned by the NTSB because it does not convey warning information directly to pilots, potentially limiting the systems ability to mitigate collisions. The NTSB has recommended that the FAA develop systems that provides direct warnings to pilots. The FAA recently approved the use of electronic flight bags, portable computers for pilot use, with moving maps to improve pilot situation awareness while taxiing. While useful for orienting and navigating in the airport environment, these devices currently do not present information regarding other aircraft and vehicles in the airport environment. To provide direct incursion mitigation tools for pilots, the FAA has been operationally testing the use of runway status lights (RWSLs) to warn taxiing aircraft that it is unsafe to cross an active runway, and final approach runway occupancy signal (FAROS) lights to warn landing aircraft if the runway ahead is occupied. The FAA has not fully evaluated the results of these ongoing operational tests and has not made any decisions regarding the operational deployment of these systems beyond the test phase at this point. While the FAA has been actively engaged in developing operational procedures, and deploying technologies to mitigate runway incursions, the FAA proposal does not include any specific language addressing the issue of runway incursions. S. 1300 would require the FAA to develop an installation and deployment schedule for systems to alert controllers and flight crews regarding potential runway incursions no later than December 31, 2008. The bill further stipulates that this schedule be integrated into the FAA's operational evolution plan, its roadmap for near-term system enhancements. H.R. 2881 contains a provision, similar to the S. 1300 provision, that would require the FAA to submit a report to Congress detailing its plan to install systems to alert controllers, flight crews, or both of potential runway incursions by December 31, 2008. The FAA would be required to integrate the plan into its annual Operational Evolution Partnership document. H.R. 2881 also explicitly authorizes, from the amounts authorized for overall Facilities and Equipment (F&E) spending, the amounts specified in Table 4 for runway incursion reduction programs and runway status lights (indicators for taxiing aircraft that a runway is occupied by a landing or departing aircraft and should not be used or crossed). The bill would also require the FAA to develop a strategic plan for runway safety within six months of enactment. The plan would be required to specifically address the effects of expected increases in air traffic on runway safety risk, and include specific goals to improve runway safety; near-term and long-term actions for reducing the number of runway incursions and their severity; a timeline and a list of resources needed for implementing these actions; and details of a continuous process for monitoring progress toward achieving stated runway safety goals. The safety of fuel tanks on transport category aircraft has been a central safety concern for over ten years following the 1996 crash of TWA flight 800 off the coast of Long Island, NY. Recent technology advances in fuel inerting systems have led to the development of small, light-weight fuel inerting pumps that extract oxygen from the air in fuel tanks, replacing it with a nitrogen-rich mixture that greatly reduces flammability potentially mitigating future accidents like the TWA flight 800 tragedy. In May 2002, the FAA announced an innovative lightweight prototype fuel inerting system. This system—unlike earlier versions used by the military—weighs significantly less, uses no moving parts, is more reliable, and could be retrofitted into airplanes currently in service at a fraction of the industry-estimated cost. Boeing is now shipping new aircraft from its factories with these systems already installed. The FAA has proposed an approach that would require passenger airlines to take such steps to reduce fuel tank flammability in their aircraft fleets over the next eight years. The FAA issued proposed rulemaking in November, 2005 to require that operators of large transport category airplanes used in passenger airline service take steps to reduce fuel tank flammability, such as installing fuel inerting systems. The proposed rule does not specifically require the fuel tank inerting systems discussed above for all passenger airliners, but leaves the door open for alternative means of compliance. The proposal seeks to set a flammability exposure criterion for center fuel tanks. The proposed rule, however, does not require fuel tank flammability reduction for wing tanks as it only establishes requirements for an aircraft's main fuel tank, and would exempt all-cargo aircraft. The rule would require that retrofitting of the fleet be phased-in between 2009 and 2014. The FAA proposal does not include any legislative language addressing the issue of fuel tank safety. S. 1300 specifies that, no later than December 31, 2007, the FAA is to issue a final rule regarding the reduction of fuel tank flammability in transport category aircraft. The proposed rule—which would require that operators of large transport category airplanes used in passenger airline service take steps to reduce fuel tank flammability—was issued by the FAA on November 23, 2005, and the opportunity for public comments on the proposal closed on March 23, 2006. H.R. 2881 includes a provision identical to S. 1300 regarding aircraft fuel tank safety. Reducing accidents caused by fatigue across all modes of transportation by establishing working hour limits for transportation operators based on fatigue research, circadian rhythms, and sleep and rest requirements has been a longstanding priority of the NTSB. While existing federal regulations include flight time and rest requirements for flight crews that vary depending on the type of commercial flight operation being conducted, these regulations have often been criticized as not adequately reflecting scientific knowledge regarding human fatigue, alertness, and sleep needs. In airline operations, pilot organizations, through collective bargaining, have been able to negotiate schedules that provide longer rest periods than the minimum required under FAA regulations. However, there is still concern that airline pilots' rest periods do not adequately account for the time associated with transportation to and from the airport, and circadian disruption associated with crossing time zones over the course of a trip. However, concern over pilot fatigue tends to be even greater for other commercial operators, besides the airlines, where there are less stringent regulatory requirements for flight time and rest requirements, and fatigue issues are not typically addressed in pilot contracts to the extent that they are covered in contracts between major airlines and their pilots. The FAA proposal does not include any specific language regarding the issue of pilot fatigue. S. 1300 includes a provision that would task the National Academy of Sciences with conducting a study of pilot fatigue. The FAA would be required to consider the study's findings and recommendations in rulemaking regarding flight time limitations and crew rest requirements. However, the provision does not specifically require the FAA to propose any specific changes to existing flight time and crew rest regulations. The provision does, however, require that the FAA initiate a process to implement recommendations made by the FAA's Civil Aerospace Medical Institute (CAMI) regarding flight attendant fatigue. H.R. 2881 includes a similarly worded provision that would task the National Academy of Sciences with completing a study of pilot fatigue, and would require the FAA to implement the recommendations of the CAMI study regarding flight attendant fatigue. H.R. 2881 includes an authorization of such sums as may be necessary to carry out this provision. H.R. 2881 would also require the FAA to rewrite current flight and duty time regulations for air carrier, commuter airline, and charter pilots to count flight time accumulated conducting non-revenue flight assignments for the operator toward pilot flight and duty time totals. The safety of helicopter emergency medical service (HEMS) operations has been in the spotlight over the past few years in response to increased accidents in this growing industry. The National Transportation Safety Board (NTSB) and other aviation safety experts are advocating the mandatory use of formal flight dispatch procedures and risk management practices among helicopter air ambulance operators as well as mandatory installation of terrain warning systems on HEMS aircraft. The NTSB also found that many air ambulance accidents occur when patients are not on board, such as en route to an accident scene. Present regulations allow air ambulances to operate under a less stringent set of rules with regards to weather minimums and pilot duty times when not carrying patients. However, the NTSB believes that air ambulance flights should operate under more stringent commercial operating rules at all times that medical personnel are carried on board. The FAA proposal does not include any specific language addressing the safety of HEMS operations. S. 1300 would require, within 18 months of enactment, that all HEMS operations comply with Part 135 commercial flight operating regulations whenever a medical crew is on board, regardless of whether or not a patient is on board. The bill would also require the FAA to create a standardized risk evaluation checklist and require HEMS operators to use the checklist in making "go/no-go" decisions for flight missions. The bill would also require the FAA to create standardized flight dispatch procedures for HEMS operations based on air carrier flight dispatch requirements contained in Title 14 CFR Part 121, and require all HEMS operators to use of these dispatch procedures. S. 1300 would also require HEMS operators to install and operate FAA-certified terrain awareness and warning systems (TAWS) on all helicopters acquired for use in emergency medical service operations after the date of enactment. The bill would also require the FAA to study the feasibility of requiring cockpit voice and data recorders on new and existing HEMS aircraft, and within two years of enactment, complete rulemaking to require these devices on board such helicopters. H.R. 2881 does not include a provision addressing HEMS safety. Since 1960, airlines have been prohibited from using pilots age 60 and older on revenue passenger flights. For most pilots, this has translated into a mandatory or forced retirement at age 60. The Age-60 Rule, as it is known in the industry, has been controversial since its inception, but has nonetheless withstood numerous reviews and legal challenges. While it has been long acknowledged that the designation of age 60 as a maximum in itself is arbitrary, the predicate of the rule—rooted in concerns over safety associated with a gradual decline in mental faculties and a gradual increased risk of incapacitation with advancing age—has been generally accepted. Recent changes, however, have prompted action to modify this longstanding rule. In the late 1990s, the European Joint Aviation Authority (JAA), adopted a rule allowing airline pilots flying multi-crew aircraft to continue to serve up until age 65, provided that one of the pilots in the cockpit on any given flight is younger than age 60. While not all European Union member countries adopted this rule, it nonetheless provided the impetus for international change. In November 2006, the International Civil Aviation Organization (ICAO), adopted the European model as an international standard. The Age-60 rule in the United States is, nonetheless, still considered an acceptable international practice, because by limiting airline operations to pilots younger than 60, the United States maintains what is regarded as more conservative alternative from the standpoint of safety. Nonetheless, the FAA took recent action to review the Age 60 rule in recognition of these changes in ICAO standards. In September 2006, the FAA organized an industry working group to examine whether the United States should alternatively adopt the new international standard. While the working group did not reach a consensus on this principal task, the FAA Administrator announced that the FAA would move forward with rulemaking to adopt the international standard allowing airline pilots to continue flying until age 65 based, in part, on the work of the committee. In December 2007, Congress acted on and the President signed into law stand-alone legislation raising the maximum age for airline pilots to 65, immediately nullifying the longstanding Age-60 rule. Since December 11, 2007, the date of enactment of the Fair Treatment for Experienced Pilots Act ( P.L. 110-135 ), pilots have been permitted to continue flying in airline service up to age 65. To maintain consistency with international standards, the law specifies that one pilot in the cockpit must be under the age of 60 on international flights. The law also requires periodic evaluations, known in the industry as line checks, to be conducted every six months to assess pilots over the age of 60. The law is not retroactive in the sense that it explicitly excludes the use of its provisions as a basis for pilots that had reached the age of 60 prior to enactment to return to their former airline jobs. The law, however, does not preclude pilots that had left their pilot jobs upon reaching age 60 from being hired as an air carrier pilot. Although the law excludes such pilots from regaining any seniority status or longevity benefits based upon their prior airline service. The law requires the GAO to monitor and report on any impacts of this action on airline safety two years after enactment. The passage of this legislation largely makes moot provisions in S. 1300 and H.R. 2881 , discussed below, that are similarly intended to increase the maximum age of air carrier pilots to 65. While the FAA has announced that it intends to change the regulations governing maximum age for airline pilots, it intends to do this through the regulatory process and has not requested any legislative language in its proposed bill related to this issue. S. 1300 includes a provision that mimics the new international standard and would allow pilots to operate multi-crew aircraft up to age 65, with the proviso that one of the required pilots be younger than age 60 on any given flight. If adopted, this provision would nullify the existing age 60 rule on the date of enactment. The provision, however, prohibits any pilot who reached age 60 prior to the effective date of enactment from using this change as the basis for a seniority claim for employment with an air carrier. In other words, the provision would prohibit pilots that had already reached age 60 prior to enactment but are younger than 65 from claiming any specific right or seniority privilege to return to the pilot position they previously held. This, however, would not prohibit pilots between the age of 60 and 65 from being rehired by their former airline or gaining employment with another air carrier. S. 1300 would task GAO with studying and reporting on whether this proposed change in the maximum airline pilot age has any impact on aviation safety after its implementation. GAO's report of its findings would be due to the congressional oversight committees within two years of the date that the proposed change in maximum airline pilot age becomes effective. H.R. 2881 contains a provision that would have the same effect as the provision in S. 1300 , allowing pilots to fly in airline operations up to age 65 provided one pilot in the flight deck crew is under age 60, but includes additional mechanisms for monitoring and evaluating pilots over 60. Like S. 1300 , H.R. 2881 includes language stipulating that this provision is not retroactive unless the individual over age 60 on the date of enactment is employed as a required flight deck crew member, or is newly hired after age 60 without any service credit or benefits given for prior employment with the airline. H.R. 2881 explicitly states that pilots over age 60 shall not be subject to different medical standards unless the Secretary of Transportation determines that additional standards are needed to ensure an adequate level of flight safety. The provision would, however, set in statute that first class medical certificates, needed to conduct airline operations, that are issued to pilots age 60 and older will expire after six months. Currently, by regulation, all first class medical certificates expire after six months and cannot be used for meeting the medical standards to fly as an airline pilot. The provision would also require airlines to place a special emphasis on maintaining acceptable levels of pilot skill and judgment for pilots over 60 through initial and recurrent training, and FAA-approved qualification programs. Further airlines would be required to perform a line check of each pilot over age 60 within six months of enactment, and every six months thereafter. Pilots over 60 only flying as second-in-command, however, would be able to complete a simulator evaluation instead of a line check to fulfill this requirement. Like S. 1300 , H.R. 2881 tasks GAO with completing a study of the effects, if any, on aviation safety of this modification to the airline pilot age standards. Growing interest in the use of unmanned aerial vehicles (UAVs), or unmanned aerial systems (UASs) is spurring considerable debate over how to accommodate these unmanned systems and keep them safely separated from other air traffic. Over the next five to ten years, the FAA anticipates that civilian-use UAVs will rapidly transition to operational status, and users will seek permission to fly UAVs in all airspace throughout the United States in all weather conditions. The FAA and other federal agencies face a wide variety of complex issues related to integrating unmanned aircraft into the National Airspace System (NAS) including reliable technologies for detecting, sensing, and avoiding other aircraft; radio frequency spectrum needs for unmanned aircraft operations; technologies and procedures for systems safety; and training and certification requirements for unmanned aircraft operators. On February 13, 2007, the FAA issued a notice of policy on unmanned aircraft operations in the national airspace system. That policy states that "no person may operate a UAS in the National Airspace system without specific authority." For military unmanned aircraft and unmanned aircraft operated by federal, state, or local governments, the mechanism for such authority from the FAA is through application for and receipt of a Certificate of Waiver or Authorization (COA). The FAA has issued more than 50 such authorizations over the past two years, mostly to the Department of Defense, but also to other federal agencies such as Customs and Border Protection (CBP), and the National Oceanic and Atmospheric Administration (NOAA). For non-governmental entities seeking authorization to operate unmanned aircraft in the national airspace system, a special airworthiness certificate must be obtained from the FAA. The FAA has indicated that, at present, it is only issuing experimental airworthiness certificates for unmanned aircraft. By being designated as experimental, these vehicles are restricted to sparsely populated areas and away from routes used by manned aircraft. As of February 2007, the FAA had issued five such certificates to civilian organizations for unmanned aircraft research and development, marketing, and training. However, the FAA is concerned that other civilian users have been operating commercial UAVs under guidelines issued in the early 1980s that were intended to apply only to hobbyists or recreational users of model aircraft. Those guidelines instruct such users to maintain altitudes lower than 400 feet above the ground, select sites away from populated and noise-sensitive areas, give right of way to full-scale aircraft, and advise airport operators and air traffic facilities if operating within three miles of an airport. The FAA statement of policy clarifies that these general guidelines alone are not sufficient for commercial operators of unmanned aircraft, regardless of the size of such aircraft. The FAA did, however, indicate that it has undertaken a safety review to determine whether certain small, slow-moving unmanned aircraft could be safely operated under a similar set of guidelines without requiring a special airworthiness certificate. At present, all such aircraft, except those flown by aircraft model hobbyists, must obtain a special airworthiness certificate as a means of FAA approval for UAV flight operations. The FAA proposal does not include any specific language addressing the issue of integrating or incorporating unmanned aircraft into the National Airspace System (NAS). S. 1300 includes a provision that would permit the FAA to engage in research to improve unmanned aircraft as well as manned aircraft, and would require the FAA to carry out research on unmanned aircraft safety. The provision further directs the FAA to conduct human factors simulations to better understand the role of the human operator in unmanned aerial systems safety, and develop large-scale models simulating the integration of all classes of unmanned aircraft into the NAS. S. 1300 would also require the National Academy of Sciences to enter into an agreement with the FAA to assess unmanned aircraft systems, including consideration of human factors; detect, sense, and avoid technologies; spectrum issues and bandwidth requirements; operations in suboptimal winds and adverse weather; dissemination of information regarding unmanned aircraft activity; airworthiness and system redundancy; flight termination systems to safety and security; privacy issues; flight control technologies; propulsion technologies; operator qualifications, medical standards, and training requirements; system maintenance and maintenance training requirements; and any other unmanned aerial systems issues that the FAA Administrator believes should be addressed. S. 1300 also would require the FAA to establish three two-year pilot projects—addressing each of three categories of unmanned aircraft—to collect data to accelerate the safe integration of unmanned aircraft into the NAS. These projects are to be conducted in low density airspace over sparsely populated areas, and costs of the projects are to be shared. The provision encourages the formation of consortia including public and private sector partners, educational institutions, and non-profit organizations to carry out these pilot projects. The bill would authorize such sums as may be necessary to carry out these projects. S. 1300 would also task the FAA with developing an unmanned aerial systems "roadmap": updating its existing policy on unmanned aerial systems; issuing proposed rulemaking regarding the process of issuing airworthiness certification and experimental certificates for operating unmanned aerial systems; and reporting to Congress on the potential of using existing ultralight aircraft certification standards as the basis for establishing certification standards for lightweight unmanned aerial systems. The bill would impose a deadline of April 30, 2010 for the FAA to have initiated all rulemaking regarding vehicle design, operational requirements, airworthiness requirements; and operator certification necessary for integrating all categories of unmanned aerial systems into the NAS. The bill directs the FAA to fully consider the report from the National Academy of Sciences described above, and the three pilot projects that would be required under the bill, as well as ongoing work on unmanned aircraft systems being performed by the Radio Technical Commission for Aeronautics (RTCA, Inc.) in developing its regulations. H.R. 2881 includes a provision requiring the FAA to develop a comprehensive plan within nine months of enactment to safely integrate commercial unmanned aircraft systems (UASs) in the national airspace system. The bill further specifies that this integration is to be completed as soon as possible, but not later than September 30, 2012, and authorizes such sums as may be necessary to carry out the implementation plan. H.R. 2881 further requires the Secretary of Transportation to determine if certain UASs can be safely operated in the national airspace system before completion of the integration plan, and establish requirements for safe operation of such aircraft. The bill also requires the Secretary of Transportation to issue guidance within nine months of enactment regarding public unmanned aircraft, such as those operated by federal or state and local entities. The guidance is to expedite certification or authorization of public-use UASs; provide for collaboration with public agencies to allow for incremental expansion of UAS operations as technologies mature; and facilitate the capability of public agencies to develop and use test ranges to fly UASs. The bill also includes a provision directing the FAA, in coordination with other federal agencies, to develop: methods and technologies for assessing risk and preventing design and maintenance related failures of unmanned aircraft systems that could pose risks to other aircraft; a better understanding of human factors issues related to unmanned aircraft systems safety; and dynamic simulation models for assessing the integration of all types of UASs into the national airspace system without causing any degradation of existing levels of safety among all system users. The bill specifies slightly more that $6 million per year for FY2008 through FY2011 for unmanned aircraft system research. Large transport aircraft generate wingtip vortices that can create turbulence, referred to as wake turbulence, for trailing aircraft. While wake turbulence can be encountered during any phase of flight, it presents a particular constraint on capacity in the airport environment because it is a principal factor in establishing separation standards for landing and departing aircraft. Wake turbulence is therefore a prominent issue with regard to both safety and capacity in the airport environment. The FAA proposal does not include any language specifically addressing safety or capacity issues associated with wake turbulence. S. 1300 includes a provision that would require the FAA to evaluate proposals for increasing capacity by reducing existing spacing requirements, including research on the nature of wake vortices. The provision also directs the FAA to implement procedures for avoiding volcanic ash, which can pose significant risks and cause substantial engine damage to jet aircraft, and deploy a volcanic ash warning and notification system. Also, S. 1300 directs the FAA to establish research projects addressing in-flight icing and deicing techniques; oceanic weather risks; enroute turbulence prediction; and other hazards associated with oceanic flight operations. H.R. 2881 authorizes such sums as may be necessary from FY2008 through FY2011 for development and analysis of wake vortex mitigation technologies and systems, including advisory systems. The bill specifies roughly $14 million in FY2008, and slightly more than $11 million in each of FY2009 through FY2011 specifically for wake turbulence research. Concerns over the potential safety implications of a variety of air carrier maintenance practices have been raised by some aviation safety experts and some Members of Congress. Two overarching concerns that have been identified are: the safety of maintenance work outsourced to third-party repair stations, especially repair stations located outside the United States, and the use of non-certificated maintenance providers for routine and extensive repair work and FAA oversight of these non-certificated maintenance providers. The FAA proposal does not include any provisions specifically addressing air carrier maintenance practices. S. 1300 does not include any provisions specifically addressing air carrier maintenance practices. With regard to airline maintenance, H.R. 2881 includes a provision that would restrict the use of non-certified maintenance providers, allowing only airline employees or employees of FAA-certified repair stations to carry out substantial and routine maintenance and complete required inspections of aircraft used in airline service. Air carriers would also be required to provide complete lists of their non-certificated maintenance providers, whose activities would be restricted to non-routine, non-substantial maintenance and repair work under this provision. The bill also adopts an amendment agreed to by the House that would extend the requirement for drug and alcohol testing programs to safety-critical positions at foreign repair stations working on air carrier aircraft or components. Drug testing programs are already required for safety-critical maintenance personnel working for airlines and repair stations servicing air carrier aircraft within the United States, and this extension to foreign repair stations agreed to by the House was widely regarded as closing a gap that could have potential safety implications. Implementation and oversight of such a requirement, however, may be complicated by specific privacy laws and rights in foreign countries that may limit the FAA's authority to impose drug and alcohol testing programs at facilities located in other countries that are comparable to existing programs in the United States. The FAA, under its broad authority and responsibility for regulating aviation safety, has asserted its responsibility for regulating matters pertaining to the occupational safety and health of aircraft crewmembers including pilots and flight attendants. In August 2000, the FAA entered into a Memorandum of Understanding (MOU) with the Occupational Safety and Health Administration (OSHA) to determine whether certain OSHA requirements could be applied to working conditions in the airline environment without compromising aviation safety and in a manner that would maintain the FAA's "complete and exclusive jurisdiction over aviation safety." OSHA's role in airline occupational safety, under this arrangement, remains strictly advisory in nature. Under the MOU, the FAA and OSHA established a joint Aviation Safety and Health Team. That team sought to identify occupational hazards in the airline setting and assess the feasibility of complying with OSHA requirements to mitigate those hazards. The team finalized an action plan in June 2002 for establishing voluntary Aviation Safety and Health Partnership (ASHP) programs with air carriers, but work has not been completed to implement these initiatives. The FAA proposal does not include any language specifically addressing occupational safety and health standards for cabin crew. S. 1300 includes a provision that would require the FAA to establish milestones for completing the work begun under the FAA/OSHA MOU, and initiate development of a policy statement regarding the circumstances in which OSHA requirements may be applied to crewmembers in the aircraft cabin. The provision notes that any standards adopted by the FAA shall clearly identify the circumstances under which an airline would be required to take action to address occupational safety and health hazards, as well as the measures required and compliance obligations. The originally reported version of H.R. 2881 included a provision similar to the Senate language, except more specifically requiring the FAA to finalize its work with OSHA and issue its policy statement on airline cabin occupational safety and health within two years of enactment. However, the House-passed version of H.R. 2881 drops that language and instead includes a provision from the "manager's amendment" that would establish new statutory requirements for occupational safety and health standards for flight attendants onboard aircraft. The FAA, in consultation with OSHA, would be required to issue and enforce standards and regulations for air carriers within three years of enactment "to provide for an environment in the cabin ... that is free from hazards that could cause physical harm to a flight attendant...." The FAA would be specifically required to conduct rulemaking to address record keeping; blood-borne pathogens; noise; sanitation; hazard communication; anti-discrimination; access to employee exposure and medical records; and setting a standard for aircraft cabin temperature. The FAA would also be required to employ qualified Cabin Occupational Safety and Health Inspectors to oversee regulatory compliance among air carriers. Aviation and airport operations have air quality, water quality, and community noise impacts. To address issues associated with these impacts, and to assist airport operators with complying with local, state, and federal regulations related to those impacts, the FAA proposal and bills under consideration in the Senate ( S. 1300 ) and the House ( H.R. 2881 ) include similar proposals that would: Provide funding for research into technology or processes that would reduce noise, air emissions, water quality impacts, and energy use; Provide grants for programs or projects intended to mitigate or minimize regulated environmental impacts; and Provide grants or specify regulatory procedures to assist airports in complying with environmental requirements. S. 1300 and H.R. 2881 also include provisions that would establish certain requirements to reduce noise. H.R. 2881 includes two unique provisions. The first (§ 509) would require FAA, to the maximum extent possible, implement "sustainable practices" in the construction and major renovation of air traffic control facilities in order to reduce energy use and improve environmental performance at those facilities. Finally, each proposal includes provisions seeking to modify the Air Tour Management Program, a program designed to regulate commercial air tours over national park units primarily in an effort to mitigate noise and other adverse impacts. These provisions seek to narrow the scope of this program to park service units where noise or other adverse impacts from air tours has been identified or could become a more substantial issue. The second (§ 512) specifies the Sense of the Congress with respect to the European Union (EU) directive extending the EU's emission trading proposal to international civil aviation. The bill specifies that, by not working through the International Civil Aviation Organization in a consensus-based fashion, the EU directive is inconsistent with the Convention on International Civil Aviation; and that it is antithetical to building international cooperation to address greenhouse gas emissions from aircraft. Section 601 would permanently authorize the Airport Cooperative Research Program (ACRP). Under § 601, the FAA proposes to increase funding from $10 million to $15 million for FY2008-FY2010 (specified under § 102). Five million dollars per year of the ACRP funds would be set-aside for research activities related to the airport environment, including reductions in noise and air emissions and addressing water quality issues. The FAA proposal would also create a consortium to research aircraft technologies that would produce lower energy, air emissions, and noise. The FAA proposal (§ 606, "Research Consortium for Lower Energy , Emissions, and Noise Technology Partnership") would create the consortium by requiring FAA to work with the existing Partnership for Air Transportation Noise and Emissions Reduction (PARTNER) to develop Continuous Low Energy, Emissions and Noise (CLEEN) engine and airframe technology. The proposal would establish the following performance objectives for the consortium: a 25% increase in aircraft fuel efficiency; a 50% reduction in nitrogen oxide emissions associated with aircraft landings and takeoffs; a 10 decibel (dB) reduction, compared to 1997 levels, in subsonic aircraft noise; a feasability determination regarding the use of alternative fuels in aircraft systems; and a determination regarding the ability to retrofit or re-engine aircraft to use new engine technologies. Under the FAA proposal, funding would be authorized under the Next Generation Air Transportation System program at "sums as necessary to carry out [the program]." Provisions regarding the ACRP (§ 601) are essentially identical to the FAA proposal, except that S. 1300 would also include $15 million in funding for FY2011 (§ 601(b)). The bill also includes a proposal similar to FAA's that would create a research consortium (§ 602, "Reduction of Noise, Emissions, and Energy Consumption from Civilian Aircraft"). Funding for the research consortium would be made available from the Airport and Airway Trust Fund Authorizations for research and development. The bill directs the Administrator to designate an institution as a "Consortium for Aviation Noise, Emissions, and Energy Technology Research" to conduct research with NASA and other relevant industries. The performance objectives the consortium is directed to accomplish are the same as those in the FAA proposal. Unique to S. 1300 is a provision regarding clean coal fuel technology. Section 603 would require the Department of Transportation to establish a research grant program to develop synthetic jet fuel from clean coal. (However, the bill does not provide a definition of "clean coal.") Funds would be authorized from the Airport and Airway Trust Fund. Section 603 would also require the FAA Administrator to designate an institution as a "Center of Excellence for Coal-to-Jet Research." Under § 104 (Research, Engineering, and Development), H.R. 2881 would amend the Airport and Airway Trust Fund Authorizations for research and development for FY2008 through FY2011 by authorizing a total of approximately $125 million for "environment and energy" projects and $20 million for ACRP "environment" projects (as in the Senate and FAA proposals, H.R. 2881 would permanently authorize the ACRP (§ 907)). H.R. 2881 includes a provision (§ 505, CLEEN Engine and Airframe Technology Partnership) that is similar to the FAA proposal that would create a consortium to develop Continuous Low Energy, Emissions and Noise (CLEEN) engine and airframe technology. H.R. 2881 does not specify that the FAA must work with PARTNER to achieve the established performance goals. However, the goals are the same as those specified in the FAA proposal and S. 1300 . H.R. 2881 specifies that from FY2008 through FY2011 not more than $111 million may be appropriated, from the Airport and Airway Trust Fund Authorizations for this program. H.R. 2881 also specifies certain environmental-related responsibilities of the Next Generation Air Transportation System Joint Planning and Development Office. Included is a directive to establish specific quantitative goals for, among other factors, the environmental impacts of each phase of Next Generation Air Transportation System. Those goals are required to take into account noise pollution reduction concerns of affected communities to the greatest extent practicable in establishing the environmental goals (§ 202). Under Title IX, H.R. 2881 includes the following additional environmental-related research and development requirements (except where note, the bill does not specifically authorize funds for this research): Interagency research initiative on the impact of aviation on the climate (§ 903)— directs the FAA Administrator, in coordination with NASA and the U.S. Global Climate Change Science Program, to establish a research initiative to assess the impact of aviation on climate and to evaluate approaches to mitigate that impact. Research program on space weather and aviation (§ 910) —would require the FAA Administrator, in coordination with the National Science Foundation, NASA, National Oceanic and Atmospheric Administration, to initiate a research program on impacts of space weather to aviation. To conduct this research, the Administrator may use grants or cooperative agreements. Further, the bill would authorize $1,000,000 to be appropriated for each of the FYs 2008 through 2011. Aviation gas research and development program (§ 911)— would require the FAA to study technologies that would allow the use of unleaded gasoline in piston-engine aircraft (currently, piston-engine aircraft—mostly general aviation aircraft—use leaded gasoline). The bill would authorize $750,000 to be appropriated for each of the FYs 2008 through 2010. Research reviews and assessments (§ 912)— would require the FAA to contract with the National Research Council to assess the adequacy of FAA's energy- and environment-related research programs; and the impact of space weather on aviation. Research program on alternative jet fuel technology for civil aircraft (§ 914) —this section is similar to the proposal in S. 1300 (§ 603) that would support coal research, except that the House proposal would also require research into the development of alternative fuels from additional sources, including natural gas, biomass, ethanol, butanol, and hydrogen. Funds for the program would be authorized from the Airport and Airway Trust Fund. Section 604 would provide grants for up to six environmental mitigation demonstration pilot projects. Eligible projects would include those that would reduce or mitigate aviation impacts on noise, air quality, or water quality in the vicinity of the airport. The federal share of the projects would be 50% of the project costs, up to $2.5 million, and would be apportioned under the AIP. Section 215 of S. 1300 includes provisions that are essentially identical to the FAA proposal providing grants for environmental mitigation pilot programs. Section 507 of H.R. 2881 includes provisions that are essentially identical to the FAA proposal and those in S. 1300 providing grants for environmental mitigation pilot programs. The FAA proposal and provisions in S. 1300 include almost identical proposals that would amend the state block program, address methods of implementing and/or expediting requirements of the National Environmental Protection Act (NEPA), and amend certain noise compatibility program requirements. Section 602 would amend the state block grant program by specifying that federal environmental requirements would apply to the program. Both proposals also specify that any federal agency that must grant any approval (i.e., permit or license) to a state must consult with that state during the approval process. Further, the federal agency would be required to use any state-prepared environmental analysis associated with that approval. Sections 603 and 605 address methods of implementing and/or expediting requirements of the National Environmental Protection Act (NEPA) and airport noise compatibility planning requirements (Title 14 Code of Federal Regulations (CFR), Part 150, commonly referred to as Part 150 requirements). Section 603 would amend current requirements that allow FAA to accept funds from an airport sponsor to hire additional staff or obtain the services of consultants to expedite the processing, review, and completion of environmental activities associated with an airport development project. The proposal would allow FAA to accept funds to hire additional staff to: conduct "special environmental studies" related to a federally funded airport project; conduct studies or reviews to support noise compatibility measures approved under the Part 150 requirements; or implement environmental mitigation efforts specified in a project's final decision and delineated at the completion of the NEPA process. Section 605 would amend the existing noise compatibility program requirements to allow grants to airport operators to assist them with meeting environmental review requirements applicable to proposals to implement flight procedures. Further, the proposal would allow a project sponsor to provide FAA with funds to hire additional staff as necessary to expedite completion of the environmental review necessary to implement flight procedures. Section 210 of S. 1300 is essentially identical to § 602 of FAA's proposal regarding the state block grant program. Unique to S. 1300 is a provision that would establish a pilot program for up to three states that do not already participate in the block grant program. Sections 211 and 212 of S. 1300 are essentially identical to §§ 603 and 605 of FAA's proposal regarding methods of implementing and/or expediting requirements of NEPA. Section 502 of H.R. 2881 is essentially identical to the FAA proposal and S. 1300 (except for pilot program proposal in S. 1300 ) regarding the state block grant program. Sections 503 and 504 of H.R. 2881 are similar to the FAA proposal and S. 1300 provisions regarding methods of implementing and/or expediting NEPA requirements. Unique to H.R. 2881 is a requirement to fund an "aircraft departure queue management pilot program" (§ 508) at five public-use airports. The programs would be required to develop, and test new air traffic flow management technologies to better manage the flow of aircraft on the ground and reduce ground holds and idling times for aircraft to decrease emissions and increase fuel savings. Also unique to H.R. 2881 is a directive to review the current regulatory responsibilities of the FAA and EPA with regard to establishing engine noise and emission standards (§ 510). The review would be required to consider, among other factors, the degree to which those standards could be evaluated and addressed in an integrated manner. In 1990, Congress mandated a phase out of non-Stage 3 aircraft over 75,000 pounds by December 31, 1999. This has allowed Stage 1 and Stage 2 aircraft under 75,000 pounds, primarily corporate and private-use aircraft, to continue to operate. In 2006, such aircraft represented a relatively small number of all operational turbojet aircraft under 75,000 pounds (approximately 1,330 or 13%). However, at some airports, particularly smaller commercial and general aviation airports, their use makes a disproportionate contribution to noise exposure contours. For example, the Massachusetts Port Authority (Massport) reported that at the L.G. Hanscom Field in Bedford, MA, non-Stage 3 aircraft accounted for less than one percent of the airport's annual traffic in 2005, yet were responsible for 23 percent of the noise energy produced by civil aircraft. Also, some airport operators have reported that between 50 and 80% of noise complaints lodged with the airport have been related to non-Stage 3 aircraft. As a result, several airports have sought to ban or restrict access to such aircraft. Those efforts have generally been prohibited by FAA. Section 711 of S. 1300 would address this issue by prohibiting the operation of aircraft under 75,000 pounds, with certain exceptions, unless it complies with Stage 3 noise levels. The prohibition would take effect five years after the bill's enactment. Section 714 of the bill proposes the creation of an exploratory program for the redevelopment of property purchased with noise mitigation funds or passenger facility charge funds, to encourage airport-compatible land uses. The trial program would involve up to four airport operators that have submitted a noise compatibility program to FAA. Provisions in this section would also amend the list of allowable noise compatibility measures to include land use planning that will prevent the introduction of additional incompatible land uses. Section 214 of the bill would expand passenger facility fee eligibility for noise compatibility projects at Los Angeles International Airport (LAX). The section specifies that the funds may be used for a project for the Lennox School District, adjacent to LAX, pursuant to a settlement agreement reached between the airport and the school district in February 2005. Like the Senate bill (§ 711), § 506 of H.R. 2881 would prohibit the operation of aircraft under 75,000 pounds, unless it complies with Stage 3 noise levels. The prohibition would take effect, with generally the same exceptions specified in S. 1300 , after January 1, 2013. Also, H.R. 2881 specifies that it is the sense of the House that the Port Authority of New York and New Jersey undertake an airport noise compatibility planning study —with particular attention to the impact of noise on affected neighborhoods, including homes, businesses, and places of worship surrounding LaGuardia Airport and JFK Airport. The National Parks Air Tour Management Act of 2000 (Title VIII, P.L. 106-181 , hereafter Air Tour Act) regulates commercial air tours over most units of the National Park System. It requires the FAA and the National Park Service (NPS) to create management plans for air tours at individual park units and within a half-mile of their boundaries. The purpose of a plan is to mitigate or prevent any significant adverse impacts of commercial air tours to natural and cultural resources, visitor experiences, and adjacent tribal lands. The Air Tour Act final rule requires air tour operators to apply for authority to fly over national park and adjacent tribal lands. The FAA received applications for commercial air tours over 106 of the 391 park units, and has granted interim operating authority to all applicants. An application triggers development of an Air Tour Management Plan (ATMP) by the FAA and NPS for each unit where there is no existing plan. Development of an ATMP requires an environmental analysis under the National Environmental Policy Act of 1969 (NEPA, 42 U.S.C. §§4321-4370f). The FAA and NPS currently are developing their first ATMPs for five park units. A January 2006 Government Accountability Office (GAO) report addressed the impact of the delay in implementing the Air Tour Act. The report concluded that the delay has limited the ability of tour operators to make major business decisions. GAO identified four areas to improve implementation, including amendment of the Air Tour Act, to give the agencies discretion in determining which park units may need ATMPs. The FAA proposal included several suggested changes affecting commercial air tours over park units (codified in 49 U.S.C. §40128) that seek to expedite and streamline agency actions, in part due to the difficulty in completing ATMPs. One change would allow that in lieu of an ATMP, the NPS Director and FAA Administrator (hereafter in this section "the Administrator") could enter into a voluntary agreement with a commercial air tour operator that would govern commercial air tours over a park unit. An agreement would address protection of park resources and visitor use of parks in the context of aviation safety. It would be prepared with public review and consultation, and implemented "without further administrative or environmental process." The NPS and FAA heads could rescind a voluntary agreement if it did not adequately protect park resources, visitor experiences, or aviation safety. A second change would exempt park units with 50 or fewer annual air tour flights from the development of an ATMP or voluntary agreement and other requirements covering air tour operations over park units. However, the NPS Director could disallow an exemption for any park unit for which an ATMP or voluntary agreement would be necessary to protect park resources and values or park visitor use and enjoyment. These provisions on voluntary agreements and exemptions could be opposed as lessening public participation in the decision making process and weakening environmental analysis of agency decisions. Other provisions in the FAA proposal could provide more interim operating authority because interim conditions have prevailed for longer than had been anticipated. One change would allow the agencies to modify interim operating authority—for instance, to allow more tours—and another would allow new entrant air tour operators provided that certain conditions were met (e.g., FAA agreement of no adverse impact on aviation safety.) These decisions could be made "without further environmental process," and thus also could raise objections as reducing environmental analysis of agency actions. Still another provision in the FAA proposal would establish a reporting requirement for commercial air tour operators with regard to the number of air tours over park units and other data requested by the FAA and NPS. The Senate Committee on Commerce, Science, and Transportation amended S. 1300 to include a section on commercial air tours over national parks. The bill seeks to make changes affecting commercial air tours over park units on topics covered by the FAA proposal as well as in additional areas. While both the bill and proposal contain provisions on voluntary agreements, exemptions from air tour requirements, operating authority, and reporting requirements, the provisions differ. S. 1300 contains additional sections, for instance on fees and safety guidance, as discussed below. S. 1300 would allow the Secretary of the Interior (hereafter in this section "the Secretary") to waive the requirements regarding the development of an ATMP and other requirements for park units with 100 or fewer annual air tour flights, without further administrative or environmental process, unless the Secretary determines that an ATMP is needed to protect park resources and values. The Secretary also could waive the requirements if an air tour operator enters into a voluntary agreement with a park unit to manage air tours over the park. The purpose of the agreement would be to protect park resources and visitor experiences without compromising aviation safety. It would require the approval of the Secretary and the Administrator. An agreement could be rescinded by the Secretary if it does not adequately protect park resources or visitor experiences, and by the Administrator if it adversely affects aviation safety or management of the national airspace system. Several provisions of the bill pertain to operating authority. For instance, one provision would allow the agencies to modify interim operating authority, without further environmental process, provided certain conditions are met. Another provision would allow an air tour operator that obtains operating authority for commercial air tours to transfer that authority to another air tour operator. Within 180 days of enactment, the FAA is to issue regulations allowing transfers of operating authority. This provision may be directed at an FAA opinion that interim operating authority is not transferable, on the grounds that transferability is not consistent with the provisions and overall goals of the Air Tour Act. Interim operating authority was not intended to be a "valuable right to be bought and sold," but a temporary solution to allow continuation of tours pending development of an ATMP, according to the FAA. Further, S. 1300 would establish an annual reporting requirement for commercial air tour operators, to include the number of air tours over the park; any relevant characteristics of tours, such as routes and altitudes; and other information requested by the Administrator and the Secretary. The Administrator is to rescind the operating authority of any tour operator that fails to file a report within a certain time period. The Inspector General of the Department of Transportation is to audit the reports periodically. The Secretary would be authorized to assess a fee on commercial air tour operators, and is to consider the cost of developing ATMPs in setting the fee. The Administrator is to revoke the operating authority of a tour operator that does not pay the fee within a certain time period. Fees have been charged at three park units with air tours, based on criteria in existing law. In May 2006, GAO concluded that expanding the fee to other park units could generate additional revenue for the Park Service, but would require a legislative change and should be evaluated in the context of potential impacts on tour operators. The Administrator would be required to provide guidance (to agency district offices) on safety issues, including the ability of commercial air tour operators to obtain increased safety certifications as well as exemptions from regulations requiring safety certifications. The FAA has issued a final rule to standardize and consolidate safety provisions for commercial air tours nationally. S. 1300 seeks to identify the Secretary as the authority working in cooperation with the FAA on overflights of national park units; current law specifies that the NPS Director is the cooperating authority. The bill would authorize $10 million to the Secretary for the development of ATMPs. H.R. 2881 is quite similar, but not identical, to the FAA proposal. A wide array of aviation industry issues are being considered in the context of FAA reauthorization. Modifications to the Essential Air Service (EAS) program that provides subsidy incentives to airlines for servicing small, rural, or otherwise isolated communities are contentious as the FAA proposal seeks to set more stringent criteria for participation, whereas S. 1300 and H.R. 2881 seek increased funding and other program enhancements. Also, H.R. 2881 seeks to clarify foreign ownership issues related to operational control of U.S. flag airlines, a central issue for potentially expanding "Open Skies" arrangements with the European Union (EU) in the future. Also, H.R. 2881 includes a provision addressing union issues among express carriers in language that would limit applicability of the Railway Labor Act (RLA) to employees engaged in airline operations, placing other employees under the terms of the National Labor Relations Act (NLRA). These issues are further discussed below. The FAA proposal includes language that would significantly modify the existing Essential Air Service Program (EAS), a DOT-managed program that subsidizes air carrier service to small and isolated communities, primarily by setting more stringent criteria for program eligibility and restricting further expansion of the program. Some modifications to the EAS program are also likely to be considered by the House and the Senate. The EAS program provides subsidies to air carriers for providing service between selected small communities and hub airports. The program was originally established in 1978 as part of airline deregulation to ensure a minimum level of air service to smaller communities that might otherwise lose service because of economic factors. As part of its annual budget recommendations over the last few years the Bush Administration has suggested limiting EAS funding to $50 million and requiring local cost-sharing as a condition for a community's continued participation in the program. The program nonetheless has grown as Congress has provided additional funding for EAS, appropriating $110 million in both FY2006 and FY2007. Vision 100 included several mechanisms and incentives designed to move communities out of the standard EAS program. Communities have not sought to participate in these incentive regimes, however, suggesting that the incentives themselves may need to be reconsidered if they are to be effective. Vision 100 also included a somewhat controversial provision that created a trial program that would have required community financial participation as a condition for continued access to EAS funding in some instances. Each annual appropriations bill since passage of Vision 100, however, has prevented the use of any appropriated funds to implement the cost-sharing trial program. The FAA produced bill includes provisions to substantially modify the EAS program, primarily by setting more stringent criteria for program eligibility and restricting further expansion of the program. Specifically, the FAA proposal would limit participation to only those airports that were receiving EAS subsidy on the date of enactment of reauthorization legislation. At present, additional airports may enter into the EAS program, provided they previously had scheduled air carrier service as specified in statute. The FAA also proposes to eliminate from participation any airports located less than 70 highway miles from a large or medium hub airport. Further, the FAA proposal would eliminate from the EAS program any airports that are less than 210 miles from the nearest medium or large hub whose per-passenger subsidy exceeds $200. The proposal also includes language intended to simplify the process involved in terminating air carrier service to an EAS-eligible community. The provisions in the FAA proposal to modify the EAS program may be particularly controversial because the program has historically been viewed favorably by Congress, particularly among members representing rural states and districts. However, from a practical standpoint, the program may be difficult to justify given that per-passenger subsidies are quite high for service to certain locations receiving service, and airlines often have difficulty filling seats on many EAS routes. Therefore, while provisions in the FAA proposal to restrict expansion of the program may be particularly controversial, other options to increase EAS program flexibility and alternatives to traditional basic EAS service may be considered during congressional debate. S. 1300 modifies the EAS program primarily at the margin, largely ignoring the Administration's proposals. Most importantly the bill increases annual funding for the program. It does this by continuing to link EAS funding to overflight fee collections, but instead of limiting funding from this source to $50 million annually it makes any additional fee collections available for the program as well. In addition the bill raises the annual authorization of appropriated fund portion of the EAS funding scheme from $77 million to $83 million. There are several additional EAS provisions in the bill. These include a requirement that DOT allow code sharing by EAS participant airlines, a requirement that a final order establishing mileage adjustment eligibility be extended until the end of FY2011, a provision including the use of financial incentives to improve EAS service—as part of long-term contracts awarded by DOT—and a program to aid the conversion of former EAS eligible airports to GA status. Similar to S. 1300 , H.R. 2881 reserves $50 million in overflight fee collections for the EAS program and increases the additional amount available from annual appropriations to $83 million. The bill, however, does not reserve overflight fee collections in excess of $50 million for EAS, but instead splits eligibility between EAS and the Small Community Air Service Program. H.R. 2881 , like S. 1300 , encourages the use of financial incentives and long term contracts as part of the EAS program. Existing law specifically limits non-U.S. ownership of United States certificated airlines. These provisions are viewed by many as exclusionary, preventing all but limited foreign investment in the U.S. domestic airline industry, and absolutely preventing any real non-U.S. control over an airline's business decisions. These laws are seen by proponents of the industry's internationalization as major barriers to a fully open international aviation market. A recent initiative by the Bush Administration to lift some of the existing ownership and control restrictions through the regulatory process was opposed by Congress and ultimately abandoned by the Administration. A recently concluded "Open Skies" agreement with the European Union (EU) suggests that the discussion about airline ownership and control issues could be reopened at some later date. Only H.R. 2881 addresses this issue. It has done so by including language to be inserted in Title 49, U.S.C. Section 40102(a)(15) that further defines the legal meaning "actual control." The Railway Labor Act ("RLA") governs labor-management relations for most carriers in the rail and air industries. Section 2, First, of the RLA requires all carriers and their officers, agents, and employees to "exert every reasonable effort to make and maintain agreements concerning rates of pay, rules, and working conditions, and to settle all disputes ... in order to avoid any interruption to commerce...." The National Mediation Board ("NMB"), which administers the RLA, has recognized the application of the statute to some employees of express carriers who would otherwise seem to be subject to the National Labor Relations Act ("NLRA"), the federal statute that governs labor-management relations in other private sector industries. In Re: Federal Express Corp ., for example, the NMB concluded that ground service employees of Federal Express were subject to the RLA rather than the NLRA. The NMB found the RLA's stated application to "every air pilot or other person who performs any work as an employee or subordinate official" of a "common carrier by air engaged in interstate or foreign commerce" to be compelling. The NMB stated: The couriers, tractor-trailer drivers, operations agents and other employees ... are employed by Federal Express directly. As the record amply demonstrates, these employees, as part of Federal Express' air express delivery system, are supervised by Federal Express employees. The Board need not look further to find that all of Federal Express' employees are subject to the Railway Labor Act. While both the RLA and the NLRA recognize collective bargaining rights for most employees in the private sector, they prescribe different organizational requirements. For example, under the RLA, employees must organize by craft or class on a company-wide basis. In contrast, under the NLRA, an appropriate bargaining unit may be an employer unit, a craft unit, a plant unit, or a subdivision thereof. The FAA proposal does not include provisions that would affect the collective bargaining rights of express carriers. S. 1300 does not include provisions that would affect the collective bargaining rights of express carriers. Section 806 of H.R. 2881 would amend the RLA to subject some employees of an express carrier to the RLA and other employees to the NLRA. Employees who perform duties for an express carrier in positions that are eligible for certification under 14 C.F.R., parts 61, 63, and 65, would be subject to the RLA. All other employees of the express carrier would be covered by the NLRA. Section 806 would amend the RLA to define an "express carrier" to mean "any person (or persons affiliated through common control or ownership) whose primary business is the express shipment of freight or packages through an integrated network of air and surface transportation." The measure is supported by labor unions and United Parcel Service (UPS) whose employees are already primarily covered under the NLRA, but is opposed by FedEx, whose employees fall under the RLA guidelines. | Funding authorization for aviation programs set forth in Vision 100—Century of Aviation Reauthorization Act (P.L. 108-176) and authorization for taxes and fees that provide revenue for the aviation trust fund expired at the end of FY2007. While Federal Aviation Administration (FAA) reauthorization legislation was considered during the 110th Congress, the only related legislation enacted consisted of several short term extensions for aviation trust fund revenue collections and aviation program authority. The Federal Aviation Administration Extension Act, Part II (P.L. 110-330) extends these authorizations until March 31, 2009, thus carrying the issue of FAA reauthorization over to the 111th Congress. Consideration of FAA reauthorization during the 110th Congress began with the introduction of the FAA's reauthorization proposal, entitled the Next Generation Air Transportation System Financing Reform Act of 2007 (H.R. 1356/S. 1076, introduced by request), which recommends a new system for financing aviation system costs through direct user fees and increased fuel taxes. The FAA proposal would also allow airports to increase passenger facility charges (PFC), and includes initiatives to simplify the apportionment of airport grants. The proposal also seeks to better integrate development of the Next Generation Air Transportation System (NGATS) into ongoing planning and acquisition activities, and would allow airport and private investment in certain aviation facilities and services. The FAA proposal would authorize funding for research on aviation noise, air emissions, and water quality impacts, and seeks to modify the Essential Air Service Program (EAS). The Aviation Investment and Modernization Act of 2007 (S. 1300; S.Rept. 110-144) proposes a four-year authorization with modest overall budget increases and larger increases specifically for facilities and equipment (F&E) modernization. S. 1300 proposes a $25 surcharge for certain flights and retention of existing taxes and fees. S. 1300 would establish a modernization oversight board and would set up offices at each federal agency supporting NGATS for defining agency resources and budgetary commitments to air traffic modernization. S. 2345, introduced by the Senate Finance Committee, may be considered as the revenue title of the overall bill, and modifies certain aviation taxes and fees as a possible alternative to the $25 surcharge proposal. The FAA Reauthorization Act of 2007 (H.R. 2881) seeks higher spending authorizations for F&E compared to S. 1300. While the bill does not propose any direct user-fee mechanisms, it proposes modest increases to existing aviation fuel taxes. The overall legislation also seeks to increase accountability and coordination of NGATS planning and implementation. An amendment agreed to would create a binding arbitration process to resolve labor negotiations impasses, and would apply this process to settle the current impasse between the FAA and air traffic controllers. This report will not be updated. |
Conferees agreed to a FY2004 legislative branch appropriation of $3.548 billion contained in H.R. 2547 . The President signed the bill into law on September 30, 2003, P.L. 108-83 ,117 Stat. 1007. The act also contains $937.6 million for FY2003 emergency supplementalappropriations (for non-legislative branch programs). The annual legislative branch appropriations bill contains two titles. Appropriations forlegislative branch agencies are contained in Title I. Title II contains general administrativeprovisions, and from time to time appropriations for legislative branch entities. For example, in theFY2003 Act Title II contained funding for the John C. Stennis Center for Public Service Trainingand Development and the Congressional Award Act. Congress changed the structure of the annual legislative branch appropriations bill effective in FY2003. Prior to enactment of the FY2003 bill, and effective in FY1978, the legislative branchappropriations bill was divided into two titles. Title I, Congressional Operations, contained budgetauthorities for activities directly serving Congress. Included in this title were the budgets of theHouse, the Senate, Joint Items (joint House and Senate activities), the Office of Compliance, theCongressional Budget Office (CBO), the Architect of the Capitol (AOC) (except the Library ofCongress (LOC) buildings and grounds), the Congressional Research Service (CRS) within theLibrary of Congress, and congressional printing and binding activities of the Government PrintingOffice (GPO). Title II, Related Agencies, contained budgets for activities not directly supporting Congress. Included in this title were 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 bill contained additionaltitles for such purposes as capital improvements and special one-time functions. In addition to activities funded in the annual legislative branch appropriations bill, there are legislative budget authorities that include permanent budget authority for both federal funds and trustfunds, and non-legislative entities. Permanent federal funds are available as the result of previously enacted legislation and do not require annual action. (1) Permanent trust funds are monies held in accounts credited with collections from specific sources 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. (2) The Budget also contains non-legislative entities within the legislative branch budget. They are funded in other appropriation bills, but are placed in the legislative section by the Office ofManagement and Budget for bookkeeping purposes. (3) Table 1. Legislative Branch Appropriations, FY1995 toFY2004 (budget authority in billions of current dollars) a a. These figures represent current dollars, exclude permanent budget authorities, and contain supplementals and rescissions. Permanent budget authorities are not included in the annuallegislative branch appropriations bill but, rather, are automatically funded annually. b. Includes budget authority contained in the FY1999 regular annual Legislative BranchAppropriations Act ( P.L. 105-275 ), the FY1999 emergency supplemental appropriation ( P.L.105-277 ), and the FY1999 supplemental appropriation ( P.L. 106-31 ). c. Includes budget authority contained in the FY2000 regular annual Legislative BranchAppropriations Act ( P.L. 106-57 ); a supplemental and a 0.38% rescission in P.L. 106-113 ; andsupplementals 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; (2) 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 , FY2001 ConsolidatedAppropriations Act. The first FY2001legislative branch 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 . This figure does not reflect any terrorism supplementals funds released pursuant to P.L. 107-38 . e. This figure contains regular annual appropriations in P.L. 107-68 ; transfers from the legislativebranch emergency response fund pursuant to P.L. 107-117 ; and FY2002 supplementalappropriations in P.L. 107-206 . f. This figure contains regular annual appropriations in P.L. 108-7 , FY2003 Omnibus AppropriationsAct, and supplemental appropriations in P.L. 108-11 . g. This figure contains regular annual appropriations in P.L. 108-83 . Table 2. Status of Legislative Branch Appropriations, FY2004(H.R.2657) Submission of FY2004 Budget Request by the President. On February 3, 2003, President Bush issued the FY2004 U.S.Budget containing an estimate of $3.76 billion for operations of the legislative branch. Subsequently, the request was later revised to $3.78 billion due to modifications by legislativebranch agencies, which reflected an increase of 9.1% ($315.5 million) over the FY2003appropriation of $3.46 billion. A substantial part of the increase was to meet mandatoryexpenses required by law, including additional funding for salaries and related expenses andincreased costs of goods and services for internal operations of legislative branch agencies. Hearings on FY2004 Budget Requests. The House and Senate Committees on Appropriations held most of their hearings on FY2004legislative branch agency requests in March, April, and May 2003. An additional hearing isto be held on the Capitol Visitors' Center as announced by the chairman of the HouseSubcommittee on Legislative, Committee on Appropriations indicated on May 20, 2003. Themost recent hearings were held May 20 and 21, 2003, by the House Subcommittee onLegislative during which Members heard testimony and questioned the Capitol Police Boardand Architect of the Capitol. Report of FY2004 Bill By House Committee on Appropriations (H.R. 2657). As reported by the HouseAppropriations Committee on July 1, 2003, the House bill contained (4) an overall reduction of 1.2% from the FY2003 appropriation for legislative branch activities, except those of the Senate, to $2.70 billion from $2.73 billion; a reduction of 11.8% in the budget of the Capitol Police, to $211.8 million from $240.2 million; and a reduction of 24.8% in the budget of the Architect of the Capitol, excluding funds for Senate Office Buildings, to $294.9 million from $392.3million; The Committee marked up the bill and ordered it reported on June 26. Passage of FY2004 Bill by the House (H.R. 2657). On July 9, the House passed a scaled down bill, H.R. 2657 (394-26), containing an overall decrease of 1.2%, excluding funds forSenate operations, and freezing funding for the Capitol Police, by reducing the expensesaccount and increasing the salaries account by 8.8%. New funding was withheld pendingcompletion of a master plan for the police force. Funds for the Architect of the Capitol wereincreased slightly, with additional funds to be considered as Congress determined wereneeded for the Capitol Visitors' Center and other pending construction projects. The Housebill did not contain funds for the center. H.R. 2657 passed with an amendment prohibiting the use of funds in the bill for supplemental dental and vision health insurance benefits for House Members andemployees. This language was contained as an amendment to H.R. 2657 in thenature of a substitute to the rule providing for consideration of H.R. 2657 ( H.Res. 311 ). The rule was agreed to by a vote of 411-13. Report of FY2004 Bill by Senate Committee on Appropriations (S. 1383). As reported in the Senate on July 10, S. 1383 contained an overall increase of 2.7%, for legislative branch operations, excluding funds for the House, to $2.51 billion from $2.44 billion; a slight decrease in the budget for the Capitol Police, to $240.0 million from $240.2 million, which included a reduction in general expenses account and an 18.6%increase in the salaries account; and a reduction of 9.6% in the budget of the Architect of the Capitol, excluding funds for House office buildings , $357.8 million from $396.2 million; the FY2004Architect's figure contains a one-time appropriation of $47.8 million for the Capitol Visitors'Center. Absent the $47.8 million appropriation, the Architect's budget would reflect adecrease of 21.7%, to $310.0 million from $396.2 million in FY2003. During markup on July 9, the Senate Committee on Appropriations added $2.044 billion in FY2003 emergency supplemental appropriations in a new title, Title III, of S. 1383 . This funding included $1.55 billion for disaster relief, $50 million for NASA ; $314 million for wildfire suppression; $10 million for flood control; $100 million for AmeriCorps; and $20 million for activities funded in the general provisions section ofTitle III. Passage of FY2004 Bill by the Senate (S. 1383; H.R. 2657). On July 11, the Senate passed H.R. 2657 , which was amended to contain the language of S. 1383 , by a vote of 85-7. As passed by the Senate, H.R. 2657 contained a 2.7% increase, not includingappropriations for House operations. Like the House, the Senate version contained areduction in the police expenses account, but provided an 18.6% increase in the police salariesaccount. The Senate reduced the Architect's budget by 9.6%. The reduction from FY2003was greater if the one-time appropriation of $47.8 million for the Capitol Visitors' Centercontained in the Architect's FY2004 appropriation is not counted. The Senate did not consider amendments relating to funding for the legislative branch; it did consider amendments relating to programs funded in the FY2003 emergencysupplemental which was added in Title III of H.R. 2657 by the SenateAppropriations Committee. Report of Conference on H.R. 2657. On September 18, conferees filed their report on H.R. 2657 ( H.Rept. 108-279 ) after having agreed to $3.548 billion for legislativebranch activities, contained in Titles I and II. As reported from conference, Titles I and IIcontained an overall increase of 2.5% in legislative branch appropriations, to $3.548 million from $3.461 million in FY2003; a reduction of 8.0% in the budget of the Capitol Police, to $221.1 million from $240.2 million; a reduction of 11.3% in the budget of the Architect of the Capitol, to $405.4 million from $456.8 million; and an appropriation of $36.839 million and a transfer of $12.0 million for completion of the Capitol Visitors' Center. Legislative branch administrative and funding language is contained in H.R. 2673 , the FY2004 consolidated appropriation bill. The conference report on H.R.2673 was agreed to by the House on December 8; the report is scheduled for Senateconsideration on January 20, 2004. Provisions relating to legislative branch activities arecontained in Division H of the bill. (5) Theseprovisions give the Attending Physician authority and responsibility for oversight and coordination of the use of "medical assets" to respond to bioterrorist incidents and otherpublic health emergencies that occur within the Capitol building and grounds; authorize theAttending Physician to impose a quarantine and to declare deaths (Section 151; for bill textsee Congressional Record , vol. 149, November 25, 2003, p. H12442); authorize the Architect of the Capitol to enter into an agreement to "acquire by lease" any part of the property at 499 South Capitol Street, SW, Washington, DC,for use by the Capitol Police; specify that such property be considered within the definitionof the Capitol grounds (Section 152; for bill text see Congressional Record , vol. 149,November 25, 2003, p. H12442); establish a "United States Group," composed of 12 Senators, to meet annually with representatives of China to discuss "common problems in the interest ofrelations" between the two countries that would be known as the "United States-ChinaInterparliamentary Group"; direct the President pro tempore to appoint Senators to the groupupon recommendations of the Senate majority and minority leaders; authorize $100,000 tobe appropriated for expenses each fiscal year in which Congress makes an appropriation ;authorize the use of $75,000 from the Senate contingent fund in FY2004 for specified officialexpenses; and appropriate $100,000 for expenses of the Interparliamentary Group in FY2004(Section 153; for bill text see Congressional Record , vol. 149, November 25, 2003, pp.H12442-H12443); establish a "United States Group," composed of 12 Senators, to meet annually with representatives of Russia to discuss "common problems in the interest ofrelations" between the two countries that would be known as the "United States-RussiaInterparliamentary Group"; direct the President pro tempore to appoint Senators to the groupupon recommendations of the Senate majority and minority leaders; authorize $100,000 tobe appropriated for expenses for each fiscal year in which Congress makes an appropriation ;authorize the use of $75,000 from the Senate contingent fund in FY2004 for specified officialexpenses; and appropriate $100,000 for expenses of the Interparliamentary Group in FY2004(Section 153; for bill text see Congressional Record , vol. 149, November 25, 2003, p.H12443); authorize a maximum of $50,000 in the Senate contingent fund to be used each fiscal year for reimbursement to the Senate chaplain for expenses incurred in thepurchase of food and food-related items while performing the duties of office; repeal thechaplain expense revolving fund (Section 155; for bill text see Congressional Record , vol.149, November 25, 2003, p. H12443); establish a House of Representatives revolving fund containing appropriations and donations made to the fund, and interest on its balance; require the HouseChief Administrative Officer to authorize expenditures from the fund, upon notification to theHouse Committee on Appropriations (Section 156; for bill text see Congressional Record ,vol. 149, November 25, 2003, p. H12443); and require a 0.59% across the board rescission in FY2004 legislative branch appropriations (contained in P.L. 108-83 ) to be applied proportionately to each account, andto programs, projects, and activities within each account; (6) require the Office of Managementand Budget to submit within 30 days of enactment of H.R. 2673 a report to theHouse and Senate Committees on Appropriations that specifies "the account and amount ofeach rescission" (Section 168(b)(c); for bill text see Congressional Record , vol. 149,November 25, 2003, p. H12445). Soon after approving the FY2003 regular annual legislative branch appropriations ( P.L.108-7 ), and prior to consideration of the FY2004 legislative branch budget, Congress clearedan FY2003 supplemental ( H.R. 1559 , P.L. 108-11 ) containing $125 million forthe legislative branch emergency response fund. (7) Appropriations were made available asfollows: $11.0 million -- House of Representatives, committee employees (standing committees, special and select), for salaries and expenses; $37.8 million -- Capitol Police, general expenses, "for increasingemergency costs of the security requirements for the United States Capitol Complex relatedto protecting the occupants and visitors;" $111,000 -- Office of Compliance, salaries and expenses, "to covercontracted services of hearings officers and mediators for the increasing number ofhearings;" $63.9 million -- Architect of the Capitol, Capitol police buildings andgrounds, "for the property purchase, design, and the beginning of construction for a newCapitol Police headquarters," $5.5 million -- Library of Congress, salaries and expenses, "toimplement a public address system for the Library's buildings to assure effectivecommunications in all emergency situations;" $1.9 million -- Library of Congress, Congressional Research Service,"to support the planning, design, and implementation of the Congressional Research Serviceportion of the alternate computer facilities;" $4.9 million -- General Accounting Office, salaries and expenses, "tosupport the implementation of important security enhancements required within the GAOfacility." (8) Funding Issues. In recent years, Congress has undertaken to strengthen the capabilities of the Capitol Police by providing increasedfunding; the FY2002 budget was increased by 47.1%, and the FY2003 budget by 38.6%. The Capitol Police requested a 20.9% increase of $50.3 million for FY2004. (9) Conferees,however, agreed to withhold additional funds and actually reduce the Capitol Policeappropriation by 8.0%, to $221.1 million from $240.2 million in FY2003. (10) The conferencefigure reflects an increase of 4.4% from the appropriation contained in the House bill, anda decrease of 7.9% from that contained in the Senate bill. The FY2004 Capitol Police appropriation funds 1,993 positions, including 1,592 sworn staff and 401 civilian employees. Language authorizes 30 positions to be converted fromsworn to civilian positions. Conferees also directed the Capitol Police to recruit 75 newpersonnel as follows: five positions for the chief, three of which are to be mid-level attorneysin the Office of General Counsel; 33 positions, three of which are to be intelligence analystsand 13 positions for the Security Services Bureau; and 37 positions for the Office of the ChiefAdministrative Officer. Conferees noted "that should the Capitol Police strategic plan, and associated staffing plan, be completed and approved by the House and Senate Appropriations Committees,during fiscal year 2004, there is ample funding from the Emergency Response Fund for newsworn positions." (11) The Capitol Police appropriation is contained in two accounts: (12) salaries account , which conferees funded at $197.6 million, a 13.2% increase from $174.5 million; the House funded the salaries account at $189.9 million, anincrease of 8.8% (request was a 25.1% increase), and the Senate funded the account at $207.0million, an increase of 18.6%; general expenses account , which conferees funded at $23.5 million, adecrease of 15.8% from $27.9 million; the House funded the account at $21.9 million, adecrease of 21.5% (request was a 158.8% increase), and the Senate funded the account at$33.0 million, an increase of 18.2%. A separate appropriation under the Architect of the Capitol account contains $3.3 millionfor Capitol Police buildings and grounds, the same amount contained in both the House andSenate bills. This represents a significant decrease from the FY2003 appropriation of $63.9million. (13) Among other Capitol Police provisions contained in P.L. 108-83 are those authorizing the recruitment and training of sworn positions for assignment to the Library of Congress, including 23 positions in FY2004; restating a requirement that the Capitol Police notify and consult with the House and Senate Committees on Appropriations on plans that "result in theredistribution, reprogramming, or reallocation of FTE's or funds in a manner different fromthat presented in each budget year's appropriation hearings; position reports to theCommittees; and the final approved budget;" (14) authorizing any counsel providing legal assistance and representation to the Capitol Police to appear in any federal or state court; directing that hazardous materials response team members assisting the Capitol Police be treated as members of the force in order to receive retirement benefits thatare comparable to benefits available to other federal firefighters and law enforcementpersonnel; providing for a "more effective and efficient" transfer of Library of Congress police to the Capitol Police force; (15) redefining and extending the physical jurisdiction of the Capitol Police over traffic within and around the Capitol grounds to limit and prohibit trucks, referred to asthe "truck interdiction program;" directing the Capitol Police Board to make regulations regarding "implementation, execution and maintenance" of the truck interdiction program and to submitits regulations to the Committee on House Administration and the Senate Committee on Rulesand Administration for approval; and directing that FY2004 basic training expenses of the Capitol Police at the Federal Law Enforcement Training Center be paid from Department of Homeland Securityfunds. Conferees agreed to a $48.839 million additional appropriation for the Capitol Visitors' Center, funded under the Architect of the Capitol account. The appropriation is similar to theamount considered necessary to complete construction of the center, based upon a review bythe General Accounting Office (GAO) and a GAO "assessment of a cost-to-complete estimateprepared by a third party with expertise in construction cost analysis." (16) Of this amount,$1.039 million is marked for operational costs, and $48.550 million is no-year money. TheSenate version of the FY2004 bill contained an appropriation of $47.8 million for the center;the House did not provide funds for the center. The actual new appropriation for FY2004 is $36.839 million, since conferees authorized $12.0 million to be transferred to the center' appropriation from previously appropriated fundsmade available for Capitol Police buildings and grounds also funded under the Architect ofthe Capitol account. Conferees also directed the General Accounting Office (GAO) to conduct quarterly performance reviews of construction progress to determine adherence and changes to thecenter's expenses and schedule, to support oversight by the House and Senate Committees onAppropriations and the Capitol Preservation Commission; limited federal funds that can be obligated or spent on a tunnelconnecting the center with the Library of Congress to $10.0 million; prohibited the expenditure of funds by the Architect of the Capitol for construction of the tunnel until a plan for obligation of funds (showing purpose, amount, andschedule) is approved by the chairmen and ranking members of the House and SenateCommittees on Appropriations; and "urged" those responsible for exhibits in the center to consult with the Library of Congress "to ensure that the exhibit presents history of the Congress as well as therole of the congress in the preservation of the cultural and artistic heritage of the Americanpeople." (17) Senate report language addressed concerns of the Senate with several aspects of management of the project, expressing reservations about providing additional funds "withoutbetter management practices." The Senate requested the Architect to impose necessarycontrols on construction of the Capitol Visitors' Center (CVC), stating that the top priorityof the Architect is to ensure completion in a timely and financially responsible manner;directed the Architect to "develop a risk mitigation plan, and institute a global project costcoding and tracking system for all costs, to ensure to the extent practicable there will not beadditional cost requirements to complete the project in a timely fashion without jeopardizingquality." The Senate further prohibited the Architect from obligating any of the $$47.8 million contained in the report without receipt of (1) a recommendation by the Capitol PreservationCommission, and (2) approval of an spending plan by the House and Senate Committees onAppropriations. (18) Interest in the construction of the Capitol Visitors' Center reflects a heightened interest by some Members of Congress in making the necessary appropriations available so thatconstruction of the center can be completed in 2005. (19) Congressional leadership broke groundfor the center on June 20, 2000, and construction began in early 2002. Revised constructioncost estimates have increased the original budget of $265 million to $373.5 million. (20) A totalof $308.5 million in federal appropriations have been made for the center's construction, andan additional $65 million in private funds is reportedly available. Funding Issues. Conferees agreed to $405.4 million for activities of the Architect of the Capitol, a decrease of $51.4 million(-11.3%) from the FY2003 appropriation of $456.8 million. Operations of the Architect arefunded in nine accounts. The FY2004 appropriations for these accounts and the percentagechanges from FY2003 are as follows: general administration -- $77.1 million (+30.7%); Capitol building -- $28.2 million (-14.5%); Capitol grounds -- $6.9 million (-17.1%); Senate office buildings -- $63.4 million (-1.7%); House office buildings -- $62.8 million (+3.7%); Capitol power plant -- $81.5 million (-34.4%); (21) Library buildings and grounds -- $39.2 million(+5.1%); Capitol Police buildings and grounds -- $3.3 million (-94.8%); (22) and Botanic garden -- $6.2 million (+2.1%). From time to time, other projects of the Architect are funded in separate accounts of the bill under the Architect, as is the case in the FY2004 Act which makes available $48.839million for completion of the Capitol Visitors' Center (CVC). That figure reflects a newappropriation of $36.839 million combined with $12.0 million made available by confereesin a transfer from the Capitol Police buildings and grounds account under the Architect of theCapitol. Prior to FY2004, Congress funded separate accounts under the Architect in FY2002, including $70.0 million for the CVC and $1.3 million for the Congressional Cemetery. Conferees on the FY2004 bill also directed the AOC to issue control and administrative procedures and processes to prevent waste and fraud in the use of funds by offices under hisjurisdiction; encouraged the AOC to cooperate with other legislative branch entitiesto increase the "volume and visibility" of artwork which reflects the contributions ofAfrican-Americans throughout the history of the United States; deferred action on personnel and costs associated with energy service at the Capitol Power Plant until completion of a study by the AOC on the organization andadministration of his office (as directed in the House report on H.R. 2657 ); directed that the study of the AOC on organization and administration of his office be "comprehensive" and address "all aspects of AOC central and administrativestaff, including any administrative positions that have been established in the offices of thesuperintendents to ensure that duplicative services do not occur; that all positions are requiredto conduct business; and that they are aligned with the AOC strategic plan;" (23) funded replacement os high voltage switchgear for the Senate ($2.0 million), the House ($3.6 million), and the Library of Congress ($1.8million); provided $275,000 for upgrades to the emergency evacuation andnotification system in the Capitol Complex; provided $6.0 million for phase two of the U.S. Capitol Master Plan; provided $9.5 million for modernization of elevators in the House; $4.3 million to upgrade the House data center; directed the General Accounting Office (GAO) to review the master plan of the Capitol Power Plant, its operations and management, and report its findings andrecommendations on the "adequacy of the master plan, the capacity and efficiency of plantoperations, the reliability and security of its distribution infrastructure, as well as the statusof the expansion projects;" (24) provided $22.0 million for the West Refrigeration Plant Expansion project at the Capitol Power Plant; and provided transfer authority for an alternate computing facility. FY2004 Budget Proposal and House and Senate Floor Action. The original FY2004 budget proposal for the Architect was $513.9million, an increase of $57.1 million (12.5%) from $456.8 million in FY2003, including aFY2003 supplemental of $63.9 million for Capitol Police buildings and grounds. (25) Theproposal also authorized the Architect to use $4.4 million in reimbursements made to hisoffice for utilities provided to nonlegislative branch agencies. (27) Most of the increase was for general administration of activities of the Architect (+169.0%), maintenance of the Capitol building (+58.8%), and enhancements to the BotanicGarden (+80.1%). In testimony before the Senate Appropriations Committee in May 2003,the Architect stated that the most significant factor in the FY2004 budget increase is thepurchase of an alternate computer facility to be shared by legislative branch agencies ($61.0million). (28) The request also reflected a significant decrease for the Capitol police buildings and grounds appropriation (-95.4%), primarily due to a FY2003 supplemental of $40.1 million fora new police headquarters. Other reductions were to be made in funds for the Capitol powerplant (-17.8%) and maintenance of the Capitol grounds (-15.9%). The House version of the FY2004 bill contained a reduction of 9.6% in the budget of the Architect, excluding funds for Senate office buildings , to $357.8 million from $396.2million. The Senate version contained a decrease of 9.6%, excluding funds for House office buildings , to $357.8 million from $396.2 million in FY2003. The FY2004 figure contains anappropriation of $47.8 million for the Capitol Visitors' Center. Overall Funding. The FY2004 appropriation for House internal operations is $1.01 billion, an increase of 5.8% over theFY2003 funding level of $960.9 million, (29) anda reduction of 2.4% from the House budgetrequest. Most of the increase is for mandatory expenses, those required by law to meet suchexpenses as the annual salary adjustment and related costs, plus increased costs of goods andservices. Among increases are those for Members' representational allowances to assist Members in their official duties, an increase of 8.0%; salaries and expenses for House leadership offices, an increase of 9.8%; salaries of House administrative officers, their employees and other personnel, an increase of 3.2%; Office of the Chief Administrative Officer of the House, an increase of 5.5%; and allowances and expenses heading (which includes supplies; official mail for committees, leadership and administrative offices; and mandatory House contributions toinsurance and retirement programs for House employees), an increase of8.9%. Among other provisions of P.L. 108-83 are those that established the House Office of Interparliamentary Affairs with jurisdiction over visits to the House by participants in interparliamentary exchanges, members of foreign legislative bodies, and permanent officials of foreign governments; required unused funds available to Members for their representational allowances to be used to reduce the deficit; and prohibited the use of funds in the Act to provide supplemental dental or vision health insurance benefits to Members and other Houseemployees. House conferees included language in the conference report regarding the role of the Office of House Finance in the annual budget preparation process. (30) They directed theFinance Office to set deadlines for the receipt of budget information, includingreprogramming activities, from House entities. They also expressed the AppropriationsCommittee's expectation that each House entity will "provide its utmost support in meetingOffice of Finance deadlines," necessitating at times "an immediate response with little or noadvance notification." Conferees noted that in the event a House entity "is not available torespond to the Finance Office, the Committee expects the Finance Office to provide theirindependent analysis to the Committee." (31) House Committee Funding. The FY2004 appropriation for House committee operations is $132.1 million, a decrease of 4.7% from theFY2003 appropriation of $138.6 million. (32) Funding for House committees is contained in the appropriation heading, committee employees, that comprises two subheadings. The first subheading contains funds forpersonnel and non-personnel expenses of House committees, except the AppropriationsCommittee, as authorized by the House in a committee expense resolution. The FY2004appropriation is $107.2 million. The second subheading contains funds for the personnel and non-personnel expenses of the Committee on Appropriations. The FY2004 appropriation is $24.9 million. Overall Senate. The Senate's FY2004 appropriation of $716.8 million is an 8.0% increase over FY2003 ($663.4 million). Asignificant factor in the increase is funding for mandatory expenses related to insurance andretirement programs for Senate employees. Among other increases are those for official personnel and office expense account, to assist Senators in their official duties, an increase of 6.8%; activities of the Senate Sergeant at Arms, funded under "salaries, officers, and employees") including six additional positions for enhanced Senate security, anincrease of 6.1%; activities of the Senate Sergeant at Arms, funded under "contingent expenses of the Senate," an increase of 18.2%; the increase primarily reflects expenses relatedto a "fit-out" of the new Senate warehouse and mail processing facility ($6.3 million),purchase of computer equipment and software for offices of Senators and committees ($10.3million), relocation of the Senate Recording Studio to the Capitol Visitors' Center (CVC)($5.2 million), continuation of technology upgrades in the Senate Recording Studio ($3.8million), enhanced security for Senators' state offices ($2.7 million), move and upgrades ofthe audio system infrastructure in the Senate chamber in connection with the CVC ($2.5million), and procurement and maintenance of correspondence management systems inSenators' offices ($4.3 million); (33) activities of the Secretary of the Senate funded under "salaries, officers, and employees," an increase of 7.1%; activities of the Secretary of the Senate funded under "contingent expenses of the Senate," a decrease of 68.0%; and salaries of officers and their employees and mandatory Senate contributions to insurance and retirement programs for most Senate employees, an increaseof 7.1%. Among other provisions of P.L. 108-83 are those that made $500,000 available for a pilot postal patron mail program which allows mailing of postcards by Senators to provide notices of town meetings which they willattend; (34) struck the limitation on expenses for the Conference of the Majority and the Conference of the Minority; defined the authority of the Senate Commission on Art in the acceptance of monetary gifts and in the acquisition of art and historical items for display in the Senatewing of the Capitol and in Senate office buildings; and established a Senate CuratorialAdvisory Board and a Senate Preservation Fund; authorized the Senate Sergeant at Arms to provide services and furnish equipment to certain Senate entities on a reimbursable basis; provided authority to the Senate Committee on Rules and Administration to authorize the installation of data communication lines and other internetconnections in the home of each Senator and in the homes of two employees designated bya Senator; and authorized Senators from states with high cost of living expenses (contiguous states) to provide additional funds to employees located in their states, andlimited the additional allowances to 25% of the basic salary of employees. Language in the Senate Appropriations Committee report encouraged the Secretary of the Senate to study Senate employee pay, hiring, and benefits, and made $65,000 availablefor this purpose. (35) Among the FY2004 budget requests were those for $5.9 million for a year's maintenance of recent security enhancements to the alternate computing facility and temporary assistancein processing of packages to the Senate until the new mail processing facility off the CapitolComplex is completed, and an additional $4.7 million to support the Senate's computerinfrastructure. (36) Senate Committee Funding. Appropriations for Senate committees are contained in two Senate accounts: the inquiries and investigations account , which contains funds for all Senate committees except Appropriations, $118.5 million, an increase of 8.2%; and the Committee on Appropriations account , $12.8 million, an increaseof 13.6%. Congressional Budget Office. Conferees agreed to a 6.1% increase in the FY2004 appropriation for the Congressional Budget Office(CBO), to $33.8 million from $31.9 million. Among other activities and personnel costs theappropriation funds are two additional FTE positions. The House bill contained $33.8million, an increase of 6.0%, and the Senate bill contained $33.6 million, an increase of 5.3%. Conferees agreed to the House provision for CBO, along with other members of the Federal Accounting Standards Advisory Board, to contribute its appropriate share of theexpenses of the Board. The FY2004 CBO request was $34.0 million, an increase of 6.6%, allowing for 236 positions. The agency requested three new positions, increasing staff from 233 to 236, toenhance CBO's "ability to make economic forecasts and project tax receipts;" continue theagency's visiting scholars' program for post doctoral fellows and academics with specializedexpertise; and allow staff promotions and merit increases and performance-based payincreases for managers and senior analysts who do not receive annual across the board payadjustments. (37) General Accounting Office. Conferees appropriated $460.3 million to the General Accounting Office (GAO) for FY2004. Thesefunds reflect $466.3 million in direct appropriations and an offset of $6.0 million in receipts,which is an increase of 1.6% from $453.1 million made available for FY2003. (38) The House appropriated $458.5 million, an increase of 1.2% , and the Senate, $462.1 million, an increase of 2.0%. Both houses approved GAO's request to fund 3,269 FTEs, andauthorized the Comptroller General to receive payments from the Securities and ExchangeCommission for GAO audits of the Commission's finances. Language in the conference report directed GAO to report to Congress with regard to the impact on GAO's mission and capabilities if it were to assume a role in technology assessment for the legislativebranch; directed the report be submitted to the House and Senate Committees onAppropriations by December 15, 2003; (39) and authorized GAO, and other members of the Federal Accounting Standards Advisory Board, to contributed their appropriate shares of the Board'sexpenses. The FY2004 GAO request was $466.6 million, an increase of 3.0%, and, as originally proposed, contained $4.8 million for security enhancements at GAO facilities. Congressapproved this appropriation in the FY2003 supplemental earlier in calendar year 2003. (40) GAOalso requested authority to use an additional estimated $6.0 million in revenues, which wasapproved by both houses in their versions of the FY2004 legislative funding bill. The director of GAO noted during hearings earlier this year that the increase was primarily to fund mandatory pay and uncontrollable costs of goods. According to the director,the FY2004 budget proposal placed major emphasis on workforce development, includingadditional employee training and development programs to ensure "the ability to attract, retainand reward high-quality staff." The budget also contained a recommendation that Congresspass legislation to "facilitate GAO's continuing efforts to recruit and retain top talent, developa more performance-based compensation system, realign our workforce, and facilitate oursuccession planning and knowledge transfer efforts." (41) Library of Congress. Conferees appropriated $526.1 million for operation of the Library of Congress (LOC), including theCongressional Research Service (CRS). This appropriation reflects the Library's authorityto spend $36.5 million in receipts, and an increase of 4.6% over $503.2 million madeavailable for FY2003. The House bill made available $522.6 million, an increase of 3.8% over FY2003; the Senate bill made available $522.8 million, an increase of 3.9%. The House Appropriations Committee funded 4,300 FTE positions, an FTE count that had been projected by the LOC; (42) the Senate didnot specify the number of FTEs funded inits appropriation. Conferees referred to 4,155 FTE positions funded in the bill, but did notcomment on the number of FTEs funded in the account, "Books for the Blind and PhysicallyHandicapped. (43) In addition to appropriations for the regular administration of services and programs of the LOC, the conference agreement includes $2.8 million for an alternate computer facility, primarily for emergencies; 8.8 million for the Adventures of the American Mindproject; $905,000 for the Integrated Library System; $500,000 for the Lincoln-Douglas debatesproject; 11.1 million for the National Audio-Visual ConservationCenter; $500,000 for final funding of the Louisiana Purchase Bicentennialcelebration; and a statement of conferees' expectation that during the upcoming mergerof the LOC and Capitol Police "security of the Capitol complex will take the highest priority,overriding jurisdictional concerns." (44) Among other issues were those addressed by the Senate Committee on Appropriationswhich directed the LOC to restructure its annual budget justification submitted to Congress; and limited changes in the Global Legal Information Network (GLIN) to necessary modifications that would "provide an online digital law library of the official,authentic text of laws and related legal information for exclusive use by governmentauthorities from jurisdictions around the globe or international organizations that contributeofficial authenticated texts of laws, regulations, and related legal material to the database." (45) The House Committee on Appropriations, in its report on H.R. 2657 , directed the Librarian of Congress to develop an interagency agreement with thesuperintendent of the Washington, D.C. public schools for making surplus books andperiodicals available to the school system. (46) The FY2004 request of the Librarian of Congress was $540.1 million, an increase of $36.9 million (7.4%) from the FY2003 appropriation of $503.2 million. (47) In addition, theLibrarian requested congressional authorization to use $29.7 million in FY2004 from receipts. According to the Librarian, the increase was partially necessary "to improve physical securityand support collections security and management (including the construction of the nationalAudio-Visual Conservation Center at Culpeper, VA); to support the Copyright Office'sreengineering efforts; and to enhance access to CRS products and increase CRS researchcapacity in critical areas." (48) Congressional Research Service. Conferees agreed to a 3.9% increase in funding for the Congressional Research Service, to$91.7 million from $88.3 million, which funds 729 FTE positions. (49) The appropriation is thesame as that approved by the Senate. The House bill contained $93.6 million, an increase of6.1%. Conferees dropped a Senate provision authorizing voluntary separation incentives,suggesting that CRS place the request in its FY2005 budget submission. Language in theSenate report requested CRS to use available personnel funds to pay for contract servicesduring FY2004. The FY2004 request of CRS was $96.3 million, an increase of 9.1%. over the FY2003 appropriation of $88.3 million. According to the CRS director, the request allowed theagency to provide continuity of operations in the event of an emergency through a "securetechnical infrastructure;" to enhance its "research capability to procure, create, maintain andmanipulate the large data sets upon which CRS analysts rely to conduct their public policyassessments of legislative proposals and specific program implementation;" and to makeavailable to managers the means and incentives to "encourage staff retention." (50) Government Printing Office. Conferees agreed to the Senate's recommendation of $135.6 million for FY2004 for the GovernmentPrinting Office (GPO). The funds are a 13.9% increase over FY2003's funding level of$119.0 million. Funds are appropriated in three accounts - congressional printing andbinding, Office of Superintendent of Documents (salaries and expenses), and, from time totime, the revolving fund. The agency's FY2004 appropriations are: Congressional printing and binding -- $91.1 million, an increase of $1.6 million (1.7%) over the FY2003 appropriation of $89.6 million; Office of Superintendent of Documents (salaries and expenses) -- $34.5million, an increase of $5.0 million (16.9%) over the appropriation of $29.5 million; (51) and Government Printing Office Revolving Fund -- $10.0 million. (52) The additional $10.0 million is a one-time expense to meet the expenses of a retirement separation incentive program which the agency implemented in April 2003. The public printerestimated the resulting savings to be $18.0 million per year after the investment is made. (53) The House bill contained $130.6 million, an increase of 9.6% over FY2003; the Senate bill contained a 13.9% increase, the same increase requested by GPO. The FY2004 Government Printing Office request was $135.6 million, an increase of $16.5 million (13.9%) over the FY2003 appropriation of $119.0 million. Table 3. Legislative Branch Appropriations, FY2004(P.L.108-83; H.R. 2657; S.1383) (in thousands of dollars) Source: House Committee on Appropriations. a. FY2003 funds are contained in (1) P.L. 108-8 , FY2003 Legislative Branch Appropriations Act, and (2) P.L. 108-11 , FY2003 EmergencyWartime Supplemental Appropriations Act. b. This is a new account, effective with the FY2003 legislative appropriation bill. Previously, CapitolPolice funds were contained under the jointitems account. c. The center was named the Russian Leadership Program prior to FY2004. d. The House does not consider appropriations for internal Senate operations. e. The House does not consider appropriations for Senate office buildings contained in the budget of theArchitect of the Capitol. f. This figure does not contain funds for internal Senate operations, which are funded in a separateaccount, or for Senate office buildings, whichare contained in the budget of the Architect of the Capitol. g. The Senate does not consider appropriations for internal House operations. h. The Senate does not consider appropriations for House office buildings contained in the budget of theArchitect of the Capitol. i. This figure does not contain funds for internal House operations, which are funded in a separateaccount, or for House office buildings, whichare contained in the budget of the Architect of the Capitol. Table 4. Capitol Police Appropriations, FY2004 (P.L.108-83; H.R. 2657; S. 1383) (in thousands of dollars) Source: House Committee on Appropriations. a. FY2003 funds are contained in (1) P.L. 108-8 , FY2003 Legislative Branch Appropriations Act ($27,917,000), and (2) P.L. 108-11 , FY2003 Emergency Wartime SupplementalAppropriations Act ($37,758,000). Table 5. Architect of the Capitol Appropriations, FY2004 (P.L. 108-83; H.R. 2657; S.1383) (in thousands of dollars) Source: House Committee on Appropriations. a. FY2003 funds are contained in (1) P.L. 108-8 , FY2003 Legislative Branch Appropriations Act, and (2) P.L. 108-11 , FY2003 Emergency Wartime Supplemental Appropriations Act. b. This figure includes a $39.985 million supplemental appropriation contained in P.L. 108-11 ,FY2003 Emergency Wartime Supplemental Appropriations Act. The regular annualappropriation was $23.9 million, to remain available until September 2007. c. The House does not consider appropriations for Senate office buildings. d. This figure does not include appropriations for Senate office buildings. e. The Senate does not consider appropriations for House office buildings. f. This figure does not include appropriations for House office buildings. Table 6. Senate Appropriations, FY2004 (P.L.108-83; H.R.2657;S. 1383) (in thousands of dollars) Source: House Committees on Appropriations a. The Senate account contains seven appropriations headings, which are highlighted in bold. b. FY2003 funds are contained in (1) P.L. 108-8 , FY2003 Legislative Branch AppropriationsAct, and (2) P.L. 108-11 , FY2003Emergency wartime supplemental appropriations act. c. Office operations of the Office of the Secretary of the Senate are also funded under "Salaries,Officers, and Employees." d. Activities of the Office of Sergeant at Arms and Doorkeeper are also funded under "Salaries,Officers, and Employees." Table 7. House of Representatives Appropriations, FY2004(P.L.108-83; H.R. 2657) (108th Congress, 1st Session) (in thousands of dollars) Sources : House Committee on Appropriations a. The appropriations bill contains two House accounts: (1) payments to widows and heirs of deceased Members of Congress and (2)salaries and expenses. b. FY2003 funds are contained in (1) P.L. 108-8 , FY2003 Legislative Branch AppropriationsAct, and (2) P.L. 108-11 , FY2003Emergency Wartime Supplemental Appropriations Act. c. This appropriation heading was new in the FY1996 bill. The heading represents aconsolidation of (1) the former headingMembers' clerk hire; (2) the former heading official mail costs; and (3) the former subheading official expenses ofMembers,under the heading allowances and expenses. d. This appropriation heading was new in the FY1996 bill. The heading represents aconsolidation of (1) the former headingcommittee employees; (2) the former heading standing committees, special and select; (3) the former headingCommittee onBudget (studies); and (4) the former heading Committee on Appropriations (studies and investigations). Table 8. Legislative Branch Budget Authority Contained in Appropriations Acts, FY1995-FY2002 (Does not include permanent budget authority; in thousands ofcurrent dollars) Note: This table reflects the title structure of the legislative branch appropriation bill prior to the FY2003 bill in which most appropriations werecombined in one title. For purposes of comparison from FY1995 through FY2002, this table follows the formerbill structure. An upcomingversion of this report will contain historical data in the new bill structure. Sources: Budget authorities for FY1995-FY2002 are from the House Appropriations Committee. FY1995 budget authorities reflect rescissions anda supplemental contained in P.L. 104-19 , 109 Stat. 219-221, July 27, 1995, FY1995 Supplemental and RescissionsAct ( H.R. 1944 ). FY1996budget authorities reflect rescissions contained in P.L. 104-208 , 110 Stat. 3009-510-511, Sept. 30, 1996, FY1997Omnibus Consolidated AppropriationsAct ( H.R. 3610 ). FY1998 budget authorities represent supplementals contained in P.L. 105-174 , May 1,1998, and an $11 million transferto the Government 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 supplementaland a 0.38% rescission in P.L. 106-113 . Totals reflect rounding. FY1999 budget authority contains $223.7 million in emergency supplementalappropriations ( P.L. 105-277 ), and $3.8 millionfor expenses of a House page dormitory and $1.8 million for expenses of life safety renovations to the O'Neill HouseOffice Building ( P.L. 106-31 ). TheFY1999 appropriation also contains a rescission of $3.5 million, and a supplemental for the same amount in P.L.106-31 . The legislative branch appropriations acts do not contain permanent federal funds or permanent trust funds. Permanent federal funds were: FY1995,$343,000; FY1996, $302,000; FY1997, $325,000; FY1998, $333,000; FY1999, $358,000; and FY2000, $279,000. Permanent trust funds were: 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 Houseand Senate Committees on Appropriations. The formula for conversion to constant dollars is as follows: 2001 Consumer Price Index (CPI) number divided by each year's CPI number multipliedby that year's budget authority. Source for 1995-2000 index figures is the Bureau of Labor Statistics. Source for2001 estimate is the CongressionalBudget Office. Notes: a. Prior to FY1978, the legislative branch appropriations act contained numerous titles. Effective inFY1978, Congress restructured the legislative billso that it would "more adequately reflect actual costs of operating the U.S. Congress than has been true in the pastyears" (H.Rept. 95-450, FY1978Legislative Appropriations). As a result, the act was divided into two titles. Title I, Congressional Operations, wasestablished to containappropriations for the actual operation of Congress. Title II, Related Agencies, was established to contain thebudgets for activities not consideredas providing direct support to Congress. Periodically, the act has contained additional titles for such purposes ascapital improvements and specialone-time functions. b. FY1996 figures contain rescissions in the Omnibus Consolidated Appropriations Act, FY1997 ( P.L.104-208 , Sept. 28, 1996). Provisions applicableto 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 FY1999emergency supplemental appropriations in P.L. 105-277 , and $5.6 million in FY1999 supplemental appropriationsin 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 $3.5 million from the House heading "salaries, officers, and employees" anda supplemental appropriationof $3.5 million for the chief administrative officer for replacement of the House payroll 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 ). Thetotal Joint Items figure also includes $2 million for the 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 Capitolbuildings account, in "salaries and expenses" ( P.L. 105-277 ), and includes $3.8 million for expenses of a House pagedormitory and $1.8 millionfor expenses 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 completionof 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; FY2001supplemental appropriations of $118 million and a 0.22% across-the-board rescission contained in H.R. 5666 ,miscellaneousappropriations 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 ConsolidatedAppropriations Act. The first FY2001 legislative branch appropriations bill, H.R. 4516 , was vetoed Oct. 30, 2000. Table 9. Legislative Branch Budget Authority Contained inAppropriations Acts, FY1995-FY2002 (Does not include permanent budget authority; in thousands ofconstant 2002 (est.) dollars) See notes at end of Table 8. CRS Report RL31012 . Legislative Branch Appropriations for FY2003 , by Paul Dwyer. CRS Report RL30212 . Legislative Branch Appropriations for FY2002 , by Paul Dwyer. CRS Report 98-212 . Legislative Branch Appropriations for FY2001 , by Paul Dwyer. These sites contain information on the FY2003 and FY2004 legislative branch appropriations requests 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/ | Summary On September 30, 2003, the President signed into law H.R. 2657 , the FY2004 Legislative Branch Appropriations Act ( P.L. 108-83 ). The Act contains $3.548 billion for FY2004legislative branch activities, and $937.6 million for FY2003 emergency supplemental appropriations(for executive and judicial programs). During markup on July 9, 2003, the Senate Committee on Appropriations added $1.989 billion in FY2003 emergency supplemental appropriations to its version of the FY2004 legislative branchfunding bill, S. 1383 . It placed the funds in Title III of the bill. The Senate amendedthe supplemental to contain $2.0 billion, and conferees reduced the funding level to $937.6 million. Among elements considered during discussions on the FY2004 budget were the level of additional funds necessary to complete construction and furnishing of the Capitol Visitors' Center; additional security enhancements within and around the Capitolcomplex; the level of funding for activities of the Capitol Police;and requests of the Capitol Police to expand their physical jurisdiction, establisha mounted police unit, authorize officers to carry guns (other than those used for official duty) whenoff-duty, and expand the law enforcement duties of officers outside the physical jurisdiction of theCapitol Police, including Members' home districts and states. Key Policy Staff Division abbreviations: GOV/FIN = Government and Finance |
On March 11, 2009, President Obama signed the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ), which provides $44.6 billion for FSGG programs and agencies, an increase of $385 million above the FY2009 requested amount and $58 million less than FY2008 enacted appropriations. The House Appropriations Committee had recommended $44.27 billion for FSGG agencies and programs for FY2009, while the Senate Appropriations Committee had recommended FY2009 appropriations of $44.75 billion. Table 1 , below, reflects the status of the FY2009 FSGG appropriations bill. The House and Senate Committees on Appropriations reorganized their subcommittee structures in early 2007. Each chamber created a new Subcommittee on Financial Services and General Government (FSGG). In the House, the jurisdiction of the FSGG Subcommittee was formed primarily of agencies that had been under the jurisdiction of the Subcommittee on Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies, commonly referred to as "TTHUD." In addition, the House FSGG Subcommittee was assigned four independent agencies that had been under the jurisdiction of the Science, State, Justice, Commerce, and Related Agencies Subcommittee. In the Senate, the jurisdiction of the new FSGG Subcommittee was a combination of agencies from the jurisdiction of three previously existing subcommittees. The District of Columbia, which had its own subcommittee in the 109 th Congress, was placed under the purview of the FSGG Subcommittee, as were four independent agencies that had been under the jurisdiction of the Commerce, Justice, Science, and Related Agencies Subcommittee. Additionally, most of the agencies that had been under the jurisdiction of the Subcommittee on Transportation, Treasury, the Judiciary, Housing and Urban Development, and Related Agencies were assigned to the FSGG Subcommittee. As a result of this reorganization, the House and Senate FSGG Subcommittees have nearly identical jurisdictions. On September 30, 2008, President George W. Bush signed the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 ( P.L. 110-329 ). Division A of P.L. 110-329 provided continuing appropriations for most accounts in the Financial Services and General Government accounts through March 9, 2009. Funding was generally at the same rate appropriated in P.L. 110-161 , the Consolidated Appropriations Act, 2008. Division B of P.L. 110-329 provided GSA with an additional $182 million for courthouse construction, and provided SBA with an additional $799 million, most of which was for the disaster loan program account. The Administration's FY2009 budget request included $44.20 billion for FSGG agencies and programs. The House Appropriations Committee recommended $44.27 billion for FSGG agencies, and the Senate Appropriations Committee recommended $44.75 billion. Table 2 lists the enacted amounts for FY2008, the President's request, House and Senate Appropriations Committees' recommendations, and the enacted amounts for FY2009. The wide scope of FSGG appropriations—which provide funding for two of the three branches of the federal government, a city government, and 26 independent agencies with a range of functions—encompasses a number of potentially controversial issues, some of which are identified below. Department of the Treasury. Is the proposed funding for enforcement, taxpayer services, and business systems modernization at the Internal Revenue Service adequate for lowering the federal tax gap? Executive Office of the President (EOP). Should Congress accept the President's proposals to (1) consolidate EOP budget accounts into a single appropriation, (2) expand the authority of the EOP to transfer funds among separate appropriations accounts, and (3) centralize funding for administrative services provided throughout the EOP in the Office of Administration? The Judiciary. What level of funding should Congress provide for judicial security enhancements and other administrative issues, such as pay increases for judges, hiring of additional staff, and creation of additional judgeships to meet the demands of rising caseloads? This section examines FY2009 appropriations for the Treasury Department and its operating bureaus, including the Internal Revenue Service (IRS). Table 3 shows the enacted amounts for FY2008, as well as the Bush Administration's budget request for FY2009, House and Senate Appropriations Committee recommendations for FY2009, and enacted amounts for FY2009. The Treasury Department performs a variety of governmental functions. They can be summarized as protecting the nation's financial system against a host of illicit activities (e.g., money laundering and terrorist financing), collecting tax revenue, enforcing tax laws, managing and accounting for federal debt, administering the federal government's finances, regulating financial institutions, and producing and distributing coins and currency. At its most basic level of organization, Treasury consists of departmental offices and operating bureaus. In general, the offices are responsible for formulating and implementing policy initiatives and managing Treasury's operations, while the bureaus perform specific duties assigned to Treasury, mainly through statutory mandates. In the past decade or so, the bureaus have accounted for over 95% of the agency's funding and work force. With one possible exception, the bureaus can be divided into those engaged in financial management and regulation and those engaged in law enforcement. In recent decades, the Comptroller of the Currency, U.S. Mint, Bureau of Engraving and Printing, Financial Management Service (FMS), Bureau of the Public Debt, Community Development Financial Institutions Fund (CDFI), and Office of Thrift Supervision have undertaken tasks related to the management of the federal government's finances or the supervision and regulation of the U.S. financial system. By contrast, law enforcement has been the central focus of the tasks handled by the Bureau of Alcohol, Tobacco, and Firearms; U.S. Secret Service; Federal Law Enforcement Training Center; U.S. Customs Service; Financial Crimes Enforcement Network (FinCEN); and the Treasury Forfeiture Fund. Since the advent of the Department of Homeland Security in 2002, Treasury's direct involvement in law enforcement has shrunk considerably. A possible exception to this simplified dichotomy is the Internal Revenue Service (IRS), whose main duties encompass both the collection of tax revenue and the enforcement of tax laws and regulations. Funding for many bureaus comes largely from annual appropriations. This is the case for the IRS, FMS, Bureau of Public Debt, FinCEN, Alcohol and Tobacco Tax and Trade Bureau, Office of the Inspector General (OIG), Treasury Inspector General for Tax Administration (TIGTA), and the CDFI. By contrast, the Treasury Franchise Fund, U.S. Mint, Bureau of Engraving and Printing, Office of the Comptroller of the Currency, and the Office of Thrift Supervision finance their operations largely from the fees they charge for services and products they provide. In FY2008, Treasury received $12.263 billion in appropriated funds (including emergency appropriations), or 5% more than it received in FY2007. As usual, most of these funds were used to finance the operations of the IRS, which received $11.094 billion in FY2008. The remaining $1.169 billion was distributed among Treasury's other appropriations accounts in the following amounts: departmental offices (which includes the Office of Terrorism and Financial Intelligence—or TFI—and the Office of Foreign Assets Control) received $248 million; department-wide systems and capital investments, $19 million; OIG, $18 million; TIGTA, $140 million; CDFI, $94 million; FinCEN, $86 million; FMS, $298 million; Alcohol and Tobacco Tax and Trade Bureau (ATB), $93 million; and Bureau of the Public Debt, $173 million. For FY2009, the Bush Administration asked Congress to approve $12.463 billion in funding for Treasury, or 1.6% more than the amount enacted for FY2008. Under the proposal, the IRS would have received $11.361 billion (or 91% of the total). The remaining $1.102 billion would have been distributed among Treasury's other appropriations accounts in the following amounts: departmental offices would have received $274 million; departmental systems and capital investments, $27 million; OIG, $19 million; TIGTA, $146 million; CDFI, $29 million; FinCEN, $91 million; FMS, $239 million; ATB, $97 million; and Bureau of the Public Debt, $177 million. All major accounts except for FMS and CDFI would have been funded at the same level as or higher levels than the amounts enacted for FY2008. Under the Administration's budget proposal, total full-time equivalent employment (direct and reimbursable) at Treasury could have risen from an estimated 107,912 in FY2008 to a projected 109,597 in FY2009. Nearly 98% of the gain in full-time jobs of 1,685 would have stemmed from an increase in full-time jobs at the IRS of 1,826 and a decrease in such jobs at the FMS of 179. According to Treasury's budget documents, its proposed budget for FY2009 was crafted to provide the resources needed to "effectively manage the government's finances, promote economic opportunity through sound fiscal policy, work towards entitlement reform, strengthen trade and investment policies, and maximize voluntary tax compliance." The following Treasury appropriations accounts (excluding the IRS) would have received the largest increases in funding under the FY2009 budget proposal: department-wide systems and capital investments (44.2%), departmental offices (10.3%), and FinCEN (6.4%). Additional spending on department-wide systems and capital investments would have served multiple purposes. These include remedying "critical building deficiencies in the Treasury Annex Building," furthering the use of a newly developed computer-based system known as the Enterprise Content Management System, securing the Treasury Secure Data Network, and improving Treasury's performance in meeting the requirements of the Federal Information Security Management Act. In seeking more funding for Treasury's departmental offices, the Administration hoped to improve the department's debt management systems and its ability to "perform timely legal reviews" for the Committee on Foreign Investment in the United States, construct an Operations Center to respond to domestic and international financial crises, expand the department's capability to administer sanctions against "terrorist groups and their sponsors," and enhance its "internal counterintelligence and security capabilities." Foremost among FinCEN's functions is administering the Bank Secrecy Act (BSA). The Administration asked Congress to increase funding for FinCEN from $86 million in FY2008 to $91 million in FY2009. Most of the added funds would have been used to improve the agency's management and analysis of BSA data. For the third straight year, the Administration asked Congress to slash funding for the CDFI in FY2009. The proposed reduction would have totaled 70%. Most of it would have stemmed from ending funding for the Bank Enterprise Award Program and the Native Initiatives programs and cutting funding for the CDFI Program by $34 million. Action in the House . The House Appropriations Committee recommended $12.578 billion in appropriated funds for the Treasury Department in FY2009, in a bill ( H.R. 7323 ) it reported December 10, 2008. This amount was $115 million more than the amount requested by the Bush Administration and $315 million above the amount enacted for Treasury in FY2008. Under the measure, the IRS would have received $11.398 billion; departmental offices, $275 million; department-wide systems and capital investments, $27 million; OIG, $19 million; TIGTA, $146 million; FinCEN, $91 million; FMS, $239 million; ATB, $97 million; Bureau of Public Debt, $177 million; and CDFI, $105 million. Nearly the entire difference between the total amount recommended in the bill and the Administration's budget request lay in proposed funding for the CDFI and the IRS: H.R. 7323 would have given $76 million more to the former and $37 million more to the latter. In its report ( H.Rept. 110-920 ) that accompanied H.R. 7323 , the committee directed Treasury to submit an operating plan addressing its expected use of the appropriated funds for each of its offices and bureaus in FY2009 within 60 days of the enactment of an appropriations bill. It also recommended that the department receive $700,000 more than the Administration requested to spend on initiatives to combat predatory lending and improve the financial education of students in elementary and high schools. In addition, the committee endorsed a proposal to spend $62 million (or $300 million more than the Administration requested) on the activities overseen by TFI, without commenting on how the additional funds should be used—though it did specify that at least $300,000 of the $62 million be used by OFAC to reduce its current backlog of Freedom of Information requests. The report also expressed concern that OFAC was devoting too much staff time to investigating alleged violations of the trade embargo against Cuba and urged the agency to re-think its decisions on resource allocation by assigning the highest priority to the "most pressing national security threats facing the United States." To underscore this concern, the committee directed Treasury to submit a report within 60 days of the enactment of an appropriations bill describing the steps it is taking to "assess OFAC's allocation of resources." Action in the Senate . The Senate Appropriations Committee recommended that the Treasury Department receive $12.699 billion for FY2009. That amount was $237 million more than the amount requested by the Administration and $121 million more than the amount recommended by the House Appropriations Committee. Relative to the Administration's budget request, S. 3260 would have granted $71 million more in funding to CDFI and $163 million more in funding to the IRS. Most of the difference in funding between S. 3260 and the appropriations bill approved by the House Appropriations Committee was accounted for by proposed funding for the IRS: S. 3260 would have given the IRS an additional $127 million. Under S. 3260 , the IRS would have received $11.525 billion in appropriated funds; departmental offices, $274 million; FMS, $239 million; Bureau of Public Debt, $177 million; TIGTA, $146 million; CDFI, $100 million; ATB, $99 million; FinCEN, $91 million; department-wide systems and capital investments, $27 million; and OIG, $19 million. In its report, the Senate Appropriations Committee endorsed the Administration's request that Treasury's budget for terrorism and financial intelligence be increased from $56.8 million in FY2008 to $61.7 million in FY2009. More specifically, it recommended that an additional $1.4 million be spent to upgrade OFAC's capacity to administer economic sanctions on "State sponsors of terrorism, such as Iran and Sudan, as well as terrorists, terrorist groups, and their support networks." The committee also directed Treasury to channel an additional $3.4 million into OIA in order to address "current and emerging threats affecting the Department's national security mission" and improve the "Department's coordination of global finance intelligence issues with the intelligence community." The report also expressed concern about problems with suspicious activity reports (SARs) filed with FinCEN under the Bank Secrecy Act (BSA). To address the problems, the committee urged the agency to make an effort to improve the "consistency" of SARs. It recommended that FinCEN receive an additional $1.1 million to support its efforts to implement the provisions of the BSA over which it has jurisdiction, and an additional $865,000 to upgrade its capacity to work with "other Financial Intelligence Units around the world regarding international anti-money laundering and terrorist financing." In addition, the report expressed opposition to the Administration's request to decrease funding for CDFI. It recommended that $8.3 million be set aside in FY2009 for grants, loans, technical assistance, and training programs intended to benefit "Native American, Alaskan Natives, and Native Hawaiian communities." In the committee's view, the agency should place a higher priority on improving its measurement of the extent to which programs funded through CDFI "leverage other non-Federal funds for CDFIs across the country." Passage of the Omnibus Appropriations Act of 2009 ( H.R. 1105 , P.L. 111-8 ). The omnibus spending bill for FY2009 signed by President Obama on March 11, 2009, provides $12.687 billion in appropriated funds for the Treasury Department — or $425 million more than the amount enacted for FY2008 and $255 million more than the amount requested by the Bush Administration. For the other offices and bureaus within the department, departmental offices are receiving $279 million, including $62 million for TFI, (or $30.5 million more than the amount it got in FY2008); department-wide systems and capital investments program, $27 million (+$8 million); OIG, $26 million, (+$8 million); TIGTA, $146 million (+$5.5 million); FinCEN, $91 million (+$6 million); FMS, $240 million (+$5 million); ATB, $99 million (+$6 million); Bureau of the Public Debt, $177 million (+$4 million); CDFI, $107 million (+$13 million); and a rescission of $30 million from the Treasury forfeiture fund. The joint explanatory statement accompanying the act provides additional detail on congressional concerns and expectations about the use of appropriated funds by covered agencies. It notes that the Treasury Department has added administrative responsibilities as a result of the Emergency Economic Stabilization Act of 2008 (EESA, P.L. 110-343 ) and orders the department to account "properly" for spending on activities covered by the appropriations act and spending on activities funded under ESSA. The statement also specifies that at least $300,000 of the $31 million in funding for OFAC should be used to reduce its backlog of Freedom of Information Requests. In addition, the statement directs OFAC to assess how much it spends on investigating and penalizing violations of the Cuban trade embargo, and report to the House and Senate appropriations committees within 90 days of the enactment of H.R. 1105 on how it plans to allocate its resources in FY2009. There is some concern in Congress that OFAC is devoting insufficient resources to the enforcement of financial and trade sanctions against Sudan, Burma, Iran, and Zimbabwe. To help finance its operations and multitude of spending programs, the federal government levies individual and corporate income taxes, social insurance taxes, excise taxes, estate and gift taxes, customs duties, and miscellaneous taxes and fees. The federal agency responsible for administering and collecting these taxes and fees (except for customs duties) is the Internal Revenue Service. In discharging this responsibility, the IRS receives and processes tax returns, related documents, and tax payments; disburses refunds; enforces compliance through audits and other procedures; collects delinquent taxes; and provides a host of services to taxpayers with the aim of enabling them to understand their rights and responsibilities under the federal tax code and resolving problems without litigation. In FY2006, the agency collected $2.537 trillion before refunds, the largest component of which was individual income tax revenue of $1.236 trillion. The IRS receives funding for its operations from three sources: appropriated funds, user fees, and so-called reimbursables, which are payments the IRS receives from other federal agencies and state governments for services it provides. In FY2008, appropriated funds account for 97% of IRS's operating budget, user fees for 2%, and reimbursables for the remaining 1%. Appropriated funds are distributed among five accounts: (1) taxpayer services , which provides resources for pre-filing taxpayer assistance, filing and account services, administrative services for IRS employees, and senior IRS management; (2) enforcement , which covers the cost of compliance services, research and statistical analysis, and administration of the earned income tax credit; (3) operations support , which addresses the improvement and maintenance of the agency's information and management systems; (4) business systems modernization (or BSM) , which provides funds for developing new information systems for tax administration and acquiring the hardware and software needed to integrate them into IRS's operations; and (5) health insurance tax credit administration , which covers the cost of administering the refundable tax credit for health insurance established by the Trade Adjustment Assistance Reform Act of 2002. In FY2008, the IRS received $11.095 billion (including emergency appropriations) in appropriated funds, or 4.7% more than it received in FY2007. Of this amount, $2.200 billion was appropriated for taxpayer services, $4.780 billion for enforcement, $3.831 billion for operations support (including emergency appropriations), $267 million for the BSM program, and $15 million for administration of the health coverage tax credit (HCTC) established by the Trade Act of 2002 ( P.L. 107-210 ). The Bush Administration asked Congress to appropriate $11.362 billion for IRS operations in FY2009, or 2.4% more than the amount enacted for FY2008. Of this amount, $2.150 billion (2% less than FY2008) was to be used for taxpayer services, $5.117 billion (7% more than FY2008) for enforcement, $3.856 billion (0.6% more than FY2008) for operations support, $223 million (17% less than FY2008) for the BSM program, and about $15 million (the same amount as FY2008) for administering the HCTC. Under the budget proposal, total full-time equivalent employment (direct and reimbursables) at the IRS was projected to rise from an estimated 91,746 in FY2008 to 93,572 in FY2009, a gain of 2%. Budget documents indicated that the FY2009 budget proposal for the IRS was intended to support three strategic goals: (1) improve service to taxpayers; (2) enhance enforcement of federal tax laws; and (3) modernize the IRS by investing in people, processes, and technology. In addition, the Administration requested that Congress pass a number of legislative proposals aimed at improving taxpayer compliance and reducing the federal tax gap. The Administration claimed (without providing documentary support) they could raise $36 billion in revenue over the next 10 years. Some proposals would have expanded information reporting; others would have targeted tax compliance by firms of all sizes; and one would have penalized the failure to comply with the requirements for electronic filing of tax and information returns. In assessing the Administration's budget proposal for the IRS, lawmakers may want to consider whether proposed funding for enforcement, taxpayer service, and the BSM can be judged adequate in light of the difficult challenges facing the agency. Foremost among those challenges are improving compliance rates among individuals and businesses without sacrificing recent gains in taxpayer service, generating more detailed and reliable estimates of the rates of non-compliance among business taxpayers, increasing the share of tax returns filed electronically, upgrading the agency's computer systems, managing the agency's private tax debt collection program so that it at once respects taxpayer rights and is cost-effective, and hiring and training sufficient numbers of enforcement agents to replace those who have retired or quit in recent years. Action in the House . The House Appropriations Committee recommended that the IRS receive $11.398 billion in appropriated funds for FY2009, or $304 million more than the amount enacted for FY2008 and $37 million more than the Administration's request. Of this total, $2.210 billion ($60 million more than the Administration's requested amount) would have gone to taxpayer services, $5.117 billion (same as the Administration's requested amount) to enforcement, $3.833 ($23 million less than the Administration's requested amount) to operations support, $223 million (same as the Administration's requested amount) to BSM, and $15 million (same as the Administration's requested amount) for administration of the HCTC. In H.Rept. 110-920 , the committee recommended that the $60 million in additional funding for taxpayer service be used for the following purposes: (1) $47 million to educate taxpayers about their rights and responsibilities before they file, improve the IRS 1-800 help line, and assist taxpayers at walk-in centers around the country; (2) $10.5 million to bolster the capabilities of the IRS Taxpayer Advocate to assist taxpayers who have disputes with the IRS; (3) $1 million to expand the Tax Counseling Program for the Elderly; and (4) $1.5 million to increase grants to Low-Income Taxpayer Clinics. The bill included a provision that could prove to be a source of controversy when the full House considers the measure. It would bar the IRS from using any appropriated funds to "enter into, renew, extend, administer, implement, enforce, or provide oversight of any qualified tax collection contract" under the IRS's private tax debt collection program. The report cited as the major reason for taking this step the repeated acknowledgment of senior IRS officials in the past two years that the IRS could collect the same delinquent tax debt targeted by the program at less expense. In its budget request, the Administration noted that it would need $12 million to manage the program in FY2009. Action in the Senate . The Senate Appropriations Committee recommended that the IRS receive $11.525 billion in FY2009. That amount was $163 million more than the amount requested by the Administration and $127 million more than the amount endorsed by the House Appropriations Committee. Of the amount recommended by the committee, $2.213 billion was allocated to taxpayer services ($63 million more than the amount requested by the Administration and $3 million more than the amount approved by the House Appropriations Committee); $5.117 billion to enforcement (the same amount recommended by the Administration and the House Appropriations Committee); $3.897 to operations support ($40 million more than the amount requested by the Administration and $64 million more than the amount recommended by the House Appropriations Committee); $282 million to the BSM ($59 million more than the amount recommended by both the Administration and the House Appropriations Committee); and $15 million for the administration of the HCTC (the same amount recommended by both the Administration and the House Appropriations Committee). In its report on S. 3260 ( S.Rept. 110-417 ), the committee maintained that one of the biggest challenges facing the IRS was reducing the federal tax gap. It also noted that the agency could make significant progress toward that objective if it was "given additional resources and is able to improve its operational capabilities (most notably through the Business Systems Modernization program)." At the same time, the committee expressed the concern that the 16 legislative reforms aimed at reducing the tax gap proposed by the Administration in its budget request for FY2009 would lack the needed forcefulness to make sizable reductions in the gap and would yield a meager return on investment of "slightly more than a penny on the dollar." Of the recommended funding for taxpayer services, the committee directed the IRS to spend not less than $4 million on the tax counseling for the elderly program, $9 million on grants for low-income taxpayer clinics, and $8 million (to be made available for two years) for the newly created volunteer income tax assistance matching grant program. It also expressed disagreement with the Administration's decision to decrease funding for taxpayer assistance centers and pre-filing taxpayer assistance and education. The committee included language in the bill that would have required the IRS to fund pre-filing assistance and education at an amount not less than the $645 million enacted for this purpose in FY2008. The committee expressed strong support for the ongoing efforts by the IRS to deepen its understanding of the scope and causes of taxpayer non-compliance through the National Research Program (NRP). In a bid to improve the NRP, the committee directed the IRS in FY2009 to collect information on the "causes of noncompliance, including inadvertent noncompliance, the type of return preparation method (self, volunteer, paid preparer, or IRS preparer), whether the taxpayer was represented during the examination, and the extent to which the taxpayer sought and received IRS services." Moreover, in recommending that funding for the BSM be increased by about $15 million in FY2009 over the amount enacted for FY2008, the committee endorsed the support for the BSM expressed by the IRS Oversight Board in its report to Congress on the IRS's proposed budget for FY2009 and expressed opposition to the cutback in funding requested by the Administration. It also directed the IRS to spend at least $78 million on the continued development of the Customer Account Data Engine, $35.5 million on Accounts Management Services, and $35 million on Modernized e-File. As approved by the committee, S. 3260 also contained the same controversial provision dealing with the IRS's private tax debt collection program that was included in the appropriations bill for the IRS approved by the House Appropriations Committee. Specifically, Section 106 of the bill would have barred the IRS from using appropriated funds in FY2009 to "enter into, renew, extend, administer, implement, enforce, provide oversight of, or make any payment related to any qualified tax collection contract." Passage of the Omnibus Appropriations Act of 2009 ( H.R. 1105 , P.L. 111-8 ) . Under P.L. 111-8 , the IRS is receiving $11.523 billion in appropriated funds in FY2009 — or $428 million more than the amount enacted for FY2008 (including a $202 million emergency appropriation under P.L. 110-185 ) and $161 million more than the amount requested by the Bush Administration. Of the funds appropriated for FY2009, $2.293 billion is designated for taxpayer services ($143 million more than the amount appropriated for FY2008), $5.117 billion for enforcement (+337 million), $3.867 billion for operations support (+$187 million), $230 million for BSM (-$37 million), and $15 million for administering the HCTC (same as FY2008). According to the joint explanatory statement accompanying P.L. 111-8 , not less than $9.5 million of the funds appropriated for taxpayer services is to be used for low-income taxpayer clinics; $5.1 million for the Tax Counseling for the Elderly Program; $8 million (to be available until the end of FY2010) for matching grants under the Community Volunteer Income Tax Assistance program; and $193 million for the operating expenses of the Taxpayer Advocate Service. In addition, $38 million of the enacted amount above the President's budget request is to be used to improve pre-filing assistance and taxpayer education. The statement also directs the IRS to "demonstrate" to the House and Senate Appropriations Committees that any proposed reductions in taxpayer services would be "consistent with the IRS's budget justification, operating plan, and Taxpayer Assistance Blueprint, and that they would not "result in a decline in voluntary compliance." Two other concerns addressed in the statement are the quality of IRS services provided to non-English speakers and the widespread use of refund anticipation loans (RALs) by recipients of the earned income tax credit. The statement orders the IRS to report to the two committees within 30 days of the enactment of H.R. 1105 on the "status of the quality and level of customer service for Spanish language applications on the IRS 1-800 help line." The agency also must consult with the National Taxpayer Advocate on effective ways to inform taxpayers about the costs associated with RALs, and to expand access to other speedy but less costly ways of obtaining tax refunds. Reflecting heightened congressional concern over the size and persistence of the federal tax gap, the statement directs the IRS to collect information on the causes of non-compliance, as part of its administration of the National Research Program in FY2009. This information should focus on "inadvertent non-compliance, the type of return preparation method, whether the taxpayer was represented during the examination, and the extent to which that taxpayer sought and received IRS services." As a result of the increase in funding for enforcement in FY2009 relative to FY2008, the IRS expects to hire an additional 3,500 individuals to work on issues related to taxpayer compliance. None of the funds appropriated for the BSM may be spent until the Government Accountability Office and the House and Senate Appropriations Committees approve expenditure plans for the program submitted by the IRS. Under a controversial amendment to the act, none of the appropriated funds designated for the IRS can be used to operate the agency's private tax debt collection program in FY2009. On March 6, 2009, five days before President Obama signed the omnibus spending bill, the IRS announced that it would not renew the two remaining contracts with private debt collectors, effectively terminating the program. From its inception, the program faced opposition from some Members of Congress, the National Treasury Employees Union, and an assortment of consumer advocacy groups on the grounds that it was unlawful and less cost-effective than hiring additional IRS staff to collect the same amount of delinquent taxes. All but three offices in the Executive Office of the President (EOP) are funded in the Financial Services and General Government (FSGG) appropriations bill. Table 4 shows appropriations enacted for FY2008, amounts requested by the President for FY2009, amounts recommended by the House and Senate Committees on Appropriations for FY2009, and appropriations enacted for FY2009. The Administration's FY2009 budget requested an appropriation of $695.5 million for the EOP and funds appropriated to the President, a 2.3% increase above the almost $680 million appropriated for FY2008. Within the request, funding for all "White House" accounts, discussed under "Consolidation Proposal" below, would have increased by 9.2%. As for the four accounts under federal drug control programs, increased appropriations were proposed for Other Federal Drug Control Programs (+15.4%) and the Counterdrug Technology Assessment Center (CTAC) (+400%), and reduced funding was proposed for the Office of National Drug Control Policy (-10.2%) and the High Intensity Drug Trafficking Areas Program (-13%). For the eighth consecutive fiscal year, the President's FY2009 budget proposed to consolidate and financially realign eight salaries and expenses accounts that directly support the President into a single annual appropriation, called "The White House." The consolidated appropriation would have a full-time equivalent (FTE) level of 904. The accounts that would have been included in the consolidated appropriation were the following (with FTEs noted): Compensation of the President, White House Office (WHO)—446, Executive Residence at the White House—95, White House Repair and Restoration—0, Office of Administration—222, Office of Policy Development—35, National Security Council—71, and Council of Economic Advisers—35. This consolidated appropriation would have totaled $190.5 million in FY2009 for the accounts proposed to be consolidated, an increase of 9.2% from the $174.5 million appropriated in FY2008. The appropriations requested for three of the eight accounts within the White House—Compensation of the President, White House Repair and Restoration, and Council of Economic Advisers—were the same as the FY2008 funding. Increased funding was requested for these five accounts: White House Office (+1.63%), Executive Residence (+4.28%), Office of Policy Development (+1.95%), National Security Council (+4.5%), and Office of Administration (+15.45%). According to the EOP budget submission, the increased appropriations would have "offset payroll inflationary increases and maintain operations at current levels." Additionally, the proposed expansion of the Enterprise Services Initiative (discussed below) underlies some of the increased funding requested for the Office of Administration. The budget submission stated that consolidation "presents the best means for the President to realign or reallocate the resources and staff available in response to changing and emerging needs and priorities." The conference committees on the FY2002 through FY2007 appropriations acts decided to continue with separate appropriations for the EOP accounts to facilitate congressional oversight of their funding and operation. This practice continued for FY2008 under P.L. 110-161 , the Consolidated Appropriations Act for FY2008. The House and Senate Committees on Appropriations recommended that separate appropriations for the EOP accounts be continued in FY2009. P.L. 111-8 , Omnibus Appropriations Act, 2009, continues with separate accounts for FY2009. As in the FY2008 budget proposal, the FY2009 budget requested a general provision in Title VII to continue and expand the authority for the EOP to transfer 10% of the appropriated funds among several accounts under the EOP. The proposal was included under the government-wide general provisions at Section 733 and would have covered the following accounts in FY2009: The White House Office of Management and Budget (OMB) Office of National Drug Control Policy Special Assistance to the President (Vice President) and the Official Residence of the Vice President (transfers would be subject to the approval of the Vice President) Council on Environmental Quality and Office of Environmental Quality Office of Science and Technology Policy Office of the United States Trade Representative The OMB Director (or such other officer as the President designates in writing) would have been able, 15 days after notifying the House and Senate Committees on Appropriations, to transfer up to 10% of any such appropriation to any other such appropriation. The transferred funds would have been merged with, and available for, the same time and purposes as the appropriation receiving the funds. Such transfers could not increase an appropriation by more than 50%. According to the EOP budget submission, the transfer authority would "provide the President with flexibility and improve the efficiency of the EOP" and would "significantly improve the President's flexibility and effectiveness in meeting the needs across the EOP." The authority was "not intended to be used for new missions or programs, but to address emerging priorities, shifting demands, and administrative efficiencies within the currently funded programs." P.L. 108-447 , the Consolidated Appropriations Act for FY2005 (Section 533, Title V, Division H) authorized transfers of up to 10% of FY2005 appropriated funds among the accounts for the White House Office, Office of Management and Budget, Office of National Drug Control Policy, the Special Assistance to the President (Vice President), and the Official Residence of the Vice President. For FY2006, P.L. 109-115 , the Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies Appropriations Act, 2006 (Section 725) authorized transfers of up to 10% among the accounts for the White House, the Special Assistance to the President (Vice President), and the Official Residence of the Vice President. P.L. 110-161 , the Consolidated Appropriations Act for FY2008, at Section 201, continued this practice. The House and Senate Committees on Appropriations recommended continuation of, and P.L. 111-8 continues, the current practice for FY2009. The FY2009 budget request also included a proposal to expand the enterprise services initiative. The initiative was designed "to efficiently manage common services throughout the EOP and to ensure that the management of GSA [General Services Administration] space rent is consistently administered throughout the EOP." It was expected to reduce "redundant processes in administering" Enterprise Services across the EOP. Under the proposal, funding for the rent that the Office of Management and Budget and the Office of National Drug Control Policy (ONDCP) pay to GSA would have been moved into the Enterprise Services fund of the Office of Administration account. Specifically, almost $10.3 million would have been moved to this account: almost $7.2 million from OMB and $3.1 million from ONDCP. GSA space rent funding for the White House Office, Office of Policy Development, National Security Council, Council of Economic Advisers, Office of Science and Technology Policy, Council on Environmental Quality, and the United States Trade Representative is already included in the Office of Administration's Enterprise Services fund. Services that will be assumed by the fund in FY2009 are transit subsidies, Flexible Savings Account administrative fees, health unit operations, and Federal Protective Service (FPS) rent-based fees. Neither the House Committee on Appropriations nor Senate Committee on Appropriations recommended adoption of, and P.L. 111-8 did not adopt, this proposal for FY2009. The OMB and ONDCP funding for rental payments to GSA will continue under their respective "Salaries and Expenses" accounts. The FY2009 budget included a request for $8 million to fund "an orderly presidential transition." The appropriation covered the cost of processing the President's and Vice President's records, under the Presidential Records Act, and other expenses related to the transition to a new administration. There are no FTEs associated with this account. The House and Senate Committees on Appropriations recommended the same funding as the President requested. Division A, Section 133 of P.L. 110-329 and Division D, Title II of P.L. 111-8 provide an appropriation of $8 million for the transition and states that the monies may be transferred to other accounts that fund the offices within the EOP and the Office of the Vice President. An appropriation of $4.5 million and an FTE level of 24 was requested for the Special Assistance to the President (Vice President) account for FY2009. The funding was 1.44% above the $4.4 million provided for FY2008, while the FTE total remained the same. As for the Official Residence of the Vice President account, an FY2009 appropriation of $323,000, 0.94% above the $320,000 provided for FY2008, was requested. There was one FTE associated with this account for FY2009, the same as in the previous fiscal year. The House and Senate Committees on Appropriations recommended, and P.L. 111-8 provides, the same funding as the President requested. The FY2009 budget requested an appropriation of $72.8 million for OMB, 6.67% less than the $78 million provided for FY2008. The FTE level requested would have remained at 489. The decreased funding request resulted from moving OMB's monies for space rent to the Office of Administration, as discussed above under the "Enterprise Services Initiative." The House and Senate Committees on Appropriations recommended, and P.L. 111-8 provides, that the OMB funding for rental payments to GSA continue under the "Salaries and Expenses" account. An appropriation of almost $80 million, almost $7.2 million above the President's request, was recommended by the House committee for OMB. The House Committee on Appropriations report that accompanied H.R. 7323 ( H.Rept. 110-920 ) included several directives for OMB as follows: The incoming Administration is strongly urged to refocus the efforts of the Office of Federal Procurement Policy on oversight. OMB and the agencies are directed to "work directly with the pertinent appropriations subcommittees in advance of transferring funds relating to E-Government or Lines of Business." Within 60 days of the act's enactment, OMB is to report to the committee "on actions taken to implement GAO's recommendations and improve purchase card internal controls." OMB is expected to provide printed copies of the President's budget to Congress. The Senate committee recommended an appropriation of $80.2 million, almost $7.4 million above the President's request, for OMB. The funding included $200,000 for the printing of paper copies of the President's annual budget request. Section 205 of the Senate bill, as reported, provided that the OMB appropriation support the printing of a sufficient number of copies of the budget for submission to Congress. In the Senate report, the committee urged the President to establish the Task Force on International Cooperation for Clean and Efficient Technologies and reminded OMB of the March 1, 2009, deadline for reporting to Congress on "the extent to which executive departments and agencies that administer directed funding allocate the designated amounts to intended recipients at a level less than specified in any enacted bill or accompanying report." A general provision at Section 751 of the Senate bill as reported would have directed departments and agencies "to include information in the fiscal year 2010 budget justifications ... regarding redirection of congressionally directed funding." P.L. 111-8 provides an appropriation of almost $88 million for OMB for FY2009, an amount that exceeds the President's request by more than $15 million. Included in the appropriation is $200,000 for the printing of paper copies of the President's annual budget request. The House and Senate Committees on Appropriations recommended, and P.L. 111-8 provides, funding at the levels requested by the President for each of the EOP accounts, with the following exceptions (in addition to the OMB funding mentioned above): An appropriation of $53.9 million, or $1.4 million above the President's request, was recommended for the WHO. P.L. 111-8 provides this appropriation. The additional funding is for a White House Office on National AIDS Policy. In its report that accompanied H.R. 7323 , the House Committee on Appropriations calls on the new Administration to develop and implement a National AIDS Strategy that engages multiple sectors in strategy development, is comprehensive across Federal agencies, sets timelines and assigns responsibility for implementing changes, identifies targets for improved prevention and treatment outcomes and reduced racial disparities, and mandates annual reporting on progress. An appropriation of $5.2 million, $1.7 million above the President's request, was recommended by the Senate committee for the OPD. The funding included $1.4 million for OPD "to coordinate a government-wide effort to develop and implement a domestic AIDS strategy, [with] targets for improved prevention and treatment outcomes." OPD was directed to report to the Committee on Appropriations within 180 days of the act's enactment on the Administration's activities to develop the strategy. The appropriation also included $300,000 "to support international symposiums to discuss ways to improve the relationship between faith and science." Participating in the symposiums would have been some "30 internationally-renowned scientists and theologians, equally divided." The symposiums would have been open to the public and would have produced a written record that would have been available on the Internet at http://www.whitehouse.gov . The Senate committee also "urges the President to send the Framework Convention on Tobacco Control to the Senate for ratification." The House committee recommended, and P.L. 111-8 provides, an appropriation of $3.5 million, the same amount requested by the President. An appropriation of $95.6 million, almost $10.3 million below the President's request, was recommended by both the House and Senate committees for the OA. The committees recommended that OMB's and ONDCP's funding for rent continue under their respective "Salaries and Expenses" accounts and not be transferred to the OA. In H.Rept. 110-920 , the committee "strongly urges the incoming Administration to establish comprehensive policies and procedures for the preservation of all Presidential records, in keeping with the Presidential Records Act, the Federal Records Act, and other pertinent laws." Furthermore, the committee directed the new Administration to report to the committee by June 30, 2009, on "actions it is taking to implement such policies and procedures ... [and] the estimated costs, by program, activity, and fiscal year, of new systems, staff, or other resources needed to ensure the preservation of electronic Presidential records." The Senate report stated the committee's support of the efforts of the National Archives and Records Administration (NARA) "to make all appropriate electronic records public regardless of original formatting," and expressed concern about "the lack of information from the White House on the format and volume of records to be transferred for the current administration." The OA was directed "to work closely to meet NARA requirements and deadlines so that a complete record is available." Division A, Section 132 of P.L. 110-329 provides an appropriation of $5.7 million for the electronic mail restoration activities. P.L. 111-8 provides an appropriation of $101.3 million for the OA for FY2009. This amount is almost $4.6 million less than the President's request. Included in the appropriation is $11.9 million for the continued modernization of the infrastructure for information technology. The law includes the reporting requirement stated above. The House committee recommended increased appropriations for the ONDCP, and the HIDTA, and decreased appropriations for the CTAC, and Other Federal Drug Control Programs. Funding of $26.0 million ($2.3 million above the President's request) and $230 million ($30 million above the President's request) would have been provided for ONDCP and HIDTA, respectively. Of the ONDCP total, $500,000 was for policy research and evaluation and $3.1 million was for rental payments to GSA that would have remained with the account rather than being transferred to OA. Included in the HIDTA total was almost $12 million in discretionary funding. Appropriations of $1 million ($4 million below the President's request) and $165 million (almost $25 million below the President's request) would have been provided for the CTAC and the Other Federal Drug Control Programs, respectively. The committee did not explain the reduced funding for the CTAC. The funding for the Other Federal Drug Control Programs would have been allocated as follows: Drug Free Communities—$90 million Training and technical assistance for drug court professionals—$1.5 million National Alliance for Model State Drug Laws—$1,250,000 National Youth Anti-Drug Media Campaign—$60 million United States Anti-Doping Agency—$10.1 million World Anti-Doping Agency dues—$1.9 million National Drug Control Program performance measures—$250,000 The Senate committee recommended increased appropriations for the ONDCP, the HIDTA, and Other Federal Drug Control Programs. Funding of $27.9 million, $4.2 million above the President's request, was recommended for the ONDCP. Of the total, $3.1 million was for rental payments to GSA that would have remained with the account rather than being transferred to OA, and $500,000 was provided for an independent review of ONDCP's grant-based programs by the National Academy of Public Administration. The study was to be completed by the end of FY2009. The Senate report included the committee's prohibition against the reorganization of three of ONDCP's 12 components. An appropriation of $235 million, $35 million above the President's request was recommended for the HIDTA. Included in the total is funding of up to $2.1 million for auditing services and associated activities and up to $250,000 "to ensure the continued operation and maintenance of the Performance Management System." In addition, the committee suggested that $500,000 could be provided for the establishment of new counties "if the need is warranted and the criteria has been met." The Senate committee recommended an appropriation of $204.2 million, $14.6 million above the President's request, for the Other Federal Drug Control Programs. The funding would have been allocated as the House committee recommends, except as follows: Training and technical assistance for drug court professionals—$2 million National Youth Anti-Drug Media Campaign—$100 million United States Anti-Doping Agency—$9.6 million National Drug Control Program performance measures—$500,000 With regard to the Counterdrug Technology Assessment Center (CTAC), the Senate report stated that "the lackluster performance of, and lack of confidence in, the current director" precluded the committee from providing higher levels of funding to this program. The report also expressed the committee's hope that the FY2010 "budget will reinvigorate the CTAC program with additional requested funds and new leadership." P.L. 111-8 provides appropriations of $27.2 million for the ONDCP, $234 million for the HIDTA, $174.7 million for Other Federal Drug Control Programs, and $3 million for the CTAC. These amounts are $3.5 million more, $34 million more, almost $15 million less, and $2 million less, respectively, than the President's request. As a co-equal branch of government, the judiciary presents its budget to the President, who transmits it to Congress unaltered. Table 5 shows appropriations for the judiciary as enacted for FY2008, as requested for FY2009, as recommended by the House and Senate Appropriations Committees, and as enacted. Appropriations for the judiciary—about two-tenths of 1% (0.2%) of the entire federal budget—are divided into budget groups and accounts. Two accounts that fund the Supreme Court (the salaries and expenses of the Court and the expenditures for the care of its building and grounds) together make up about 1.2% of the total judiciary budget. The structural and mechanical care of the Supreme Court building, and care of its grounds, are the responsibility of the Architect of the Capitol. The rest of the judiciary's budget provides funding for the "lower" federal courts and for related judicial services. The largest account, about 75% of the total budget—the Salaries and Expenses account for the U.S. Courts of Appeals, District Courts, and Other Judicial Services—covers the salaries of circuit and district judges (including judges of the territorial courts of the United States), justices and judges retired from office or from regular active service, judges of the U.S. Court of Federal Claims, bankruptcy judges, magistrate judges, and all other officers and employees of the federal judiciary not specifically provided for by other accounts; it also covers the necessary expenses of the courts. The judiciary budget does not fund three "special courts" in the U.S. court system: the U.S. Court of Appeals for the Armed Forces, the U.S. Tax Court, and the U.S. Court of Appeals for Veterans Claims. Federal courthouse construction also is not funded within the judiciary's budget. The judiciary also uses non-appropriated funds to offset its appropriations requirement. The majority of these non-appropriated funds are from fee collections, primarily from court filing fees. The fees are used to offset expenses within the Salaries and Expenses account. In some instances, the judiciary also has funds which may carry forward from one year to the next. These funds are considered "unencumbered" because they result from savings from the judiciary's financial plan in areas where budgeted costs did not materialize. According to the judiciary, such savings are usually not under its control (e.g., the judiciary has no control over the confirmation rate of Article III judges and must make its best estimate on the needed funds to budget for judgeships, rent costs based on delivery dates, and technology funding for certain programs). The judiciary also has "encumbered" funds—no-year authority funds for specific purposes, used when planned expenses are delayed, from one year to the next (e.g., costs associated with space delivery, and certain technology needs and projects). In her March 12, 2008, written testimony submitted to the House and Senate subcommittees on the judiciary's FY2009 budget request, Judge Julia S. Gibbons, United States Circuit Judge for the Sixth Circuit Court of Appeals and chair of the Budget Committee of the Judicial Conference of the United States, stated, "We recognize the fiscal constraints Congress is facing. Through our cost-containment efforts and information technology innovations we have significantly reduced the Judiciary's appropriations requirements without adversely impacting the administration of justice." According to Judge Gibbons, the Judicial Conference has endeavored, through cost containment policies, to reduce costs and increase productivity in the federal judiciary. For example, to limit the growth of the court rental fees paid to the General Services Administration (GSA), the judiciary has been working collaboratively with GSA. Through rent validation and rent capping initiatives, Judge Gibbons said that the previously projected rent costs of $1.2 billion for FY2009, has been reduced by $200 million dollars, with a new projection of $1.0 billion (or 17% below the pre-cost containment projection). She cited the identification of GSA rent overcharges, which totaled $30 million over three years, and a more recent finding of an additional $22.5 million in overcharges. The Judicial Conference also approved a cap of 4.9% on the average annual rate of growth for courthouse rent to be paid in FY2009 through FY2016. Under the rent cap, the circuit judicial councils are responsible for keeping their respective circuits within the caps for space needs through managing and prioritizing such needs. The Judicial Conference, at its September 2007 meeting, approved recommendations to slow the growth in personnel costs throughout the judiciary. Expected savings of up to $300 million from FY2009 through FY2017 would be gained by restricting annual salary step increases, limiting the number of law clerks, and other measures governing the classification and grading of judiciary staff nationwide. Other cost containment initiatives include using information technology (e.g., consolidating computer servers around the country) to increase efficiency and cost-effectiveness. According to Judge Gibbons, savings and cost avoidances amounting to $55.4 million through FY2012 are expected to be achieved through the consolidation of services for the judiciary's national accounting system in FY2008. Judicial security—the safe conduct of court proceedings and the security of judges in courtrooms and off-site—continues to be an issue of concern. The 2005 Chicago murders of family members of a federal judge; the Atlanta killings of a state judge, a court reporter, and a sheriff's deputy at a courthouse; and the 2006 sniper shooting of a state judge in the judge's office in Reno spurred efforts to enhance judicial security. Early in the 110 th Congress, the chairmen of Senate and House Judiciary Committees introduced companion bills ( S. 378 and H.R. 660 , respectively), the Court Security Improvement Act of 2007, to strengthen security. The legislation was amended and approved in December 2007, and the president signed the bill into law on January 7, 2008 ( P.L. 110-177 ). Judicial security continues to be an issue of critical importance. As a result of concerns the judiciary raised about perimeter security the Federal Protective Service (FPS) provides, some functions at selected courthouses will be transferred to the U.S. Marshals Service (USMS). Under the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ), Congress authorized USMS to monitor the exterior of seven courthouses and assume control of FPS monitoring equipment in a pilot program. After months of planning, USMS officially implemented the pilot program on January 5, 2009, and assumed primary responsibility for security functions at six courthouses which previously had been the responsibility of the FPS. The six courthouses are located in New York, Chicago, Baton Rouge, Phoenix, Tucson, and Detroit. The 18-month pilot will begin in the fourth quarter of FY2008, and an evaluation of the pilot is expected to be provided to congressional subcommittees. The estimated annualized cost of the pilot is $5 million, which would be offset by expected reductions in FPS billings. Judge Gibbons, in written testimony submitted to the House and the Senate on March 12, 2008, noted that Congress provided the judiciary with funding for staff in the past two years to enable the courts to address the workload in the short term, but that the additional judgeships and courthouse are needed. She referred to the increased workload expected from the southwest border due to immigration-related cases, and stressed that the President's request for additional border patrol agents would bring the border patrol, when fully staffed, to a total of about 20,000—doubling its size since 2001. Judge Gibbons stated that, "The district courts on the southwest border have not received any new district judgeships since 2002" although the Judicial Conference requested additional judgeships in 2003, 2005, and 2007 for a total of 32 judgeships. She also urged Congress to support the additional $110 million included in the President's FY2009 budget to fund fully a new federal courthouse in San Diego, California. Judge Gibbons summarized the judiciary's projection of the courts' workload, and noted that FY2009 staffing needs are based on 2008 caseload projection. "Our projections indicate that caseload will increase slightly in probation (+1%) and pretrial services (+3%) and increase substantially for bankruptcy filings (+23%). For 2008 we are projecting small declines in appellate (-3%) and criminal (-3%) caseload, and a steeper decline in civil filings (-8%)." The Judicial Conference voted on March 13, 2007, to ask Congress to create 67 new federal judgeships—15 for the courts of appeals (13 permanent, 2 temporary) and 52 for the district courts (38 permanent, 14 temporary)—to make permanent five temporary judgeships, and to extend another temporary judgeship for five years. According to the judiciary, since the 1990 omnibus judgeship bill, the number of courts of appeals judges has remained the same, while federal appellate court case filings increased by 55% over the same 17-year period. According to the judiciary, the number of district court judgeships increased by 4%, while case filings increased by 29%, over the same period of time. Subsequent to the conference's recommendation, on September 10, 2007, Representative James F. Sensenbrenner, Jr., introduced H.R. 3520 , the Federal Judgeship and Administrative Efficiency Act of 2007. Among other things, the bill would authorize the appointment of an additional nine permanent and three temporary federal circuit judges, and an additional 44 permanent and 12 temporary district judges; establish a judicial district in the Virgin Islands; and provide for additional bankruptcy judgeships. In addition, the bill would amend the federal judicial code to divide the Ninth Judicial Circuit into the Ninth Circuit (to be composed of California, Guam, Hawaii, and the Northern Mariana Islands) and the Twelfth Circuit (to be composed of Alaska, Arizona, Idaho, Montana, Nevada, Oregon, and Washington). On October 12, 2007, the bill was referred to the Subcommittee on Courts, the Internet, and Intellectual Property, and the Subcommittee on Commercial and Administrative Law. No further action was taken on H.R. 3520 in the 110 th Congress. On March 13, 2008, Senate Judiciary Committee Chairman Patrick J. Leahy introduced (for himself, and Senators Orrin G. Hatch, Dianne Feinstein, and Charles E. Schumer) S. 2774 , the Federal Judgeship Act of 2008. The legislation would provide for the appointment of additional federal circuit and district judges: 12 permanent circuit court judgeships, 38 permanent district court judgeships, and the conversion of five existing temporary judgeships into permanent positions. In addition, 14 temporary district court judgeships, two temporary circuit judgeships, and one existing temporary district court judgeship would be extended. The bill was referred to the Senate Judiciary Committee. On May 15, 2008, the committee ordered S. 2774 reported favorably without amendment by a vote of 15-4. After the committee reported the bill and written report ( S.Rept. 110-427 ) on July 21, 2008, the bill was placed on the Senate calendar on the same day. No further action was taken on the bill in the 110 th Congress. Another key issue being discussed is the judiciary's advocacy for a significant increase in judicial pay. John G. Roberts Jr., Chief Justice of the United States, stated in his 2006 End-of-the-Year Report on the Federal Judiciary that judges' pay has not kept pace with inflation over the years and has led to judges leaving the bench in increasing numbers. According to the Chief Justice, retaining and attracting the best talent to the courts is a serious concern. He stated that failure to raise judicial salaries has reached the level of a "constitutional crisis that threatens to undermine the strength and independence of the federal Judiciary." In the subsequent 2007 and 2008 year-end reports, the Chief Justice reiterated his strong support to increase judicial pay. On June 15, 2007, Senator Leahy introduced S. 1638 , the "Federal Judicial Salary Restoration Act of 2008," that, before markup, would have provided a 50% pay adjustment for justices and judges. Representative John Conyers Jr., chairman of the House Judiciary Committee, introduced a companion bill, H.R. 3753 , "Federal Judicial Salary Restoration Act of 2007," on October 4, 2007. The House bill, before markup, would have provided for a 41.3% pay adjustment. As amended in markup, and ordered to be reported by the respective committees, both bills, S. 1638 and H.R. 3753 , would authorize pay increases of 28.7% to 28.8%. On November 14, 2007, Senator Richard J. Durbin introduced S. 2353 , the Fair Judicial Compensation Act of 2007, to authorize a 16.5% increase in the annual salaries of the Chief Justice of the United States, Associate Justices of the Supreme Court, courts of appeals judges, district court judges, and judges of the United States Court of International Trade, and to increase fees for bankruptcy trustees. S. 2353 was referred to the Senate Judiciary Committee. No further action was taken on the above pay bills before the end of the 110 th Congress. For FY2009, the Senate Appropriations Committee recommended a salary adjustment for justices and judges under Section 310 ( S.Rept. 110-417 ). The salary adjustment was authorized in Section 310 of the act. On March 12, 2008, the House Appropriations Subcommittee on Financial Services and General Government held a hearing on the FY2009 federal judiciary budget request. The subcommittee heard testimony from Judge Julia S. Gibbons, and James C. Duff, director of the Administrative Office of the U.S. Courts (AOUSC). Among issues raised at the hearing were judicial security, rent paid to GSA, and workload. Later that same day, the Senate Appropriations Subcommittee on Financial Services and General Government also held a hearing on the FY2009 budget request and heard testimony from Judge Gibbons and Director Duff. The Senate subcommittee heard testimony on some of the same issues that were discussed at the House hearing. In prepared testimony on the FY2009 judicial budget request, Judge Gibbons stated The goal of our fiscal year 2009 request is to maintain staffing levels in the courts at the level Congress funded in fiscal year 2008, as well as to obtain funding for several much needed program enhancements. As I noted earlier in my testimony, we are not requesting additional staff for our clerks or probation offices. We believe the requested funding level represents the minimum amount required to meet our constitutional and statutory responsibilities. While this may appear high in relation to the overall budget request submitted by the Administration, I would note that the Judiciary does not have the flexibility to eliminate or cut programs to achieve budget savings as the Executive Branch does. The Judiciary's funding requirements essentially reflect basic operating costs of which more than 80 percent are for personnel and space requirements. On the following day, the House subcommittee heard Supreme Court Justices Anthony M. Kennedy and Clarence Thomas give testimony on the Supreme Court budget request for FY2009. Issues raised at the hearing included the Supreme Court building modernization project, caseload, minority clerk hiring, and televising Supreme Court proceedings. For FY2009, the judiciary requested $6.721 billion in total appropriations, a $475 million (7.6%) increase over the $6.246 billion enacted for FY2008. According to the judiciary, about 85.6% of the increase was to provide for pay adjustments, inflation, and other adjustments necessary to maintain current services. The FY2009 request included funding for 33,591 full-time-equivalent (FTE) positions—an increase of 300 FTE positions over the estimated 33,291 FTE positions funded for FY2008. For FY2009, the House committee recommended a total of $6.525 billion, and the Senate recommended $6.518 billion. The FY2009 enacted amount was $6.481 billion. The following are highlights of the FY2009 judiciary budget request, FY2008 enacted amounts, the recommendations of the House and Senate Appropriations Committees, and FY2009 enacted amounts. For FY2009, the total request for the Supreme Court (salaries and expenses plus buildings and grounds) was $88.224 million, a $9.5 million (12.1 %) increase over the FY2008 appropriation of $78.727 million. The total request comprised two accounts: (1) Salaries and Expenses—$69.777 million was requested, an increase of $3.3 million (4.9%) over the $66.526 million enacted for FY2008; and (2) Care of the Building and Grounds—$18.447 million was requested, an increase of $6.2 million (51.2%) over the $12.201 million enacted for FY2008. The increase in the second account included repairs to the roof of the Supreme Court building and exterior property renovation and landscaping. The overall request reflected increases in salary and other inflationary costs. The House committee recommended the full amount requested for both Supreme Court accounts. The Senate committee recommended $69.776 million for Salaries and Expenses ($1,000 less than requested), and the full amount requested for Care and Building Grounds. The total enacted amount was the same as the full amount requested. This court, consisting of 12 judges, has nationwide jurisdiction and reviews, among other things, certain lower court rulings in patent and trademark, international trade, and federal claims cases. The FY2009 request for this account was $32.357 million—a $5.3 million (19.5%) increase over the $27.072 million appropriated for FY2008. The request included six FTE positions for 12 law clerks, one for each of the judges. According to the budget submission, the need for more law clerks was due to the increase in caseload and the complicated nature of the cases. The House committee recommended $30.384 million. The Senate recommended $31.482 million. The enacted amount was $30.384 million, the same amount the House recommended. This court has exclusive nationwide jurisdiction of civil actions against the United States, its agencies and officers, and certain civil actions brought by the United States, arising out of import transactions and the administration and enforcement of the federal customs and international trade laws. The FY2009 request was $19.622 million—a $3.0 million (18.0%) increase over the FY2008 appropriation of $16.632 million. The judiciary budget submission ascribed the increase primarily to rent paid to GSA. The House committee recommended $19.590 million. The Senate committee recommended $19.605 million. The enacted amount was $19.605 million, the same amount the Senate had recommended. This budget group includes 12 of the 13 courts of appeals and 94 district judicial courts located in the 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the territories of Guam and the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands. Totaling about 95% of the judiciary budget, the four accounts in the group—salaries and expenses, court security, defender services, and fees of jurors and commissioners—fund most of the day-to-day activities and operations of the federal circuit and district courts. For this budget group, the FY2009 request was $6.381 billion, a $438 million (7.4%) increase over the FY2008 enacted amount of $5.943 billion. The House committee recommended $6.189 billion for this budget group. The Senate committee recommended $6.181 billion. The enacted amount was $6.146 billion. The total of this budget group comprised the following accounts: The FY2009 request for this account was $4.963 billion, a $344 million (7.4%) increase over the FY2008 level of $4.619 billion. According to the budget request, this increase was needed for inflationary and other adjustments to maintain the courts' current services. According to the FY2009 budget submission, the request included $308.8 million for standard pay and other inflationary increases, and other adjustments to maintain FY2008 service levels. The House committee recommended $4.830 billion. The Senate committee recommended $4.833 billion. The enacted amount was $4.801 billion. This account provides for protective guard services, security systems, and equipment for courthouses and other federal facilities to ensure the safety of judicial officers, employees, and visitors. Under this account, a major portion of the funding is transferred to the U.S. Marshals Service (USMS), to pay for court security officers under the Judicial Facility Security Program. The FY2009 request was $439.915 million—a $29.915 million (7.3 %) increase over the FY2008 appropriation of $410.000 million. This increase was reportedly driven by pay and benefit adjustments and other adjustments needed to maintain current services. The FY2009 request to pay the Federal Protective Service (FPS) $72.9 million was also covered under this account. Funding requested included 9 FTE positions for USMS. The House committee recommended $430.004 million. The Senate committee recommended $428.004 million. The enacted amount was $428.858 million. This account funds the operations of the federal public defender and community defender organizations, and the compensation, reimbursement, and expenses of private practice panel attorneys appointed by the courts to serve as defense counsel to indigent individuals accused of federal crimes. The FY2009 request was $911.408 million—a $65.307 million (7.7 %) increase over the FY2008 appropriation of $846.101 million (which included $10.500 million in emergency funding). The House committee recommended $862.977 million. The Senate committee recommended $854.204 million. The enacted amount was $849.400 million. This account funds the fees and allowances provided to grand and petit jurors, and the compensation of jury and land commissioners. The FY2009 request was $62.206 million—a $0.9 million (1.4%) decrease over the FY2008 appropriation of $63.081 million. Both the House and Senate committees recommended the full amount requested. The enacted amount was the full amount requested. Established to address a perceived crisis in vaccine tort liability claims, the Vaccine Injury Compensation Program is a federal no-fault program that protects the availability of vaccines in the nation. The FY2009 request for this account was $4.253 million, a slight increase of $0.2 million (3.8%) above the FY2008 enacted amount of $4.099 million. Both the House and Senate committees recommended the full amount requested. The enacted amount was the full amount requested. As the central support entity for the judiciary, the AOUSC provides a wide range of administrative, management, program, and information technology services to the U.S. courts. The AOUSC also provides support to the Judicial Conference of the United States, and implements conference policies and applicable federal statutes and regulations. The FY2009 request for this account was $81.959 million—a $5.923 million (7.8%) increase over the FY2008 level of $76.036 million. The increase was reportedly for pay increases and other inflationary adjustments to maintain FY2008 service levels. The AOUSC also receives non-appropriated funds from fee collections and carry-over balances to supplement its appropriations requirements. Both the House and Senate committees recommended $79.049 million for this account. The enacted amount was the amount as recommended by both the House and Senate. As the judiciary's research and education entity, the center undertakes research and evaluation of judicial operations for the Judicial Conference committees and the courts. In addition, the center provides judges, court staff, and others with orientation and continuing education and training. The center's FY2009 request was $25.759 million—a $1.6 million (6.5%) increase over the FY2008 appropriation of $24.187 million. The House committee recommended $25.725 million. The Senate committee recommended $25.468 million. The enacted amount was $25.725 million, the same amount the House recommended. The commission promulgates sentencing policies, practices, and guidelines for the federal criminal justice system. The FY2009 request was $16.257 million—a $0.800 million (5.0%) increase over the FY2008 appropriation of $15.477 million. Both the House and Senate committees recommended $16.225 million. The enacted amount was the same amount both the House and Senate committees recommended. This mandatory account provides for three trust funds that finance payments to retired bankruptcy and magistrate judges, retired Court of Federal Claims judges, and spouses and dependent children of deceased judicial officers. The FY2009 request was $76.140 million—a $10.740 million (16.4%) increase over the FY2008 appropriation of $65.400 million. According to the budget submission, the appropriation requirements were calculated by an enrolled actuary as mandated by law. Both the House and Senate committees recommended the full amount requested. The enacted amount was the full amount requested. According to the budget request submission, the judiciary proposed the following new language under general provisions: Sec. 306, which would have granted the judiciary the same tenant alteration authorities as the executive branch. Sec. 308, which would have deleted a provision related to establishing Vancouver, Washington, as a place of holding court in the Western District of Washington. Sec. 309, which would have deleted a one-year provision extending the temporary judgeships in the Districts of Kansas and the District of Northern Ohio through FY2008. The House Appropriations Committee recommended the following provisions: Sec. 301, which would have continued language to permit funding in the bill for salaries and expenses to employ experts and consultant services (as authorized by 5 U.S.C. 3109). Sec. 302, which would have continued language to permit the transfer of up to 5% of any available FY2008 appropriations between judiciary appropriations accounts, provided that no appropriation shall be decreased by more than 5% or increased by more than 10% by any such transfer except in certain circumstances. The language also provides that any such transfer shall be treated as a reprogramming of funds under Section 608 of the bill and shall not be available for obligation or expenditure except in compliance with procedures in that section. Sec. 303, which would have continued language to authorize official reception and representation expenses, not to exceed $11,000, incurred by the Judicial Conference of the United States. Sec. 304, which would have continued language to require a financial plan for the judiciary within 90 days of enactment of this act. Sec. 305, which would enable the judiciary to contract for repairs under $100,000. Sec. 306, which would have authorized a court security pilot program. Sec. 307, which would have provided equal treatment for federal judges regarding life insurance premiums. Sec. 308, which would have allowed the Director of AOUSC to expend funds for the purposes of the Second Chance Act, and directs the AOUSC to report to the committee on the parameters that define eligible expenses before the program is implemented. Sec. 309, which would have removed a sunset date from certain procurement authorities. Sec. 310, which would have extended temporary judgeships in Ohio and Kansas. The Senate committee recommended the same provisions the House recommends for Sections 301 through Section 309, but Section 310 differs. The Senate recommended the following: Sec. 310, which would have allowed for a salary adjustment for justices and judges. As enacted, the administrative provisions are as follows: Sec. 301, which allows the Judiciary to expend funds for the employment of expert and consultative services. Sec. 302, which provides transfer authority in compliance with transfer and reprogramming guidelines set forth in section 604 and 608 of this act. Sec. 303, which authorizes not to exceed $11,000 to be available for official receptions and representation expenses. Sec. 304, which requires a financial plan from the judiciary allocating the sources and uses of all funds within 90 days of enactment of this act. Sec. 305, which extends the authority to contract for repairs of less than $100,000 to the judiciary. Sec. 306, which continues to authorize a pilot program to allow the AOUSC to reimburse the U. S. Marshals Service for some services currently being performed by the Federal Protective Service. Sec. 307, which includes language intended to provide equal treatment for federal judges regarding life insurance premiums. Sec. 308, which extends the sunset provision for certain procurement authorities. Sec. 309, which extends the term of temporary judgeships in Kansas, Northern Ohio, and Hawaii for one year. Sec. 310, which authorizes a cost of living adjustment for fiscal year 2009 for federal judges. The authority for congressional review and approval of the District's budget is derived from the Constitution and the District of Columbia Self-Government and Government Reorganization Act of 1973 (Home Rule Act). The Constitution gives Congress the power to "exercise exclusive Legislation in all Cases whatsoever" pertaining to the District of Columbia. In 1973, Congress granted the city limited home rule authority and empowered citizens of the District to elect a mayor and city council. However, Congress retained the authority to review and approve all District laws, including the District's annual budget. As required by the Home Rule Act, the city council must approve a budget within 50 days after receiving a budget proposal from the mayor. The approved budget must then be transmitted to the President, who forwards it to Congress for its review, modification, and approval. Both the President and Congress may propose and approve of financial assistance to the District in the form of special federal payments in support of specific activities or priorities. Table 6 shows details of the District's federal payments—the FY2008 enacted amounts, the amounts included in the President's FY2009 budget request, and the amounts recommended by the House and Senate Appropriations Committees, and the amount enacted for FY2009 with the passage of P.L. 111-8 . The Bush Administration's proposed FY2009 budget included $668.0 million in federal payments to the District of Columbia. The funding request for the courts and criminal justice system (court operations, defender services, offender supervision, and criminal justice coordinating council) was $511.9 million, or 76.8%, of the request. The President's budget also requested $109.1 million in special federal payments for specific education initiatives, including $35.1 million for college tuition assistance, $38 million for public school enhancements and reforms, $18 million for public charter schools, and $18 million for the school choice (school voucher) program, which awards grants to eligible students to attend private schools. In addition to recommending $667 million in federal payments to the District of Columbia, the President's budget also contains general provisions, including a number of so-called "social riders." The President's budget request would have prohibited the use of federal and District funds to finance or administer a needle exchange program intended to reduce the spread of AIDS and HIV among intravenous drug abusers and their partners; prohibited the use of both federal and District funds to provide abortion services except in instances of rape or incest, or when the health of the mother is threatened; prohibited the city from decriminalizing the use of marijuana for medical purposes; prohibited the use of federal funds to implement the Health Care Benefits Act; limited the payment of fees to no more than $4,000 to attorneys representing a party in an action brought against the District under the Individuals with Disabilities Act; and limited the city's ability to use District funds to lobby for congressional voting representation or statehood. The House Appropriations Committee recommended $711.8 million in special federal assistance to the District of Columbia. This was $101.9 million more than appropriated last year and $44.8 million more than requested by the Administration. The additional funding included assistance for public safety, criminal justice and court operations, and education activities. The committee recommended $15.3 million for emergency planning and security activities—$11.9 million more than appropriated for FY2008, and $300,000 more than requested by the Administration. The committee also recommended $561.9 million for criminal justice and court operations activities, including $16 million more than requested by the Administration for construction of a consolidated bioterrorism and forensic laboratory facility, and $24.5 million more for court operations. The bill would have provided $109 million for education initiatives, including an additional $20 million to support the mayor's public school reform. The Senate Appropriations Committee recommended $722.0 million in special federal assistance to the District of Columbia. This is $112.1 million more than appropriated last year, $55 million more than requested by the Administration, and $10.2 million more than recommended by the House Appropriations Committee. The additional funding included assistance for public safety, criminal justice and court operations, and education activities. The committee recommended $15.4 million for emergency planning and security activities—$12 million more than appropriated for FY2008, and $400,000 more than requested by the Administration. The committee also recommended $561.9 million for criminal justice and court operations activities, including $21 million for construction of a consolidated bioterrorism and forensic laboratory facility, and $27.7 million more for court operations than requested by the Administration. The Senate bill, like its House counterpart, would have appropriated $109 million for education initiatives, including an additional $20 million to support the mayor's public school reform. The Omnibus Appropriation Act of FY2009, P.L. 111-8 , includes $742.4 million in special federal assistance to the District of Columbia. This is $132.5 million more than appropriated in FY2008, and $75.4 million more than requested by the Bush Administration. The additional funding includes increased assistance for public safety, criminal justice and court operations, education initiatives, and planning and security activities related to inauguration of the 44 th President of the United States, Barak Obama. The act includes $599.2 million for public safety and court operations activities, and $109 million in support of school improvement and reform activities including support for school vouchers and college tuition assistance programs. The District of Columbia Tuition Access Grant (DCTAG) program provides tuition support through grants to institutions of higher education (IHEs) for eligible residents of the District of Columbia by paying the difference between in-state and out-of-state tuition (up to $10,000) at public IHEs; and up to $2,500 per year for tuition at private non-profit IHEs that are either located in the Washington, DC, metropolitan area, or are Historically Black Colleges and Universities (HBCUs). Funding has been provided for the DCTAG program annually since FY2000. For FY2009, the Administration proposed an appropriation of $35.1 million for the DCTAG program, of which $1.3 million would have been available for administrative expenses. The House Appropriations Committee and the Senate Appropriations Committee both recommended the appropriation of $35.1 million for the DCTAG program. Consistent with House and Senate recommendations, the Omnibus Appropriations Act for FY2009 included $35.1 million for the program. As in prior years, the appropriations language specified that awards made under the DCTAG program may be prioritized on the basis of a resident's academic merit, the need of eligible students, and other factors as may be authorized. Since FY2004, a federal payment for school improvement in the District of Columbia has been provided annually to be allocated between the District of Columbia Public Schools (DCPS) for the improvement of public education; the State Education Office (SEO) for the expansion of public charter schools; and the U.S. Department of Education (ED) for the DC School Choice Incentive program (also known as the Opportunity Scholarship program). The Opportunity Scholarship program was enacted under the D.C. School Choice Incentive Act of 2003 ( P.L. 108-199 ) and was authorized through FY2008. Under the program, the Secretary of Education may award grants to eligible entities for a period of not more than five years to make opportunity scholarships to eligible individuals. The program enables children from families with incomes not exceeding 185% of the poverty line to apply to receive opportunity scholarships valued at up to $7,500 to cover the costs of tuition, fees, and transportation expenses associated with attending participating private elementary and secondary schools located in the District of Columbia. Scholarship recipients remain eligible to continue to participate in the program in subsequent years, so long as their family income does not exceed 300% of the poverty level. FY2008 (school year 2008-2009) is the final year of the initial grant awarded to the Washington Scholarship Fund. For FY2009, the Administration proposed an appropriation of $54 million for school improvement in the District of Columbia. Of this amount, $18 million would have been provided to DCPS for school improvement, $18 million would have been provided to the SEO for public charter schools, and $18 million would have been provided to ED for the Opportunity Scholarship program. Of the $18 million that would have been provided for the Opportunity Scholarship program, $1 million would have been available for the administration and funding of assessments. In addition, the Administration proposed amending the D.C. School Choice Incentive Act of 2003 to establish annual limits on opportunity scholarship awards for school year 2009-2010 in the amounts of $7,500 for kindergarten through grade 8, and $12,000 for grades 9 through 12; and to provide for adjustments to annual award limits in future years by indexing them to the consumer price index for all urban consumers (CPI-U). The Administration also proposed extending the authorization of appropriations for the Opportunity Scholarship program at the amount of $18 million for FY2009, and such sums as may be necessary for FY2010 through FY2013. The House Appropriations Committee recommended the appropriation of $54 million for school improvement in the District of Columbia—the same amount proposed by the Administration. However, the committee recommended that $21.2 million be provided to DCPS for school improvement, that $18 million be provided to the SEO for public charter schools, and that $14.8 million be provided to ED for the Opportunity Scholarship program, of which $1 million would be available to administer and fund assessments. In S. 3260 , the Senate Appropriations Committee also recommended $54 million in funding for school improvement, but with $20 million provided to DCPS to improve public school education, $20 million provided to the SEO to expand public charter schools, and $14 million to ED for the Opportunity Scholarship program, of which $1 million would have been available to administer and fund assessments. The House Appropriations Committee did not recommend the amendments to the D.C. School Choice Incentive Act of 2003 proposed by the Administration. In S. 3260 , the Senate Appropriations Committee recommended that funds provided for the Opportunity Scholarship program may not be used to support the enrollment of students in schools participating in the program unless the school has a valid certificate of occupancy and the teachers of core subjects hold four-year baccalaureate degrees. S. 3260 also specified that after school year 2009-2010, funds for the Opportunity Scholarship program be available only upon the reauthorization of the program by Congress and the adoption of legislation by the District of Columbia approving reauthorization. The Omnibus Appropriations Act for FY2009 includes $54 million for school improvements, including $20 million for public schools, $20 million for public charter schools, and $14 million school vouchers. In addition to funding provided for school improvement in the District of Columbia, the Administration proposed, and both the House Appropriations Committee and the Senate Appropriations Committee recommended, the appropriation of $20 million to "jump start" the reform of public education in the District of Columbia. Of the $20 million that would have been made available, $3.5 million would have been provided for the recruiting, development, and training of principals and other school leaders; $7 million would have been provided for the development of optimal school programs, and for intervention in low-performing schools; $7.5 million would have been provided for a student performance data reporting and accountability system, and for parental and community outreach; and $2 million would have been provided for data reporting associated with the DCPS teacher incentive program. Of the total amount appropriated, the lesser of $500,000 or 10% would have been available for transfer from one activity to another. Consistent with the recommendations of the House and Senate Appropriations Act, P.L. 111-8 includes $20 million for public school reform activities. Consistent with the provision included in the House and Senate bills, the Omnibus Appropriations Act: prohibits the use of federal funds to finance or administer a needle exchange program intended to reduce the spread of AIDS and HIV among intravenous drug abusers and their partners; prohibits the use of both federal and District funds to provide abortion services except in instances of rape or incest, or when the health of the mother is threatened; prohibits the city from decriminalizing the use of marijuana for medical purposes; prohibits the use of federal funds to implement the Health Care Benefits Act; and prohibits the use of federal funds to lobby for congressional voting representation or statehood. Prior to passage of the Omnibus Appropriations Act, P.L. 111-8 , Congress approved a Continuing Budget Resolution that funded the federal government through March 11, 2009. Section 134 of the CR granted congressional approval of the District of Columbia General Fund budget for FY2009. This allowed the District to spend $10 billion in local source revenues and federal grants, including $1.1 billion for capital projects and $8.9 billion for operating expenses. FY2009 special federal payments for the District of Columbia were frozen at the FY2008 appropriations level. However, there is one exception. Section 135 of the act appropriated $15 million in special federal payments for emergency planning and security activities. This was a significant increase above the $3.4 million appropriated for FY2008, and was intended be used to cover expenses related to the activities surrounding the inauguration of President Obama. The Omnibus Appropriations Act approves the District of Columbia's budget for FY2009. This includes $9.9 billion for operating expenses and $1.5 billion for capital projects. In FY2009, a collection of 26 independent entities are slated to receive funding through the FSGG appropriations bill. Table 7 lists appropriations as enacted for FY2008, as requested by the President for FY2009, as recommended by the House and Senate Committees on Appropriations, and as enacted. The CFTC is the independent regulatory agency charged with oversight of derivatives markets. The CFTC's functions include oversight of trading on the futures exchanges, registration and supervision of futures industry personnel, prevention of fraud and price manipulation, and investor protection. Although most futures trading is now related to financial variables (interest rates, currency prices, and stock indexes), congressional oversight remains vested in the agriculture committees because of the market's historical origins as an adjunct to agricultural trade. In the Senate, FY2008 CFTC appropriations were proposed in H.R. 2829 . In the House, FY2008 CFTC appropriations were proposed in H.R. 3161 , the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act of 2008. In the Consolidated Appropriations Act, 2008, the CFTC was funded in Division A, Agriculture and Related Agencies. The FY2008 appropriation was $111.3 million. For FY2009, the Administration requested $130.0 million. The Senate Appropriations Committee recommended $157.0 million, an increase of 24.3% over the Administration's request, and 41.1% over the FY2008 appropriation. The increase was related to concerns over the CFTC's ability to monitor the futures markets, particularly those in energy commodities. In the House, CFTC funding was proposed through the agriculture appropriations bill, but FY2009 enacted funding was included in the Financial Services section of the omnibus appropriations act ( P.L. 111-8 ). The act provides $146.0 million for the CFTC, of which $34.7 million is to be available only after the agency has submitted an expenditure plan for FY2009 to the Agriculture Committees of the House and Senate. The CPSC is an independent federal regulatory agency whose enabling legislation is the Consumer Product Safety Act of 1972. The Commission's primary responsibilities include protecting the public against unreasonable risks of injury associated with consumer products; developing uniform safety standards for consumer products and minimizing conflicting state and local regulations; and promoting research and investigation into the causes and prevention of product-related deaths, illnesses, and injuries. For FY2009, the Administration requested $80 million in funding for the CPSC, the same amount Congress provided for FY2008, but $16.75 million more than requested last year ($63.25 million). The House Committee on Appropriations recommended $100 million, $20 million above the Administration's request. The committee stated that the additional funding was necessary for the agency to meet the increased responsibilities envisioned by the CPSC reform legislation (discussed below), including the implementation of an Import Safety Initiative, upgrades to information technology and databases, and modernization of CPSC's testing laboratory. In the Senate, the Committee on Appropriations recommended $95 million, $5 million less than its House counterpart, but $15 million above the Administration's request. P.L. 111-8 provided the CPSC $105.4 million for FY2009, slightly more than $25 million in additional funding than requested by the Administration—a nearly one third (31.75%) increase. Last year, the House approved the Appropriation Committee's recommendation of $66.8 million, $3.6 million above the Administration's request. Subsequently, the Senate recommended $70 million for CPSC for FY2008. In the end, however, following widespread publicity about unsafe exports from China, particularly dangerously defective toys, the consolidated appropriations bill provided the agency with $80 million. A steady stream of television and print media stories throughout 2007 about unsafe imported consumer products generated strong congressional interest concerning the agency. Conferees, concluding months of negotiations over differences between House and Senate CPSC reform bills ( H.R. 4040 and S. 2663 , respectively), sent what is generally regarded as the strongest consumer protection legislation in decades to the President for his signature. The new law, P.L. 110-314 , substantially increases the authority of and funding for the CPSC. Major provisions of the Consumer Product Safety Improvements Act of 2008 included the creation of a publicly accessible consumer complaint database, increased civil penalties that the agency can assess against violators, the protection of whistleblowers who report product safety defects, mandatory testing of toys, and banning certain phthalates in children's products. The EAC provides grant funding to the states to meet the requirements of the Help America Vote Act (HAVA), provides for testing and certification of voting machines, studies election issues, and promulgates voluntary guidelines for voting systems standards and issues voluntary guidance with respect to the requirements in the act. The commission was not given express rule-making authority under HAVA, although the law transferred responsibilities for the National Voter Registration Act (NVRA) from the Federal Election Commission to the EAC; these responsibilities include NVRA rule-making authority. The Department of Justice is charged with enforcement responsibility. For FY2008, funding for the EAC and election reform programs was provided by the Consolidated Appropriations Act, 2008. The act provided $16.53 million for the EAC, of which $3.25 million was for National Institute of Standards and Technology (NIST), and $200,000 was for the high school mock election program. It also provided $115 million for requirements payments and $10 million for data collection grants to selected states. The President's budget request for FY2009 included $16.7 million for EAC salaries and expenses. The House Appropriations Committee recommended $18.6 million for EAC salaries and expenses, of which $4 million was to be transferred to NIST, and the Senate Appropriations Committee recommended $16.7 million for the EAC, of which $4 million was to be transferred to NIST for the development of voluntary voting systems guidelines. The Omnibus Appropriations Act, 2009 provided $18 million for the EAC, with $4 million of that to be transferred to NIST, $750,000 for the College Program, and $300,000 for the high school mock election program. It also provided funding for requirements payments to the states in the amount of $100 million, with an additional $5 million for grants for research on voting technology improvements and $1 million for a pilot program for grants to states and localities to test voting systems before and after elections. The Federal Communications Commission, created in 1934, is an independent agency charged with regulating interstate and international communications by radio, television, wire, satellite, and cable. The FCC is also charged with promoting the safety of life and property through wire and radio communications. The mandate of the FCC under the Communications Act is to make available to all people of the United States a rapid, efficient, nationwide, and worldwide wire and radio communications service. The FCC performs five major functions to fulfill this charge: spectrum allocation, creating rules to promote fair competition and protect consumers where required by market conditions, authorization of service, enhancement of public safety and homeland security, and enforcement. The FCC obtains the majority — and sometimes all — of its funding through the collection of regulatory fees pursuant to Title I, Section 9, of the Communications Act of 1934; therefore, its direct appropriation is considerably less than its overall budget; sometimes, as is the case for FY2009, there is no direct appropriation. For FY2009, the President signed a budget of $341.875 million to be collected entirely through regulatory fees (e.g., no direct appropriation). The budget stipulates that $3 million will be available to establish and administer a competitive grant program for state broadband data collection and analysis; proceeds of up to $85 million from the use of a competitive license bidding system may be made available for obligation; and up to $25.48 million may be transferred from the Universal Service Fund (USF) to monitor the USF program. Additionally, the FY2009 budget stipulates that none of the budget may be used to "modify, amend, or change its rules or regulations for universal service support payments to implement the February 27, 2004 recommendations of the Federal-State Joint Board on Universal Service regarding single connection or primary line restrictions on universal service support payments." For FY2008, the President signed a budget of $313 million with a direct appropriation of $1 million and the remainder to be collected through regulatory fees. The FDIC's Office of the Inspector General is funded from deposit insurance funds; the OIG has no direct support from federal taxpayers. Before FY1998, the amount was approved by the FDIC Board of Directors; the amount is now directly appropriated (through a transfer) to ensure the independence of the OIG. The Consolidated Appropriations Act of 2008 ( P.L. 110-161 ) provided for a FY2008 budget of $27 million for the OIG, which was a 13% decrease from the FY2007 appropriation of $31 million. The President requested, and both the House and Senate Committees on Appropriations recommended, $27.5 million for FY2009. The Omnibus Appropriations Act of 2009 ( P.L. 111-8 ) also provides for $27.5 million. The FEC administers, and enforces civil compliance with, the Federal Election Campaign Act (FECA) and campaign finance regulations. The agency does so through educational outreach, rulemaking, and litigation, and by issuing advisory opinions. The FEC also administers the presidential public financing system. Between January and June 2008, the FEC lacked a quorum necessary to make major policy decisions. With the June 24, 2008, Senate confirmations of five FEC nominees, the agency now stands at full capacity of six commissioners. The President's FY2009 budget request included an appropriation of $63.6 million for the FEC, a 7.4% increase above the enacted FY2008 appropriation of $59.2 million. The House Appropriations Committee also recommended an appropriation of $63.6 million for FY2009. Although the FEC requested no additional staff in FY2008, the FY2009 budget justification requested funding for 12 additional full-time positions. Most of the FY2009 request emphasized maintaining current services and funding technology upgrades. Like its House counterpart, the Senate Appropriations Committee recommended $63.6 million in FY2009 funding for the FEC. The FY2009 omnibus appropriations law ( P.L. 111-8 ) also funded the FEC at $63.6 million. Report language (which originated in the Senate) accompanying P.L. 111-8 directed the FEC, within 270 days of the law's enactment, to provide the House and Senate appropriations committees with an estimate of the feasibility of gathering and making public data about media costs in campaigns. Campaign media costs have been of recent interest to Congress, particularly in the Senate. The topic was the subject of a June 2007 Senate Rules and Administration Committee hearing, and the Senate Appropriations Committee report on the FY2008 FSGG appropriations bill directed the Government Accountability Office (GAO) to provide information on "the 10-year trend in the cost of House and Senate campaigns as well as the percentage of those costs that are incurred due to rising broadcast advertising rates." In the past, Congress has chosen to use the appropriations process to extend the FEC's Administrative Fine Program (AFP), which was scheduled to expire at the end of 2008. In October 2008, however, President George W. Bush signed a stand-alone bill ( H.R. 6296 , which became P.L. 110-433 ) that extends authority for the program until 2013. In recent years, FEC appropriations have generally been noncontroversial and subject to limited debate in committee or on the floor. For FY2009, the House Appropriations Committee noted that it had "recently approved a significant reprogramming" of the FEC's FY2008 appropriation and that it intended to "carefully monitor the resource needs of the FEC during the coming months and may consider adjustments to [the agency's] fiscal year 2009 budget in the final appropriations bill." That reprogramming came in response to a significant drop in FEC salary expenses between January and June 2008, when four commissioners and some staff were out of office, and when the agency reportedly had difficulty recruiting career staff. Now that the Commission is back at full operating capacity, provided that career staff recruiting improves, salary needs will presumably return to normal levels. The Senate report did not mention the reprogramming. The Federal Trade Commission (Commission or FTC) is an independent agency. It seeks to protect consumers and enhance competition by eliminating unfair or deceptive acts or practices in the marketing of goods and services and by ensuring that consumer markets function competitively. For FY2009, the Administration requested a program level for the FTC of $256.2 million, an increase of $12.4 million, or 5%, over the agency's present (FY2008) level of funding. Of the total amount provided, $168 million was to be derived from pre-merger filing fees, $19.3 million from Do-Not-Call fees, and the remaining amount—$68.9 million—was to be provided by a direct appropriation. The request represents an increase of $12.3 million from the FTC's FY2008 budget appropriations level. The Senate Committee on Appropriations recommended the same program level as requested by the Administration, including the same breakdown of fees and direct appropriation, as noted above. For its part, the House Committee on Appropriations recommended an FTC program level of $259.2 million, $3 million more than the Administration's request. More specifically, the committee assumed $168 million from pre-merger filing fees, $21 million from Do-Not-Call fees, and a direct appropriation of $70.2 million. The committee recommendation assumed an increase of $3 million over the Administration's request to provide additional support for consumer protection activities, including subprime lending and other financial services investigations, as well as activities to fight spam, spyware, and Internet fraud and deception. Enacted appropriations for FY2009 echoed the recommendations of House Committee on Appropriations (i.e., an FTC program level of $259.2 million, with a $168 million from pre-merger filing fees, $21 million from Do-Not-Call fees, and a direct appropriation of $70.2 million). For FY2008, the Consolidated Appropriations Act provided the FTC with a total program level of $243.9 million. More specifically, $139 million came from pre-merger filing fees, and $23 million from Do-Not-Call fees, with a direct appropriation of $81.9 million. The General Services Administration administers federal civilian procurement policies pertaining to the construction and management of federal buildings, disposal of real and personal property, and management of federal property and records. It is also responsible for managing the funding and facilities for former Presidents and presidential transitions. Typically, only about 1% of GSA's total budget is funded by direct appropriations. For FY2009, the President requested $56.6 million for government-wide policy and $71.8 million for operating expenses, $54.0 million for the Office of Inspector General (OIG), $2.9 million for allowances and office staff for former presidents, $8.5 million for presidential transition expenses, and $36.6 million to be deposited into the Federal Citizen Information Center Fund (FCICF). The House Committee on Appropriations recommended $56.2 million for government-wide policy, $71.2 million for operating expenses, $51.8 million for the OIG, $2.9 million for allowances and office staff for former presidents, $8.5 million for presidential transition expenses, and $36.1 million to be deposited into the FCICF. The Senate Appropriations Committee recommended $54.6 million for government-wide policy, $69.3 million for operating expenses, $54 million for the OIG, $2.9 million for allowances and office staff for former presidents, $8.5 million for presidential transition expenses, and $36.6 million for the FCICF. The CR provided $8.25 million for presidential transition expenses, and $2.68 million for allowances and office staff for former presidents. Enacted appropriations for FY2009 included $54.6 million for government-wide policy, $70.6 million for operating expenses, $54.0 million for the OIG, $2.9 million for allowances and office staff for former presidents, $8.52 million for presidential transition expenses, and $36.1million for the FCIF. Most GSA spending is financed through the Federal Buildings Fund. Rent assessments from agencies paid into the FBF provide the principal source of its funding. Congress may also provide direct funding into the FBF. Congress directs the GSA as to the allocation or limitation on spending of funds from the FBF in provisions found accompanying GSA's annual appropriations. For FY2009, the President requested that an additional amount of $525 million be deposited in the FBF, and that $620 million of FBF revenues remain available until expended for construction and acquisition of facilities. The House Appropriations Committee recommended that an additional amount of $309 million be deposited in the FBF, and $454 million be made available for construction and acquisition of facilities, both less than the President's request. The Senate Appropriations Committee recommended that an additional amount of $672 million be deposited in the FBF, and $767 million be made available for construction and acquisition of facilities, both more than the President's request. Enacted appropriations for FY2009 included $651 million for deposit in the FBF, and $746 million for construction and acquisition of facilities. Originally unveiled in advance of the President's proposed budget for FY2002, the E-Gov Fund and its appropriation have been a somewhat contentious matter between the President and Congress. The President's initial $20 million request was cut to $5 million, which was the amount provided for FY2003, as well. Funding thereafter was held at $3 million for FY2004, FY2005, FY2006, FY2007, and FY2008. Created to support interagency e-gov initiatives approved by the Director of OMB, the fund and the projects it sustains have been subject to close scrutiny by, and accountability to, congressional appropriators. As he did for FY2008, the President requested $5 million for the fund for FY2009. Noting that, as of March 2008, the e-gov account had a little over $7 million still unspent from prior years, including the entire FY2008 appropriation, House appropriators recommended no additional funding for the account for FY2009. Senate appropriators recommended $1 million for the fund. The consolidated continuing appropriations act temporarily returned the E-Gov Fund to a $3 million appropriation for FY2009. The omnibus budget, however, eliminated all FY2009 E-Gov Fund appropriations. The E-Gov Fund received no FY2009 appropriations. Although GSA did not receive FY2009 appropriations for its E-Gov Fund, the Small Business Administration received $2,649,000 in direct appropriations for its "Business Gateway" E-gov initiative. The program is to improve administrative efficiency by eliminating the need for as many as 80 funding transfers annually from 21 participating agencies. Congress also directed SBA to budget a direct request for funding for this project in its FY2010 submission to Congress. In addition, Section 733 of P.L. 111-8 prohibits agencies from acquiring funding for E-Gov initiatives previously approved by the Office of Management and Budget (OMB) unless the relevant congressional appropriation committee has been notified of the funding request at least 15 days prior the distribution of funding. The law also requires all new E-Gov initiatives seeking funding to receive approval from relevant congressional committees. The FY2008 budget included information on the portfolios of each of the agencies involved in personnel management functions: the Federal Labor Relations Authority (FLRA), the Merit Systems Protection Board (MSPB), the Office of Personnel Management (OPM), and the Office of Special Counsel (OSC). Table 8 shows appropriations as enacted for FY2008, as requested for FY2009, as recommended by the House and Senate Committees on Appropriations, and as enacted for FY2009, for each of these agencies. The FLRA is an independent federal agency that administers and enforces Title VII of the Civil Service Reform Act of 1978. Title VII gives federal employees the right to join or form a union and to bargain collectively over the terms and conditions of employment. Employees also have the right not to join a union that represents employees in their bargaining unit. The statute excludes specific agencies (e.g., the Federal Bureau of Investigation and the Central Intelligence Agency) and gives the President the authority to exclude other agencies for reasons of national security. The FLRA consists of a three-member authority, the Office of General Counsel, and the Federal Services Impasses Panel (FSIP). The authority resolves disputes over the composition of bargaining units, charges of unfair labor practices, objections to representation elections, and other matters. The General Counsel's office conducts representation elections, investigates charges of unfair labor practices, and manages the FLRA's regional offices. The FSIP resolves labor negotiation impasses between federal agencies and labor organizations. The President's FY2009 budget proposed an appropriation of $22.7 million for the FLRA, $967 thousand below the agency's FY2008 appropriation of $23.6 million. The House recommended $22.7 million for FY2009, the same as the President's request. The Senate Committee on Appropriations approved funding of $22.7 million, the same amount as recommended by the House. The Omnibus Appropriations Act, 2009 ( P.L. 111-8 ) appropriated $22.7 million, the same as the amount requested and $967 thousand (4.1%) less than the amount provided for FY2008. The President's budget requested an FY2009 appropriation of almost $41.4 million for the MSPB, 3.25% above the FY2008 funding of $40.1 million. The agency's full-time equivalent (FTE) employment level would remain at 236 for FY2009. The House committee recommended the same appropriation as the President requested to provide "funding for mandatory pay raises, increased rent payments, and other non-personnel cost increases." The Senate committee also recommended, and P.L. 111-8 provides, the same appropriation as the President requested. MSPB issued 8,105 decisions in FY2007 (actual), and its budget submission projected that 8,400 decisions would be issued in FY2008 (estimate). The authorization for the agency expired on September 30, 2007. The 110 th Congress considered, but did not act upon, legislation that would have reauthorized the MSPB for three years and enhanced the agency's reporting requirements. Senator Daniel Akaka and Representative Danny Davis introduced the Federal Merit System Reauthorization Act of 2007, S. 2057 and H.R. 3551 , on September 17, 2007, and the bills were referred to the Senate Committee on Homeland Security and Governmental Affairs and the House Committee on Oversight and Government Reform, respectively. The President's budget requested an FY2009 appropriation of $92.8 million for salaries and expenses for OPM, an amount that is 8.8% less than the $101.6 million provided for salaries and expenses for FY2008. This amount included funding of $5.8 million for the Enterprise Human Resources Integration project and more than $1.3 million for the Human Resources Line of Business project. The agency's full-time equivalent (FTE) employment level would have been 4,940 for FY2009, 48 less than the 4,988 for FY2008. Among the initiatives stated in OPM's budget submission are these: a legislative proposal has been submitted to Congress to offer a third benefit option under the Federal Employees' Health Benefits Program (FEHBP) and to broaden the types of health plans offered by the FEHBP, continued development of market-sensitive pay systems, the transitioning of the personnel and payroll records for 1.8 million active federal employees into the modernized, electronically accessible federal retirement system, and improving the federal hiring process, by, among other things, streamlining the application process. The House committee recommended the same funding as requested by the President for the OPM accounts, except for the "limitation on transfers from the trust funds" account of the Office of Inspector General (OIG), for which the committee recommended an additional $500,000. The Senate committee did likewise, except for the OIG salaries and expenses and "limitation on transfers from the trust funds" accounts for which the committee recommends additional amounts of $598,000, and almost $4 million, respectively. The Senate report stated that the funding "will help restore the OIG's budget to previous levels and permit additional audits and investigations." P.L. 111-8 provides the same funding as requested by the President for the OPM accounts, except for the OIG salaries and expenses and "limitation on transfers from the trust funds" accounts for which the law appropriates additional amounts of $300,000 and $2.3 million, respectively. Several directives for OPM were included in the House report or the Senate report as follows: The Government Accountability Office is directed "to assess the impact of the stop work [on a major contract] order on OPM's plans for developing (including testing) and implementing RetireEZ," the program to modernize the federal government's retirement systems. (House and Senate reports) OPM is directed to continue to make publicly available, "in a consistent and consolidated format, and in a timely manner" data from the Federal Human Capital Survey. (House report) OPM is encouraged "to develop approaches that agencies can use to attract the best and brightest talent; match employee skills and abilities with specific agency missions and goals; ensure that talented employees are engaged and empowered to use their talent; improve leadership development; and ensure high performance from the workforce." (House report) OPM is urged to review the findings of a study group on Hispanic employment in the federal government (formed by several agencies, including the Equal Employment Opportunity Commission and the Social Security Administration) "for possible approaches to improve Hispanic recruitment, retention, and advancement government-wide." (House report) OPM is directed to lead an "effort to encourage individual agency human resource offices to ... [recruit from] the talent pool that exists in the U.S. territories." (House report) Within 45 days after the act's enactment, OPM is directed to report to the committee on time lines, including start and completion dates for activities related to dependent care programs, including a marketing campaign for an open season for enrollment, development of ways to encourage agencies to educate employees about enrollment, outreach to groups with similar interests in dependent care, advertising the availability of tuition assistance to offset enrollment costs, and establishing a link on child care subsidies on the OPM homepage. (Senate report) OPM is directed to advise the committee as improvements in the agency's efforts to foster the employment of individuals with disabilities are made. (Senate report) Within 120 days after the act's enactment, OPM is directed to report to the committee on the use of the Intergovernmental Personnel Act Mobility Program to alleviate the shortage of nurses and the steps taken to encourage nurses employed by the federal government to teach at accredited colleges of nursing. (Senate report) OPM is directed to review federal employment policies and consider whether any changes may be necessary to foster the employment of individuals who are blind. The agency is encouraged to submit a report on employment for the blind, including the views of federal employee labor organizations. The report must be submitted by July 15, 2009. (Senate report) The directives listed above are included in P.L. 111-8 . The law also strongly urges the Department of Defense to submit a request, and OPM to act swiftly on any such request, to waive the pay cap for blue-collar workers in the New Orleans, Louisiana Appropriated Fund Federal Wage System area. P.L. 111-8 directs OPM to consider taking steps to extend health care benefits to the domestic partners of federal employees. The President's budget requested an FY2009 appropriation of $17.5 million for the OSC, the same level of funding that was enacted in FY2008. The agency's full-time equivalent (FTE) employment level would have increased by one, to 111, for FY2009. OSC's budget submission projected a continued increase in the number of prohibited personnel practices cases and disclosure cases received and notes that strategic management and cross-training of employees is being emphasized to ensure the maximum use of agency resources. The House and Senate committees recommended, and P.L. 111-8 provides, the same funding as the President requested. The House committee report stated that the OSC "must refocus its efforts" to carry out its "fundamental missions of protecting federal employees from prohibited personnel practices, providing a safe channel for whistleblower disclosures, and enforcing the Hatch Act and the Uniformed Services Employment and Reemployment Rights Act." In its report, the Senate committee "strongly urges the OSC to work with whistleblower advocacy organizations to promote the highest level of confidence in the Whistleblower Protection Act and the OSC" and acknowledges that the agency's caseload continues to grow. The authorization for the agency expired on September 30, 2007. The 110 th Congress considered, but did not act upon, S. 2057 and H.R. 3551 , The Federal Merit System Reauthorization Act of 2007. The legislation, introduced by Senator Daniel Akaka and Representative Danny Davis, would have reauthorized the OSC for three years and included provisions to enhance the agency's reporting requirements. As indicated in Table 7 , the President's FY2009 request for NARA was $392 million, which was about $8 million less than the $400 million appropriated for FY2008. Of this requested amount, almost $328 million was sought for operating expenses, an increase of $13 million over the FY2008 appropriation for this account. For the electronic records archive, $67 million was sought, a $9 million increase over the previous fiscal year allocation; for repairs and restoration, a little more than $9 million was sought, which is much below the FY2008 appropriation of over $28 million; and for the NHPRC, no appropriation was requested, which was the President's request for the previous two fiscal years, although Congress allocated $7 million for FY2007 and over $9 million for FY2008. The President's budget also attempted to deny funding for the recently created Office of Government Information Services (OGIS) established within NARA by amendments to the Freedom of Information Act (FOIA), which were signed into law by the President on December 31, 2007. The OGIS was established to (1) review agency compliance with FOIA policies, (2) recommend policy changes to Congress and the President, and (3) offer mediation services between FOIA requesters and agencies as a non-exclusive alternative to litigation. The OGIS is authorized to issue advisory opinions if mediation fails to resolve a dispute. The President's budget proposed no funding for the OGIS and having the Department of Justice carry out the responsibilities of the office using funds from its general administration account. Amending language would have to be included in appropriations legislation in order to fully effectuate this proposed arrangement. House appropriators recommended almost $424 million for NARA for FY2009, an increase of almost $32 million over the requested amount. Of this recommended amount, $330 million was proposed for operating expenses, an increase of a little more than $2 million above the budget request. Specified allocations from this account included slightly more than half a million dollars to increase archivist staff, $1 million for the OGIS, and over half a million dollars for review and declassification of U.S. government records on the Nazi and Japanese Imperial governments. Other allocations from the recommended amount for NARA included $67 million for the electronic records archive, almost $27 million for repairs and restoration, and $12 for the NHPRC. Appropriators indicated they were "greatly concerned about the preservation of official Presidential records, including the revelations that the White House cannot account for hundreds of days of e-mails processed between 2003 and 2005. They urged NARA "to continue to work diligently to ensure that the records of the outgoing Administration are located and preserved" and "to work with the incoming Administration to establish and implement policies and procedures to ensure the preservation of electronic Presidential records." Senate appropriators recommended almost $430 million for NARA, about $38 million more than the President's request and $6 million more than the amount recommended by House appropriators. Of this recommended $430 million, almost $331 was proposed for operating expenses, with $1 million allocated for the continuance of public research hours at NARA and $1 million for the OGIS. Other allocations from the recommended amount for NARA included $67 million for the electronic records archive, a little more than $33 million for repairs and restoration, and $10.5 million for the NHPRC. The consolidated continuing appropriations act temporarily returned NARA funding to its FY2008 funding level of $400 million for FY2009. As indicated in Table 7 , the omnibus budget appropriated a total of $447,435,000 to the National Archives and Records Administration. The omnibus budget appropriated $330,308,000 in operating expenses — nearly $2 million more than requested by the President and $308,000 more than recommended by the House Appropriations Committee, but $575,000 less than the Senate Appropriations Committee recommended. Congress appropriated $67,008,000 for the electronic records archive, and $50,711,000 for repairs and restoration. The funding for repairs and restoration is considerably larger than the President, the House, and the Senate had requested, but the law requires $31,500,000 of that appropriation be used to build an addition on the John F. Kennedy Presidential Library and Museum ($22,000,000), to repair and renovate the Franklin D. Roosevelt Presidential Library and Museum ($17,500,000), and to repair and restore the Lyndon Baines Johnson Presidential Library and Museum ($2,000,000). Within the appropriation, $6,325,000 is provided for operations of the temporary George W. Bush Presidential Library and Museum in Lewisville, TX. In addition to the other appropriations, Congress included in the omnibus budget $1 million for NARA to create a new Office of Government Information Services. The law explicitly states that the Office is to be funded through NARA as "authorized by the OPEN Government Act of 2007" ( P.L. 110-175 ). The National Historical Publications Commission received $11,250,000 for FY2009, $1,750,000 more than FY2008. Congress required $2 million of that appropriation to be used for operating expenses. The NCUA is an independent federal agency funded entirely by the credit unions that the agency charters, insures, and regulates. Two entities managed by the NCUA are addressed by the Financial Services and General Government bill. One of these, the Community Development Revolving Loan Fund (CDRLF), makes low-interest loans and technical assistance grants to low-income credit unions. The Consolidated Appropriations Act of 2008 ( P.L. 110-161 ) appropriated $975,000 for FY2008. The President requested, and both the House and Senate Committees on Appropriations recommended, $1 million for FY2009. The Omnibus Appropriations Act of 2009 ( P.L. 111-8 ) provides for $1 million. The Consolidated Appropriations Act of 2008 ( P.L. 110-161 ) provided a $1.5 billion limitation on direct loans from the Central Liquidity Facility (CLF) for FY2008. The President requested, and both committees recommended, that the $1.5 billion cap remain unchanged for FY2009. P.L. 110-329 increases the cap to the amount authorized by the Federal Credit Union Act (12 U.S.C. 1795f(a)(4)(A)) of 12 times the subscribed capital stock and surplus of the CLF. This increase is equivalent to a cap of about $41 billion. The Omnibus Appropriations Act of 2009 also provides the CLF with the ability to lend up to the maximum level provided for by the Federal Credit Union Act for FY2009. This provision gives the NCUA flexibility to assist with credit unions' financial liquidity during the current economic downturn. Originally established by the Intelligence Reform and Terrorism Prevention Act of 2004 as an agency within the Executive Office of the President (EOP), the PCLOB was reconstituted as an independent agency within the executive branch by the Implementing Recommendations of the 9/11 Commission Act of 2007. The board assumed its new status on January 30, 2008; its FY2009 appropriation will be its first funding as an independent agency. Among its responsibilities, the five-member board is to (1) ensure that concerns with respect to privacy and civil liberties are appropriately considered in the implementation of laws, regulations, and executive branch policies related to efforts to protect the nation against terrorism; (2) review the implementation of laws, regulations, and executive branch policies related to efforts to protect the nation from terrorism, including the implementation of information sharing guidelines; and (3) analyze and review actions the executive branch takes to protect the nation from terrorism, ensuring that the need for such actions is balanced with the need to protect privacy and civil liberties. The board advises the President and the heads of executive branch departments and agencies on issues concerning, and findings pertaining to, privacy and civil liberties. The board provides annual reports to Congress detailing its activities during the year, and board members appear and testify before congressional committees upon request. As indicated in Table 7 , the President's FY2009 request for the PCLOB was $2 million, which was the same amount appropriated for the board for FY2008 when it was an EOP agency. House appropriators recommended $1 million for the PCLOB for FY2009. In their report, appropriators expressed strong support for the mission of the board, and indicated they would "consider additional funding as necessary at the appropriate time." They noted that the board has not been fully reconstituted as an independent agency and, therefore, "the new entity's funding requirements have not been firmly established or justified to the Committee [on Appropriations]." The board was urged, "once reconstituted, to present the Committee with a detailed budget justification as quickly as possible." Senate appropriators recommended $2 million for the PCLOB, the amount requested by the President. The consolidated continuing appropriations act temporarily returned PCLOB funding to its FY2008 funding level of $2 million for FY2009. The omnibus appropriations act ( P.L. 111-8 ) provides $1.5 million for the board to remain available until September 30, 2010. The SEC administers and enforces federal securities laws to protect investors from fraud, to ensure that sellers of corporate securities disclose accurate financial information, and to maintain fair and orderly trading markets. The SEC's budget is set through the normal appropriations process, but funds for the agency come from fees that are imposed on sales of stock, new issues of stocks and bonds, corporate mergers, and other securities market transactions. When the fees are collected, they go to a special offsetting account available to appropriators, not to the Treasury's general fund. The SEC is required to adjust the fee rates periodically in order to make the amount collected approximately equal to the agency's budget. For FY2008, the SEC received $906.0 million, of which $63.3 million came from prior year unobligated balances, and the remainder from current-year collections. There was no direct appropriation from the general fund. For FY2009, the President requested $913.0 million for the SEC, an increase of 0.8% over FY2008. The House Appropriations Committee recommended $928.0 million, 2.4% above the FY2008 appropriation and 1.6% above the Administration's FY2009 request. Of this amount, $879.4 million was to come from current year fee collections, the remaining $48.6 million from unobligated balances from prior year collections. There would have been no direct appropriation from the general fund. The Senate Appropriations Committee recommended $938.0 million for FY2009, or 2.7% over the Administration's request. Of the amount, $890 million would have come from new fee collections, and the remaining $48 million from prior year balances. There would have been no direct appropriation from the general fund. The omnibus appropriations act ( P.L. 111-8 ) provides $943.0 million for the SEC, of which $48.6 million will come from prior-year fees and $894.4 million from current-year fees. The SSS is an independent federal agency operating with permanent authorization under the Military Selective Service Act (50 U.S.C. App. §451 et seq.). It is not part of the Department of Defense, but its mission is to serve the emergency manpower needs of the military by conscripting personnel when directed by Congress and the President. All males ages 18 through 25 and living in the United States are required to register with the SSS. The induction of men into the military via Selective Service (i.e., the draft) terminated in 1972. In January 1980, President Carter asked Congress to authorize standby draft registration of both men and women. Congress approved funds for male-only registration in June 1980. Since 1972, Congress has not renewed any President's authority to begin inducting (i.e., drafting) anyone into the armed services. In 2004, an effort to provide the President with induction authority was rejected. Funding of the Selective Service has remained relatively stable over the last decade. For FY2008, the enacted amount, $22 million, was the same as the House approved, the Senate reported, and the President requested. For FY2009, the amount requested by the President, recommended by the House and Senate Appropriations Committees, and ultimately enacted, was again $22 million. The SBA is an independent federal agency created by the Small Business Act of 1953. Although the agency administers a number of programs intended to assist small firms, arguably its three most important functions are to guarantee—principally through the agency's Section 7(a) general business loan program—business loans made by banks and other financial institutions; to make long-term, low-interest loans to small businesses, nonprofits, and households that are victims of hurricanes, earthquakes, floods, other physical disasters, and acts of terrorism; and to serve as an advocate for small business within the federal government. The Bush Administration requested $658.5 million for the SBA for FY2009; this figure included $174.4 million for disaster loans. The Senate Appropriations committee recommended $765.8 million in FY2009 budget authority compared to the House Appropriations Committee recommendation of $880.3 million. The Administration's request and the Senate and House committees' recommendations represented an increase over the amount enacted for FY2008 of $569.0 million ( P.L. 110-161 ). In addition to regular appropriations, in FY2008 the SBA had $799 million in an emergency appropriation contained in the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act of 2009 ( P.L. 110-329 ), which became law on September 30, 2008, for total appropriations of $1.368 billion in FY2008. P.L. 111-8 , the Omnibus Appropriations Act of 2009, provides $386.9 million for SBA salaries and expenses; $141.0 million was provided for the business loan account, $65.7 million for small business "programmatic and construction activities," $16.8 million for the SBA Office of the Inspector General, and $2.0 million for the surety bond guarantee revolving loan program. There was no new budget authority for disaster loans. Total funding appropriated for SBA for FY2009 was $612.3 million, 7% below the President's request of $658.5 million. In FY2009 the SBA is authorized to guarantee up to $17.5 billion of 7(a) loans, up to $7.5 billion for the 504 certified development company loans, up to $3.0 billion for Small Business Investment Company debentures, and up to $12.0 billion for the secondary market guarantee program. These are the same authorization levels as in FY2008. In addition, the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) appropriated $730 million for the SBA. The U.S. Postal Service generates nearly all of its funding—about $75 billion annually—by charging users of the mail for the costs of the services it provides. However, Congress does provide an annual appropriation to compensate the USPS for revenue it forgoes in providing free mailing privileges to the blind and overseas voters. Appropriations for these purposes were authorized by the Revenue Forgone Reform Act of 1993 (RFRA). This act also authorized Congress to provide the USPS with a $29 million annual reimbursement until 2035 to pay for the costs of postal services provided at below-cost rates to not-for-profit organizations in the early 1990s. Funds appropriated to the USPS are deposited in the Postal Service Fund, a revolving fund at the U.S. Department of the Treasury. The Postal Accountability and Enhancement Act (PAEA), which was enacted on December 20, 2006, first affected the postal appropriations process for FY2009. While the PAEA did not authorize any additional appropriations to the Postal Service Fund, it did alter the budget submission process for the USPS's Office of Inspector General (USPSOIG) and the Postal Rate Commission (PRC). In the past, the USPSOIG and the PRC submitted their budget requests to the USPS's Board of Governors. Accordingly, past presidential budgets did not include funding proposals for the USPSOIG and the PRC. Under the PAEA, both the USPSOIG and the PRC—which the PAEA renamed the Postal Regulatory Commission—must submit their budget requests to Congress and to the Office of Management and Budget (120 Stat. 3240-3241), and they are to be paid from the off-budget Postal Service Fund. The law further requires USPSOIG's budget submission to be treated as part of USPS's total budget, while the PRC's budget, like the budgets of other independent regulators, is treated separately. For FY2009, the USPS requested a $117.7 million appropriation to the Postal Service Fund. Of this amount, $88.7 million would be for revenue forgone, and $29 million would be for the annual RFRA reimbursement. This amount is $0.2 million less than USPS's FY2008 appropriation ( P.L. 110-161 , Title V). The USPSOIG requested a $241.3 million appropriation, and the PRC requested a $14 million appropriation. The President's FY2009 budget proposed a $322.2 million total appropriation to USPS. It included an $82.8 million appropriation to USPS for revenue forgone, no funds for the annual RFRA reimbursement, and a $239.4 million transfer of funds from the Postal Service Fund to the USPSOIG. Separately, the President's budget proposed a $14.0 million "transfer of funds" from the USPS's Postal Fund to the PRC. The House Committee on Appropriations recommended a total appropriation of $351.2 million, which includes $111.8 for USPS—$82.8 million for revenue forgone, $29 million for the RFRA reimbursement—and $239.4 million for the USPSOIG. Separately, the committee recommended a $14.0 million transfer of funds from the Postal Service Fund to the PRC. The committee also approved an amendment offered by Representative Jack Kingston that would have required the USPS to provide a "report on the cost effectiveness of and fuel consumption of a five-day delivery system and the efficiency and consumer demand of Saturday delivery services." On July 10, 2008, the Senate Committee on Appropriations reported S. 3260 ( S.Rept. 110-417 ), which would have provided funding in the same amounts as the House's proposal: $111.8 million for USPS, and $14.0 million and $239.4 million in transfers from the USPS's Postal Fund for the PRC and the USPSOIG. In its report, the committee declared that it believes that 6-day mail delivery is one of the most important services provided by the Federal Government to its citizens. Especially in rural and small town America, this critical postal service is the linchpin that serves to bind the Nation together. The committee also encouraged the USPS to expedite its efforts to assess service needs, reestablish postal facilities, improve mail delivery, and enhance product and service offerings to customers in New Orleans and other Louisiana communities affected by Hurricanes Katrina and Rita.... to seek additional savings resulting from lower [paper] waste disposal costs which accompany increased [paper] recycling.... [and] to routinely examine the cost, feasibility, and mission compatibility of other opportunities to fulfill its commitment to minimize the agency's impact on every aspect of the environment and demonstrate its commitment to environmental stewardship. Additionally, the committee directed the USPS not to proceed with the Sioux City, Iowa AMP until after the [Government Accountability Office (GAO)] has reported to Congress and the Committee has had an opportunity to review GAO's findings.... [and] to keep the Committee promptly and regularly informed on its [mail biohazard] treatment processes and to consult with the Committee on its future plans for securing mail irradiation services, including costs. Congress's decision to enact a continuing resolution presented, as the U.S. Government Accountability Office (GAO) put it, a "conundrum" for the USPOIG and the PRC. As mentioned above, Section 603 of the PAEA requires the USPOIG and the PRC to receive their funding through congressional appropriation. Additionally, the law makes these agencies' expenditures "subject to the availability of the amounts appropriated." A continuing resolution would extend the past year's appropriation law ( P.L. 110-161 ), which did not provide an appropriation for either the USPOIG or the PRC. (Again, under the pre-PAEA law, the USPS's Board of Governors funded the USPOIG and the PRC.) Thus, the enactment of a continuing resolution might have required the USPOIG and the PRC to shut down operations on October 1, 2008, the start of FY2009. To avert this situation, Congress included two provisions in the continuing resolution ( P.L. 110-329 ) that fund the USPOIG and the PRC for the duration of the continuing resolution: SEC. 140. Notwithstanding section 101, amounts are provided to carry out section 504(d) of title 39, United States Code, as amended by section 603(a) of the Postal Accountability and Enhancement Act (Public Law 109—435), at a rate for operations of $14,043,000, to be derived by transfer from the Postal Service Fund;" and SEC. 141. Notwithstanding section 101, amounts are provided to carry out section 8G(f)(6) of the Inspector General Act of 1978 (5 U.S.C. App.), as added by section 603(b)(3) of the Postal Accountability and Enhancement Act (Public Law 109—435), at a rate for operations of $233,440,000, to be derived by transfer from the Postal Service Fund. Ultimately, the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ) provided the USPS with an appropriation of $111.8 million, $82.8 million of which is to be used for revenue forgone, and $29.0 million is for the annual RFRA reimbursement. The act also approved transfers of $239.4 million and $14.0 million from the Postal Fund to the USPOIG and the PRC respectively. The explanatory statement accompanying the act states the following: The U.S. Postal Service should keep Congress apprised of any actions the Postal Service plans to take on the PRC recommendations [regarding alterations to universal postal service and the USPS's monopoly], including actions, if applicable, relating to five-day delivery service and its impact on fuel consumption. The Postal Service should continue its efforts to upgrade postal operations and improve customer service in Chicago, and to assess service needs, reestablish postal facilities, improve mail delivery, and enhance product and service offerings to customers in New Orleans and other Louisiana communities. The Postal Service should make every effort to maintain the U.S. Post Office in Danville, Virginia, and provide full postal services to the citizens of Danville. [Additionally, the USPS must] keep the Appropriations Committees promptly and regularly informed on its mail treatment processes and to consult with the Committees on its future plans for securing mail irradiation services, including costs. A court of record under Article I of the Constitution, the United States Tax Court is an independent judicial body that has jurisdiction over various tax matters as set forth in Title 26 of the United States Code . The court is headquartered in Washington, DC, but its judges conduct trials in many cities across the country. The President requested, and P.L. 111-8 provides, $48.5 million for USTC for FY2009, an increase of $3.2 million over the agency's FY2008 enacted appropriation. The Financial Services and General Government appropriations language includes general provisions which apply either government-wide or to specific agencies or programs. There also may be general provisions at the end of an individual title within the appropriations act which relate only to agencies and accounts within that specific title. The Administration's proposed language for government-wide general provisions was included in the FY2009 Budget, Appendix. Most of the provisions continue language that has appeared under the General Provisions title for several years. For various reasons, Congress has opted to reiterate the language rather than making the provisions permanent. Presented below are some of the government-wide general provisions that were included in P.L. 110-161 , the Consolidated Appropriations Act for FY2008, but that were not included in the FY2009 budget proposal. (The section numbers refer to the provisions as they appeared in P.L. 110-161 . Section 709, which prohibited payment to political appointees who are filling positions for which they have been nominated, but not confirmed. Section 749 of P.L. 111-8 prohibits appropriation of funds for the payment of services to any individual carrying out the responsibilities of any position requiring Senate advice and consent in an acting or temporary capacity after the second submission of a nomination for that individual to that position has been withdrawn or returned to the President. The provision became effective on January 20, 2009, and applies for each fiscal year thereafter. Section 717, which prohibited the payment of any employee who prohibits, threatens, prevents, or otherwise penalizes another employee from communicating with Congress. Section 714 of the House bill and the Senate bill as reported and Section 714 of P.L. 111-8 . Section 718, which prohibited the obligation or expenditure of appropriated funds for employee training that (1) does not meet identified needs for knowledge, skills, and abilities bearing directly upon the performance of official duties; (2) contains elements likely to induce high levels of emotional response or psychological stress in some participants; (3) does not require prior employee notification of the contents and methods to be used in the training and written end of course evaluation; (4) contains any methods or contents associated with religious or quasi-religious belief systems or "new age" belief systems; or (5) is offensive to, or designed to change, participants' personal values or lifestyle outside the workplace. Section 715 of the House and Senate bills as reported and P.L. 111-8 . Section 719, which prohibited the use of appropriated funds to implement or enforce employee non-disclosure agreements if they do not contain whistleblower protection clauses. Section 716 of the House and Senate bills as reported and P.L. 111-8 . Section 722, which required the approval of the Committees on Appropriations for the release of any "non-public" information, such as mailing or telephone lists, to any person or any organization outside the federal government. Section 719 of the House and Senate bills as reported and P.L. 111-8 . Section 733, which stated that Congress recognizes the United States Anti-Doping Agency as the official anti-doping agency for Olympic, Pan American, and Paralympic sports in the United States. Section 729 of the House and Senate bills as reported and Section 729 of P.L. 111-8 . Section 735, which prohibited the use of appropriated funds to implement or enforce restrictions or limitations on the Coast Guard Congressional Fellowship Program or to implement OPM's proposed regulations limiting the detail of executive branch employees to the legislative branch. Section 731 of the House and the Senate bills as reported and P.L. 111-8 . Section 737, which required agencies to provide information on e-government initiatives, including lines of business, in their FY2009 budget justifications. Section 733 of the House and Senate bills as reported and P.L. 111-8 . Section 738, which required appropriate executive department and agency heads either to transfer funds to, or reimburse, the Federal Aviation Administration to ensure the uninterrupted, continuous operation of the Midway Atoll airfield. Section 734 of the Senate bill as reported and P.L. 111-8 . Section 742, which precluded contravention of the Privacy Act. Section 739 of the House bill and section 740 of the Senate bill as reported and P.L. 111-8 . Section 744, which required OMB to submit a crosscut budget report on restoration activities for the Great Lakes. Section 741 of the House bill and Section 742 of the Senate bill as reported and P.L. 111-8 . Section 745, which prohibited funds to be used for federal contracts with expatriated entities. Section 742 of the House bill and Section 743 of the Senate bill as reported and P.L. 111-8 . Section 748, which required OMB to establish a pilot program to develop and implement an inventory to track the cost and size of service contracts, particularly those that have been performed poorly, in at least three cabinet-level departments. Section 746 of the Senate bill as reported and Section 747 of P.L. 111-8 . The FY2009 budget proposed a new Section 734 to provide a 2.9% pay (annual and locality pay combined) adjustment for federal civilian employees. The House bill, as reported, included the provision at Section 737(a), and the Senate bill, as reported, included the provision at Section 738(a) and would have provided a 3.9% pay adjustment. Division A, Section 142(a) of P.L. 110-329 provides a 3.9% pay adjustment for federal civilian employees, including employees in the Department of Homeland Security. The pay increase became effective on the first day of the first applicable pay period beginning after January 1, 2009. The pay adjustment for blue-collar workers in most locations is no less than the increase received by white-collar General Schedule (GS) employees in that location. Blue-collar workers in Alaska, Hawaii, and certain other non-foreign areas receive a pay adjustment that is no less than the increase received by GS employees in the Rest of the United States (RUS) pay area (Section 142(b)). The law provides that the pay raise will be paid from the appropriations for salaries and expenses made to each department and agency for FY2009 (Section 142(c)). These provisions apply notwithstanding any other provision of the joint resolution (Section 142(d)). The President allocated the pay raise between a 2.9% annual (basic) adjustment and a 1.0% locality pay adjustment in Executive Order 13483, issued on December 18, 2008. (Individuals who are paid under the schedule for the Senior Executive Service (SES) do not receive locality pay and those who are paid under the schedule for senior-level (SL) and scientific or professional (ST) positions will not receive locality pay after April 12, 2009, when a new SL and ST pay schedule authorized by P.L. 110-372 becomes effective.) Among new general provisions that were recommended by the House or Senate Committees on Appropriations and are included in P.L. 111-8 are these: OPM, or any other agency, is prohibited from using funds to implement regulations that would change competitive areas under reductions-in-force affecting federal employees. Section 745 of the House bill, Section 749 of the Senate bill as reported and Section 745 of P.L. 111-8 . Funds are prohibited from being used to implement the provisions on Regulatory Policy Officers in Executive Order 13422. Section 746 of the House bill and P.L. 111-8 . The federal government is expected to conduct its business "in an environmentally, economically, fiscally sound and scientifically defensible manner" in carrying out Executive Order 13423 related to management of the environment, energy, and transportation. Section 747 of the House bill and Section 748 of P.L. 111-8 . Federal employees will maintain their federal salary when called up to active duty in the National Guard and Reserve, with their agencies making up the difference between their military pay and their federal salary. Section 750 of the Senate bill as reported and Section 751 of P.L. 111-8 . Each executive branch department and agency is required to submit a report to the OMB Director that would state the total size of its workforce, including the number of civilian, military, and contract workers as of December 31, 2008. The report must be submitted within 120 days after the act's enactment. The OMB Director is required to submit a "comprehensive statement" to the House and Senate Committee on Appropriations on the workforce data of the departments and agencies and aggregate totals of civilian, military, and contract workers, within 180 days after the act's enactment. Section 753 of the Senate bill as reported and Section 752 of P.L. 111-8 . Section 735 of P.L. 111-8 expands the applicability of Section 739(a)(1) (Division D) of P.L. 110-161 , the Consolidated Appropriations Act of 2008, to all public-private competitions. Section 739(a)(1) of the act, which established certain requirements for public-private competitions, applied only to competitions that involve more than 10 federal government employees. Section 736 of P.L. 111-8 replaces the language found in Section 739(b) (Division D) of P.L. 110-161 and elaborates on the guidelines for insourcing new functions and agency functions performed by the private sector sources. This provision directs agency heads to implement required guidelines and procedures no later than 120 days after the date of enactment of this subsection (that is, Section 736(b)). GAO's deadline for submitting a report to certain congressional committees regarding the implementation of insourcing guidelines is 210 days after the date of enactment of this subsection. In this context, the term "insourcing" refers to considering using federal employees "to perform new functions and functions that are performed by contractors and could be performed by Federal employees." Public-private competitions that involve work performed by contractors are rare. Most public-private competitions involve work performed by agency employees. Opponents of the proposed revision may maintain that the feasibility, and hence the implications, of Section 735 are unclear. The requirement to consider using federal employees for new functions and for functions currently being performed by contractors might be affected by, for example, the availability of resources. That is, an agency might not have sufficient personnel to staff the new function, and it might not be able to obtain additional personnel. Potential critics may argue that if a function under consideration for insourcing is currently being performed by contractor personnel and an A-76 competition is required, an agency might not have sufficient resources to perform the tasks associated with a public-private competition. Section 737 of P.L. 111-8 prohibits using funds appropriated by this act or any other act for the announcement or commencement of a public-private competition or study that involves activities currently being performed by federal employees. This provision does not apply to public-private competitions in progress. In its report on H.R. 7323 , the House Committee on Appropriations explained that the "one-year moratorium on new A-76 studies" would provide "the new [presidential] Administration ... an opportunity to review and develop Federal workforce policies." In the absence of additional information, the meaning of "Federal workforce policies" is unclear in this context. Nevertheless, the moratorium could provide an opportunity for gathering data on the disposition of federal employees whose work was outsourced as a result of public-private competitions, or conducting an independent study of the savings and costs associated with public-private competitions. Opponents of this provision might assert that the moratorium will adversely affect the amount of savings that results from completed competitions. Since the early 1960s, U.S. policy toward communist Cuba has consisted largely of efforts to isolate the island nation through comprehensive economic sanctions, including prohibitions on U.S. financial transactions—the Cuban Assets Control Regulations (CACR)—that are administered by the Treasury Department's Office of Foreign Assets Control (OFAC). Restrictions on travel have been a key and often contentious component of U.S. efforts to isolate the Cuban government by denying it access to U.S. currency. The regulations do not ban travel itself, but place restrictions on any financial transactions related to travel to Cuba. Over the years, there have been numerous changes to the CACR regarding family travel. In March 2003, the regulations were eased to allow such travel to visit relatives within three degrees of relationship to the traveler (e.g., great-grandparents and second cousins). In June 2004, however, the restrictions were tightened to allow family travel only to visit immediate family once every three years for a period not to exceed 14 days. Permission from OFAC was required through a specific license. Previously, OFAC allowed family travel under a general license, which meant that there was no need to obtain special permission from OFAC. Under U.S. sanctions, some U.S. commercial agricultural exports to Cuba have been allowed since 2001 pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000, or TSRA (Title IX of P.L. 106-387 ). However, there are numerous restrictions and licensing requirements for these exports. For instance, exporters are denied access to U.S. private commercial financing or credit, and all transactions must be paid for in cash in advance or with financing from third countries. The Administration tightened sanctions on Cuba in February 2005 by further restricting how U.S. agricultural exporters may be paid for their product. OFAC amended the CACR to clarify that the term "payment of cash in advance" for U.S. agricultural sales to Cuba means that the payment is to be received prior to the shipment of the goods. This differs from the practice of being paid before the actual delivery of the goods, a practice that had been utilized by many U.S. agricultural exporters to Cuba since such sales were legalized in late 2001. U.S. agricultural exporters and some Members of Congress strongly objected to this "clarification" on the grounds that the action constituted a new sanction that violated the intent of TSRA, and could jeopardize millions of dollars in U.S. agricultural sales to Cuba. Then OFAC Director Robert Werner maintained that the clarification "conforms to the common understanding of the term in international trade." Since 2001 Cuba has purchased almost $2.7 billion in agricultural products from the United States. Overall U.S. exports to Cuba rose from about $7 million in 2001 to $404 million in 2004. U.S. exports to Cuba declined in 2005 and 2006 to $369 million and $340 million, respectively, but increased to $447 million in 2007. In 2008, U.S. agricultural exports to Cuba rose to $718 million, far higher than in previous years, in part because of the rise in food prices, but also because of increased Cuban needs in the aftermath of several hurricanes and tropical storms that severely damaged Cuba's agricultural sector. From 2000-2007, either one or both houses of Congress included provisions in the annual Treasury Department appropriations bill that would have eased U.S. economic sanctions on Cuba (especially on travel and on U.S. agricultural exports), but none of these provisions were enacted. The Bush Administration regularly threatened to veto legislation if it included any provision weakening sanctions on Cuba. In 2007, both the House-passed and Senate Appropriations Committee-reported versions of the FY2008 Financial Services and General Government Appropriations bill, H.R. 2829 , contained language that would have eased Cuba sanctions, but ultimately Congress dropped these provisions in the Consolidated Appropriations Act for FY2008 ( P.L. 110-161 ). In 2008, the House Appropriations Committee version of the Financial Services and General Government Appropriations bill for FY2009, H.R. 7323 , contained three provisions in Title VI that would have eased restrictions on the sale of U.S. agricultural exports and on family travel. Section 621 would have prohibited funds in the act from being used to administer, implement, or enforce new language in the Cuban embargo regulations added on February 25, 2005 (31 CFR Part 515.533) that requires that U.S. agricultural exports must be paid for before they leave U.S. ports. With regard to family travel, Section 622 would have allowed for such travel once a year, while Section 623 would have expanded such travel by a person to visit an aunt, uncle, niece, nephew, or first cousin. The committee's report to the bill, H.Rept. 110-920 , would have required the OFAC to provide detailed information on OFAC's Cuba-related licensing and enforcement actions. The Senate version of the FY2009 Financial Services and General Government Appropriations bill, S. 3260 , as reported by the Senate Appropriations Committee on July 14, 2008 ( S.Rept. 110-417 ), included three provisions easing Cuba sanctions. Section 618 (identical to Section 621 in the House version of the bill) would have prohibited funds in the act from being used to restrict payment terms for the sale of agricultural goods to Cuba. Section 619 would have eased restrictions on travel relating to the commercial sale of agricultural and medical goods to Cuba by allowing for such travel under a general license. Section 620 would have prohibited funds from being used to administer, implement, or enforce family travel restrictions that were imposed by the Bush Administration in June 2004. None of the Cuba provisions in S. 3260 or H.R. 7323 were included in the Consolidated Appropriations Act for FY2009 ( P.L. 110-329 ), which continued FY2009 appropriations for the Treasury Department through March 6, 2009 (at FY2008 levels). In 2009, however, the 111 th Congress included three provisions easing Cuba sanctions in Sections 620-622 of Division D of the Omnibus Appropriations Act, 2009 ( H.R. 1105 / P.L. 111-8 ) that was signed into law on March 11, 2009. (The provisions were identical to the Cuba provisions in the Senate version of the FY2009 Financial Services and General Government Appropriations bill, S. 3260 .) The provisions ease restrictions on family travel and travel for the marketing and sale of U.S. agricultural and medical exports to Cuba, and also were intended to ease payment provisions for U.S. agricultural exports to Cuba, although as discussed below, the Treasury Department's interpretation of this provision mitigated its practical effect. The joint explanatory statement to P.L. 111-8 also requires the Department of the Treasury to prepare a report within 90 days on the steps that it is taking to assess OFAC's allocation of resources for investigating and penalizing violations of the Cuba embargo with respect to the numerous other sanctions programs it administers. As part of the report, the Treasury Department is directed to provide detailed information on OFAC's Cuba-related licensing on its enforcement of the Cuba embargo. Travel for the Marketing and Sale of Agricultural and Medical Goods. Section 620 amends the Trade Sanctions Reform and Export Enhancement Act of 2000 to require the Secretary of the Treasury to issue regulations for travel to, from, or within Cuba under a general license for the marketing and sale of agricultural and medical goods. Such travel had required a specific license from OFAC, issued on a case by case basis. On March 9, 2009, Secretary of the Treasury Timothy Geithner stated in a letter published in the Congressional Record that the regulations issued pursuant to this provision "would provide that the representatives of only a narrow class of businesses would be eligible, under a new general license, to travel to market and sell agricultural and medical goods." The Secretary also maintained that "any business using the general license would be required to provide both advance written notice outlining the purpose and scope of the planned travel and, upon return, a report outlining the activities conducted, including the persons with whom they met, the expenses incurred, and business conducted in Cuba." On March 11, 2009, OFAC maintained that it would implement this provision in the coming weeks and promulgate regulations authorizing travel under the general license for the marketing and sale of agricultural and medical goods. Family Travel. Section 621 prohibits funds from being used to administer, implement, or enforce family travel restrictions that were imposed by the Bush Administration in June 2004. As noted above, those 2004 restrictions allowed family travel only to visit immediate family (grandparents, grandchildren, parents, siblings, spouses, and children) once every three years for a period not to exceed 14 days. Under the 2004 restrictions, a specific license was required from OFAC for such travel, and the authorized amount that family travelers could spend while in Cuba was limited to $50 a day. On March 11, 2009, OFAC provided guidance on its implementation of this omnibus provision that reinstated the authorization for family travel to Cuba that existed prior to the June 2004 restrictions. OFAC issued a general license authorizing family travel once every 12 months for an unlimited length of stay, and increased daily expenditure limits for family travelers to the same as all other authorized travelers to Cuba (State Department maximum per diem rate for Havana, currently $179 a day). The new general license also provides for an expanded definition of "close relatives" to mean any individual related to the traveler by blood, marriage, or adoption, who is no more than three generations removed from that person (e.g., great-grandparents and second cousins). Specific licenses may be issued on a case-by-case basis for additional visits during the 12-month period or for travel to visit a close relative who is not a national of Cuba. Payment of Cash in Advance. Section 622 prohibits funds in the Act from being used to administer, implement, or enforce an amendment to the Cuban embargo regulations issued on February 25, 2005, requiring that U.S. agricultural exporters using the "cash in advance" payment mechanism for selling their goods to Cuba must be paid in cash for their goods before the goods leave U.S. ports. As noted above, TSRA requires either the "payment of cash in advance" for such exports (or financing by third country financial institutions), but does not provide a definition of cash in advance. Prior to the February 2005 amendment to the Cuban embargo regulations, U.S. exporters could be paid for the goods before they were unloaded in Cuba. OFAC guidance on the implementation of this provision states that TSRA's statutory provisions remain in place that agricultural exports to Cuba be either paid for by "cash in advance" or financed using a third-country bank. Secretary of the Treasury Geithner provided additional guidance on the implementation of this provision in a letter published in the Congressional Record that states that, "exporters will still be required to receive payment in advance of shipment." This appears to continue the Bush Administration policy imposed in February 2005. Given the Secretary's interpretation, it appears the omnibus provision will have little, if any, practical effect. While the Secretary's response ameliorated the concerns that several Senators had regarding the provision, it also triggered concerns by other Senators who maintained that the Secretary's action ignores the legislative intent of the Cuba provisions to ease restrictions on agricultural sales to Cuba. | The Financial Services and General Government (FSGG) appropriations bill includes funding for the Department of the Treasury, the Executive Office of the President (EOP), the judiciary, the District of Columbia, and 26 independent agencies. Among the independent agencies funded by the bill are the General Services Administration (GSA), the Office of Personnel Management (OPM), the Small Business Administration (SBA), and the United States Postal Service (USPS). On September 30, 2008, President George W. Bush signed the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 (P.L. 110-329). Division A of P.L. 110-329 provided continuing appropriations for most accounts in the Financial Services and General Government accounts through March 9, 2009. Funding was generally at the same rate appropriated in P.L. 110-161, the Consolidated Appropriations Act, 2008. Division B of P.L. 110-329 provided GSA with an additional $182 million for courthouse construction, and provided SBA with an additional $799 million, almost of all which was for the disaster loan program account. On March 11, 2009, President Obama signed the Omnibus Appropriations Act, 2009 (P.L. 111-8), which provides $44.6 billion for FSGG programs and agencies, an increase of $385 million above the FY2009 requested amount and $58 million less than FY2008 enacted appropriations. The House Appropriations Committee had recommended $44.27 billion for FSGG agencies and programs for FY2009, and the Senate Appropriations Committee had recommended $44.75 billion. In addition, Title V of the American Recovery and Reinvestment Act (ARRA; P.L. 111-5) provided funding for three FSGG agencies: GSA received $5.85 billion, the Department of Treasury received $187 million, and SBA received $730 million. The newly established Recovery Act Accountability and Transparency Board was also funded through Title V of the ARRA, receiving $84 million. This report will be updated as events warrant. |
Iran has sought Russian assistance partly because of the limited alternatives and not necessarily because ofstrategic or ideological affinity between the twocountries. Iran's relationship with Russia is tempered by a lingering fear of Russian power and intentions. In 1907, Russia concluded a treaty with Britain dividing Iran into spheres of control. Russian troops occupied northern Iran during World War I. Soviettroops invaded again in 1941, in concert with Britain, when Iran appeared to become sympathetic to Nazi Germany. After World War II, the Soviet Unionrefused to withdraw completely from Iran and it set up two autonomous zones in northern Iran, which lasted until1946, when U.S. pressure forced theSoviets to withdraw completely. Iran's Islamic revolution, which triumphed in February 1979, considered anathemaSoviet ideology and its suppression ofIslam and other religious expression. The December 1979 Soviet invasion of Afghanistan revived Iranian fears thatMoscow might have territorial designson Iran. The Soviet Union also backed Iraq with arms sales, financial credits, diplomatic support, and militaryadvice, throughout the Iran-Iraq war(1980-1988). The Iran-Iraq war, which ended in August 1988, left Iran's conventional arsenal devastated, and the need for rearmament provided Iran and the SovietUnion an opportunity to pursue mutual interests. A U.S. military buildup in the Gulf during the Iran-Iraq war -designed to protect the free flow of oil in theGulf - had created concern in Moscow that the United States was attempting to establish hegemony in that strategicbody. Iran, partly because of U.S.efforts during the Iran-Iraq war to shut off worldwide arms sales to Iran, lacked a wide choice of willing suppliers,and the Soviet Union saw arms sales toIran as one way to broaden its influence in the Gulf. A February 1989 visit to Tehran by then Soviet ForeignMinister Edouard Shevardnadze, and hismeeting with the ailing Ayatollah Khomeini, signaled the beginning of a thaw in Iran's relations with the SovietUnion. Iran established an arms and technology relationship with the Soviet Union during a visit to Moscow by then parliament speaker Ali AkbarHashemi-Rafsanjani in June 1989, two weeks after the death of Ayatollah Khomeini. A joint communique at theconclusion of the visit said that the twocountries would collaborate in the "peaceful use of nuclear energy," and that the Soviet Union "agreed to bolsterthe military capacity of the IslamicRepublic." (3) The subsequent breakup of the Soviet Union in late 1991 raised Iran's importance in the strategic calculations of Russia, the successor to the Soviet Union ininternational affairs. Russia perceived an arms and technology relationship with Iran as a key part of an effort tomoderate Iranian behavior on Russia'ssouthern flank. After the dissolution of the Soviet Union in 1991, Russia and the former Communist leaders leftin charge in the six Muslim states of theformer Soviet Union (Azerbaijan, Turkmenistan, Tajikistan, Uzbekistan, Kyrgyzstan, and Kazakhstan) wereconcerned that Iran might try to spreadrevolutionary Islam into these new states. According to observers, Russia tacitly linked arms and technology salesto Iran's refraining from politicalmeddling in these states. An additional factor in Russian planning was the aftereffects of the 1990-1991 Persian Gulf crisis, which left the United States pre-eminent in the Gulf anddemonstrated the effectiveness of U.S. military technology. The war cemented the U.S. position as the primary armssupplier to the Persian Gulf monarchystates. U.N. sanctions imposed on Iraq after its August 1990 invasion of Kuwait included a worldwide armsembargo, removing one of the key Soviet armsclients from the international market. Russian officials viewed Iran as a key source of needed new sales tocompensate for the closure of these and otherarms markets. Attempting to curb Russia's arms and technology relationships with Iran, U.S. officials have consistently impressed upon their Russian counterparts thepossibility that Iran's historic resentment of past Russian actions in Iran might some day make Russia itself a targetof Iranian WMD. Iran and Russia arealso wary of each others' ambitions and claims on Caspian Sea energy resources, even though their positions on thedivision of resources in the sea havediffered little to date. (The two countries, along with Kazakhstan, Azerbaijan, and Turkmenistan, border the sea.) These arguments have not dissuadedRussia from selling arms and technology to Iran, and the Clinton Administration and Congress tried to use the threatof sanctions in efforts to achievenonproliferation goals. In a few cases, the Clinton Administration took the step of imposing sanctions on Russian entities dealing with Iran, although it was reluctant to sanction theRussian government, maintaining that the United States has broad objectives in Russia. Those objectives includedpromoting economic and political reform,mutual arms control and reduction, safeguarding nuclear material, and limiting the effects of the war in Chechnya. During 1999 and 2000, the ClintonAdministration worked constructively with Russia to try to contain the Islamist threat posed by the Taliban regimeof Afghanistan and its protected "guest,"Saudi-born terrorist financier Osama bin Laden. These objectives, according to some observers, sometimesoverrode calls within and outside theAdministration to closely link U.S. relations with Russia to the abandonment of its arms and technology relationshipwith Iran. Like its predecessor, the Bush Administration has been reluctant to risk broader relations with Russia over the Iran issue and has been reluctant to sanctionthe Russian government. Some Russian entities have been sanctioned for sales of weapons related technology toother state sponsors of terrorism: Libya,Sudan, and Syria. The Bush Administration's reluctance to strongly criticize Russia on proliferation issues has beenparticularly evident since the September11, 2001 attacks. Russia has been helpful to the United States in the response to the attacks, especially itsacquiescence to the U.S. use of bases in CentralAsia for the war effort in Afghanistan. In 1991, Soviet arms ordered by Iran in 1989 began flowing to the Islamic Republic. Possibly because of fluctuations in Iranian oil revenues and its largedebt burden, it appears that Russia delivered fewer arms than Iran had originally ordered, and deliveries tapered offby the mid 1990s. Total deliveries toIran by Russia include about 30 MiG-29 and 30 Su-24 combat aircraft, (4) about300 T-72 tanks, (5) SA-5 and SA-7 surface-to-air missile systems, and threeKilo-class diesel submarines, the last of which arrived in January 1997. The submarine purchases represented thefirst deployment of the vessels by acountry in the Gulf and raised concerns among U.S. naval officials of a heightened threat to U.S. naval andinternational commercial shipping in the strategicwaterway. The purchases and their strategic implications drew considerable attention in early 1992, when then CIA Director Robert Gates testified before the HouseArmed Services Committee that Iran was planning to spend $2 billion per year to rebuild its conventional arsenaland try to become the pre-eminent PersianGulf power. (6) In response to these assessments and to reports of Iran'sattempts to acquire WMD and delivery means, Congress passed the Iran-Iraq ArmsNonproliferation Act of 1992 (Title XVI of the National Defense Authorization Act for FY1993, P.L. 102-484 ). That law requires sanctions against foreignfirms (a ban on U.S. government procurement from and technology export licenses to the entity) and foreigncountries (a suspension of U.S. economicassistance, and of U.S. technical exchanges and assistance) that "contribute knowingly and materially to the effortsby Iran or Iraq ... to acquire chemical,biological, and nuclear weapons (7) or to acquire destabilizing numbersand types of advanced conventional weapons." As discussed below (see section onChina), the law did not precisely define "destabilizing numbers and types" of advanced conventional weapons,thereby giving the President discretion tointerpret the Act's requirements and to decide whether or not to impose sanctions under the Act. Russian Pledge to the United States. Clinton Administration officials argued that the threat of imposingsanctions under the Act helped the United States extract a formal pledge from Russia in June 1995 not to enter any new arms contracts with Iran. Thatpledge was required for the United States to accede to Russia's membership in a multilateral export control regimeknown as the Waasenaar Arrangement, asuccessor to the Cold War era Coordinating Committee for Multilateral Export Controls (COCOM). The pledgewas obtained after numerous U.S.-Russiandiscussions on the issue, including at the Clinton-Yeltsin summits in Vancouver, Canada (April 1993), Washington(September 1994), and Moscow (May1995). Delivering a summary of the achievements of the 1995 Moscow summit, an Administration briefer statedthat "The two Presidents have resolvedsome outstanding issues associated with arms sales to Iran, and as soon as those are recorded and in agreement, it'llbe possible to welcome Russia'sparticipation as a founding member of the new post-COCOM regime." (8) Remaining issues were resolved to the Administration's satisfaction in June 1995,and Russia subsequently provided the Administration with a list of military items delivered, or yet to be delivered,under existing contracts with Iran. (9) The New York Times reported on October 13, 2000 that, under the understanding reached with Russia, all deliveries to Iran were to end by December 31,1999, and that Russia did not honor that element of the arrangement. (10) Apartial text of a classified "Aide Memoire" setting out some elements of theU.S.-Russian understandings reached in 1995 regarding Russia's arms sales to Iran was printed in the Washington Times on October17, 2000. (11) The printedAide Memoire notes that "Russia's obligation not to conclude new contracts and other agreements on transfers ofarms and associated items to Iran willenter into force upon Russia's invitation to participate in the development of the new regime." The reference to the"new regime" seems a clear reference tothe soon to be established Wassenaar Arrangement. (12) Another point in theAide Memoire of 1995 states that the Russians were precluded from "therenegotiation or modification of existing contracts so as to increase the type or quantity of arms-related transfersfor which Russia is currently obligated."The Aide Memoire makes reference to an Annex (not published), which is part of the overall understanding, thatsets out "planned Russian transfers to Iran"and is to represent "the totality of the existing obligations that Russia reserves the right to fulfill pursuant to itsundertakings." The Russians, according to theAide Memoire, are to "terminate all arms-related transfers to Iran not later than 31 December 1999." (13) The New York Times , in a October 13, 2000 story,reported that a "classified annex" specified weapons Russia "was committed to supply to Iran: one Kilo-classdiesel-powered submarine, 160 T-72 tanks,600 armored personnel carriers, numerous anti-ship mines, cluster bombs and a variety of long-range guidedtorpedoes and other munitions for thesubmarine and the tanks." This story also noted that "Russia had already provided Iran with fighter aircraft,surface-to-air missiles, and other armoredvehicles." (14) The 1995 Aide Memoire also states that in view of the undertakings contained in the "Joint Statement (15) and this Aide Memoire, the United States isprepared to take appropriate steps to avoid any penalties to Russia that might otherwise arise under domestic lawwith respect to the completion of thetransfers disclosed in the Annex for so long as the Russian Federation acts in accordance with these commitments." The Aide Memoire also adds that, "Thisassurance is premised on the assumption that the Russian disclosures in the Annex are complete and fully accurate." The United States added that it wished"to make clear that while noting Russia's interest in fulfilling its preexisting obligations, it in no way endorses suchtransfers." (16) In early November 2000, following the spate of U.S. press articles about the Aide Memoire, Russia informed the United States that, as of December 1, 2000,Russia would no longer consider itself bound by the pledge not to enter into new arms deals with Iran. In responseto U.S. criticism of Russia's shift, Russiaassured the United States it would sell only "defensive" weapons to Iran, a characterization that was unsatisfactoryto the Clinton Administration. A lateDecember 2000 visit to Iran by Russia's Defense Minister resulted in an agreement for Russia to train Iranianmilitary personnel. New sales of Russian armsreportedly were discussed but none were announced. On October 2, 2001, Iran and Russia signed an agreementthat provides Iranian arms purchases overthe next 5 years, reportedly to include new MiG-29 and Sukhoi combat aircraft and anti-ship missiles, as well asthe S-300 air defense system (the Russiancounterpart of the U.S. "Patriot"). According to U.S. government data, in 2001 Iran signed arms purchaseagreements valued at about $700 million (17) ,which appears to coincide with or include the announced agreement with Russia. The Bush Administration could choose to impose sanctions on Russia for the new sales to Iran under legislation passed by Congress in 1996; the legislationattempts to punish suppliers of conventional arms to Iran and other countries on the U.S. "terrorism list." TheAnti-Terrorism and Effective Death PenaltyAct of 1996 ( P.L. 104-132 ) built on the Iran-Iraq Arms Nonproliferation Act by requiring a cutoff of U.S. aid tocountries that aid or sell arms to countrieson the terrorism list, of which Iran is one. This law, which added a section 620H to the Foreign Assistance Act,imposes sanctions for any arms sales, notonly those considered "destabilizing in number and type." The sanctions apply only to "lethal military equipmentprovided under a contract entered intoafter the date of enactment" (April 24, 1996). The Clinton Administration considered Russian arms sales to Iranas part of a contract signed before the April1996 law was enacted, and no penalties for sales to Iran were imposed. Nor did the Clinton Administration issuea waiver to the provision in order to avoidsanctioning Russia for the Iran sales. The Bush Administration might be taking a similar position; no sanctionsagainst the Russian government or Russianentities have been imposed for the new arms agreements with Iran, although the Administration position will likelybecome clearer if and when actualdeliveries begin. Both the Clinton and George W. Bush Administrations have sanctioned Russian entities under this provision for arms sales to other state sponsors ofterrorism. In April 1999, the Clinton Administration sanctioned three Russian entities under this provision for armssales to Syria, but the Russiangovernment was not sanctioned. In September 2002, the Bush Administration imposed sanctions under thisprovision on three Russian entities for sales toLibya, Sudan, and Syria, while electing not to sanction the Russian government. The three entities sanctioned inSeptember 2002 are the Tula DesignBureau of Instrument Building; the State Scientific Product Enterprise, Bazalt; and Rostov Air Frame Plant 168. Since late 1996, U.S. officials and published reports have cited Russia, which has been a formal member of the MTCR since August 8, 1995, as a primarysupplier of Iran's ballistic missile programs. Press reports and U.S. official statements and reports since 1997 haveindicated that Russian entities haveprovided Iran's missile programs with training, testing equipment, and components including specialty steels andalloys, tungsten coated graphite,gyroscopes and other guidance technology, rocket engine and fuel technology, laser equipment, machine tools, andmaintenance manuals. The Russian technology assistance to Iran frustrated Clinton Administration and Congress. Through a combination of engagement and selected impositionof sanctions, the Clinton Administration and Congress sought to enlist greater Russian government cooperation inhalting the technology flow, with mixedsuccess. Critics in Congress took a different view, arguing for broad and sustained application of sanctions onRussia and its entities on the grounds that theRussian government has been insincere in its pledges to crack down on technology exports to Iran by its entities. In the 105th Congress, H.R. 2709 , the Iran Missile Proliferation Sanctions Act, passed both chambers by large margins. The bill requiredsanctions, including suspension of U.S. government assistance, on foreign entities (including governmental entitiesoperating as businesses) that assist Iran'sballistic missile programs. However, the Administration vetoed the bill on June 23, 1998 on the grounds that doingso would likely make Russia morerecalcitrant rather than promote cooperation to stop the transfers. As justification for the veto, the Administrationcited a January 1998 Russian decreetightening technology export controls and a May 1998 implementing directive as evidence of improved Russiangovernment cooperation. In an effort to atleast appear cooperative, Russia also began an investigation of eight entities for criminal violations of Russiancontrols on exports to Iran. Administration policy on the issue appeared to suffer a setback in July 1998 - only one month after vetoing H.R. 2709 - when Iran first testedits Shahab-3 missile. On July 28, 1998, one week after that test, the Clinton Administration took steps to forestallcongressional action to override the vetoof H.R. 2709 by issuing Executive Order 13094. The order expanded a previous executive order (12938 ofNovember 14, 1994) to enable thePresident to ban U.S. trade with, aid to, and procurement from foreign entities assisting WMD programs in Iran orelsewhere. The sanctions contained in theexecutive orders were similar to those provided in the Iran-Iraq Arms Nonproliferation Act (see above), althoughthe executive orders focused onsanctioning supplier entities, not governments. Pursuant to the amended executive order, the Clinton Administrationsanctioned seven Russian entities (18) believed to be assisting Iran's Shahab program. On January 12, 1999, the Administration sanctioned three additionalRussian entities (19) believed helpingIran's missile and nuclear programs. At the same time, the Clinton Administration tried to provide incentives for Russian cooperation and to prevent this issue from derailing progress on broaderU.S.-Russian issues. Claiming that Russia had made progress on export controls, in July 1999 the ClintonAdministration increased the quota of Russianlaunches of U.S. commercial satellites from 16 to 20 launches, with additional launches linked to further exportcontrol progress. The Administrationpraised Russia in April 2000 for reprimanding the rector of Baltic State Technical University (BSTU) - one of theentities sanctioned by the United States -and cancelling the training of Iranian technical students there. That step was taken after the election of VladimirPutin as President of Russia, and appearedto signal a U.S. hope and expectation that Putin would be more cooperative with the United States on this issue thanwas his predecessor, Boris Yeltsin. OnApril 24, 2000, the United States extended its sanctions on BSTU to the rector, Yuri Savelyev, and simultaneouslydropped the sanctions on two othermissile-related entities - the INOR Scientific Center and the Polyus Scientific Production Associates (guidancetechnology). Sanctions on the latter entitieswere dropped on the grounds that, according to the Clinton Administration, they had ended their technologyrelationships with Iran. In December 2000,although noting that individual Russian experts continued to sell their expertise to Iran, the Clinton Administrationallowed the quota on U.S. commercialuse of Russian space launches to expire at the end of 2000. U.S. officials justified the move on the grounds thatRussia, in their view, had established bettercontrols over exports by its aerospace firms. (20) Although progress with Russia has ebbed and flowed, Congress sought stronger steps to end the missile assistance to Iran. H.R. 2709 , the billvetoed in 1998, was revived in May 1999 with the introduction of H.R. 1883 , the Iran Nonproliferation Act. In contrast to its predecessor andto the Iran-Iraq Arms Nonproliferation Act, H.R. 1883 authorized , rather than mandated, thePresident to impose sanctions on Russian entitiesthat assisted Iran's missile as well as other WMD programs. The bill passed both chambers unanimously, and wassigned into law on March 14, 2000 ( P.L.106-178 ). The sanctions authorized by the new law include: a ban on U.S. government procurement from or contracts with the entity; a ban on U.S. assistance to the entity; (21) a prohibition of U.S. sales to the entity of any defense articles or services; and denial of U.S. licenses for exports to the entity of items that can have military applications ("dual use items"). The bill also included a provision, not contained in the earlier version, that banned U.S. extraordinary payments to the Russian Aviation and Space Agencyin connection with the international space station unless the President can certify that the agency or entities underthe Agency's control had not transferredany WMD or missile-related technology to Iran within the year prior. The provision contains certain exceptions toensure the safety of astronauts who willuse the space station and for certain space station hardware. In his statement upon signing the bill into law, thePresident noted that Russia "continues to bea valued partner in the International Space Station." On October 16, 2000, the National Aeronautics and SpaceAdministration (NASA) testified before aHouse International Relations Committee oversight hearing on implementation of the Iran Nonproliferation Act. The U.S. space agency indicated that it hascontinued extraordinary payments to Russian entities for work on the space station under an exemption in the Actallowing for payments to ensure spacecrew safety (Section 6F). Available evidence suggests that some Russian assistance to Iran's ballistic missile programs continues. In its report for Congress in January 2002, the CIAsaid "Russian entities during the period (first half of 2001) continued to supply a variety of ballistic missile relatedgoods and know how to countries such asIran, Libya, India, and China." The Bush Administration has not added any Russian entities to those alreadysanctioned for WMD technology sales to Iran. Since January 1995, when Iran signed an $800 million contract with Russia for the completion of the 1,000 megawatt nuclear power reactor at Bushehr, theU.S. Administration and Congress have been concerned about the potential for Iran to use the project to advancea nuclear weapons program. Although thework on Bushehr is far behind its original schedule, Russia asserts that the project will be operational by 2005. Iranian technicians have begun nuclear plantoperations training in Russia. In July 2002, Russia raised U.S. concerns by floating a plan to build five morereactors in Iran over the next ten years; U.S.pressure contributed to Russia's backtracking on the plan and its subsequent statements that the expanded projectmight not go forward. When the Bushehr contract was first signed, some in Congress said that sanctions should have been imposed on Russia under the Iran-Iraq ArmsNonproliferation Act. However, the Clinton Administration asserted that the law did not specifically requiresanctions for transfers of civilian nucleartechnology permitted to be transferred under the NPT. In taking this position, the Clinton Administration signaledthat it preferred to work with Russia toend, or at least limit, the scope of the project. The Clinton Administration also sought to separate the issue frombroader U.S. - Russian relations by waiving- when possible - provisions of recent foreign aid laws making one half (or more) of U.S. aid to the Russiangovernment contingent on ending assistance toIran's nuclear and missile programs. The Clinton Administration limited the types of aid subject to cuts so that aidcould still flow to local Russiangovernments and for humanitarian and nuclear dismantlement programs. (22) On the other hand, as noted above, the Administration did impose sanctions ontwo Russian entities - the Scientific Research and Design Institute of Power Technology (NKIET) and the D.Mendeleyev University of ChemicalTechnology - when there was firm evidence that these entities were continuing to help Iran in the nuclear field. The Clinton Administration's decision to rely primarily on engagement rather than punishment of Russia, a policy continued by the Bush Administration,has yielded some benefits. The Clinton Administration obtained Russian pledges not to supply Iran with anytechnology that could contribute to a nuclear weapons program, including uranium enrichment equipment. In September 2000, the ClintonAdministration successfully persuaded Russia to block a saleto Iran by one of its research centers of a laser device that the United States believed Iran would only use for anuclear weapons program. In regionaldiplomacy, the Clinton Administration dealt the Bushehr project a setback in March 1998 when visiting Secretaryof State Albright initialed an agreementwith Ukraine under which it pledged to drop the sale of the turbines for the reactor. In mid-2002, in a further nodto U.S. concerns, Russia finalizedagreement with Iran for Russia to reprocess spent nuclear fuel from the Bushehr project. Some in Congress believe that the United States is indirectly helping the Bushehr project - a project the United States strongly opposes - and that such aidshould cease. About $1.5 million of the budget of the International Atomic Energy Agency (IAEA), an organizationto which the United States contributes,has gone toward technical assistance (primarily training in nuclear safety) to the Bushehr project during 1995-1999. Section 307 of the Foreign AssistanceAct of 1961 exempts the IAEA (and UNICEF) from a ban on U.S. contributions to programs in countries namedin that section. Ending this IAEAexemption was the subject of bills ( H.R. 1477 and S. 834 ) in the 106th Congress, whichwere not adopted. In the 107th Congress,the measure passed as Subtitle B of an FY2002 foreign relations authorization bill ( H.R. 1646 , P.L. 107-228 ). On the other hand, somemaintain that funding IAEA assistance to Bushehr ensures that the United States can obtain information on theBushehr project. The IAEA also is helpingensure the plant will be operated safely when it becomes operational. Recent U.S. proliferation reports say that Iran has sought chemical weapons technology and chemical precursors from Russia (and China) in order to create amore advanced and self-sufficient chemical warfare infrastructure. According to those same U.S. reports, Iran hasexpanded its efforts to acquire"biotechnical" materials and expertise from entities in Russia and elsewhere. Press reports indicate Iran hasrecruited Russian scientists to work on itsbiological program. (23) U.S. official statements on efforts to dissuade Russian WMD-related technology sales generally omit discussion of chemical or biological technology. U.S.statements note that outside assistance to Iran's chemical and biological program is "difficult to prevent, given thedual-use nature of the materials, theequipment being sought, and the many legitimate end uses for these items." The relative absence of publicdiscussion could, alternately, suggest that theprovision of Russian chemical or biological technology to Iran has not reached the level at which intense U.S.diplomatic pressure has been deemedwarranted. Iran and China have not been close ideologically or politically, but Iran was never occupied or invaded by China's troops and Iran does not fear China'slong-term ambitions as Iran might fear those of Russia. Under the Pahlavi dynasty, Iran cut diplomatic relationswith China after the People's Republic ofChina (PRC) was established in 1949. As PRC-Soviet relations worsened in the late 1960s and the 1970s, relationsthawed as China saw a strong Iran -even though it was governed by the pro-U.S., anti-Communist Shah Mohammad Reza Pahlavi - as an obstacle toSoviet aims to expand its influence in thePersian Gulf, according to articles in China's press during that period. After the fall of the Shah at the hands of theIslamic revolution in February 1979,Iran-China relations warmed further. In January 1980, China abstained on a U.N. Security Council vote to sanctionIran for the November 4, 1979 seizure ofthe U.S. Embassy in Tehran. In an effort to bolster Iran against Iraq, which was backed by the Soviet Union, China established itself as a key arms supplier to Iran soon after the Iran-Iraqwar broke out in September 1980. In June 1985, at the height of the Iran-Iraq war, then parliament speaker AliAkbar Hashemi-Rafsanjani visited Beijingand reportedly signed missile technology agreements with China. (25) Thatvisit apparently opened Iran to the supply of Chinese-made Silkwormsurface-to-surface anti-ship missiles (55 mile range). During the latter stages of the Iran-Iraq war, which ended inAugust 1988, Iran fired Silkworms at U.S.Navy-escorted oil tankers in the Persian Gulf and at Kuwaiti oil terminals. During 1987-88, China reportedly builtIran's infrastructure to design, build, andtest ballistic missiles and to extend their ranges. In May 1989, then President (now Supreme Leader) Ali Khamene'i visited China to cement China-Iran defense and political relations. Iran's strategicrationale for buying arms and technology from China is, in part, to counter U.S. pressure on Iran by buildingalliances with other big powers. China seesarms sales to Iran as a means to perhaps divert some U.S. military forces from areas near Taiwan and possibly asretribution for continued U.S. arms sales toTaiwan. Others note that China has not cultivated Iran exclusively, but has sought to expand its influence broadlywithin the Middle East. Those who holdthis view point out that China maintains good relations with moderate Arab states including Saudi Arabia and Egypt. Some experts perceive China'sinterests in Iran as more narrow: China wants to guarantee itself supplies of oil to feed its growing economy, andto earn revenues from sales of weapons andtechnology to Iran. As in the Russia case, the United States has a broad agenda with the PRC. Aside from nonproliferation issues, the high priority issues on the U.S.-Chinaagenda include: encouraging a peaceful resolution of the dispute between the PRC and Taiwan, U.S.-PRC traderelations, and China's human rights record. The Clinton Administration maintained that it needed to keep the broader issues in mind when faced with a decisionwhether or not to impose sanctions onChina for its relations with Iran. Some, particularly those who believe the United States should do more to containthe PRC's growing strategic power,argued that the Clinton Administration was too willing to accept China's nonproliferation pledges at face value. Some in Congress have taken this latterview and want to ensure that China is sanctioned if it provides WMD-related technology to Iran. The ClintonAdministration efforts slowed China'scooperation with Iranian WMD programs in some areas. However, a visit to China by President Khatemi in June2000 raised U.S. fears that new WMD orweapons cooperation would be agreed between Iran and China, but both countries strongly denied that the visitinvolved or resulted in new militarycooperation agreements. The Bush Administration has sanctioned a relatively large number of China's entities for proliferation activities with Iran, even as the Bush Administrationhas cultivated China as a partner in the overall war on terrorism spawned by the September 11, 2001 attacks. This,combined with U.S. government reportsover the past few years, suggests that China continues to provide advanced conventional arms and WMD-relatedtechnology to Iran. Then leader of ChinaJiang Zemin visited Iran in April 2002 and signed agreements covering, according to official Iranian and Chinesestatements, oil, gas, trade, transportation,educational and cultural exchange, and information technology. It is not known from open sources whether or notWMD or arms related technologytransfers were discussed. Over the past five years, China has supplied Iran with artillery pieces , tanks, the Chinese version of the SA-2 surface-to-air missile, and 24 F-7 combataircraft, but it is China's past sales to Iran of anti-ship cruise missiles that have caused the most significant U.S.concern. The anti-ship missiles improveIran's ability to strike at U.S. forces and installations or commercial shipping in the Gulf. China has delivered toIran 15 Hudong fast attack craft, as well asten other French-made patrol boats. Of the 15 Hudong s, five were delivered to Iran's RevolutionaryGuard, which is a bastion of Iran's hardline politicalelements, and ten went to its regular Navy. The ships are outfitted with about 150 C-802 anti-ship cruise missile(75 mile range), also supplied by China. (The C-802 is not covered under the Missile Technology Control Regime because its range and payload are underthe regime's threshold.) Iran tested theChinese-supplied air-launched C-801K missile (25 mile range) on one of its U.S.-made F-4 Phantom aircraft (26) in June 1997, prompting Secretary ofDefense Cohen to assert that Iran posed a "360 degree threat" to U.S. forces. In October 2000, Iran's RevolutionaryGuard Navy reportedly tested a"modified" version of a Chinese-made anti-ship missile, possibly indicating Iran had increased its range. (27) Congressional debate about the Chinese anti-ship missile transfers centered on whether the transfers, which occurred in the early 1990s, should havetriggered U.S. sanctions under the Iran-Iraq Arms Nonproliferation Act of 1992. (28) In mid-1996, some in Congress pressed the Clinton Administration toimpose sanctions on China for the C-802 transfers, and the Clinton Administration said it considered that step. InApril 1997, electing to negotiate the issuewith China rather than impose sanctions, the Administration determined that the C-802 and C-801 transfers to Iranwere "not of a destabilizing number andtype" to warrant U.S. sanctions. Some in Congress disagreed with the determination, and the disagreementsharpened after Secretary Cohen's June 1997statement that the C-801K posed a new threat to U.S. forces in the Gulf. The issue of sanctions for the C-802 and C-801 sales quieted when China pledged to Secretary of State Albright in September 1997, and again to Secretaryof Defense Cohen in January 1998, that it would halt further sales of C-802's and C-801's to Iran. U.S. officials saythat China is upholding this pledge. Other reported sales by China to Iran appear to violate the spirit, if perhaps not the letter, of China's pledges. The Washington Times reported on August 19,1999, that China had agreed to modify Iran's FL-10 anti-ship cruise missiles (20-30 mile range) to enable them tobe fired from helicopters or fast attacknaval craft. U.S. officials said the reported deal would not technically violate China's pledges because thoseassurances applied only to the C-802 andC-801. (29) In May 2002, the Washington Times reported that China had soldIran additional patrol boats designed to carry up to eight C-701 anti-shipmissiles. That missile has a range of about 10 miles, and China reportedly shipped some of those missiles to Iranearly in 2002. (30) Recent U.S. CIA and DoD proliferation reports have said that entities in China continue to supply ballistic missile-related technology and advice to Iran'sShahab missile program. In the mid-1990s, there were numerous press reports, such as a November 21, 1996 Washington Times report quoting U.S.intelligence sources, that China had sold Iran guidance technology (gyroscopes and accelerometers), special steelsuited to missile fabrication, and missilesequipment, possibly for use in the Shahab program. There have been no confirmed deliveries of entire M-9 or M-11ballistic missiles to Iran, both of whichare considered to have range/payload combinations that are covered by MTCR guidelines. The Clinton Administration tried to limit China's missile assistance to Iran primarily through diplomatic engagement. On November 22, 1996, and again onSeptember 10, 1997, the State Department said the United States had not determined that China had violated itsMarch 1992 commitment to adhere to theterms of the MTCR. In March 1998, the Clinton Administration reportedly offered China expanded cooperationon commercial space ventures in return foran end to all Chinese assistance to Iran's ballistic missile programs and its joining the MTCR. In November 2000,the Clinton Administration negotiated anagreement with China under which China issued (November 21, 2000) a public statement that it would not assistother countries' efforts to develop ballisticmissiles and that it would adopt a control regime for exports of technology that could be used for ballistic missiles. The U.S. insistence that China join theMTCR was dropped, and the Clinton Administration said it would not sanction China for past missile assistanceto Iran or Pakistan and that U.S.-Chinacommercial space cooperation would resume. Simultaneously, recipient entities in Pakistan and Iran (the Ministryof Defense and Armed Forces Logistics,the Armed Forces Logistics Command, and the Defense Industries Organization) were sanctioned, although thesanctions (a ban on U.S. trade with andexports to the sanctioned entities) were already in force under broader U.S. sanctions laws and regulations on Iran. Some subsequent press reports seemed to support critics who urged the United States not to rely too heavily onbilateral anti-proliferation agreements withChina. On January 26, 2001, the Washington Times quoted unnamed U.S. officials as saying that theChinese firm Norinco (China North IndustriesCorporation) had recently shipped specialty metals and chemicals used in missile production to Iran's Shahid (MartyrBakeri Industrial Group, a defensefirm involved in Iran's missile program. (31) The Bush Administration has sanctioned several entities of China that appear to have been involved in missile proliferation activities, althoughAdministration pronouncements and reports generally list a number of entities without specifically identifying thetype of equipment transferred or Iranianprogram assisted. The sanctions were imposed on January 16, 2002, May 9, 2002, and July 9, 2002, underauthorities including the Iran-Iraq ArmsNonproliferation Act and the Iran Nonproliferation Act. Many of the names of the entities sanctioned appear toduplicate each other, which could reflectimprecise information on the exact name of the entity alleged to be transferring technology to Iran. In other cases,entities sanctioned are repeated insuccessive designations, suggesting that these entities could be involved in several of Iran's WMD programs. Forthe list of sanctioned entities, see FederalRegister: January 24, 2002; May 16, 2002; and July 25, 2002, where these sanctions are announced. In the nuclear field, the Clinton Administration extracted significant pledges from China to limit its relationship with Iran. In February 1993, Chinacontracted to construct in Iran two 300 megawatt nuclear reactors and to provide related technology and training. (32) In mid-1997, Administration officialssaid they had blocked a deal between Iran and a Chinese government-owned firm for the sale to Iran of a "uraniumconversion facility," although Chinareportedly gave Iran blueprints for the facility. (33) In advance of the October1997 U.S.-China summit, the Administration said it received a firm writtenassurance that China would end its nuclear relations with Iran (not build the reactors contracted in 1993), althoughtwo small ongoing projects would becompleted. One project is to supply Iran's civilian nuclear program with a zirconium production facility, for whichIAEA safeguards are not required, andthe other is to build a small research reactor, which the United States judged does not pose a significant proliferationconcern. The Administration apparently extracted the PRC pledge by promising, in exchange, to certify to Congress that China is cooperating to end nuclearproliferation. This certification, required by P.L. 99-183 and issued in January 1998, opened China to nuclearcooperation with the United States under a1985 bilateral agreement. Congress did not formally disapprove within the thirty legislative day period, and thecertification took effect on March 18, 1998. Published reports by U.S. intelligence agencies in 2000 and 2001 said that China was living up to that pledge, butthe more recent reports by U.S.intelligence, and public statements in June 2002 by senior State Dept. official John Wolf, have refrained from thatpositive assessment. Specific allegationsof any nuclear transfers from China have not been made public. Since the early 1990s, U.S. officials have identified firms in China as suppliers of Iran's chemical weapons program, although some U.S. officials attributedthe assistance to Iran to a lack of export controls by China's government. On May 22, 1997, Secretary of StateAlbright imposed U.S. sanctions, under theChemical and Biological Warfare Elimination Act of 1991 ( P.L. 102-182 ), on two PRC firms (Nanjing ChemicalIndustries Group and Jiangsu YongliChemical Engineering and Technology Import/Export Corp.), five PRC citizens, and one Hong Kong firm (CheongLee Ltd.) for knowingly and materiallyaiding Iran's chemical weapons programs. The Clinton Administration said there was no evidence the PRCgovernment was aware of the transfers. On June10, 1997, the State Department announced suspension of an Exim Bank loan for a U.S. firm's exports to the Nanjingfirm above. In June 1998, Chinaappeared to address U.S. concerns by expanding chemical export controls to include ten chemicals not banned forexport under the Chemical WeaponsConvention but included in the more restrictive "Australia Group" chemical export control list. The sanctions onthe entities remain in effect. The Bush Administration clearly believes that entities in China are assisting Iran's chemical weapons program. In four separate determinations, the BushAdministration has imposed sanctions on several chemical firms based in China - June 14, 2001; January 16, 2002;May 9, 2002; and July 9, 2002. In thefirst three cases, the sanctions were imposed pursuant to the Iran Nonproliferation Act of 2000. In the latest case,sanctions were imposed pursuant to theIran-Iraq Arms Nonproliferation Act and the nonproliferation provisions of the Arms Export Control Act and theExport Administration Act. One firmsanctioned by the Bush Administration is the Jiangsu Yongli Chemicals and Technology Import-Export Corporation,the same firm sanctioned by theprevious administration. Other sanctioned entities with names that clearly indicate their involvement in the chemicalindustry include: Liyang ChemicalEquipment Company, and the Zibo Chemical Equipment Plant. Overview of North Korea-Iran Relations. NorthKorea has tended to align itself with countries in theMiddle East, such as Iran, Libya, and Syria, that have opposed U.S. policy in the region or have hosted terroristorganizations. Pyongyang's motive,according to many observers, has been to serve its own interests by building alliances with countries that opposeU.S. global influence. North Koreasupported the 1979 Islamic revolution in Iran, which overthrew a key U.S. ally, the Shah, and it provided missiletechnology to Iran to help it in its 1980-88war with Iraq. The United States backed Iraq in that war. In their statements and cooperation, Iran and North Koreaappear to try to reinforce each other'scriticism of the United States as a global hegemon bent on dominating developing nations. Iran uses that argumentto criticize the U.S. military presence inthe Persian Gulf monarchy states, and North Korea likewise derides the U.S. military presence in South Korea. North Korea also has sought to earn hardcurrency from sales of arms and technology to Middle Eastern countries. Over the past decade, North Korea and Iran have been further drawn together by U.S. references to both of them as "rogue states" and as targets of U.S.economic sanctions. As noted above, both of them, along with Iraq, were designated by President Bush as part of"an axis of evil" in his January 29, 2002State of the Union message. At the same time, North Korea has deflected some scrutiny by emphasizing that it isnot a Muslim nation and asserting that ithas no connections to Islamic terrorist groups such as Al Qaeda or those backed by Iran. Iran, by contrast, has beenidentified by the United States for over adecade as the most active state sponsor of terrorism because of its backing for Islamic terrorist organizations suchas Lebanese Hizballah and Hamas, aPalestinian organization. Even though President Bush described North Korea as part of an axis of evil in early 2002, later in the year the Administration appeared to move moretoward the engagement policy with North Korea that was followed during by the Clinton Administration. Thatpolicy is discussed in greater detail below, inthe context of the Clinton Administration's efforts to broaden its October 1994 framework agreement on nuclearissues to halting North Korea's missiletesting and missile exports (to Iran and other countries) as well. At the end of 2002, however, a sense of crisisdeveloped as North Korea admitted toworking on a uranium enrichment route to a nuclear weapon, and later unfroze its plutonium program that had beensuspended under the October 1994framework agreement. North Korea expelled IAEA inspectors monitoring that agreement in December 2002. The sense of crisis developed at the same time as there were revelations of two previously unknown nuclear sites in Iran, as note above. Although theseparate Iran and North Korea revelations coincided in time, there was nothing to indicate that Iran and North Koreaare working together on nuclearweapons technology. North Korea's defense relationship with Iran appears mostly limited to ballistic missiles, building on a long-standing missile relationship with Iran. (34) During Iran's war with Iraq, North Korea provided Iran with about 100 Scud-B ballistic missiles, as well as facilitiesin which Iran could produce the Scud-Bindigenously. (35) North Korea also reportedly sold Iran conventionalweapons, including mini-submarines and mines, and provided training to Iran'sRevolutionary Guard. Some reports indicate that North Korea helped Revolutionary Guard naval units track andtarget U.S. ships during their skirmisheswith U.S. forces in the Gulf in 1987-88). In 1991, North Korea reportedly began to supply Scud-C missiles to Iranand, in 1992, the State Departmentsanctioned Iran's Ministry of Defense and Armed Forces Logistics, along with two North Korean firms, for allegedmissile proliferation activities. In March1992, U.S. Navy ships tracked - but did not attempt to intercept - a North Korean ship, believed to be carryingScud-C missiles, that docked in Iran. InAugust 2000, North Korean leader Kim Jong-Il publicly admitted that North Korea had sold complete missiles toIran and Syria. Iran refuted Kim'sassertion. In the early 1990s, Iran reportedly discussed with North Korea the purchase of North Korean-made Nodong 1 missiles (1,000 mile range). Iranian officialsattended test launches of the Nodong 1 during its development in North Korea, according to a number of pressreports. U.S. scrutiny of the Iran-North Korearelationship, U.S. sanctions on North Korean entities, and U.S.-North Korea talks on missile exports (36) apparently contributed to Iran's decision to build theShahab missile indigenously, based on the Nodong design. In May 1996, one month after the first U.S.-NorthKorea talks on missile exports to Iran (andother Middle Eastern countries), the Administration issued another determination (37) that entities in Iran and North Korea had engaged in missileproliferation activities. On August 6, 1997, following another round of U.S.-North Korea missile talks, the UnitedStates imposed trade sanctions on twoNorth Korean firms for missile-related activities believed to involve Iran and Pakistan. The Clinton Administration's engagement of North Korea began gradually in 1994 with a U.S. effort to halt North Korea's nuclear program and, later, itsdevelopment of missiles capable of hitting the United States. The Clinton Administration attempted to extendagreements in these areas to the additionalgoal of curbing North Korea's ballistic missile technology relationship with Iran and other countries. In May 1999,a U.S. envoy to North Korea, formerDefense Secretary William Perry, reportedly offered a lifting of U.S. sanctions on North Korea in exchange for ahalt to its testing of missiles and an end toits exports of missile technology to the Middle East and Pakistan. In July 2000, U.S.-North Korea talks on missileexports faltered when the United Statesrefused North Korea's demand that it receive $1 billion annually for three years to compensate for the halting ofexports. The Clinton Administrationappeared to be on the verge of a broad nonproliferation agreement with North Korea before President Clinton leftoffice, but no agreement was finalized. Because some of the nonproliferation issues were not resolved by the end of his term, President Clinton did not goforward with a late-term visit to NorthKorea. In the course of engaging North Korea, the Clinton Administration continued to sanction North Korean entities that were known to be assisting Iran. InFebruary 2000, U.S. intelligence officials indirectly confirmed press reports that North Korea had delivered to Iran12 engines that would be critical to Iran'sefforts to build extended-range Shahab missiles. (38) Two months later, onApril 6, 2000, the Department of State imposed sanctions on one North Koreanand four Iranian entities for engaging in missile technology proliferation activities. The sanctions were imposedpursuant to the Arms Export Control Actand the Export Administration Act, as carried out under Executive Order 12924 of August 19, 1994. The NorthKorean entity sanctioned was theChanggwang Sinyong Corporation; the four Iranian entities sanctioned were: the Ministry of Defense and ArmedForces Logistics; the Aerospace IndustriesOrganization; the Shahid Hemmat Industrial Group, and the Sannam Industrial Group. In practice, the sanctions(no U.S. licenses for exports to theseentities, no U.S. government contracts with the entities, and no imports to the United States of products from theseentities) will have little or no effect. TheUnited States does not export to or contract with these entities, and no Iranian or North Korean products permittedto be imported to the United States areproduced by these organizations. Despite U.S. efforts to halt North Korean exports of technology to the Middle East, by all accounts North Korean assistance to Iranian weapons programs is continuing. The CIA proliferation report of January 2002 said that entities in North Korea continue to supply crucialballistic missile-related equipment,technology, and expertise to Iran. The Clinton Administration again sanctioned the Changgwang entity for missileproliferation to Iran on January 2, 2001,and the Bush Administration sanctioned Changgwang for similar activity yet again on June 14, 2001. Both lattersanctions were imposed pursuant to theIran Nonproliferation Act. Some reports have appeared recently to suggest that Iran and North Korea have begun to cooperate on anti-ship missiles. According to press reports in early2000, Iran sent to North Korea a few of the C-802 anti-ship missiles Iran bought from China. (39) Iran reportedly has asked North Korea to help upgrade theaccuracy of the missiles. Iran might also be seeking to persuade North Korean to manufacture the missile - orprovide Iran the technology to produce themissile itself - to compensate for China's cutoff of additional supplies of the C-802. Information on Iranian efforts to acquire weapons and technology from other suppliers appears sketchy, andsuggests that Iran is willing to deal with anumber of suppliers and middlemen to acquire needed technology. Most suppliers to Iran possess former Sovietbloc equipment and technology that canreplace, complement, or supplement the technology Iran is acquiring from Russia. However, Iran does not limit itsbuying to former Soviet bloc states; itcontinues to attempt, according to the most recent CIA reports to Congress, to approach entities in Western Europefor WMD and missile technology. Majorexamples of suppliers to Iran, other than its three key supplier countries, include the following: Poland sold Iran 100 T-72 tanks in 1994, and subsequently pledged to the United States not to sell Iran any additionaltanks. In 1997, the U.S. Department of Defense purchased 21 Russian-made MiG-29's from Moldova after reportedly receiving informationthat Iran was seeking to buy the aircraft. As noted above, in 1998 the U.S. Administration successfully dissuaded Ukraine from supplying key turbines for the Bushehr nuclearreactor project. In 1999, a Czech firm, ZVVZ Milevesko, signed a contract to supply air conditioning technology for the Bushehr reactor. TheAdministration asked the Czech government to ban that sale, and the Czech government subsequently draftedlegislation preventing Czech firms fromsupplying the plant. In April 2000, the lower house of the Czech parliament rebuffed objections from the upperSenate in passing the law, which isexpected to be signed by President Vaclav Havel. Some past CIA nonproliferation reports have said that Indian firms had supplied Iran's chemical weapons program, although the 2000,2001, and 2002 nonproliferation reports do not mention India specifically as a supplier to Iran. However, the July9, 2002 sanctions determination againstnine entities of China for alleged missile and chemical proliferation to Iran, referenced above, also included anindividual apparently of Indian origin - HansRaj Shiv. The determination said Shiv was "previously residing in India, and last believed to be in the Middle East." The determination did indicate anyconnection between Shiv and the government of India or impose sanctions on that government. The May 9, 2002 determination discussed above imposed sanctions not only on entities from China, but also on two entities fromMoldova (one firm, Cuanta, S.A. and one individual, Mikhail Pavlovich Vladov); and two entities from Armenia(one firm, Lizen Open Joint StockCompany, and one individual, Armen Sargsian). That determination was issued in response to reports of chemicaland missile proliferation to Iran. Thegovernments of Moldova and Armenia were not sanctioned, and the determination did not indicate knowledge ofthe sanctioned activity on the part of thosegovernments. | Successive U.S. administrations since Iran's 1979 Islamic revolution have viewed Iran as a potential threat to U.S. allies and forces in the Persian Gulf andin the broader Middle East and have sought to limit its strategic capabilities. The greater visibility of moderateelements inside Iran since 1997 led theUnited States to seek to engage Iran in a formal governmental dialogue, but the Clinton and George W. BushAdministration did not reduce U.S. efforts todeny Iran advanced conventional arms and weapons of mass destruction (WMD) technology. Iran's moderatesappear to see regional threats to Iran as doIran's hardliners and have made no apparent effort to curb Iran's efforts to acquire WMD. Even if moderate leadershad sought to do so, they have beenlargely outmaneuvered on defense and other issues by hardliners who still control the armed forces, internal securityservices, the judiciary, and keydecision-making bodies. In the past, Iran has generally lacked the indigenous skills to manufacture sophisticated conventional arms or independently develop weapons of massdestruction (WMD), and one of Iran's objectives over the past decade has been to obtain the technology and skillsto become self-sufficient. Iran has come along way toward that objective in certain areas, including ballistic missiles and chemical weapons, but in theaggregate, Iran remains reliant on foreignsuppliers. This dependence has given the United States some opportunity to work with potential suppliers to containIran's WMD capabilities. Europeanallies of the United States have agreed not to sell conventional weaponry to Iran, and the United States haspersuaded its European allies not to sell anytechnology that could have military applications ("dual use items") to Iranian military or security entities. To try to thwart U.S. efforts, Iran has cultivated close relationships with foreign suppliers that are not allied to the United States, especially Russia, China,and North Korea. Curtailing arms and technology supplies to Iran has formed an important part of the U.S. agendawith all three of these countries, but morepressing U.S. objectives with each of them have sometimes hampered the U.S. ability to dissuade them fromassisting Iran. Iran apparently continues toreceive critical technology from all three, but U.S. efforts appear to be limiting their supply relationships with Iran. Congress and successive Administrations have enacted several laws and executive orders, many of which are similar to each other, that impose sanctions oncountries and firms that sell WMD technology to Iran. The most recent measure enacted is the Iran NonproliferationAct ( P.L. 106-178 ), signed in March2000. The Clinton Administration generally preferred diplomacy and engagement with supplier states, and it usedthe threat of sanctions to obtain suppliercooperation. The Bush Administration has taken much the same approach, although it has appeared more willingthan its predecessor to sanction entities insome supplier states. This report will be updated as events warrant. |
Because of the annual budget and appropriation process in Congress and the current conflicts involving U.S. servicemembers overseas, there is a strong interest in the levels of spending by the federal government for veterans' benefits and services among members of Congress and the public. For this report, veterans' benefits and services include direct spending on veterans (such as disability compensation or health care) and indirect spending (such as administration and construction of facilities). This report provides information on the historical budget authority for veterans' benefits and services for FY1940 through FY2012, and a brief discussion of major changes in budget authority over this period. Budget authority is presented in both current dollars and constant 2011 dollars (i.e., inflation-adjusted). The budget authority for veterans' benefits and services over the FY1940-FY2012 period has generally shown a steady increase. As can be seen in Table 1 and Figure 1 , the FY2012 budget authority in current dollars was more than 20 0 times the FY1940 budget authority, reflecting an average annual growth rate for the period of 7.9%. In constant 2011 dollars, the FY2012 budget authority is 1 4 times the FY1940 budget authority and reflects a 3.8% average annual growth rate over the period. A large number of Americans, 16.1 million, served in the military in World War II (WWII, December 7, 1941, through December 31, 1946), making WWII the largest conflict to date in terms of the number of servicemembers. Because the servicemembers volunteered (or were drafted) for "the duration," a large number of servicemembers were released in a relatively short period of time at the end of the war. Before the end of the war, the Servicemen's Readjustment Act (P.L. 346 of the 78 th Congress), commonly known as the GI Bill, was signed into law in 1944, providing a major change in benefits for veterans. The GI Bill introduced education and training benefits that enabled millions of servicemembers who may have otherwise been unable to attend college or training schools to receive a college education or specific job skills training. In addition, the housing loan guarantee benefits provided by the GI Bill enabled WWII veterans to purchase homes for their families. As shown in Table 1 , the combination of the large number of veterans being released in a relatively short period of time and the change in benefits resulted in the budget authority for veterans increasing from $561.1 million before the war in FY1940 to a peak in the post-war period in FY1947 of almost $8.4 billion. In current dollars, the FY1947 budget authority was 14.9 times the FY1940 pre-war budget authority for veterans. In constant 2011 dollars, the FY1947 budget authority for veterans was $80.7 billion, or 9. 8 times the FY1940 pre-war budget authority for veterans. The Vietnam era (February 28, 1961 through May 7, 1975) was significantly longer than WWII, with a total of 8.7 million Americans who served in the military during the period. Until the end of 1972, a military draft was in place (the last drafted servicemembers began service in 1973), and drafted servicemembers were released through the period at the end of their military obligation. Also, while benefit changes or expansions were made during the period, no new large benefit programs were started during the period (unlike the WWII period). As a result of the regular release of servicemembers from the military over the period and the relatively stable levels of veterans' benefits and services, the large peak in budget authority at the end of WWII was not repeated at the end of the Vietnam era. There was however a smaller peak in budget authority for the FY1975-FY1976 period that reflected an increase in the number of veterans at the end of the Vietnam conflict. While the current dollar budget authority for FY1975 and FY1976 was 2.0 and 2.3 times the FY1947 budget authority, in constant 2011 dollars (after adjusting for inflation) the budget authority for FY1975 and FY1976 was below that of FY1947. This reflects in large part the differences between the two conflicts in terms of the timing for release of servicemembers and veterans benefits and services (compared to the pre-conflict period). During the current conflicts [Operation Enduring Freedom (OEF, which began October 2001), Operation Iraqi Freedom (OIF, March 2003 - August 2010), and Operation New Dawn (which began September 2010)], there is no military draft in place. Servicemembers generally leave at the end of their obligation, or at retirement. The somewhat steady increase in budget authority for veterans' benefits and administration each year since the late 1990s reflects the impact of the aging of the veteran population (with an accompanying increased demand for services) in addition to the impact of the returning OEF/OIF veterans. Also, increases in appropriations for disability compensation reflect changes to the conditions considered presumed to be service-connected for Vietnam veterans. In FY2000, of the 83,159 veterans who began receiving disability compensation that year, 19.8% were aged 55 or older. By FY2011, of the 272,509 veterans who began receiving disability compensation that year, 52.9% were aged 55 or older. The budget authority for FY2009 and later years also reflect the impact of the Post-9/11 Veterans Educational Assistance Program. Over time, the increases in the budget authority for veterans' benefits and services have reflected the impact of increases in the number of veterans as the result of wars and other conflicts, the aging of the veteran population, and changes in the benefits and services provided for veterans. The most dramatic impact of the combination of an increase in the number of veterans and changes in veterans' benefits can be seen in the period shortly after World War II. | Budget authority—the amount of money a federal department or agency can spend or obligate to spend by law—for veterans' benefits and services has increased significantly since FY1940. In FY1940, the budget authority for veterans' benefits and services was $561.1 million, and in FY2012 the budget authority was $125.3 billion, or more than 200 times the FY1940 budget authority. In constant 2011 dollars (i.e., inflation-adjusted), the FY2012 budget authority is 14 times the FY1940 budget authority. The increases over time have reflected the impact of increases in the number of veterans as the result of wars and other conflicts, the aging of the veteran population, and changes in benefits and services provided for veterans. This report provides information on the historical budget authority of the Department of Veterans Affairs (formerly the Veterans Administration) for FY1940 through FY2012. Budget authority is presented in both current dollars and constant 2011 dollars. This report will be updated as additional information becomes available. |
Growth in North American crude oil and natural gas production has resulted in efforts to expand the domestic oil and natural gas pipeline network. Pipelines can be a cost-effective and comparatively safe means of hydrocarbon transport. Pipelines and their routes also can be controversial locally, regionally, or nationally. While many new or expanded pipelines have been proposed and completed in recent years, other proposed pipelines have been unable to satisfy all the requirements to obtain federal authorizations, have faced barriers among state regulatory agencies, and have been the subject of litigation. Congress has a long-standing interest in pipeline development and the regulation of pipelines because of the critical role of pipelines in the domestic energy markets. Failure to construct pipelines may result in various potential effects, such as greater reliance on road or rail transport and constraints on getting oil and natural gas resources to refineries, power plants, and other consumers—all of which can create economic inefficiencies. Local interests along proposed pipeline routes regularly have raised concerns about the local environmental and other impacts of pipeline construction; they also have expressed concerns about the risks during pipeline operations of accidents that could affect the environment and human health. In recent years, stakeholders interested in reducing U.S. reliance on fossil fuels or promoting other energy sources and energy conservation have brought greater public attention both to oil and natural gas pipelines and to federal and state decisions related to new pipelines in particular. Some of these pipeline opponents argue that pipelines may facilitate the use of oil and natural gas, thereby indirectly contributing to the human health, welfare, and environmental effects of oil and natural gas production and use. Pipeline proponents argue that the impacts of development and use of natural gas may be less than impacts associated with other energy sources and that both oil and natural gas pipelines contribute to the nation's energy security and provide broad benefits to the U.S. economy. This report discusses how the U.S. Army Corps of Engineers (Corps) administers its responsibilities related to certain pipeline segments that require Corps authorizations. The Corps is one of many federal agencies with responsibilities that may relate to oil and natural gas pipelines. Interest in federal approvals and requirements for pipelines relates to a broader policy issue before Congress: What is the appropriate federal role in protecting the environment, public health, national economy, and domestic energy security when reviewing and authorizing activities associated with private development of energy-sector or other infrastructure? The role of the Corps in authorizing oil and natural gas pipelines is limited to (1) the agency's regulatory authorities for authorizing activities affecting regulated water bodies and wetlands and activities that alter or obstruct navigable waters and (2) its civil works authorities, including allowing a pipeline to cross a Corps water resource project and related lands. Because most pipelines cross regulated water bodies, the Corps must authorize the activities at those crossings before construction at those locations can commence. Because the Corps has no broad authority related to pipelines along their entire domestic routes, the agency's analyses to support its authorization decisions are scoped to focus on the application of Corps authorities to specific pipeline segments. Controversy regarding the Dakota Access Pipeline (DAPL), a crude oil pipeline from North Dakota to Illinois, focused attention on the Corps' authorizations and approvals. This attention to the Corps may continue, given the renewed efforts for the international Keystone XL, proposed domestic pipelines, and related litigation. This report provides an overview of the agency's role with respect to oil and natural gas pipelines. Because the Corps' pipeline-related decisions can be controversial, the report also introduces some of the issues raised. After an overview of the Corps and the broader federal role in approving private oil and natural gas pipelines, the remainder of the report discusses how the Corps' regulatory responsibilities apply where pipelines cross water bodies and wetlands (i.e., Corps regulatory program); how the Corps' civil works authorities may apply if a pipeline may alter or affect a Corps water resource project or may cross Corps-managed land (i.e., Corps civil works program); how the Corps complies with various federal statutes as it arrives at pipeline-related decisions, including the environmental documentation requirements of the National Environmental Policy Act (NEPA) and the historic preservation requirements of the National Historic Preservation Act (NHPA); and how the agency's role in pipelines raises or illustrates various policy issues for decisionmakers. Siting, construction, and operation of oil and natural gas pipelines may be subject to a number of local, state, tribal, and federal requirements. Whether the entire pipeline will require federal agency authorization generally depends on the commodity the pipeline would transport and whether it would cross state lines. Specifically, the siting, construction, and operation of interstate natural gas pipelines must be authorized by the Federal Energy Regulatory Commission (FERC), in accordance with requirements established under Section 7(c) of the Natural Gas Act of 1938; in contrast, domestic oil pipelines and intrastate natural gas pipelines are not subject to a similar federal authorization for their entire routes. Federal pipeline safety standards also could affect pipeline siting, construction, operation, and maintenance. The Department of Transportation's Pipeline and Hazardous Materials Safety Administration (PHMSA) is the principal federal agency charged with ensuring the safe interstate movement of natural gas and hazardous liquids, including crude oil. Congress tasked the Department of Transportation, working through PHMSA, with regulating key aspects of interstate pipeline safety, including design, construction, operation and maintenance, and spill response planning. For more information on the Department of Transportation's safety program, see CRS Report R44201, DOT's Federal Pipeline Safety Program: Background and Key Issues for Congress , by [author name scrubbed], and see the box later in this report titled "PHMSA Pipeline Safety Regulation and Corps Permit Conditions Related to Safety." Specific aspects or activities associated with pipelines may be subject to federal agency approval. For example, separate federal agency authorization (in the form of a permit or other approval) may be required if the proposed pipeline, in whole or in part, would cross federal land or potentially would affect an environmental, natural, or cultural resource protected under federal law. As discussed below, the involvement of the Corps in pipelines generally is limited to those pipeline segments that would cross Corps-managed federal land (hereinafter referred to as Corps land ) or a Corps-managed federal flood easement on nonfederal land and to those pipeline activities that may affect or cross waters and wetlands regulated by the agency. Although the Corps has no authority to approve pipelines, certain pipeline segments and their construction may require Corps authorizations. Under the agency's regulatory program, the Corps is responsible for authorizing activities that could affect federally regulated waters and wetlands. Under its civil works program, the agency is responsible for approving activities that cross or affect Corps lands and projects. A pipeline developer must have authorization from the Corps regulatory program (sometimes referred to as its permit program) for any pipeline segment affecting or crossing Corps jurisdictional water, in accordance with Section 404 of the Clean Water Act, under which the Corps regulates the discharge of dredged or fill material into waters of the United States, including wetlands; and Section 10 of the Rivers and Harbors Act of 1899, under which the Corps regulates structures and/or work in or affecting the course, condition, or capacity of navigable waters. Because pipelines of any significant length will cross or otherwise may affect U.S. waters somewhere along their routes, pipeline developers are routinely required to have authorization from the Corps under Section 404 of the Clean Water Act (hereinafter Section 404) and/or under Section 10 of the Rivers and Harbors Act (hereinafter Section 10). The Corps regulates all activities affecting regulated waters; for pipelines, the Corps regulates activities whether the pipeline is interstate or intrastate and whether the pipeline is transporting oil or natural gas. A pipeline developer may need certain approvals from the civil works program of the Corps if the proposed pipeline could affect a Corps water resource project or Corps land and real estate interests. Corps land and other real estate interests (e.g., private lands with a federal flood or other flowage easement) typically were acquired as part of a water resource project. For pipelines to cross below, on, or above Corps land and non-Corps land with a Corps real estate interest, the agency generally will decide on granting both a Corps permission to alter a Corps civil works project; and a Corps easement to cross Corps land or a consent to cross non-Corps land with a Corps real estate interest. Figure 1 illustrates pipeline segments over which the Corps may have some role, specifically segments that would cross Section 404 Corps-regulated waters and wetlands or Section 10 Corps-regulated waters (and therefore would involve a role for the agency's regulatory program) and Corps land (and therefore would involve a role for the agency's civil works program). Figure 1 also illustrates FERC involvement in authorizing the siting and construction of interstate natural gas pipelines; no federal agency has a similar role for domestic interstate or intrastate oil pipelines or for intrastate natural gas pipelines. Stakeholders with an interest in pipeline construction sometimes have focused on the role of the Corps in pipeline-related approvals when no other federal agency has authority to approve the entire pipeline, which primarily is the case for domestic pipelines transporting crude oil. In the case of the DAPL to transport crude oil, the pipeline route selected crossed Corps-regulated waters and Corps land at Corps water resource projects. For more on the DAPL, see the box "Why Was the Corps the Main Federal Agency Involved in the DAPL Debate?" The Corps is responsible for authorizing activities that may affect waters over which it has jurisdiction under Section 404 or Section 10. The agency performs this work as part of its regulatory program. The types of projects that may cause impacts to regulated waters vary widely, including navigation, coal mining, riverbank stabilization, and transportation projects. One category of activities is a water or wetland crossing by a utility line, which includes oil and natural gas pipelines. The Corps' regulatory authorities are limited by statute to activities affecting waters and wetlands regulated pursuant to the Section 404 and Section 10 authorities. That is, the agency's regulatory jurisdiction does not extend to a pipeline's entire route; it is limited to the crossings of regulated waters, as shown in Figure 1 . Therefore, the Corps generally does not regulate the largest components of pipeline projects because it does not have regulatory jurisdiction over portions of the pipeline that cross upland areas. Authorizations pursuant to the Corps regulatory authorities fall under two categories of permits—individual permits and general permits. Actions authorized through general permits represented almost 94% of the Corps' 53,825 regulatory actions in FY2016. Activities that may or are expected to have significant adverse impacts on regulated waters require individual permits. The Corps (or states that have been delegated the authority to administer Section 404 permits) can process individual permits as standard individual permits or through an abbreviated process known as a Letter of Permission procedure (which can vary by state). Each standard individual permit is subject to public notice, public interest review, public hearing, activity-specific environmental documentation, and case-by-case evaluation (including an evaluation of alternatives), so these permits typically require more time than general permits before an activity is authorized. Public notification is not required for individual permits processed using Letters of Permission procedures. The Corps issues general permits for activities that are similar in nature and that are expected to have minimal adverse effect on waters and wetlands both individually and cumulatively. General permits essentially preauthorize a group of similar activities on a programmatic level. The Corps uses general permits to minimize the permit processing burden of its regulatory program on both itself and applicants. General permits authorize applicants to proceed without the more time-consuming need to obtain standard individual permits in advance. The lower processing burden of general permits creates an incentive for applicants to reduce the impacts of their activities on regulated waters and wetlands in order to qualify for a general permit. During the process required for the Corps to issue a general permit, the general permit is subject to public notice, public interest review, public hearing, and environmental documentation; the specific actions undertaken pursuant to the general permit do not go through these steps. The Corps issues a range of general permits, including Nationwide permits (NWPs), which cover a wide range of activities—such as aids to navigation, minor dredging, and bank stabilization. There are 52 NWPs in force. Regional conditions also can be applied to NWPs. Other general permits that apply in a single state or regionally. Programmatic permits are built on an existing state, local, or other federal agency program and are designed to avoid duplication between the existing program and Corps efforts. Regional permits are a type of general permit issued by a division or district engineer at the Corps. Nationwide and other general permits are issued for five-year terms; the permits automatically expire and become null and void (and cannot be extended) if they are not modified or reissued within five years of their effective date. The current NWPs took effect on March 19, 2017, for a five-year period. Pipeline activities that require Corps authorization and that are similar in nature with minimal environmental impacts (e.g., minor stream crossings) may qualify for a general permit. It typically would be NWP 12 (which is discussed in more detail in " Nationwide Permit 12: Utility-Line Activities ," below), unless a state or regional general permit applies. To qualify for NWP authorization, proposals must meet a number of general conditions (GCs). (See section titled " General Conditions Required for NWP Authorization " for more information). Many activities covered by NWPs can proceed without advance notification to the Corps, whereas other activities that can be pursued under an NWP require that the applicant submit a pre-construction notification (PCN) and obtain a verification by the Corps for use of that NWP. A PCN is a request submitted by the applicant to the Corps to confirm (i.e., verify) whether or not a particular activity is authorized by general permits. If the activity does not require the permittee to submit a PCN, the permittee determines if the activity qualifies for an NWP. Therefore, the Corps reviews the activities for which it receives a PCN but does not conduct a review of all the individual activities potentially authorized by an NWP. (See section titled " Pre-construction Notification " for more on PCNs.) If a pipeline-related crossing does not meet the conditions of a general permit or qualify for a general permit as determined by statute and regulation, the Corps district may use its discretionary authority to require use of the individual permit process. The Atlantic Sunrise natural gas pipeline is an example of a pipeline for which the Corps reviewed the application as a standard individual permit because the proposed activity would exceed the wetland loss threshold of the applicable general permit. One of the nationwide permits—NWP 12—is used to authorize utility-line activities, including the construction, maintenance, or repair of utility lines in waters of the United States. The permit defines a utility line as any pipe or pipeline for the transportation of any gaseous, liquid, liquescent, or slurry substance—including oil or natural gas—for any purpose and any cable, line, or wire for the transmission for any purpose of electrical energy, telephone, and telegraph messages and radio and television communication. NWP 12 can be used only if the activity (e.g., a water crossing) does not result in the loss of more than 0.5 acres of waters of the United States. Certain activities under NWP 12 require an approved PCN before the activity authorized by that permit may commence. An NWP 12 permit applicant must submit a PCN based on various thresholds and criteria—for example, when a Section 10 permit is required, when mechanized land clearing in forested wetlands is required for the right-of-way, or when discharges are expected to cause the loss of more than 0.1 acres of waters of the United States, among other thresholds and criteria. For NWP 12 specifically, the Corps requires that PCNs include information on other water crossings for the linear project (e.g., the pipeline) that will use NWP 12 that do not require PCNs. The Corps estimates that NWP 12 is used on average approximately 11,500 times per year on a national basis, affecting approximately 1,700 acres of U.S. waters, including wetlands regulated under the Clean Water Act. The total includes about 9,000 uses per year for activities that involve submitting a PCN to the Corps and about 2,500 uses for activities that do not require a PCN. Individual NWP 12 verifications do not require NEPA documentation, nor do they require an opportunity for public comment. The public comment opportunity occurs during the rulemaking procedure for the NWP itself, not with each verification or use of the permit. Whereas for some pipelines Corps regulatory information is publicly available through Corps districts, FERC dockets, or court documents, no nationally aggregated data are available on NWP 12 use that is specifically about oil and natural gas pipelines. The 11,500 NWP 12 authorizations cited are not specific to pipelines; the figure includes all utility-line activities. Furthermore, although NWP 12 covers a large majority of utility-line activities, some pipeline activities may not qualify for NWP 12 and may require individual permits. The publicly available database that the Corps maintains on individual permits is not designed to track which individual permits are related to oil and gas pipelines, and no publicly available database is available that tracks each verification for NWP 12 activities related to pipelines specifically or utility lines more broadly. By statute, activities that have the potential to result in more than minimal individual and cumulative adverse effects on the aquatic environment cannot be authorized by NWPs, including NWP 12. To ensure that individual activities do not exceed that level of impact, each NWP rulemaking includes general conditions (GCs) that a permittee must comply with, as applicable. The NWPs reissued in 2017 detail 32 GCs that apply to any activity using an NWP for its authorization, including the following: Navigation (GC 1). No activity may cause more than minimal adverse effects on navigation. Water Supply Intakes (GC 7). No activity may occur in the proximity of a public water supply intake, except where the activity is for the repair or improvement of public water supply intake structures or adjacent bank stabilization. Management of Water Flows (GC 9). To the maximum extent practicable, the pre-construction course, condition, capacity, and location of water flows must be maintained. Proper Maintenance (GC 14). Any authorized structure or fill shall be properly maintained, including maintenance to ensure public safety and compliance with applicable NWP GCs, as well as any activity-specific conditions added by the district engineer to an NWP authorization. (For information on how pipeline safety is addressed and how it relates to GC 14, see box titled "PHMSA Pipeline Safety Regulation and Corps Permit Conditions Related to Safety.") Tribal Rights (GC 17). No NWP activity may cause more than minimal adverse effects on tribal rights (including treaty rights), protected tribal resources, or tribal lands. Endangered Species (GC 18). No activity may be authorized if it is likely to directly or indirectly jeopardize the continued existence of a threatened or endangered species or a species proposed for such designation, as identified under the federal Endangered Species Act (ESA), or if it will directly or indirectly destroy or adversely modify the critical habitat of such species. Historic Properties (GC 20). In cases where the district engineer determines that the permitted activity may affect properties listed, or eligible for listing, in the National Register of Historic Places, no activity may be authorized until the requirements of Section 106 of NHPA have been satisfied. Section 106 requires federal agencies to take into account the effect of their undertakings on any historic property. Mitigation (GC 23). The district engineer must consider specific factors when determining appropriate and practicable mitigation measures to ensure that any adverse effects on the aquatic environment are minimal (e.g., to the maximum extent practicable, the activity must be designed and constructed to avoid and minimize temporary and permanent adverse effects, at the project site, to waters of the United States). Water Quality (GC 25). The permittee must obtain an individual water quality certification or waiver for discharges authorized by the NWP if the state or authorized tribe has not previously certified compliance of the NWP with Section 401 of the Clean Water Act. Pre-construction Notification (GC 32). The permittee is required to provide a PCN as specified in each NWP. Unlike with individual permits, activities in regulated waters can be conducted pursuant to NWPs without an evaluation of alternatives to those activities (e.g., a water crossing proposed by a pipeline developer can be authorized under the NWP without the Corps evaluating alternative crossing locations). For verification under an NWP, GC 18 and GC 20 may require the use of the NWP to be reviewed if the activity may adversely affect federally listed endangered or threatened species or historic properties. For more on NWP and ESA compliance, see box "Nationwide Permits and Endangered Species Act Compliance." For more on historic properties compliance, see this report's section titled " Corps Procedures for Protecting Historic Properties ." GC 32 specifies that the permittee is required to submit a PCN to the Corps pursuant to the applicable NWP; it also establishes the information required for inclusion in the PCN and the timing of the agency's review of the PCN. When a PCN is submitted, the Corps has 30 days to determine whether a PCN is complete. The Corps district engineer has 45 days to review a complete notification under most NWPs, including NWP 12, unless the proposed activity requires an ESA Section 7 consultation and/or NHPA Section 106 consultation. If no ESA or NHPA consultation is required, the proposed work generally may not proceed without written confirmation from the district engineer; however, if no decision is issued during the 45-day review period, the permittee may presume that the activity qualifies for the NWP. If ESA or NHPA consultation is required, the proposed work may not begin before receiving a written NWP verification. PCNs and their verifications are not required to be published, nor must a public comment opportunity be provided during the review period. The public may not be aware that a PCN has been submitted to the Corps. As noted, the majority of oil and natural gas pipeline activities subject to the Corps regulatory program are authorized via NWP 12. Some stakeholders have criticized the Corps for relying on NWP 12 to authorize pipeline-related activities. A primary concern is that the NWP process does not allow for a separate environmental review of each activity or set of activities for a pipeline project proceeding under NWP 12. The agency's position is that, if applicable general conditions and limits for using the NWP are met, the environmental impacts would be minimal. The Corps has developed the general conditions for the use of NWP 12 to establish compliance with federal laws related to species, historic properties, and environmental impacts. Some critics contend that permittees that are not required to submit PCNs make their own determinations about project-specific conditions without Corps review. Another criticism relates to the scope of environmental impacts considered for projects under NWP 12. NWPs can be used only for a "single and complete project" that will cause only minimal adverse environmental effects, individually or cumulatively. The Corps defines a single and complete project as a portion of a total project that includes all crossings of a single water body at a specific location. Thus, NWP 12 can be used multiple times for a single pipeline with numerous water crossings if each crossing does not result in the loss of greater than 0.5 acres of waters of the United States. Therefore, the "project" that is subject to Corps authorization is not the entire pipeline but rather the discrete segments that cross waters subject to the agency's regulatory jurisdiction. Critics say that such segmenting of a pipeline when NWPs are used fails to account for cumulative effects. Legal challenges to the use of NWPs along these lines of argument have been largely unsuccessful. If a proposed nonfederal pipeline of any type or other nonfederal activity would cross or otherwise use federal lands, the developer generally is required to obtain the appropriate real estate interest (e.g., an easement providing a right-of-way for the pipeline) from the federal agency authorized to administer that land. The Corps owns 7.6 million acres of land and manages another 4.1 million acres, often through federal flowage easements on nonfederal, frequently private, land. The Corps is responsible for these lands because they are part of Corps civil works projects. The agency's inventory of civil works projects includes 702 dams and associated reservoirs and 14,500 miles of Corps-constructed levees. A pipeline developer also is required to obtain the agency's permission prior to altering or otherwise affecting the operations of a Corps civil works project. For requests to have pipelines cross below, on, or above Corps land and non-Corps land with a Corps real estate interest, the Corps generally will decide on whether or not to grant both a permission to alter a Corps civil works project and an easement to cross Corps land or a consent to cross non-Corps land with a Corps real estate interest. Corps authority to allow alterations to its projects derives from Section 14 of the Rivers and Harbors Act of 1899, also known as Section 408 based on its codification at 33 U.S.C. §408. This provision states that the Secretary of the Army may "grant permission for the alteration or permanent occupation or use of any of the aforementioned public works when in the judgment of the Secretary such occupation or use will not be injurious to the public interest and will not impair the usefulness of such work " (emphasis added). A Section 408 permission is required for all alterations to Corps projects, not only alterations by pipelines. For pipelines over 24 inches (24″) in diameter, the Corps conducts a technical review of the proposed pipeline's effects on Corps projects pursuant to Engineer Circular (EC) 1165-2-216, Policy and Procedural Guidance for Processing Requests to Alter US Army Corps of Engineers Civil Works Projects Pursuant to 33 USC 408 . For more details on the technical review conducted for deciding to grant, grant with conditions, or deny a Section 408 permission, see the box "Section 408 Permissions: Guidance Since 2015 and Congressional Action." For smaller pipelines and other encroachments of a more routine or minimal nature, the Corps complies with Section 408 by following the process established in Chapter 17, "Non-Recreation Outgrant Policy," of Engineer Regulation (ER) 1130-2-550, Recreation Operations and Maintenance Policies . Federal agencies, including the Corps, may grant an easement for oil and natural gas pipelines to cross federal land in accordance with the provisions of Section 28 of the Mineral Leasing Act (MLA). The Corps also can consent to a pipeline crossing non-Corps lands with a Corps real estate interest (e.g., flowage easement) using a broad, military-wide real estate authority. If a Section 408 permission is needed, the easement or consent is contingent upon the granting of the Section 408 permission. Since 1973, the MLA requires that two congressional authorizing committees—the House Natural Resources Committee and the Senate Energy and Natural Resources Committee—be notified if the developer of an oil or natural gas pipeline with a diameter of 24″ or greater is requesting to cross federal land. The Corps also must notify the committees if it intends to grant an easement and must provide "detailed findings as to the terms and conditions" to be imposed on the applicant. The MLA is not more specific about what the contents of these notifications, nor does it provide guidance about when an agency may grant the rights-of-way application in relation to the committee notification. The Corps released a policy guidance memorandum in 2008 for easements of pipelines that are 24″ or larger. The policy direction therein regarding congressional notification and the granting of the rights-of-way states: "If the Committee does not provide an affirmative response, [the Corps] District will wait 14 days following Committee notification before execution of the easement." The Administration can waive this policy-based waiting period. To decide on easements and consents, the Corps follows Chapter 8 of ER 405-1-12, Real Estate Handbook , and Army Regulation (AR) 405-80, Management of Title and Granting Use of Real Property . ER 405-1-12 requires that the Corps find that "the proposed easement will not be inconsistent with the authorized purposes of the Federal installation or project." According to ER 405-1-12, site-specific environmental, cultural, and operational requirements may be added to the easement or consent; also, the Corps is to impose any special requirements for safe operation of a pipeline or related facilities. For example, according to the Corps, the Lake Oahe easement for DAPL "contains 36 conditions that are intended to further mitigate risk of rupture at the Lake Oahe crossing," including specific coatings to prevent corrosion, corrosion surveys after installation, more stringent enforcement of the pipeline's oil spill facility response plan, mainline valve and automatic shutdown requirements, and measures for initial and ongoing leak and crack detection. If the Corps finds that the pipeline is not inconsistent with the authorized purposes of the Corps project and its lands, the Corps signs a real estate instrument that grants the easement. If the pipeline crosses lands administered by the Corps and at least one other federal agency, the Secretary of the Interior is authorized, after consultation with the agencies involved, to grant or to deny the easement. Each agency head remains responsible for administering and enforcing the easements, as they involve lands under the agency head's jurisdiction. Figure 2 illustrates the relationship between the Section 408 permission, the real estate or consent process, and the MLA congressional notification requirements for proposed pipelines. The Section 408 permission process is shown in the grey boxes on the left side of Figure 2 . The process to grant or deny the easement or consent is shown in the tan boxes on the right side of Figure 2 . The MLA notification requirements are shown in the green boxes in Figure 2 . As part of the process of granting an easement or consent, the Corps must comply with federal statutes. The Corps typically evaluates this compliance as part of its NEPA documentation. For a request that requires both a Section 408 permission and an easement or consent by the Corps, the NEPA document is produced as part of the technical review for the Section 408 permission. As part of the technical review process, the Corps documents and demonstrates that it has gathered relevant information from the pipeline developer and that it has analyzed that and any additional information necessary to determine what federal requirements may apply to the Corps' actions. During that process, the Corps determines the resources potentially affected by granting the permission and easement or consent, and it determines whether the impacts to those resources would trigger actions necessary for compliance with other federal laws, such as Section 106 of NHPA and Section 7 of ESA, among others. As previously noted, Corps regulatory actions and civil works actions may be subject to other federal statutes, such as NEPA, NHPA, and ESA. Part of the compliance may include consultation or input from other entities. Table 1 lists selected federal laws that, if applicable to a Corps pipeline-related action, may require the Corps to consult with relevant state or tribal entities or with other federal agencies. Most requirements listed in the table are limited to actions taken by federal agencies. For example, an oil pipeline constructed on private land that does not require a federal agency approval (e.g., a pipeline that does not cross Corps jurisdictional waters or federal lands) would not be subject to NEPA or NHPA. As shown in Table 1 , federal licenses and approvals, such as Corps individual permits, generally are conditioned on the permittee obtaining a state or tribal water quality certification pursuant to Section 401 of the Clean Water Act and a state or tribal consistency concurrence pursuant to the Coastal Zone Management Act. For the NWPs, compliance with Section 401 of the Clean Water Act is accomplished by satisfying GC 25. The state or tribe can certify all activities authorized by an NWP or require that verifications of certain activities under an NWP obtain state or water quality certification. The state or tribe can approve, deny, or condition its certification. Although the Corps is not part of the process for the permittee to obtain a state or tribal water quality certification, the denial of a water quality certification can affect the Corps' regulatory authorizations for pipelines. For example, the developer of the Northern Access Pipeline to transport natural gas from Pennsylvania to New York has planned on using the NWP 12 for 276 wetland and 192 stream crossings. In April 2017, the New York State Department of Environmental Conservation (NYSDEC) denied the state water quality certification pursuant for the April 2016 application for the 94-mile pipeline. Until the pipeline developer complies with Section 401 of the Clean Water Act, the Corps will be unable to allow the permittee to proceed in New York under NWP 12 because of the permit's GC 25 on water quality. Individual permits also require state water quality certification. The pipeline developer can address the concerns that led to the NYSDEC denial and submit a new application to NYSDEC for a state water quality certification or pursue a public hearing within 30 days of the denial consistent with New York regulations. A detailed discussion of how state approvals, and the state water quality certification in particular, may affect federal approvals for pipelines is beyond the scope of this report. The remainder of this section addresses two agency-specific procedures that the Corps has adopted for its regulatory program: NEPA procedures and historic properties procedures. The Corps regulations implementing the agency's regulatory program include procedures to implement NEPA and to provide for the protection of historic properties. Those procedures reveal the agency's interpretation of the limits to its jurisdiction; that is, the procedures reflect that the Corps interprets its regulatory authorities under Section 404 and Section 10 as not extending to private actions upland of regulated waters. NEPA requires federal agencies to identify and consider the environmental impacts of an action before a final decision is made about that action. Regulations implementing NEPA were promulgated by the Council on Environmental Quality (CEQ). Those regulations identify federal actions subject to NEPA to include those over which a federal agency has some control or responsibility. Each federal agency was required to adopt the CEQ regulations, supplement them as necessary to include procedures relevant to that agency's authority, and ensure that those procedures implementing NEPA are integrated into the agency's broader decisionmaking procedures. The Corps adopted and supplemented the CEQ regulations in its own Procedures for Implementing NEPA. Further, the Corps provides additional procedural guidance for preparing and processing NEPA documents for regulatory actions in Appendix B to the regulations implementing its regulatory program. Under NEPA, a project known to have a significant impact on the environment requires the preparation of an environmental impact statement (EIS). When impacts are uncertain, an environmental assessment (EA) is prepared to determine if an EIS is needed or a finding of no significant impacts (FONSI) may be issued. The Corps has identified "regulatory actions" (i.e., issuance of a permit) among the actions that normally require an EA but not necessarily an EIS. The Corps does not require NEPA review for individual NWP verifications. Instead, to date, the federal action subject to NEPA has been issuance of NWP 12. During the public rulemaking for each of these five-year permits, NEPA compliance has involved preparation of an EA that resulted in Corps issuance of a final decision document (its version of a FONSI). The Corps EA/decision document for NWP 12 has been prepared, in part, to identify conditions that must be met to ensure that authorization via an NWP is appropriate. Part of the process to develop the decision document is the identification of general conditions to ensure that activities related to a single and complete project will have minimal adverse environmental effects (i.e., no significant impacts that would require the preparation of an EIS). Understanding the scope of Corps NEPA reviews is useful in recognizing how far upland the Corps will evaluate the impacts of a larger project (e.g., a pipeline that extends beyond Corps-regulated waters). As noted, under NEPA, the Corps is required to evaluate the impacts of an action over which it has control and responsibility. Depending on the details of the activity subject to Corps approval, the agency's interpretation of the extent of its control and responsibility over a proposed action will dictate the geographic area over which environmental impacts are evaluated (i.e., how far upland from regulated waters the agency will review the impacts of a larger project). For a discussion of the geographic limits of Corps environmental reviews for pipelines, see the box titled "Geographic Limits of Corps Environmental Reviews." The Corps established "Procedures for the Protection of Historic Properties" in Appendix C to its regulations applicable to Department of the Army permits. The Corps follows Appendix C to fulfill the procedural requirements set forth in NHPA, other applicable historic preservation laws, and presidential directives as they relate to the Corps regulatory program. Section 106 of NHPA provides that federal agencies, prior to expending federal funds or granting a license to any undertaking over which they have direct or indirect jurisdiction, must "take into account the effect of [the] undertaking on any historic property." If historic properties might be affected, the agency must consult with the state historic preservation officer or tribal historic preservation officer, as applicable, about alternatives to avoid, minimize, or mitigate adverse effects to those properties. The Advisory Council on Historical Preservation (ACHP), an independent federal agency established under NHPA to promote and advise on historic preservation, also may be involved in consultations under certain circumstances. Procedures for NHPA Section 106 compliance for the regulatory program of the Corps have been the subject of disagreements with the ACHP and some other stakeholders. According to 2016 ACHP communications to the Corps, the ACHP has not accepted the Corps procedures as being consistent with ACHP regulations. Some federal district courts have declined to apply the agency's procedures, on the bases of inconsistency with NHPA or non-approval by the ACHP; however, others have cited or applied the Corps procedures. The ACHP has objected particularly to the decision by the Corps to review each water crossing by a linear project, such as a pipeline, as a separate undertaking. The ACHP regulations define an "undertaking" as "a project, activity, or program funded in whole or in part under the direct or indirect jurisdiction of a Federal agency, including those carried out by or on behalf of a Federal agency; those carried out with Federal financial assistance; and those requiring a Federal permit, license or approval." The ACHP contends that this definition would in many cases require the Corps to conceive of the "undertaking" as broader than a single water crossing. The approach used by the Corps, the ACHP states, "dismiss[es] the potential for effects to historic properties that may be located within the broader project area of an undertaking when properly defined under the Section 106 regulations." The Corps maintains that its procedures for historic properties in Appendix C satisfy the requirements of NHPA Section 106. The Corps explained its interpretation of an undertaking related to pipelines as follows: For oil pipelines and other utility lines, the activities that are subject to the Corps' regulatory authorities and require DA [Department of Army] authorization are crossings of jurisdictional waters and wetlands, as well as utility line substations, foundations for overhead utility lines, and access roads, that involve discharges of dredged or fill material into waters of the United States or structures or work in navigable waters of the United States. Segments of an oil pipeline or other utility line in upland areas outside of the Corps' jurisdiction, or attendant features constructed in upland areas, do not require DA authorization and therefore are not, for the purposes of the Corps' compliance with section 106 of the NHPA, "undertakings." The Corps does not have direct or indirect jurisdiction over pipeline segments in upland areas. The Corps does not regulate oil pipelines, or other utility lines per se; we only regulate those components of oil pipelines or other utility lines, that involve activities regulated under our authorities (i.e., section 404 of the Clean Water Act and section 10 of the Rivers and Harbors Act of 1899). The Corps indicates in this statement its position that the agency has neither direct nor indirect jurisdiction over the entire pipeline and that its control does not extend to areas upland of regulated waters. The essence of this interpretation was adopted by one district court, the U.S. District Court for the District of South Dakota, in Standing Rock Sioux Tribe v. U.S. Army Corps of Engineers . However, as noted above, other district courts have declined to apply other elements of the agency's procedures on the basis of inconsistency with NHPA or lack of approval by the ACHP. Separately, stakeholders have raised concerns about the Corps' procedures whereby the permit applicant, rather than the Corps itself, is responsible for identifying historic properties that may be affected by a pipeline activity under an NWP. The ACHP regulations specify that "[i]t is the statutory obligation of the Federal agency to fulfill the requirements of section 106," including identification of historic properties that may be affected by an undertaking. For pipeline activities that occur under NWP 12, GC 20 provides that the Corps must initiate Section 106 review and consultation when an applicant identifies historic properties in a PCN. Once a PCN is submitted, the activity cannot proceed until the Corps district engineer completes a site-specific analysis and verifies either that the activity will not affect any eligible historic site or that the consultations required by NHPA are complete. However, the Corps does not undertake the analysis unless the project applicant raises the issue through a PCN. For pipeline activities that require individual permits, by contrast, the Corps district engineer is responsible for identifying historic properties that may be affected by the permitted activity and completing consultations as necessary. Growth in North American crude oil and natural gas production has led to efforts to expand the domestic oil and natural gas pipeline network. Pipeline construction and operation may impact the environment, human health, and welfare. The interest in expanding the domestic pipeline network and the concerns about the local, regional, and national effects of pipeline construction and operation have raised policy questions about how the Corps' regulatory authorities and civil works processes may influence the development and approval of pipelines and their routes. The Corps is authorized as part of its regulatory program to regulate certain pipeline activities that may affect certain waters and wetlands; it also is authorized to grant permissions, easements, and consents for pipeline segments that cross Corps water resources projects and associated lands. These Corps roles in pipelines are not without controversy. Some of the issues raised center on the following policy questions: I mpacts . How does the Corps determine the geographic area for its evaluations of impacts on the environment, historic properties and cultural resources, communities, and specific population groups? How does the Corps evaluate cumulative impacts? Limits of Agency Authority . When a pipeline is largely a nonfederal undertaking and the federal role is limited to discrete segments, to what extent should the federal government shape siting and other aspects of the pipeline? Risk and Safety . To what extent is the Corps authorized to address oil and natural gas pipeline safety (e.g., risk of spills) as part of its regulatory authorizations and civil works decisions? How are low-probability, high-consequence safety risks considered and addressed in the Corps' decisionmaking processes? Public Interest . How does the Corps arrive at and document its assessment of public interest in its pipeline-related regulatory and civil works activities? That is, how are anticipated costs and benefits (both monetized and non-monetized) for one group weighed relative to costs and benefits for another group, and how is the national public interest considered? General Permits . How does the use of general permits (rather than individual permits) for Corps-regulated pipeline segments affect the agency's review of proposed water crossings, the information available to stakeholders and the public, and compliance with the requirements of NHPA? An extensive discussion of each of these questions is beyond the scope of this report. Many of these questions are not unique to pipelines or to the Corps; that is, many of them have been the subject of past (and ongoing) court cases related to other Corps approvals or to similar actions by other federal agencies. As Congress considers the Corps' current and future roles and the federal role in pipelines more broadly, these questions reflect some of the basic debates about federal actions associated with private infrastructure. | Growth in North American crude oil and natural gas production has led to efforts to expand the domestic oil and natural gas pipeline network. Pipeline developers are required to obtain authorizations from the U.S. Army Corps of Engineers (Corps) before constructing certain pipeline segments. Under the agency's regulatory program, the Corps is responsible for authorizing activities that may affect federally regulated waters and wetlands. Under its civil works program, the agency is responsible for approving activities that cross or may affect Corps-managed lands and Corps water resource projects. The agency's role with respect to pipelines can be controversial and may raise policy issues for Congress. Congress has a long-standing interest in pipeline development and the regulation of pipelines because of the role of pipelines in the domestic energy markets. Corps Regulation of Water Crossings. The Corps has regulatory responsibilities pursuant to Section 404 of the Clean Water Act (33 U.S.C. §1344), under which the Corps authorizes activities that may discharge dredge or fill material into waters of the United States, including wetlands. The agency also has regulatory responsibilities pursuant to Section 10 of the Rivers and Harbors Act of 1899 (33 U.S.C. §403), under which the Corps authorizes structures and work in or affecting the course, condition, or capacity of navigable waters. Because most pipelines cross or potentially affect U.S. waters and wetlands somewhere along their routes, pipeline developers routinely are required to obtain Corps authorization for some pipeline segments. The Corps authorizes most pipeline water crossings using a general permit—Nationwide Permit 12—for utility-line activities in waters of the United States. A nationwide permit essentially preauthorizes a group of activities similar in nature that are likely to have a minor effect on waters and wetlands both individually and cumulatively. Approvals Related to Corps Land and Corps Projects. A pipeline developer may need permissions from the agency's civil works program if a pipeline segment may affect or cross a Corps water resource project and Corps-managed land. That is, the Corps would need to grant (1) an easement, typically for a right-of-way, to cross federal land managed by the Corps or (2) a consent to cross non-Corps land with a Corps real estate interest (typically a federal flood easement over nonfederal land). Prior to the granting of the easement or consent, the Corps generally must provide permission for the pipeline to alter the associated Corps water resource project. The easement at a Corps project for the Dakota Access Pipeline to cross under the Missouri River in North Dakota was particularly controversial. Corps Actions Must Comply with Federal Statutes. In carrying out its regulatory and civil works authorities, the Corps complies with applicable federal requirements. For example, the Corps identifies and considers the environmental impacts of the agency's proposed action (e.g., Corps permit of an activity affecting a wetland) pursuant to the National Environmental Policy Act (NEPA; 42 U.S.C. §§4321 et seq.) and considers impacts on historic properties pursuant to the National Historical Preservation Act (NHPA; 54 U.S.C. §306108). Policy Issues. Various questions arise in policy debates on Corps' actions related to pipelines: How does the Corps determine the direct, indirect, and cumulative impacts of its decisions to authorize activities in regulated waters or Corps-managed lands? When the federal role in a pipeline is limited to approving activities at discrete segments, to what extent should federal agencies influence siting and other aspects of a pipeline? How does the use of Corps general permits affect the agency's review, information available to stakeholders and the public, and compliance with NHPA? These questions reflect some of the basic debates and challenges that Congress and other policymakers face regarding federal approvals associated with private infrastructure. |
The Unified Command Plan (UCP) and associated Combatant Commands (COCOMs) provide operational instructions and command and control to the Armed Forces and have a significant impact on how they are organized, trained, and resourced—areas over which Congress has constitutional authority. In a grand strategic sense, the UCP and the COCOMs are the embodiment of U.S. military policy both at home and abroad. The COCOMs not only execute military policy but also play an important role in foreign policy, and Congress, in both oversight and budgetary roles, has shown great concern in this regard. All Combatant Commanders testify to the Armed Services Committees on an annual basis about their posture and budgetary requirements and frequently host Members and staff during a variety of congressional delegation visits. The Department of Defense (DOD) defines the Unified Command Plan (UCP) as The document, approved by the President, that sets forth basic guidance to all unified combatant commanders; establishes their missions, responsibilities, and force structure; delineates the general geographical area of responsibility (AOR) for geographic combatant commanders; and specifies functional responsibilities for functional combatant commanders. The UCP is a classified executive branch document prepared by the Chairman of the Joint Chiefs of Staff (CJCS) and reviewed and updated at a minimum every two years. While the UCP is normally on a two-year cycle, it can be updated anytime based on changing strategic, political, and budgetary requirements. As noted, the UCP assigns missions; planning, training, and operational responsibilities; and geographic areas of responsibilities to COCOMs. The UCP is assessed and modified, taking into consideration the following strategic documents: The National Security Strategy of the United States of America; The National Defense Strategy of the United States of America; The National Military Strategy of the United States of America; and The current UCP. The UCP process also takes into consideration the strategic context (such as the war in Afghanistan, the global economic situation, relationships with allies, etc.) and command guidance from the President and senior DOD civilian and military leadership. As part of the final review process before the UCP is submitted to the President, the proposed UCP is reviewed by senior service leaders, the Secretary of Defense, and the National Security Council (NSC). Congress is not included in this review process but does have visibility into issues affecting UCP development. DOD defines Combatant Command (COCOM) as: A unified or specified command with a broad continuing mission under a single commander established and so designated by the President, through the Secretary of Defense and with the advice and assistance of the Chairman of the Joint Chiefs of Staff. Combatant commands typically have geographic or functional responsibilities. Dr. Cynthia Watson, a professor at the National War College and author of "Combatant Commands: Origins, Structure, and Engagements" describes combatant commands as being: Commands in charge of utilizing and integrating air, land, sea, and amphibious forces under their commands to achieve U.S. national security objectives while protecting national interests. Four [now three] of the unified commands handle functional concerns while there are six with geographic mandates. The specific configurations have shifted over the decades, but the idea that geography provides an organizing principle remains the same, allowing each combatant command to have its specific threats and opportunities. The combatant commanders work with the military forces in their theaters, and report to the commander in chief and secretary of defense. The combatant commanders do not serve on the Joint Chiefs of Staff nor are they the senior U.S. representatives in the theater. The number of combatant commands is not regulated by law or policy and their numbers and responsibilities have varied over the years. Today, there are nine active COCOMs, and one COCOM–U.S. Joint Forces Command (JFCOM) was disestablished in 2010 and all of its remaining functions were transferred to other COCOMs or organizations. Functional combatant commands operate worldwide across geographic boundaries and provide unique capabilities to geographic combatant commands and the services: USSOCOM: U.S. Special Operations Command, MacDill Air Force Base, FL; USSTRATCOM: U.S. Strategic Command, Offutt Air Force Base, NE; and USTRANSCOM: U.S. Transportation Command, Scott Air Force Base, IL. Geographic combatant commands operate in clearly delineated areas of operation and have a distinctive regional military focus. USAFRICOM: U.S. Africa Command, Kelley Barracks, Stuttgart, Germany; USCENTCOM: U.S. Central Command, MacDill Air Force Base, FL; USEUCOM: U.S. European Command, Patch Barracks, Stuttgart, Germany; USNORTHCOM: U.S. Northern Command, Peterson Air Force Base, CO; USPACOM: U.S. Pacific Command, Camp H.M. Smith, HI; and USSOUTHCOM: U.S. Southern Command, Miami, FL. The United States' experience with global warfare in World War II provided countless lessons attesting to the importance of unity of military effort achieved through the unified command of U.S. forces. While the United States was able to achieve a degree of unified command in the European theater under General Dwight Eisenhower—Supreme Commander, Allied Expeditionary Force—attempts to establish unified command in the Pacific "proved impossible." Differences between the Army and Navy precluded any sort of unified command arrangement and General Douglas MacArthur commanded U.S. Army Forces, Pacific while Admiral Chester Nimitz commanded the U.S. Pacific Fleet. Although both commanders were able to work together to defeat Japan, there was a considerable amount of friction between these two powerful, independent commands. After the war, President Truman noted: We must never fight another war the way that we fought the last two. I have the feeling that if the Army and Navy had fought our enemies as hard as they fought each other, the war would have ended much earlier. In 1946, the Chief of Naval Operations characterized the Pacific command arrangement as "ambiguous and unsatisfactory" and proposed a single command over the Pacific (not including Japan, Korea, and China) to provide unity of command over all U.S. forces in the region. The Army and the Army Air Forces rejected this proposal, favoring instead unified command based on assignment of mission and forces as opposed to geographic areas. After a great deal of discussion and compromise, a worldwide system of unified command was established. President Truman approved the "Outline Command Plan" in December 1946, establishing seven commands as an "interim measure for the immediate post war period." The seven commands were: Far East Command; Pacific Command; Alaskan Command; Northeast Command; Atlantic Fleet; Caribbean Command; and European Command. Some of these seven commands contained more than one service and were, in a sense, unified, while others, such as the Atlantic Fleet, were service-specific. Even though these commands were established to achieve a degree of unity, the services continued in many instances to plan and act independently. Since 1946, the UCP has continued to evolve—sometimes in a dramatic manner—to reflect ever changing strategic, organizational, and political requirements. While Congress has influenced the UCP over the years, three major legislative initiatives have had a lasting impact on the UCP. While the National Security Act of 1947 is best known for the creation of the U.S. Air Force, the Central Intelligence Agency (CIA), and establishing the office of the Secretary of Defense, it also created the Unified Combatant Command (UCC) system. The UCC system signified the recognition by the United States that it would continue to have a worldwide, continuous global military presence. The National Security Act of 1947 also gave the Joint Chiefs of Staff (JCS) the responsibility to establish unified commands in "strategic areas" subject to the approval of the President and Secretary of Defense. In 1958, President Eisenhower—the former Supreme Commander, Allied Expeditionary Force—decided a more unified and streamlined chain of command to employ combat forces was needed, essentially putting an end to separate land, sea, and air combat. President Eisenhower sought "a complete unification of all military planning and combat forces and commands" and proposed the DOD Reorganization Act of 1958 to Congress to amend the National Security Act of 1947. The DOD Reorganization Act of 1958 authorized the President, acting through the Secretary of Defense with the advice of the JCS, to establish unified or specified commands, assign missions, and determine their force structure. This act did not alter any of the authorities established by the National Security Act of 1947 but instead established a clear line of command from the President, through the Secretary of Defense, to the combatant commanders. Combatant commanders were delegated full operational control over forces assigned to them but once these forces were assigned, they could only be transferred with presidential approval. Responsibility for the administration of these assigned forces was to remain with their respective services. In the aftermath of the failed 1980 multi-service mission to rescue U.S. hostages in Iran and the 1983 invasion of Grenada which featured numerous instances of poor inter-service planning and cooperation, there was renewed emphasis on "jointness" both in Congress and at the Pentagon. Goldwater-Nichols sought to "rebalance the relative power of the geographic commands versus the services." Goldwater-Nichols called for the Chairman of the JCS (CJCS) to review the missions, responsibilities, and force structure and geographic boundaries for each COCOM not less than every two years and recommend changes to the Secretary of Defense and the President. In addition, the act expanded the CJCS's and combatant commander's powers and gave combatant commanders greater interaction with Congress and greater participation in the DOD budget process. The UCP and COCOMs are covered under Title 10 - Armed Forces; Subtitle A - General Military Law; Part I–Organization and General Military Powers; Chapter 6–Combatant Commands. As it relates to the UCP, Section 161, inter alia, stipulates: Unified COCOMs are established by the President, through the Secretary of Defense (SECDEF), with the advice and assistance of the CJCS. The CJCS shall periodically review (at least every two years) missions, responsibilities (including geographic boundaries), and force structure of each combatant command. Based on this review, the CJCS will recommend to the President, through the SECDEF, changes to missions, responsibilities, and force structure deemed necessary. The President, except in times of hostilities or imminent danger, will notify Congress not less than 60 days after establishing a new combatant command or significantly revising the missions, responsibilities, or force structure of an existing combatant command. Also under Section 161, the CJCS is required to consider during each periodic UCP review: Whether there was an adequate distribution of responsibilities among the regional unified combatant commands; Whether fewer or differently configured commands would permit the United States to better execute war fighting plans; Whether any assets or activities were redundant; Whether war fighting requirements were adequate to justify current commands; Whether exclusion of certain nations from the Areas of Responsibility presented difficulties with respect to national security objectives in those areas; and Whether the boundary between the U.S. Central and European Commands could create command conflicts in the context of a major regional conflict in the Middle East. Generally, the UCP update cycle runs from 12 to 18 months. The current UCP process consists of five iterative phases described below: 1. Guidance: DOD UCP planners review four central documents: The National Security Strategy of the United States of America; The National Defense Strategy of the United States of America; The National Military Strategy of the United States of America; and the current UCP. UCP participants also receive command guidance in various forms and in varying degrees, and are apprised of the strategic context under which the UCP will be evaluated. During the final part of this phase, stakeholders (Combatant Commanders, Service Chiefs, and the Joint Staff) identify issues they believe need to be addressed during the UCP update cycle. 2. Slate: During this phase, issues are slated for discussion. At the beginning of the phase an action officer planning conference is held to discuss UCP issues. After the conference, stakeholders submit Issue Development Papers (IDPs) to the Joint Staff where they are posted online on a secure operating system (SIPRNET) where stakeholders can view and comment on them. After a period of time, these IDPs and associated comments are sent to the Deputy Director for Strategy and Policy and the Director J-5 for validation. Those IDPs that make it through the validation process are then "slated" and placed online so stakeholders can develop positions for the next phase of the UCP process. 3. Assessment: This phase begins with a Planner's Assessment Conference where courses of action (COA) are developed for each validated IDP. These COA provide decision makers with a range of choices to address the IDPs. Once the COA are agreed at the conference, they are again posted online for review and comment. After a period of time, the COA are finalized and "closed out." 4. Adjudication: The adjudication phase is a four part process whereby the issues and COA are sent to various levels of the Joint Staff for approval. The first level is the Deputy Director for Strategy and Policy and after review and approval, a draft UCP is published. Next comes the Director J-5 and another revised draft UCP is published. This draft UCP is then taken to a Service Chiefs' "Tank" meeting and after that meeting, another UCP draft is prepared. Finally a Joint Chiefs of Staff Tank meeting is held and a final draft UCP is prepared, posted on the SIPRNET, and is then ready for final review. 5. Review: During this phase the UCP is reviewed and revised for the final time. The first review is held at the "four-star level" including Service Chiefs, Combatant Commanders, and other 4-star level general officers and DOD civilians. Next, the SECDEF reviews the draft UCP and suggests changes. The next step is the National Security Council (NSC) review where the UCP is commented on by other U.S. government agencies. Finally, after incorporating the views of the NSC principals, the UCP is taken to the President for approval and final publication. There are other executive branch agencies (State Department, Department of Justice, Department of Homeland Security, and the Central Intelligence Agency, to name a few) that are collectively referred to as the Interagency and have a vested interest in the UCP because some of its associated military tasks intersect with the responsibilities of these agencies. While none of these agencies are formally part of the UCP development process, they do have access to it by means of agency liaison officers stationed at the COCOMs and on the Joint Staff. These liaison officers have visibility of the IDP and COA process as well as access to draft UCPs and are able to report their observations and concerns to their principals (i.e., Secretary of State, Attorney General, etc.). The NSC also receives periodic updates on UCP development or revisions during the UCP cycle. The principals may then choose to address their UCP concerns with senior DOD leadership. During the NSC UCP Review, other agencies can publicly voice concerns with the UCP but, unless an agency has not been actively following the UCP development, there should be no "surprises" when the UCP is reviewed by the NSC. Congress currently has no statutory role in the UCP development, revision, or review process other than those stipulated in Title 10, Chapter 6, Sections 161 and 166. Congress does, however, make its concerns known during hearings, private conversations between Members and staff and DOD leadership, and through lending support to UCP-related issues through legislation or by resolution. For example, prior to the 2007 decision to stand up AFRICOM, a number of Members called for the creation of a separate geographic combatant command for Africa. Congress also periodically includes provisions in annual National Defense Authorization Acts calling for DOD studies and reports on certain aspects of COCOM structure and operations. These requirements, in addition to providing information to Congress, also serve the purpose of identifying areas of congressional concern which can influence DOD COCOM-related resourcing and policy decisions. The 2011 UCP is a classified document. On April 8, 2011, DOD released the 2011 UCP and the unclassified highlights were included in the following news release: DOD Releases Unified Command Plan 2011 The Department of Defense released today the updated Unified Command Plan (UCP), a key strategic document that establishes the missions, responsibilities, and geographic areas of responsibility for commanders of combatant commands. Unified Command Plan 2011, signed by the President on April 6, assigns several new missions to the combatant commanders. Every two years, the chairman of the Joint Chiefs of Staff is required to review the missions, responsibilities, and geographical boundaries of each combatant command and recommend to the President, through the Secretary of Defense, any changes that may be necessary. As in past years, the 2011 review process included the combatant commanders, service chiefs and DOD leadership. Significant changes made by UCP 2011 include - Shifting areas of responsibilities boundaries in the Arctic region to leverage long-standing relationships and improve unity of effort. As a result of this realignment, responsibility for the Arctic region is now shared between USEUCOM and USNORTHCOM rather than USEUCOM, USNORTHCOM and USPACOM as directed in previous UCPs. - Giving USNORTHCOM responsibility to advocate for Arctic capabilities. - Codifying the President's approval to disestablish U.S. Joint Forces Command. - Expanding U.S. Strategic Command's responsibility for combating weapons of mass destruction and developing Global Missile Defense Concept of Operations. - Giving U.S. Transportation Command responsibility for synchronizing planning of global distribution operations. UCP 2011 continues to support U.S. defense security commitments around the world while improving military responsiveness to emerging crises. A map with the UCP COCOM Areas of Responsibility is included in the Appendix . On September 12, 2011, President Obama signed Change One to the 2011 UCP, which primarily captured the administrative changes reflecting the disestablishment of USJFCOM and a number of SECDEF-directed Efficiency Initiatives. These changes include Removing any language referring to USJFCOM which was disestablished on August 31, 2011; Removing language for geographic combatant command standing joint force headquarters, which are approved for disestablishment by the end of FY2012; Adding the responsibility of global standing joint headquarters to USTRANSCOM; Transferring the Joint Warfare Analysis Center missions from USJFCOM to USSTRATCOM; and Removing language and responsibilities for Information Operations, Military Deception, and Operations Security from USSTRATCOM as these mission areas are to be transferred to the Joint Staff. The non-statutory origins of COCOMs are rooted in the U.S. experience in World War II. Prior to World War II, the services operated independently and, despite lessons learned from World War I suggesting the Army and Navy needed to better communicate and plan, no real concerted effort was made to coordinate the Armed Forces, largely attributed to "bureaucratic distrust and service rivalry." During this period, Marine Corps fears the Army would lobby to eliminate the Marines on the grounds they were a "redundant service" as well as Army efforts to maintain control over the country's air arm typified the climate among the services that made any meaningful reform virtually impossible. World War II presented unique challenges not faced during the 18-month U.S. involvement in the First World War. While World War I was fought in a variety of theaters, such as Europe, Africa, the Mediterranean, and the Middle East, U.S. involvement was primarily limited to Europe and was predominately land-centric. In terms of strategic planning and command relationships, the United States played a supporting role. The United States' experience in World War II bore little resemblance to that of the Great War. The European and Pacific theaters of the Second World War varied significantly, with the European Theater being a land-centric conflict supported by naval operations whereas the Pacific Theater was naval-centric and supported by Marine and Army ground forces. Both theaters also featured extensive supporting air force operations, including long-range strategic bombing campaigns unprecedented in both size and scope. In terms of relationships with allies, the United States assumed the leadership role in both the Pacific and European theaters—largely due to its unmatched military and industrial resources—despite insistence that the U.S. was "co-equal partners" with Great Britain, France, and Russia. Unlike 1918, after the Japanese surrender in 1945, U.S. political and military leaders did not advocate a post war policy of isolationism, because of fears of a communist Russia and, to a lesser extent, China. U.S. global military presence was viewed as a guarantee against unfettered communist expansion, and this presence necessitated an effective, geographically focused, long-term, joint command arrangement. As previously noted, COCOMs are governed by the provisions contained in Sections 161 through 168 of Title X, Armed Forces, U.S. Code. These sections address the following provisions; Section 161: The establishment of COCOMs; Section 162: Chain of command and assignment of forces for COCOMs; Section 163: Role of the CJCS; Section 164: Assignment and powers and duties of commanders of COCOMs; Section 165: Administration and support of COCOMs; Section 166: COCOM budget proposals; Section 166a: Funding COCOMs through the CJCS; Section 166b: Funding for combating terrorism readiness initiatives; Section 167: Unified COCOMs for special operations forces; Section 167a: Unified COCOMs for joint warfighting experimentation: acquisition authority; and Section 168: Military-to-military and comparable activities. These provisions assign a number of responsibilities to the CJCS including a regular (at least every two years) review of the missions, responsibilities, areas of operation, and force structure of each combatant command. Upon completion of this review, the Chairman provides suggestions to the President—through the SECDEF—for changes in missions, force structure, and responsibilities for the COCOMs. These provisions also tie the services to the COCOMs as the Secretaries of the military departments are directed to assign their forces (unless assigned elsewhere such as a multi-national peacekeeping operation) to COCOMs. These forces can only be transferred from the commands by the SECDEF. Forces assigned to COCOMs are under the command of that COCOM commander, with the chain of command starting with the President and running through the SECDEF as indicated in Figure 1 . The CJCS serves as a link between the President and the SECDEF and the COCOM commanders. The President can send guidance to COCOM commanders through the CJCS, and the chairman can relay combatant commander's needs and concerns to the SECDEF and the President. The CJCS may exercise oversight of the COCOMs, if desired by the SECDEF, but has no command authority over the COCOMs. In this regard, the CJCS is described as taking part in national security discussions but not in the formal decision-making process as it relates to COCOMs. COCOM commanders are responsible for the accomplishment of missions assigned to them as well as all aspects of joint training, logistics, and military operations. COCOM commanders are also responsible for establishing command relationships with subordinate commands as well as organizing subordinate units as deemed necessary. While Combatant Commanders exercise control over subordinate units from different services, the services retain administrative control of their personnel to include assignment, promotion, schooling, and retirement. To facilitate administrative control, geographic combatant commands have service subcomponents for each service. On an annual basis, COCOMs request Operations and Maintenance (O&M) funding. Funding for forces assigned to COCOMs are funded by the respective services and funding for operations are funded separately, such as operations in Afghanistan and counterterror operations that have primarily been funded through the Overseas Contingency Operations (OCO) account. Table 1 provides O&M funding figures for the COCOMs from FY2011 to FY2013. It should be noted that some amounts include operational and OCO costs (see corresponding notes). The SECDEF is required to submit an annual budget proposal for the COCOMs and funding may be requested for joint exercises, force training, contingencies, and selected operations. Proposed funding for special operations forces (SOF) training with foreign forces may also be requested. COCOMs can also receive funds through the CJCS as part of the "Combatant Commander Initiative Fund." Although not a COCOM, the U.S. element of the North American Aerospace Defense Command (NORAD) is also eligible for this fund. Authorized activities include Force training; Contingencies; Selected operations; Command and control; Joint exercises to include activities of participating foreign nations; Humanitarian and civic assistance; Military education and training to military and related civilian personnel of foreign countries; Personnel expenses of defense personnel for bilateral or regional cooperation programs; Force protection; and Joint warfighting capabilities. COCOMs also have access to a DOD budget account known as the "Combating Terrorism Readiness Initiatives Fund." Authorized activities under this fund include Procurement and maintenance of physical security equipment; Improvement of physical security sites; Under extraordinary circumstances: Physical security management planning; Procurement and support of security forces and security technicians; Security reviews, investigations, and vulnerability assessments; and Any other activity relating to physical security. COCOM commanders hold four-star flag rank and have risen through the ranks of their respective services, commanding at the highest levels. COCOM commanders have also met Joint Military Education Requirements as set forth in the Goldwater-Nichols Act. The President nominates combatant commanders based on the recommendations of the SECDEF. The Senate Armed Services Committee holds confirmation hearings for the nominees and the Senate then votes to confirm the candidates. While four-star officers from any service may serve as combatant commander for any given COCOM, some appointments (e.g., U.S. Pacific Command being commanded by a Navy admiral) traditionally have gone to specific services. The basic configurations of COCOM staffs are generally the same and mirrors the Joint Staff at the Pentagon. COCOM staffs are organized as follows, although there are variations based on unique COCOM mission areas: J-1 Directorate of Manpower and Personnel; J-2 Directorate of Intelligence; J-3 Directorate of Operations; J-4 Directorate of Logistics; J-5 Directorate of Strategic Plans and Policy; J-6 Directorate of Command, Control, Communication, and Computer; J-7 Directorate of Operational Planning and Joint Force Development; J-8 Directorate of Force Structure, Resources, and Assessment; and J-9 Directorate of Interagency Partnering. Within the COCOM command and staff construct, Joint Task Forces (JTFs) are often created to address a single policy concern and allocate resources, such as anti-drug efforts or humanitarian assistance, on a short- to mid-term basis. JTFs can also be established in response to a crisis or for a long-term commitment. Some COCOMs also have a political advisor (POLAD) assigned to the commander to serve as an interface with the civilian portion of the national security establishment as well as the ambassadors and embassy staffs of countries that fall under the COCOM commander's UCP mandate. Both Functional and Geographic COCOMs have integrated assets and representatives of other agencies and departments of the U.S. government into the COCOM's structure to enhance operations. Examples of this representation include USAFRICOM: A State Department Deputy Commander for Civil-Military Activities, a senior U.S. Agency for International Development (USAID) advisor, and two other senior U.S. diplomats who serve as a Foreign Policy Advisor and as the J-9, Director of Outreach; USCENTCOM: An Interagency Action Group (IAG) established in the J-3 Directorate of Operations to integrate USCENTCOM and Interagency activities; USEUCOM: Established a J-9 Directorate for Interagency Partnering; and USNORTHCOM: A Joint Interagency Coordinating Group (JIACG) that integrates and synchronizes the activities of numerous civilian, State, Federal, and private sector organizations. USSOCOM's primary mission is to organize, train, and equip special operations forces (SOF) and provides those forces to the Geographic Combatant Commanders under whose operational control they serve. USSOCOM also develops special operations strategy, doctrine, and procedures for the use of SOF and also develops and procures specialized, SOF-unique equipment for its assigned forces. USSOCOM is also the lead COCOM for synchronizing DOD planning against terrorists and their networks on a global basis. USSOCOM also can execute global operations against terrorist networks when directed to do so by the President or Secretary of Defense. The diverse nature of USSOCOM's counterterror mission requires working extensively with other non-DOD U.S. Government Agencies, sometimes referred to as the Interagency. The 1980 Desert One tragedy and the 1983 loss of 237 Marines in Beirut, combined with the command and control problems experienced during Grenada in 1983 heightened apprehensions about DOD's ability to manage the services, including special operations forces who were "owned" by their respective service. By 1983, there was a small but growing sense in Congress of the need for military reforms. In June, the Senate Armed Services Committee (SASC), under the chairmanship of Senator Barry Goldwater (R-AZ), began a two-year-long study of DOD which included an examination of SOF. With concern mounting on Capitol Hill, DOD created the Joint Special Operations Agency on January 1, 1984. This agency had neither operational nor command authority over any SOF units and did little to address SOF issues. Within Congress, there was a growing sense that a radical restructuring of SOF was needed. Proponents included Senators Sam Nunn (D-GA) and William Cohen (R-ME), both members of the SASC, and Representative Dan Daniel (D-VA), the chairman of the Readiness Subcommittee of the House Armed Services Committee (HASC). Congressman Daniel believed the U.S. military establishment had little interest in special operations and that U.S. SOF was second-rate when compared to countries such as Great Britain and Israel. Senators Nunn and Cohen also believed that DOD was not preparing adequately for future threats. Senator Nunn expressed a growing frustration with the Service's practice of reallocating monies appropriated for SOF modernization to non-SOF programs and suggested the U.S. needed a more efficient organization and a more direct chain of command for special operations. In early 1986, SOF advocates introduced reform bills in the House and Senate. The Senate bill, co-sponsored by Senator Nunn and others, called for a joint military organization for SOF and the establishment of an office in DOD to ensure adequate funding and policy emphasis for low-intensity conflict and special operations. Representative Daniel's proposal went even further—he wanted a national special operations agency headed by a civilian who would bypass the Joint Chiefs and report directly to the SECDEF, thereby keeping Joint Chiefs and services out of the SOF budget process. Congress held hearings on the two bills in the summer of 1986. CJCS Admiral William J. Crowe, led the Pentagon's opposition to the bills and proposed instead a new special operations forces command led by a three-star general. This proposal was not well received by Congress, who wanted a four-star officer in charge so that he could deal on an equal footing with the four-star Service Chiefs. President Reagan approved the establishment of USSOCOM on April 13, 1987. DOD activated USSOCOM on April 16, 1987, and nominated Army General Lindsay to be USSOCOM's first commander. USASOC includes Army Special Forces, also known as Green Berets; Rangers; Civil Affairs, and Military Information Support Operations (MISO)—formerly known as psychological operations (PSYOPS)—units. In addition, the 160 th Special Operations Aviation Regiment (SOAR) provides rotary wing support to all SOF units. NSWC consists of Sea, Air, and Land (SEAL) teams that conduct operations in both maritime and ground environments. NSWC also has SEAL Delivery Vehicle (SDV) teams—specialized SEALs that pilot small submersible vehicles that can deliver SEALs to their area of operations. NSWC includes Special Boat Teams that can deliver SEALs from ship to shore as well as operate in the littorals and rivers. AFSOC provides specialized fixed and rotary wing support to USSOCOM units. In addition to aircraft support, AFSOC also provides Combat Controllers, Pararescue Jumpers, Special Operations Weather Teams, and Tactical Air Control Parties (TACPs) to support special operations. AFSOC is currently establishing a capacity to train and advise partner nation aviation units as part of foreign internal defense initiatives. Established in 2005, MARSOC is the newest USSOCOM subcomponent. It consists of three Marine Special Operations Battalions, a Marine Special Operations Support Group, a Marine Special Operations Intelligence Battalion, and the Marine Special Operations School. According to USSOCOM, JSOC is a sub unified command charged with studying special operations requirements and techniques to ensure interoperability and equipment standardization. JSOC also plans and conducts special operations exercises and training and develops joint special operations tactics. USOCOM also notes JSOC "is comprised of an impressive amalgamation of rigorously screened and accessed, Soldiers, Sailors, Airmen, Marines, and Civilians," and "past and present members of JSOC have participated in all of our Nation's wars and contingency operations since it was activated in 1980." Press reports suggest JSOC is home to USSOCOM's national mission forces which reportedly conduct highly sensitive combat and supporting operations against terrorists on a worldwide basis. JSOU's stated mission is to Educate Special Operations Forces executive, senior, and intermediate leaders and selected other national and international security decision-makers, both military and civilian, through teaching, research, and outreach in the science and art of Joint Special Operations. With the August 2010 disestablishment of JFCOM, SOCJFCOM was transferred to USSOCOM, where it was renamed SOC-JC. SOC-JC's mission is to train conventional and special operations force commanders and their staffs in the employment of Special Operations Forces focusing on the full integration of SOF and the conventional forces in both planning and execution to enhance warfighting readiness. USSOCOM operates on a global basis in both overt and classified modes. Missions range from foreign internal defense to counterterrorism, but the primary emphasis for U.S. SOF is attacking terrorists and terror cells worldwide. While USSOCOM's primary focus of these activities is the USCENTCOM region, USSOCOM Commander Admiral William McRaven stated, "U.S. special operations forces are in 78 countries around the world, supporting U.S. policy objectives." In testimony, Admiral McRaven noted that even when operations conclude in Afghanistan, historical data suggest that there will be a constant demand for a "steady state" SOF-deployed force of almost 12,000 SOF troops to support COCOM requirements. As SOF forces continue their Quadrennial Defense Review (QDR)-mandated growth, USSOCOM assesses they will have adequate capacity by FY2017 to meet the anticipated COCOM demand without placing undue risk to global counterterrorism (CT) operations. This FY2017 target is predicated on USSOCOM's self-imposed growth rate of 3% to 5% annually, which is intended to maintain the overall quality of special operations forces. In March 2011, then USSOCOM Commander Admiral Eric Olson testified that the decade-long wars had resulted in some "fraying around the edges" for U.S. SOF. This almost constant state of deployment had resulted in significant time away from families and limited time for needed professional training and education and created a great deal of pressure on SOF and their families. As a result of a study initiated under Admiral Olson, a lack of predictability resulting from a demanding operational tempo and increased difficulties for SOF troops reconnecting and reintegrating into family activities after returning from deployments were identified as two primary sources of ongoing stress. As a result, Admiral McRaven has established a task force that has been tasked with building and implementing innovative solutions across USSOCOM to address these stressors. Reports suggest USSOCOM will continue to push for more control over deployed special operations forces. At present, once U.S. SOF deploys into a region, they are controlled by a geographic combatant commander and USSOCOM can no longer control where they go or what mission they perform. According to USSOCOM officials, "Admiral McRaven is looking for the freedom to move forces where he needs them and when he needs them." This requirement seemingly suggests USSOCOM is currently allocating its SOF units to combatant commands with little to no mission guidance, which, in itself, might be considered problematic. Given USSOCOM's counterterrorism mandate, it would appear that USSOCOM could task these SOF units with missions at the national level, which would be mutually supportive of the combatant commander's regional missions for the SOF unit. If USSOCOM gets expanded authorities, it would exert enhanced control primarily through TSOCs, which currently work exclusively for each combatant commander, but USSOCOM contends that TSOCs operate "without any greater centrality to recognizing how the actions of one TSOC in his regional area of responsibility can do things that influence another region." If USSOCOM gets the additional authorities it has requested, it could give the USSOCOM Commander the ability to have a direct relationships with the TSOCs. While these enhanced authorities might benefit USSOCOM, they might also violate the principal of "unity of command" despite USSOCOM's insistence that combatant commanders would have to approve any of USSOCOM's moves of deployed SOF units. One report suggests that "turning SOCOM into a global combatant command would create constant friction with regional commands" and that efforts to gain additional authorities were perceived by some as a "power grab." The potential for a dual chain of command could result in unnecessary friction between USSOCOM and geographic combatant commands and host countries, possibly having an unintended detrimental impact on the deployed SOF unit. Because there appears to be a number of contentious issues regarding enhanced USSOCOM authorities, Congress might choose to examine these issues in greater detail. USSTRATCOM's primary responsibility is the stewardship and employment of U.S. nuclear weapons and to detect, deter, and prevent attacks against the United States and our allies and to join with the other combatant commands to defend the nation should deterrence fail. Specific responsibilities include planning, synchronizing, advocating, and employing capabilities to meet the United States' strategic deterrence; space operations; cyberspace operations; global strike; missile defense; intelligence, surveillance, reconnaissance (ISR); and combating weapons of mass destruction (WMD). USSTRATCOM was established October 1, 2002. USSTRATCOM has provided intelligence, planning, and cyber support to coalition forces in Afghanistan and Iraq. It monitors orbiting satellites and space debris, allowing spacecraft to avoid collision. USTRATCOM has also deployed systems to provide limited protection against ballistic missile attack. The missions most directly associated with USSTRATCOM and its predecessors are deterrence and global strike. These were the missions of Strategic Air Command (SAC) from 1946 to 1992 and of the first USSTRATCOM from 1992 to 2002. Though best known for its connection with the nuclear deterrent, SAC conducted conventional bombing operations during the Korean War and Vietnam War and the first Persian Gulf War, 1991. On June 1, 1992, SAC was replaced by a new unified command, USSTRATCOM. The new command's primary mission was to deter attack, especially nuclear attack, on the United States and its allies and, if deterrence failed, employ nuclear forces in response. The U.S. military began operating in space in the late 1950s, with many of the early systems developed to meet SAC's needs for surveillance, warning, meteorology, and communications. By 1985, space activities had grown to such a scale that DOD created a new unified command, USSPACECOM, to manage military space operations. Secretary Rumsfeld's initiative to merge USSTRATCOM and USSPACECOM led to the creation of the current USSTRATCOM in 2002. Two other areas took on increasing importance beginning around 2000: missile defense and cyberspace operations. By September 2004, the United States had deployed a limited system that offered some protection to North America and had opened discussions about extending the system to cover allies. The U.S. military's reliance on computer networks grew exponentially in the 1980s and 1990s. National leaders took steps to protect defense networks in 1998, creating a Joint Task Force for Computer Network Defense and assigning it to USSPACECOM. As computer attacks against DOD become more sophisticated and frequent there were calls to place greater emphasis and visibility on cyber operations. Defense Secretary Robert Gates favored a new sub-unified command under USSTRATCOM that would recombine offensive and defensive computer network operations. Established May 21, 2010, U.S. Cyber Command (USCYBERCOM) was fully operational on October 31, 2010. AFGSC is responsible for the Air Force's three intercontinental ballistic missile (ICBM) wings, two B-52 Stratofortress wings, and the sole B-2 Spirit wing. AFGSC has two numbered air forces that are tasked with providing capabilities to combatant commands. The Eighth Air Force controls the long-range nuclear bomber assets (B-52s and B-2s) and the Twentieth Air Force controls the ICBM wings. AFSPC provides space and cybersecurity forces for USSTRATCOM. It has two numbered air forces providing these capabilities. The Fourteenth Air Force controls and supports several satellite systems including the Global Positioning System (GPS); Defense Satellite Communications Systems Phase II and III; and the Defense Meteorological Support Program. In addition, the Fourteenth Air Force has Atlas, Delta, and Titan launch vehicles at its disposal to put payloads into orbit. The Twenty-Fourth Air Force plans and conducts cyberspace operations in support of combatant commands. ARSTRAT conducts space and missile defense operations and provides planning, integration, control, and coordination of Army forces and capabilities in support of USSTRATCOM missions. Fleet Forces Command is responsible for the entire Atlantic Ocean, the Caribbean Sea, and the waters around Central and South America extending into the Pacific to the Galapagos Island. MARFORSTRAT serves as the Marine Corps service component to USSTRATCOM. USCYBERCOM is a sub unified command that is subordinate to USSTRATCOM. USCYBERCOM plans, coordinates, integrates, synchronizes, and conducts activities to defend DOD information networks and also conducts cyber space activities to enable U.S. military activities. JFCC-GS optimizes planning, integration, execution, and force management of assigned missions to deter attacks against the United States, its territories, possessions, and bases. JFCC-IMD synchronizes operational-level global missile defense planning, operations support, and the development of missile defense effects for DOD. JFCC-ISR plans, integrates, and coordinates intelligence, surveillance, and reconnaissance in support of strategic and global operations and strategic deterrence. JFCC-Space is responsible for executing continuous, integrated space operations to deliver theater and global effects in support of national and combatant commander objectives. JIOWC provides joint information operations planning, execution, and operational-level integration of Electronic Warfare, Operations Security, and Military Deception across DOD to support USSTRATCOM, joint force commanders, and U.S. national objectives. On September 12, 2011, President Obama signed Change One to the 2011 UCP, which transfers the Information Operations, Military Deception, and Operations Security missions from USSTRATCOM to the Joint Staff so it is possible the structure and missions of JIOWC may change significantly in the near future. SCC-WMD plans, advocates, and advises the USSTRATCOM commander on WMD-related matters. According to USSTRATCOM's commander, USSTRATCOM's major ongoing operation is to detect, deter, and prevent attacks against the United States and to join with the other combatant commands to defend the nation should deterrence fail. One aspect of this operation is the "around the clock" command and control of U.S. nuclear forces. USSTRATCOM is also involved in implementing the new START treaty and efforts to sustain and modernize the nuclear triad and the nuclear weapons complex. USSTRATCOM provides support to other combatant commanders in the areas of integrated missile defense and ISR operations. Not unlike its nuclear deterrence activities, USSTRATCOM and USCYBERCOM operate on a daily basis to improve their ability to operate and defend the DOD information network and make sure critical activities can continue, even in the face of adversary attempts to deny or disrupt them. USSTRATCOM is also responsible for U.S. military space operations on a day-to-day basis such as launching satellites and monitoring activities in space. In March 2012, the USSTRATCOM commander noted during a Senate Armed Services Committee (SASC) hearings his concerns over the sustainment of the nation's nuclear weapons. In testimony, he noted that as U.S. nuclear weapons age, the United States faces continued erosion of the nuclear enterprise's physical and intellectual capital, necessitating investment in stockpile certification, warhead life extension, and infrastructure recapitalization. Without these investments, USSTRATCOM will not be able to maintain the nation's nuclear deterrent. During congressional testimony, the USSTRATCOM commander noted that the command's ability to process and analyze data from "increasingly capable ISR platforms is also a growing challenge." It was suggested not only are analysts dealing with more data but also with an increased operational tempo, which imposes even greater demands on the timeliness of their analysis and reporting. Conservative USTRATCOM estimates suggest the command would need a 100% increase in analysts to meet COCOM requirements—which USTRATCOM believes is "an unrealistic level of growth in almost any environment, let alone a fiscally constrained one." The USSTRATCOM commander expressed about USCYBERCOM's technical capacity and workforce. Noting that USCYBERCOM needs the best trained and educated people in its cyberspace workforce, concerns were expressed that the U.S. education system might not be emphasizing the appropriate academic disciplines. A possible solution to this situation could be "encouraging and improving science, technology, engineering, and math education from an early age." Another factor contributing to workforce concerns was the belief that "traditional military recruitment and retention programs may not be the best or fastest way to build a stable cyber cadre for the long term." Develop and direct the Joint Deployment and Distribution Enterprise to globally project strategic national security capabilities; accurately sense the operating environment; provide end-to-end distribution process visibility; and support joint, U.S. government, and Secretary of Defense-approved multinational and nongovernmental logistical requirements. World War II, the Berlin blockade, the Korean War, and the Vietnam War demonstrated the need for the United States to maintain a capable and ready transportation system for national security. A 1978 exercise exposed significant gaps in understanding between military and civilian participants: mobilization and deployment plans fell apart, and as a result, the United States and its NATO allies "lost the war." Two major recommendations came out of the exercise. First, the Transportation Operating Agencies (later called the Transportation Component Commands) should have a direct reporting chain to the JCS. Second, the JCS should establish a single manager for deployment and execution. As a result, the JCS formed the Joint Deployment Agency (JDA) in 1979 at MacDill Air Force Base, FL. Although the JDA had responsibility for integrating deployment procedures, it did not have authority to direct the Transportation Operating Agencies or Unified and Specified Commanders to take corrective actions, keep data bases current, or adhere to milestones. In April 1987 President Reagan ordered the SECDEF to establish a Unified Transportation Command (UTC), a directive made possible in part by the Goldwater-Nichols DOD Reorganization Act of 1986, which revoked the law prohibiting consolidation of military transportation functions. Designated the United States Transportation Command (USTRANSCOM), its mission was to provide global air, sea, and land transportation to meet national security needs. It had three transportation component commands—the Air Force's Military Airlift Command (replaced by Air Mobility Command in 1992), the Navy's Military Sealift Command, and the Army's Military Traffic Management Command, (renamed Military Surface Deployment and Distribution Command in 2004). On June 22, 1987, the President nominated Air Force General Duane H. Cassidy as the first USTRANSCOM commander. The commander of USTRANSCOM received operational direction from the National Command Authority (NCA) through the CJCS. There were, however, some deficiencies in this new command arrangement. The services retained their single-manager charters for their respective transportation modes. Even more restrictive, USTRANSCOM's authorities were limited primarily to wartime. As a result, during peacetime, USTRANSCOM's component commands continued to operate day-to-day much as they had in the past. They controlled their industrial funds and maintained responsibility for service-unique missions, service-oriented procurement and maintenance scheduling, and DOD charters during peacetime single-manager transportation operations. They also continued to have operational control of forces. DOD learned much from the strategic deployment for Desert Shield/Desert Storm and foremost among those lessons was USTRANSCOM and its component commands needed to operate in peacetime as they would in wartime. Consequently, on February 14, 1992, the SECDEF gave USTRANSCOM a new charter. Stating the command's mission to be "to provide air, land, and sea transportation for DOD, both in time of peace and time of war," the charter greatly expanded the authorities of the USTRANSCOM commander. Under the new charter, the Service Secretaries assigned the components to the USTRANSCOM commander in peace and war. In addition, the military departments assigned to him, under his combatant command, all transportation assets except those that were service-unique or theater-assigned. The charter also made the USTRANSCOM commander DOD's single-manager for transportation, other than service-unique and theater-assigned assets. On September 16, 2003, Secretary of Defense Rumsfeld designated the USTRANSCOM commander as the Distribution Process Owner (DPO) to serve "as the single entity to direct and supervise execution of the Strategic Distribution system" in order to "improve the overall efficiency and interoperability of distribution related activities - deployment, sustainment and redeployment support during peace and war." As the DPO, USTRANSCOM partnered with other COCOMs, the services, defense agencies, Office of the Secretary of Defense, Joint Staff and industry to improve the Joint Deployment and Distribution Enterprise Since 2003, USTRANSCOM has gained additional responsibilities related to its role as the Distribution Process Owner. In 2004, USTRANSCOM became the portfolio manager for DOD logistics information technology systems, and received acquisition authority for procuring information technology systems, carrying out research projects and obtaining services needed to transform the DOD supply chain. "SDDC provides ocean terminal, commercial ocean liner service and traffic management services to deploy, sustain and redeploy U.S. forces on a global basis. The command is responsible for surface transportation and is the interface between DOD shippers and the commercial transportation carrier industry. This includes movement of servicemembers household goods and privately owned vehicles. SDDC is the nation's largest customer to the moving industry with more than 500,000 household goods moves a year. The command also provides transportation for troops and materiel to ports of departure in the U.S. and overseas and manages 24 ports worldwide, including military terminals at Sunny Point, N.C., and Concord, Calif." "MSC provides sealift transportation services to deploy, sustain and redeploy U.S. forces around the globe. MSC provides sealift with a fleet of government-owned and chartered U.S.-flagged ships. MSC executes Voluntary Intermodal Sealift Agreement (VISA) contracts for chartered vessels. Sealift ships principally move unit equipment from the U.S. to theaters of operation all over the world. In addition to sealift ships, MSC operates a fleet of prepositioned ships strategically placed around the world and loaded with equipment and supplies to sustain Army, Navy, Marine Corps, Air Force and Defense Logistics Agency operations. These ships remain at sea, ready to deploy on short notice, which significantly reduces the response time for the delivery of urgently needed equipment and supplies to a theater of operation." "AMC provides strategic and tactical airlift, air refueling, and aeromedical evacuation services for deploying, sustaining and redeploying U.S. forces wherever they are needed. Many special duty and operational support aircraft are also assigned to AMC (including Air Force One). In addition, AMC contracts with commercial air carriers through Civil Reserve Air Fleet (CRAF) and other programs for movement of DOD passengers and cargo. AMC's air fleet provides swift response as an element of America's global reach." USTRANSCOM conducts military and commercial transportation, distribution process integration, terminal management, aerial refueling, and global patient movement on a daily basis. In 2011, the Air Mobility Command (AMC) deployed a rotational force of over 60 C-130 tactical airlift aircraft, plus 120 KC-135 and KC-10 aerial refueling aircraft. AMC also employed 21 C-17 transport aircraft in dedicated support of USCENTCOM and across all COCOMs, on a daily basis, at least one-third of AMC's air mobility fleet was used to support global operations. The Military Sealift Command (MSC) and the Military Surface Deployment and Distribution Command (SDDC) moved over 19.9 million tons of cargo worldwide. USTRANSCOM noted MSC tankers delivered 1.6 billion gallons of fuel to support global operations and SDDC had moved over 3,500 pieces of mission essential cargo by commercial sealift and then used airlift to transport this cargo to Afghanistan. The Pakistan Ground Lines of Communication (PAK GLOC), when open, remain the quickest and most cost-effective route for surface transportation into Afghanistan. Ground transportation through Pakistan had been curtailed since November 2011, and in early July 2012 the PAK GLOC was reopened after extensive negotiations. It should be noted there is no guarantee the Pakistani government will not close the PAK GLOC if there are future disputes with the U.S. government or NATO. USTRANSCOM continues efforts to expand surface networks that supply Afghanistan. Called the Northern Distribution Network (NDN), USTRANSCOM's stated priority is to enhance and improve this network. In 2011, over 40% of all cargo supporting Operation Enduring Freedom (OEF) moved through the NDN's truck, water, rail, and air routes. In 2011, a total of 27,000 containers were delivered via NDN surface transportation—an increase of 15% from 2010. The importance of the NDN to USTRANSCOM's operations will likely grow as U.S. forces begin leaving Afghanistan in preparation for handing over security responsibilities to the Afghan government by 2014. As part of the Administration's shift in strategic emphasis to the Asia-Pacific region, USTRANSCOM noted during testimony the importance of Guam as a key multimodal logistics node. USTRANSCOM expressed its support of infrastructure improvements to ensure successful distribution operations in the region. USTRANSCOM has partnered with the Defense Logistics Agency (DLA) and, with congressional approval, has invested $101.3 million in the recapitalization of the fuel hydrant infrastructure and $61 million in a JP-8 pipeline between Apra Harbor and Anderson Air Force Base. "Africa Command protects and defends the national security interests of the United States by strengthening the defense capabilities of African states and regional organizations and, when directed, conducts military operations, in order to deter and defeat transnational threats and to provide a security environment conducive to good governance and development." "USAFRICOM is responsible for U.S. military relations with 54 African countries including the islands of Cape Verde, Equatorial Guinea, and Sao Tome and Principe, along with the Indian Ocean islands of Comoros, Madagascar, Mauritius, and Seychelles. U.S. Central Command maintains its traditional relationship with Egypt, though USAFRICOM coordinates with Egypt on issues relating to Africa security." Dr. Cynthia Watson, a professor at the National War College and author of "Combatant Commands: Origins, Structure, and Engagements," observes USAFRICOM has a different type of mission, noting USAFRICOM allows the U.S. government, particularly DOD, to work toward a more stable environment in which political and economic growth can take place with three former U.S. commands consolidated into a single new one to best work out the U.S. government efforts. Africa Command hopes to avoid that traditional combatant command goals of warfighting in favor of war prevention, making its orientation quite different from other parallel organizations. Africa's previous command arrangements (USEUCOM has had responsibility for most of Africa since the end of World War II) reflect the relatively low level of importance assigned to the African continent within the U.S. military structure. Before the creation of USAFRICOM, Africa generally received less attention than other regions under the three aforementioned military commands. USCENTCOM was focused on U.S. security priorities in Iraq and Afghanistan. USEUCOM was preoccupied with NATO, relations with European allies and Russia. USPACOM was primarily focused on regional powers such as China, India, and North Korea. There was a consensus that the previous command arrangements for Africa represented a "suboptimal organizational structure." Secretary of Defense Robert Gates observed that previous command arrangements for the African continent were "an outdated arrangement left over from the Cold War." U.S. foreign policy in the region, like its military involvement, was primarily concerned with Cold War geopolitics rather than African policy and development. Scholars have referred to this policy attitude as "benign neglect," designating Africa as the "stepchild" of U.S. foreign policy. This attitude continued after the end of the Cold War, when the opportunity to articulate coherent policy was overlooked. While the transformation of the geopolitical landscape was significantly altered by the fall of the Soviet Union, America's attention was focused on the newly freed Eurasian states. In 1995, in its U.S. Security Strategy for Sub-Saharan Africa, DOD noted that "ultimately we see very little traditional strategic interest in Africa." Events in the late 1990s began to change U.S. perception of security interests in Africa. In 1998, two U.S. embassies in Africa were bombed. While many scholars believe these twin bombings marked a turning point in U.S. strategic policy toward the region, the domestic terrorist attacks of September 11, 2001, forced a reassessment of U.S. policy vis-à-vis Africa and its role in the global war on terrorism. The growing strategic importance of Africa for the United States was subsequently articulated in government documents. In the 2002 National Security Strategy, the concept of weak states and their role in global instability was an important theme. The 2006 National Security Strategy solidified the newly important role of Africa, observing, "Africa holds growing geo-strategic importance and is a high priority of this administration." The National Security Presidential Directive (NSPD 50) signed by President Bush in September 2006 provided the first update to overall U.S. strategy toward Africa since 1992. Africa's abundance of natural energy resources has made it an attractive region for countries the United States, China, and India seeking additional resources. U.S. officials note three areas are of particular concern: (1) the number of soft targets (e.g., embassies and consulates); (2) the recruiting potential for young, angry, marginalized youth from Somalia to Morocco; and (3) the potential of sanctuary for international terrorists (particularly in large ungoverned spaces). Africa has also been a target terrorist activity: there were attacks on the U.S. embassies in Tanzania, and Kenya, in 1998; on targets in Mombasa, Kenya, in 2002; and in Algiers in 2007. In particular, the Horn of Africa is of concern to terrorism experts and military personnel. In addition to terrorism concern, the growth of international piracy in the region has become a serious problem for the international community. On February 6, 2007, the White House announced a presidential directive to create a new unified combatant command in Africa. U.S. Africa Command (USAFRICOM) commenced official operations on October 1, 2007, and remained a sub-unified command under U.S. European Command (USEUCOM) until October 2008. On October 1, 2008, USAFRICOM was declared fully mission capable and took over the role of geographic combatant command for Africa. While the USAFRICOM headquarters remains in Germany, there are aspirations to possibly move it to Africa sometime in the future but regional sensitivities and security concerns have made this a challenging proposition. Headquartered in Vicenza, Italy, USARAF is the Army component to USAFRICOM. In concert with national and international partners, it conducts sustained security engagement with African land forces to promote peace, stability, and security in Africa. If required, USAFRICOM can deploy as a contingency headquarters in support of crisis response. USAFRICOM is staffed by the Southern European Task Force (SETAF), which prior to August 2008 was an airborne task force that supported NATO in both combat and humanitarian operations. "NAVAF is part of a combined U.S. Naval Forces Europe (NAVEUR)/NAVAF headquarters and is tasked with the conduct of the full range of maritime operations and theater security cooperation in concert with coalition joint interagency and other partners in order to advance security and stability in Europe and Africa. Their combined areas of responsibility cover approximately half of the Atlantic Ocean, from the North Pole to Antarctica; as well as the Adriatic, Baltic, Barents, Black, Caspian, Mediterranean and North Seas. NAVEUR-NAVAF [headquartered in Naples, Italy] covers all of Russia, Europe and nearly the entire continent of Africa. It encompasses 105 countries with a combined population of more than one billion people and includes a landmass extending more than 14 million square miles." The U.S. Sixth Fleet supports NAVAF operations in the AFRICOM AOR and is headquartered in Naples, Italy. "AFAFRICA, or 17 th Air Forces, conducts sustained security engagement and operations to promote air safety, security, and development in Africa. AFAFRICA is located at Ramstein Air Base in Germany." MARFORAF, located Stuttgart, Germany, is the Marine's service component headquarters for USAFRICOM. "MARFORAF conducts operations, exercises, training, and security cooperation activities throughout the African Continent." "CJTF-HOA is USAFRICOM's forward operating task force located at Camp Lemonnier in Djibouti. It is one of more than 23 tenant organizations. CJTF-HOA has approximately 2,000 people assigned on rotating tours. While the core staff works at Camp Lemonnier, most of the service members assigned to CJTF-HOA are "embedded" in partner nations performing a range of activities—building partner security capability, capacity, and infrastructure through regional cooperation; military-to-military programs; civil-military affairs projects; and professional military education programs. Through an indirect approach, the task force, along with coalition and other U.S. defense components, provides support to regional organizations to help foster cooperation, enhance collective peace-keeping, improve humanitarian assistance, and support civil-military operations." "On October 1, 2008, SOCAFRICA was established as USAFRICOM's Theater Special Operations Command—a functional, sub-unified special operations command for Africa. SOCAFRICA contributes to USAFRICOM's mission through the application of the full spectrum of special operations forces capabilities including civil affairs, information operations, theater security cooperation, crisis response, and campaign planning." SOCAFRICA is headquartered in Stuttgart, Germany. On October 14, 2011, President Obama informed Congress that on October 12, 2011, a small team of U.S. military personnel began deploying to Uganda and that by November about 100 U.S. military personnel—primarily U.S. Special Forces—would be deployed to Central Africa to act as advisors to partner forces who are attempting to kill or capture the leadership of the Lord's Resistance Army (LRA). The LRA is a nonreligious terror group that routinely kidnaps children and forces them to serve as soldiers which has committed multiple acts of terror in the region over the past two decades. U.S. forces are operating in Uganda, South Sudan, the Central African Republic, and the Democratic Republic of the Congo, and the mission has been characterized as a mission of "months as opposed to years." In the past, USAFRICOM has provided training and equipment to a variety of central African militaries. USAFRICOM's involvement has been credited with helping central African forces attrite the LRA to about 200 core fighters and about 600 supporters. USAFRICOM notes that about 100 U.S. service members continue to operate in Uganda, South Sudan, the Central African Republic, and the Democratic Republic of the Congo as advisors. While not characterized as an "open-ended commitment" USAFRICOM regularly "reviews and assesses" the effectiveness of this effort to determine if continued involvement is warranted. "OEF-TS is the US Military regional plan against terrorist and violent extremists. OEF-TS is the military component to Trans Sahara Counterterrorism Partnership (TSCTP), together with other USG organizations, OEF-TS will help enhance stability and deter terrorist activity on the African continent, with an emphasis on greater security in North Africa. USAFRICOM is working with international partners in a regional approach to common areas of concern such as commerce, education and economic development. OEF-TS works with the partner nations to expand military -to-military cooperation, ensure adequate resources are available to train, advise, assist regional units, and establish mechanisms to promote better regional cooperation, communications, and intelligence-sharing." USAFRICOM uses exercises to encourage the development of partner nation's security capabilities and instilling professionalism in Africa's various military and security forces. These exercises range from traditional land combat operations, to logistics and medical operations, humanitarian aid and disaster response, to counterterrorism training. The USAFRICOM commander testified that Africa accounts for 14 of the world's 20 weakest states and these fragile states lack the capacity or political will to confront demographic, political, social, and economic challenges. Threats in the region include activities of Al Qaeda and its affiliates in East Africa, the Maghreb, and the Sahel. Illicit trafficking and violent extremist organizations (VEOs) also pose threats to regional security and U.S. national interests. Of further concern, many man-portable air defense systems (MANPADS) disappeared from unsecured storage sites during the 2011 Libyan conflict and could potentially be trafficked to extremist groups. The USAFRICOM commander testified that ISR continues to be a challenge. USAFRICOM is reportedly seeking an expansion of ISR activities in Africa and is seeking additional assets, particularly unmanned aerial vehicles (UAVs) to adequately cover the continent. Reports suggest that beginning in 2013, as U.S. military commitment to Afghanistan begins to decrease, more troops will be available for USAFRICOM. As early as March 2013, the Army reportedly plans to deploy around 1,200 troops to Africa, primarily to participate in partner building, engagement, and training activities, but these forces could also rapidly respond to sudden challenges or crises in the region. In addition, largely in response to the September 11, 2012, attacks in Benghazi that killed the U.S. Ambassador to Libya and three other Americans, a dedicated U.S. SOF Commander's in-Extremis Force was established in early October 2012. Previously, USAFRICOM had shared this force with USEUCOM. While USAFRICOM reportedly stated their in-Extremist Force will be stationed in Ft. Carson, Colorado—home of the 10 th Special Forces Group—some suggest that this force will spend most of its time forward-deployed to Africa in order to be more responsive. The allocation of both general-purpose Army forces and U.S. SOF in-Extremis forces offers the commander of USAFRICOM more flexibility in conducting engagement and training operations and also affords an added element of security that can be deployed in the event of crisis. "With national and international partners, U.S. Central Command promotes cooperation among nations, responds to crises, and deters or defeats state and non-state aggression, and supports development and, when necessary, reconstruction in order to establish the conditions for regional security, stability, and prosperity." The Iranian hostage crisis that played out from 1979 to 1981 and the 1979 Soviet invasion of Afghanistan served to underscore the need to strengthen U.S. presence in the region; President Carter established the Rapid Deployment Joint Task Force (RDJTF) in March 1980 and President Reagan took steps to transform the RDJTF into a permanent unified command over a two-year period. USCENTCOM was formally established on January 1, 1983. By late 1988, the regional strategy largely focused on the potential threat of a Soviet invasion of Iran. The new USCENTCOM commander, General H. Norman Schwarzkopf, believed an invasion of Iran was unlikely and began to focus on the possible emergence of a new regional threat—Iraq. On August 2, 1990, these beliefs became a reality when Iraq invaded Kuwait. The United States and other nations responded quickly by forming a coalition and deploying forces to Saudi Arabia to deter further Iraqi aggression. On January 17, 1991, U.S. and coalition forces launched Operation Desert Storm with an air interdiction campaign, which prepared the theater for a coalition ground assault. The primary coalition objective, the liberation of Kuwait, was achieved on February 27, and the next morning a cease-fire was declared, just 100 hours after the commencement of the ground campaign. Even though formal hostilities ended after the hundred hour war, there were other security concerns. Operation Provide Comfort was implemented in April 1991 to provide humanitarian assistance to the Kurds and enforce a "no-fly" zone in Iraq. In August 1992, Operation Southern Watch began in response to Saddam's noncompliance with U.N. Security Council Resolution 688 condemning his brutal repression of Iraqi civilians in southeastern Iraq. In January 1997, Operation Northern Watch replaced Provide Comfort and focused on enforcing the northern no-fly zone. Throughout the decade, USCENTCOM operations such as Vigilant Warrior, Vigilant Sentinel, Desert Strike, Desert Thunder (I and II), and Desert Fox responded to Iraqi threats to its neighbors or to enforce U.N. Security Council resolutions. To prevent widespread starvation attributed to clan warfare, USCENTCOM undertook Operation Provide Relief in 1992 to supply humanitarian assistance to Somalia and northeastern Kenya as sanctioned by the U.N. In 1993, despite some U.N. success in the countryside, the situation in Mogadishu worsened, and a series of violent confrontations compelled President Clinton to order the withdrawal of U.S. troops from Somalia. Throughout the decade following the Gulf War, terrorist attacks had a major impact on USCENTCOM forces in the region. In 1996, the Khobar Towers in Saudi Arabia were bombed, killing 19 U.S. airmen. In 1998 terrorists attacked the U.S. embassies in Kenya and Tanzania, killing 250 persons, including 12 Americans. The October 2000 attack on the USS Cole , resulting in the deaths of 17 U.S. sailors, was linked to Osama bin Laden's al Qaida organization. The September 11, 2001, attacks compelled the United States to initiate a war against international terrorism. USCENTCOM launched Operation Enduring Freedom in October 2001 to expel the Taliban government in Afghanistan, which was harboring al Qaida terrorists, hosting terrorist training camps, and repressing the Afghan population. In the wake of 9/11, some members of international community found Iraq's lack of cooperation with United Nation Security Council (UNSC) Resolutions regarding weapons of mass destruction unacceptable. Continued Iraqi resistance led the UNSC to authorize the use of force by a U.S.-led coalition. Operation Iraqi Freedom began March 19, 2003. Following the defeat of the Taliban regime in Afghanistan (November 9, 2001) and Saddam Hussein's government in Iraq (April 8, 2003), USCENTCOM continued to provide security to the new governments in those countries, conducting counterinsurgency operations and assisting host nation security forces to provide for their own defense. Beginning in October 2002, USCENTCOM conducted operations in the Horn of Africa to assist host nations there to combat terrorism, establish a secure environment, and foster regional stability. USCENTCOM also provided disaster relief such as the October 2005 earthquake in Pakistan and the large-scale evacuation of American citizens from Lebanon in 2006. On October 1, 2008, DOD transferred responsibility for Sudan, Eritrea, Ethiopia, Djibouti, Kenya, and Somalia to the newly established USAFRICOM while Egypt remained in the USCENTCOM AOR. ARCENT, in addition to being the Army component, has the mission to serve as an expeditionary headquarters to handle operations across the full spectrum for limited duration operations. The U.S. Third Army forms the basis of this subcomponent command and also serves as the Coalition Forces Land Component Command. ARCENT has a forward headquarters in Doha, Qatar. NAVCENT has its headquarters in Manama, Bahrain, the homeport of the U.S. Fifth Fleet. NAVCENT forces in the region normally include either a Carrier Strike Group, Expeditionary Strike Group, or an Amphibious Strike Group. NAVCENT also serves as the command element for the Combined Maritime Forces, which is comprised of naval forces from about two dozen nations that are responsible for combating terrorism, piracy, and illegal drug trafficking in the region. "Located at Shaw Air Force Base, South Carolina, the 9 th Air Force is the headquarters for AFCENT and serves as the air component for a 27-nation area within the USCENTCOM AOR. The 9 th Air Force is also an intermediate headquarters under Air Combat Command and is responsible for five active-duty flying wings, as well as overseeing the operational readiness of 18 designated units of the Air National Guard and Air Force Reserve." "MARCENT is designated as the Marine Corps service component for USCENTCOM. MARCENT is responsible for all Marine Corps forces in the CENTCOM AOR. MARCENT provides Marine Expeditionary Forces capable of conducting a wide range of operations, offering the command a responsive and unique set of capabilities." MARCENT has a forward headquarters in Bahrain. "SOCCENT is headquartered at MacDill Air Force Base, FL and is a subordinate unified command of U.S. Central Command. It is responsible for planning Special Operations throughout the USCENTCOM AOR, planning and conducting peacetime joint/combined Special Operations training exercises and orchestrating command and control of peacetime and wartime Special Operations as directed. SOCCENT exercises operational control of assigned and attached SOF that deploy for the execution of training and for operational missions in the USCENTCOM area of operations as directed by the USCENTCOM commander. When directed by the USCENTCOM commander, SOCCENT forms a Joint Special Operations Task Force (JSOTF)." USCENTCOM forces are conducting a theater-wide campaign in conjunction with other partner nations against Al Qaeda and its extremist allies. USCENTCOM's stated main effort is in Afghanistan, where U.S., NATO, and coalition allies are conducting a counterinsurgency campaign as well as training, equipping, and advising Afghan military and police forces so they can eventually take over security responsibilities for their country. With U.S. forces out of Iraq, USCENTCOM notes it will take on an increasing maritime character with special operations forces and air forces supporting operations. USCENTCOM believes that naval forces—with embarked troops—will provide a physical presence and a cost-effective means of projecting power in the event of a crisis. Concern has been expressed over past and current unrest in Egypt, Bahrain, Jordan, Syria, and Yemen spurred by people's demands for democratic rights in those countries. In the case of Egypt, a long-standing regime was deposed and is now moving to a more democratic form of government. Of critical concern to many is that, despite overtures towards democracy, widespread demonstrations have resulted in varying degrees of instability in these countries. In the case of Egypt, Jordan, Yemen, and Bahrain, they are considered crucial counterterrorism partners and long-term unrest and possible political changes could have a detrimental impact on U.S. counterterrorism efforts in the region. Despite international pressure, open conflict continues in Syria, with some suggesting that it could eventually turn into a long-term, full-fledged civil war that could pose a threat to regional security and stability. While there have been calls for outside military intervention, the pervasive approach appears to be "hands off" in nature. Given the volatility of these countries, USCENTCOM could be called upon in short order to protect U.S. national interests in the region. U.S. intelligence agencies and USCENTCOM have long held that Iran has provided arms, ammunition, money, and improvised explosive device (IED) components to insurgents opposing U.S. efforts in Afghanistan. Iran also stands accused of exploiting the Arab Awakening, undermining democracy in Iraq, and supporting the Asad regime in Syria, behaviors that some believe are the primary catalyst in pushing the region toward an arms race or armed conflict. The challenge to USCENTCOM is how to best mitigate Iranian interference to promote long-term regional stability. The mission of USEUCOM is to conduct military operations, international military partnering, and interagency partnering to enhance transatlantic security and defend the United States. USEUCOM forces constitute the United States military contribution to NATO. The USEUCOM Commander also traditionally serves as the Supreme Allied Commander of NATO (SACEUR). SACEUR's responsibilities are outlined as follows: SACEUR is responsible for the overall command of NATO military operations. He conducts the necessary military planning for operations, including the identification of forces required for the mission and requests these forces from NATO countries, as authorized by the North Atlantic Council and as directed by NATO's Military Committee. SACEUR analyzes these operational needs in cooperation with the Supreme Allied Commander Transformation. SACEUR makes recommendations to NATO's political and military authorities on any military matter that may affect his ability to carry out his responsibilities. For day-to-day business, he reports to the Military Committee, composed of Military Representatives for Chiefs of Defense of NATO member countries. He also has direct access to the Chiefs of Defense and may communicate with appropriate national authorities, as necessary, to facilitate the accomplishment of his tasks. In the case of an aggression against a NATO member state, SACEUR, as Supreme Commander, is responsible for executing all military measures within his capability and authority to preserve or restore the security of Alliance territory. USEUCOM was established August 1, 1952, to provide unified command and authority over all U.S. forces in Europe. For several years after World War II the services had maintained separate commands in Europe that reported directly to the JCS. After the end of the occupation of Germany in 1949, some questioned the U.S. commitment to the defense of Western Europe against the Soviet Union. The Berlin Crisis of 1948-1949 exacerbated these concerns and in 1949 the allies established the North Atlantic Treaty Organization (NATO), but little else was done to address the Soviet threat. The June 1950 surprise attack on South Korea by Communist North Korea served as a catalyst and in 1951 NATO established Allied Command Europe and the Supreme Headquarters Allied Powers Europe (SHAPE). General Dwight D. Eisenhower was recalled from retirement to become the first Supreme Allied Commander Europe (SACEUR). Even as the war in Korea raged, the U.S. reinforcements to Europe to deter the Soviet Union from similar aggression there and between 1950 and 1953, U.S. military personnel in Europe grew from 120,000 to over 400,000. To provide for national command within NATO, and to help control this build-up of forces, Eisenhower proposed a separate command for all U.S. forces in Europe. Because the senior U.S. commander would continue as Supreme Allied Commander Europe, Eisenhower recommended giving "a maximum of delegated authority" to a four-star deputy. The first U.S. Commander-in-Chief Europe (USCINCEUR) was General Matthew B. Ridgway, former commander of Eighth Army and the Far East Command during the Korean War. USEUCOM used the Military Assistance Program to help its NATO partners build their military capabilities. USEUCOM also conducted out-of-sector operations such as a major contingency operation to Lebanon in 1958. In 1961 Berlin once again became a flashpoint when the Soviets erected a wall to stop people fleeing Communist rule. In the early 1960s, policy disagreements emerged within NATO, and in 1966 France demanded the removal of all U.S. and NATO headquarters and forces from France. The following year SHAPE moved to Mons, Belgium, while Headquarters USEUCOM moved to Patch Barracks. USEUCOM continued to prepare for the defense of Europe and began a series of annual REFORGER (Return of Forces to Europe) exercises in 1967. Cold War crises continued, including the 1968 Warsaw Pact invasion of Czechoslovakia. But the readiness of U.S. forces in Europe slowly declined due to the Vietnam War and balance of payment problems. Troop strength in Europe fell to 265,000 by 1970. During the 1970s, the Cold War transitioned to an era of détente and negotiations although tensions remained high as both sides modernized their conventional and nuclear forces. In the late 1970s the Soviet Union deployed SS-20 intermediate-range ballistic missiles into Eastern Europe and in 1979 invaded Afghanistan. NATO responded with a "two-track" decision to step up negotiations while deploying U.S. intermediate-range Pershing II missiles and ground-launched cruise missiles to counter the Soviet threat. During the 1980s, the Armed Forces began to recover from the Vietnam War and U.S. forces in Europe grew to over 350,000. The UCP was changed in 1983 to transfer responsibility for the Middle East from USEUCOM to a new combatant command, USCENTCOM, but USEUCOM retained responsibility for the "confrontation states" of Israel, Lebanon and Syria. At the same time USEUCOM was formally assigned responsibility of Africa, south of the Sahara. In 1989, the Soviet Union and its empire in Eastern Europe collapsed and the Cold War came to an end. In 1991 USEUCOM and its components provided forces to USCENTCOM for another out-of-sector operation, Desert Storm. USEUCOM reached out to the emerging democracies through programs such as the Joint Contact Team Program, NATO Partnership for Peace and the National Guard Bureau State Partnership Program. It was also active in peace and stability operations in the Balkans, including Bosnia, Macedonia, and Kosovo. But it had to conduct these new missions with fewer assigned forces as its strength fell below 120,000. After the September 11, 2001, terrorist attacks, USEUCOM provided major forces for operations in Afghanistan and Iraq and stepped up its efforts to protect U.S. interests in Europe and Africa. Subsequent terrorist attacks in the USEUCOM theater in Casablanca, Madrid, London, and Algiers made it clear that terrorism demanded a collective response. USEUCOM worked to build partner capacity in Europe and Africa for peacekeeping operations and deployments to Iraq and Afghanistan. USEUCOM launched Operation Enduring Freedom and Trans-Sahara in 2007 while continuing to provide rotational forces to Afghanistan and Iraq. Located in Heidelberg, Germany, USAEUR trains, equips, deploys, and provides command and control of forward-deployed land forces, able to support and conduct the full spectrum of joint, and combined multi-national operations, and engagement activities. Located in Naples, Italy, NAVEUR, the U.S. Navy component command, conducts a full range of maritime operations as well as theater security cooperation operations with NATO allies. The U.S. Sixth Fleet, which is also a subcomponent of AFRICOM, forms the basis of this subcomponent command. Located at Ramstein Air Force Base in Germany, USAFE, the Air Force component command, operates from five main operating bases that supports nine air wings. These wings provide a full spectrum of air support, including strategic airlift as well as air support to ground forces and intelligence, surveillance, and reconnaissance support. The Third Air Force forms the basis of this subcomponent command. Located in Stuttgart, Germany, MARFOREUR employs pre-positioned assets to rapidly deploy expeditionary forces and equipment and conduct a wide array of operations, including building partner capacity. Located at Patch Barracks, Stuttgart, Germany, SOCEUR provides flexibility throughout a full range of military operations including combat, special operations, humanitarian assistance, noncombatant evacuations, and joint-combined military operations. USEUCOM's support to ISAF is significant. About 90% of the 40,000 non-U.S. troops deployed to Afghanistan are from the European theater. USEUCOM's support to ISAF is primarily focused on preparing these nation's forces for deployment to Afghanistan. These supporting activities include sending mobile planning teams to assess partner nation equipment and training requirements and working with these countries to develop a comprehensive pre-deployment plan. Multi-national and joint interagency exercises constitute the most significant form of peacetime interaction with NATO allies and other partners. In 2011, USEUCOM conducted 22 major exercises involving almost 50,000 U.S., allied, and partner nation personnel from 42 nations. These exercises focused on preparing partner nations for ongoing coalition operations including ISAF, enhancing overall NATO interoperability, and improving NATO's military interoperability with Israel. In support of NATO initiatives, USEUCOM provides U.S. forces for nine NATO and Partnership for Peace training events in the Baltics. In addition, USEUCOM provides forces for major exercises in the Balkans which not designed to help to improve these nation's military capabilities but also to ease regional tensions. USEUCOM currently has about 12,000 U.S. troops forward deployed to Afghanistan serving in a variety of capacities. As previously noted, USEUCOM plays a central role in training and deploying non-U.S. forces and the USEUCOM Commander, in his SACEUR role, is a central figure in persuading NATO allies to provide troops and resources for ISAF. As overall U.S. involvement in Afghanistan begins to wind down, NATO involvement will also likely follow suit and, in some instances, some NATO nations might opt for an abrupt end to their support to ISAF. USEUCOM's and SACEUR's primary challenge will likely be to develop plans for and manage a smooth transition as NATO forces draw down and transition security functions to the Afghan National Army. It is possible USEUCOM and NATO might have some residual support requirements in Afghanistan after the transition and these efforts will also require resources and management. USEUCOM has participated in NATO operations in the Balkans since the 1995 Dayton Peace Accords. At the height of Operation Joint Endeavor in 1996, the United States had over 20,000 troops in the Balkans. While current USEUCOM troop commitments to the Balkans are negligible, continued engagement in the region is viewed by most as essential in keeping the region stable. As such, USEUCOM participation in NATO exercises and training teams in this region is deemed essential not only to improve capabilities and diffuse tensions but also to signify U.S. long-term interest and commitment to the Balkan region. USEUCOM notes an increasing and expanding ballistic missile threat to USEUCOM's area of focus, citing missile-related activities in Iran and Syria, as well as those of non-state actors such as Hizbollah. In response to this threat, the United States and Poland have initiated a cooperative air and missile defense partnership whereby the United States rotates Patriot anti-missile and anti-aircraft batteries to Poland on a quarterly basis and conducts training with their Polish counterparts. In September 2011, Romania agreed to the stationing of 24 interceptor missiles on Romanian soil and Turkey agreed to accept sophisticated U.S. radar, which is now operational. In the spring of 2012, the U.S. Navy added two ballistic missile defense (BMD)-capable ships to the theater to further improve NATO missile defense. These events, as well as plans to expand coverage to other countries, have elicited opposition from Russia and have complicated NATO's relationship with Moscow. USEUCOM's challenge will likely be to continue to play a role in developing European ground-based missile defense while at the same time maintaining an effective military relationship with Russia under potentially trying circumstances. "USNORTHCOM's mission is to conduct homeland defense, civil support and security cooperation to defend and secure the United States and its interests. USNORTHCOM was established Oct. 1, 2002, to provide command and control of DOD homeland defense efforts and to coordinate defense support of civil authorities. USNORTHCOM's area of operation includes air, land and sea approaches and encompasses the continental United States, Alaska, Canada, Mexico and the surrounding water out to approximately 500 nautical miles. It also includes the Gulf of Mexico, the Straits of Florida, portions of the Caribbean region to include The Bahamas, Puerto Rico, and the U.S. Virgin Islands. The commander of USNORTHCOM is responsible for theater security cooperation with Canada, Mexico, and The Bahamas." "The commander of USNORTHCOM also commands NORAD, a joint U.S.-Canadian command responsible for aerospace warning, aerospace control, and maritime warning for Canada, Alaska and the continental United States. For the aerospace warning mission, the commander of NORAD provides an integrated tactical warning and attack assessment to the governments of Canada and the United States. To accomplish the aerospace control mission, NORAD uses a network of satellites, ground-based radar, airborne radar and fighters to detect, intercept and, if necessary, engage any air-breathing threat to Canada and the United States. In conjunction with its aerospace control mission, NORAD assists in the detection and monitoring of aircraft suspected of illegal drug trafficking. This information is passed to civilian law enforcement agencies to help combat the flow of illegal drugs into North America. The Command has developed an initial concept for implementing the new maritime warning mission." USNORTHCOM is the combatant command responsible for the operation of the Ground-Based Midcourse Defense System (GMD) designed to defend the United States against the threat of a limited ballistic missile attack from nations such as North Korea and Iran. USNORTHCOM's civil support mission includes domestic disaster relief operations during fires, hurricanes, floods, and earthquakes. Support also includes counter-drug operations and managing the consequences of a terrorist event employing a weapon of mass destruction. The command provides assistance to a nonmilitary Primary Agency when tasked to do so by DOD. Per the Posse Comitatus Act, military forces can provide civil support, but cannot become directly involved in law enforcement. On April 17, 2002, DOD announced the establishment of USNORTHCOM to consolidate under a single unified command those existing homeland defense and civil support missions that were previously executed by other military organizations. On May 8, 2002, U.S. Air Force General Ralph E. Eberhart, the commander of the North American Aerospace Defense Command (NORAD) and U.S. Space Command, was nominated to be the first commander of USNORTHCOM. USNORTHCOM attained initial operational capability on October 1, 2002. USNORTHCOM provided support in response to the Space Shuttle Columbia disaster in February 2002, and in May 2003 participated in a comprehensive terrorism response exercise States—Top Officials 2, or TOPOFF 2. USNORTHCOM conducted Exercise Determined Promise 03 in Clark County, NV, and Colorado Springs, CO. This major exercise was designed to evaluate the command's ability to command and control multiple homeland defense and defense support of civil authorities missions simultaneously. Following Exercise Determined Promise 03, USNORTHCOM announced full operational capability on September 11, 2003. In February 2004, USNORTHCOM conducted Exercise Unified Defense 04. This major exercise allowed the USNORTHCOM, Fifth Army, Joint Task Force Alaska and associated units to practice the homeland defense and defense support to civil authorities' missions. The exercise involved the Department of Homeland Security and more than 50 federal, state, and local organizations. During the summer of 2004, USNORTHCOM supported interagency efforts to deter and defeat any possible threats against several National Security Special Events. Exercise Determined Promise 04, conducted in August 2004, tested USNORTHCOM's ability to assist civil and federal authorities in a coordinated response to simulated chemical, radiological, and explosive hazards, conducted in California and Virginia. In the same month, USNORTHCOM supported the Federal Emergency Management Agency's efforts to provide relief to areas in Florida most impacted by Hurricane Charley. In September 2005, as directed by the Secretary of Defense and in accordance with the National Response Plan, USNORTHCOM supported the Department of Homeland Security and Federal Emergency Management Agency (FEMA) and other federal agencies in disaster relief efforts in the aftermath of Hurricane Katrina. More than 21,400 active-duty servicemembers and 45,700 Army and Air National Guard members supported the effort in the U.S. Gulf Coast. In May 2006 USNORTHCOM participated in Exercise Ardent Sentry 06, which involved numerous federal, provincial, state, and local agencies in Canada and the United States. The exercise required participants to respond to simulated terrorist activities and manage the consequences of a range of simulated man-made and natural disasters. Exercise Ardent Sentry 06 helped military and civilian officials prepare to respond to a variety of national crises. On July 4, 2006, the Democratic Peoples Republic of Korea launched six ballistic missiles, including a long-range Taepodong-2 missile. USNORTHCOM personnel were immediately able to detect the launch of all the missiles. While Ground-based Midcourse Defense System interceptors at Fort Greely, AK, and Vandenberg Air Force Base, CA, were operational during the launches, top officials from the command were able to quickly determine the missiles posed no threat to the United States or its territories. "JFHQ-NCR, based at Fort McNair, Washington, D.C. is responsible for land-based homeland defense, defense support of civil authorities (DSCA), and incident management in the National Capital Region. JFHQ-NCR is responsible for protecting the District of Columbia and neighboring counties and cities of Maryland and northern Virginia. JFHQ-NCR draws together the existing resources of the Army, Navy, Air Force, Marine Corps, Coast Guard and NORAD into a single point headquarters for planning, coordination and execution of the mission in the National Capital Region." "JTF-AK is headquartered at Elmendorf Air Force Base, Alaska. JTF-AK's mission is to, in coordination with other government agencies, deter, detect, prevent and defeat threats within the Alaska Joint Operations Area (AK JOA) in order to protect U.S. territory, citizens, and interests, and as directed, conduct Civil Support operations." "JTF-CS, was originally formed as a standing joint task force under USJFCOM. JTF-CS was transferred to USNORTHCOM when USNORTHCOM was established October 1, 2002. The task force consists of active, Guard and Reserve military members drawn from all service branches, as well as civilian personnel, who are commanded by a federalized (Title X) National Guard general officer. JTF-CS plans and integrates DOD support to the designated Primary Agency for domestic chemical, biological, radiological, nuclear, or high-yield explosive (CBRNE) consequence management operations. When approved by the Secretary of Defense and directed by the commander of USNORTHCOM, JTF-CS deploys to the incident site and executes timely and effective command and control of designated DOD forces, providing support to civil authorities to save lives, prevent injury and provide temporary critical life support." "JTF North, based at Biggs Army Airfield, Fort Bliss, TX, is the DOD organization tasked to support our nation's federal law enforcement agencies in the interdiction of suspected transnational threats within and along the approaches to the continental United States. Transnational threats are those activities conducted by individuals or groups that involve international terrorism, narcotics trafficking, alien smuggling, weapons of mass destruction, and the delivery systems for such weapons that threaten the national security of the United States." "ARNORTH is the Army component of NORTHCOM and is located at Fort Sam Houston, TX. ARNORTH's mission is to conduct homeland defense, civil support operations and theater security cooperation activities. ARNORTH is responsible for developing and unifying the military response capability for chemical, biological, radiological, nuclear and high-yield explosives (CBRNE) incidents. In addition, the Civil Support Readiness Directorate trains National Guard Weapons of Mass Destruction Civil Support Teams, which are state first responders for chemical, biological, radiological, nuclear or high-yield explosive incidents." "Headquartered at Tyndall Air Force Base, near Panama City, FL, 1 st Air Force is assigned to Air Combat Command. It has the responsibility of ensuring the air sovereignty and air defense of the continental United States. As the CONUS geographical component of the bi-national North American Aerospace Defense Command, it provides airspace surveillance and control and directs all air sovereignty activities for the continental United States Fleet Forces Command (USFF)." "USFF is the Navy component of USNORTHCOM and is located at Norfolk, VA. USFF's mission is to provide maritime forces prepared to conduct homeland defense, civil support operations and theater security cooperation activities when directed by USNORTHCOM. Additionally, USFF has responsibilities to generate ready Navy forces for assignment to global Regional Combatant Commanders, execute the Fleet Response Plan (FRP) using the Fleet Training Continuum, articulate to the Chief of Naval Operations the integrated Fleet warfighting requirements as coordinated with all Navy Component Commanders, and provide operational planning support to USTRATCOM." USNORTHCOM's and NORAD's missions of homeland defense, air and missile defense, and maritime warning involve a multitude of continuous operations in a variety of domains. These operations are best described as monitoring, detection, and warning, and, in the case of air-breathing threats, interception. According to the USNORTHCOM commander: Our daily efforts include countering terrorism and transnational criminal organizations, preparing to support our federal and state partners in the wake of a natural or manmade disaster, air defense against both internal and external threats, maritime and ballistic missile defense and of course, a growing focus on the Arctic. Mexican transnational criminal organizations (TCOs) and their involvement in the illicit trafficking of drugs, weapons, money, and human beings into the United States is one of USNORTHCOM's primary homeland security concerns. USNORTHCOM, in keeping with U.S. law and working with and through other U.S. government agencies, is working with the Mexican government to defeat the TCOs. USNORTHCOM efforts include providing the Mexican military with material solutions as well as sharing operational insights and experiences. In addition to efforts along the southern U.S. border, USNORTHCOM has been providing support to U.S. law enforcement agencies along both southern and northern borders. This support includes sensors, radar, forward-looking infrared, and manned and unmanned aerial border surveillance. Because access to these platforms is not unlimited, concerns exist that if a greater level of support is required along one border, assets available for the other border might become constrained. Because of the growing geo-strategic importance of the Arctic, the USNORTHCOM Commander has designated the Arctic as a key focus area. Along these lines, USNORTHCOM is currently examining how to support other U.S. government agencies in the region with search and rescue assets, humanitarian assistance, disaster response, and law enforcement. As part of this examination, USNORTHCOM has identified deficiencies in all-domain awareness, communications, infrastructure (including a deepwater port), mobility (including an adequate national icebreaking capability), search and rescue enabling capabilities, Arctic Ocean charting, and the ability to observe and forecast Arctic environmental change. "USPACOM protects and defends, in concert with other U.S. Government agencies, the territory of the United States, its people, and its interests. With allies and partners, USPACOM is committed to enhancing stability in the Asia-Pacific region by promoting security cooperation, encouraging peaceful development, responding to contingencies, deterring aggression, and, when necessary, fighting to win. This approach is based on partnership, presence, and military readiness." USPACOM's AOR covers half of the earth and is home to 3 billion people living in three dozen countries with five of these nations being U.S. allies and with many more important economic and security partners. USPACOM's AOR contains the world's three largest economies and almost one-third of U.S. two-way trade in goods and services. In addition, much of the world's trade and energy that fuels the global economy transits Asia's sea and air lines of communication. USPACOM was established as a unified command on January 1, 1947, and is the oldest and largest of the United States' COCOMs. The present USPACOM includes areas originally assigned to two other unified commanders. The Far East Command, which had been established on January 1, 1947, was disestablished on July 1, 1957, and all its responsibilities were assumed by the Pacific Command. That same day the command assumed some of the responsibilities of the Alaskan Command and individual Army and Air Force component commands for the Pacific also were established in Hawaii. Added responsibilities were assigned to USPACOM on January 1, 1972, for military forces and elements in the Indian Ocean, Southern Asia, and the Arctic. The Pacific Command's AOR was further expanded on May 1, 1976, to the east coast of Africa. This enlarged the Pacific Command to more than 50% of the earth's surface, an area of over 100 million square miles. Another enlargement of the USPACOM area took place in October 1983, when CINCPAC was assigned responsibility for the People's Republic of China, the Democratic People's Republic of Korea, Mongolia, and the Republic of Madagascar. CINCPAC was also redesignated Commander in Chief, U.S. Pacific Command (USCINCPAC). A new Alaskan Command (ALCOM) was established on July 7, 1989, at Elmendorf Air Force Base, Alaska, as a subordinate unified command responsible to USCINCPAC. This placed the defense of Alaska and its surrounding waters under the leadership of one commander, providing a unity of command absent from the state since the early 1970s. From 1989 through 2000, three UCPs slightly reduced USPACOM's AOR. With the focus of attention shifting to the Middle East, the August 16, 1989, plan assigned responsibility for the Gulf of Oman and Gulf of Aden to Commander, USCENTCOM. The January 1, 1996, plan transferred the Seychelles and adjacent waters to USCENTCOM. On October 1, 2000, responsibility for Indian Ocean waters off Tanzania, Mozambique, and South Africa was transferred from USPACOM to USEUCOM. The UCP changed as a result of the events of September 11, 2001, and the ensuing war on terrorism, as well as the new defense strategy articulated in the 2001 Quadrennial Defense Review. For the first time the entire surface of the earth was divided among the various unified commands. A new USNORTHCOM was created for homeland security and other changes in the various commands' responsibilities resulted in significant changes for USPACOM. The West Coast of North America was reassigned from USPACOM to USNORTHCOM. While Alaska was included in the reassignment to USNORTHCOM, Alaskan Command forces remained assigned to USPACOM in the Forces for Unified Commands Memorandum. Antarctica was also added to USPACOM's AOR. Approved in April 2002, the new UCP became effective October 1, 2002. The 2008 UCP, signed on December 17, 2008, documented the transfer of all areas of the Indian Ocean previously assigned to USPACOM west of 68 degrees east to the newly established USAFRICOM. As a result, four island countries off the east coast of Africa that were formerly assigned to PACOM were reassigned to AFRICOM: Comoros, Madagascar, Mauritius, and Reunion. Located in Fort Shafter, Hawaii, USARPAC is the Army's component command in the Pacific and supplies Army forces for full-spectrum security operations. USARPAC is the most forward deployed unit in the Army still on U.S. soil in Hawaii. USFK is a subcommand within USPACOM responsible to U.S. forces in Korea. While this is a joint headquarters, command has traditionally been held by a four-star, U.S. Army general. The U.S. Eighth Army operates in conjunction with USFK and the United Nations Command in Korea. U.S. Eighth Army's stated mission is described as Eighth Army supports deterrence of North Korea aggression against the Republic of Korea. Should deterrence fail, Eighth Army supports Non-combatant Evacuation Operations (NEO), transitions to hostilities, generates combat power to support Commander in Chief United Nations Command/USFK's campaign, and provides combat support and combat service support to assigned, attached, and other designated forces within the Korea Theater of Operation and on order, conducts combat operations. PACFLT consists of the California-based Third Fleet and the Fifth Fleet in Japan. It is the world's largest fleet command responsible for 100 million square miles, more than half the Earth's surface, from the West Coast of the United States into the Indian Ocean. PACFLT consists of approximately 180 ships, nearly 2,000 aircraft and 125,000 Sailors, Marines, and government civilian employees. PACAF is headquartered at Hickam Air Force Base, Hawaii, where it plans, conducts, and coordinates defensive and offensive air operations in the Asian and Pacific region. PACAF's components consists of the Seventh Air Force in South Korea, the Fifth Air Force in Japan, the Eleventh Air Force in Alaska, and the Thirteenth Air Force in Guam. MARFORPAC, the Marine component headquarters, includes the First Marine Expeditionary Force in California and the Third Marine Expeditionary Force based in Okinawa. SOCPAC, located at Camp H. M. Smith, Oahu, Hawaii, is a sub-unified command and serves as the SOF component command for USPACOM. SOCKOR, located at Camp Kim in Yongsan, Korea, is the Theater Special Operations Command responsible for special operations on the Korean peninsula and, when established, the Korean Theater of Operations. The JIOC is the central clearing house for intelligence throughout the theater and is responsible for managing intelligence requirements at the strategic level and supports USPACOM Subcomponents and Subordinate Commands. APCSS supports USPACOM security cooperation and capacity-building efforts by means of international executive education and specialized assistance programs that are intended to both educate and foster relationships between key regional security officials. JPAC's mission is to achieve the fullest possible accounting of all Americans missing as a result of past conflicts. JIATF-West is the USPACOM executive agent for countering drug-related transnational crimes in the Asia-Pacific region primarily by supporting U.S. law enforcement agencies operating in the region. While USPACOM has significant on-the-ground presence in Korea as well as a variety of naval and air activities throughout its AOR, its primary focus is exercise and engagement programs. USPACOM's current program consists of 18 major exercises involving joint military forces as well as other U.S. government agencies. These exercises are conducted with 27 of 36 USPACOM partner nations. On the operational side, USPACOM played a crucial role in helping Japan in the aftermath of the March 11, 2011, earthquake and resultant tsunami which devastated parts of Japan. USPACOM and its subordinate commands provided direct disaster relief support on the ground, at sea, and in the air. Of note, Joint Special Operations Task Force-Philippines continues its eight-year-old non-combat role in supporting Filipino armed forces in their efforts to contain violent extremist organizations (VEOs) in their country. In his March 2012 testimony to the Senate Armed Services Committee, the USPACOM commander indicated current major issues in his AOR. These issues included the threat to the United States and its allies posed by North Korea's nuclear and missile capabilities, its proliferation of weapons of mass destruction and associated technologies, and its potential for instability. Another issue was transnational violent extremist organizations (VEOs) undermining stability and threatening Allies and emerging partners. The USPACOM commander voiced concern with China's significant military modernization associated with its unclear intent. He also noted that territorial disputes, and increasingly assertive actions to resolve them, present the potential for conflict and instability. Cyber threats and transnational criminal activity—to include piracy and trafficking in narcotics and persons—were cited as growing areas of concern. Finally, humanitarian crises such as pandemics and famines, as well as natural disasters such as tsunamis, earthquakes, and volcanoes; and environmental degradation presented unique challenges to USPACOM. On January 26, 2012, senior DOD leadership unveiled a new defense strategy based on a review of potential future security challenges, current defense strategy, and budgetary constraints. This strategy will rebalance the Army's global posture and presence, emphasizing where potential problems are likely to arise, such as the Asia-Pacific region and the Middle East. The major focus of this new strategy is the Asia-Pacific, and the Navy plans to rebalance its fleet. Secretary of Defense Panetta recently told Asian leaders, "By 2020, the Navy will re-posture its forces from today's roughly 50/50 split between the Atlantic and Pacific to about a 60/40 split between those oceans—including six aircraft carriers, a majority of our cruisers, destroyers, littoral combat ships and submarines." It is not known if such a change in strategic emphasis will require additional resources or authorities for USPACOM. Concerned about the resources needed to successfully prosecute the Administration's Asia-Pacific strategy, the FY2013 National Defense Authorization Act requires DOD to conduct a comprehensive review detailed in the following section. SEC. 1068. REPORT ON MILITARY RESOURCES NECESSARY TO EXECUTE UNITED STATES FORCE POSTURE STRATEGY IN THE ASIA PACIFIC REGION. (a) REVIEW REQUIRED.— (1) IN GENERAL.—The Secretary of Defense shall, in consultation with the Chairman of the Joint Chiefs of Staff, conduct a comprehensive review of the national defense strategy, force structure, force modernization plans, infrastructure, budget plan, and other elements of the defense program and policies of the United States with regard to the Asia Pacific region to determine the resources, equipment, and transportation required to meet the strategic and operational plans of the United States. (2) ELEMENTS.—The review required under paragraph (1) shall include the following elements: (A) The force structure, force modernization plans, infrastructure, budget plan, and other elements of the defense program of the United States associated with the Asia Pacific region that would be required to execute successfully the full range of missions called for in the national defense strategy. (B) An estimate of the timing for initial and final operational capability for each unit based in, realigned within, or identified for support to the Asia Pacific region. (C) An assessment of the strategic and tactical sea, ground, and air transportation required for the forces assigned to the Asia Pacific region to meet strategic and operational plans. (D) The specific capabilities, including the general number and type of specific military platforms, their permanent station, and planned forward operating locations needed to achieve the strategic and warfighting objectives identified in the review. (E) The forward presence, phased deployments, pre-positioning, and other anticipatory deployments of manpower or military equipment necessary for conflict deterrence and adequate military response to anticipated conflicts. (F) The budget plan that would be required to provide sufficient resources to execute successfully the full range of missions and phased operations in the Asia Pacific region at a low-to-moderate level of risk and any additional resources (beyond those programmed in the current future-years defense program) required to achieve such a level of risk. (G) Budgetary recommendations that are not constrained to comply with and are fully independent of the budget submitted to Congress by the President pursuant to section 1105 of title 31, United States Code. (b) CJCS REVIEW.—Upon the completion of the review under subsection (a), the Chairman of the Joint Chiefs of Staff shall prepare and submit to the Secretary of Defense the Chairman's assessment of the review, including the Chairman's assessment of risk and a description of the capabilities needed to address such risk. (c) REPORT.— (1) IN GENERAL.—Not later than one year after the date of the enactment of this Act, the Secretary of Defense shall submit to the congressional defense committees a report on the results of the review required under subsection (a). (2) CONTENT.—The report required under paragraph (1) shall include the following elements: (A) A description of the elements set forth under subsection (a).(1). (B) A description of the assumptions used in the examination, including assumptions relating to— (i) the status of readiness of the Armed Forces; (ii) the cooperation of allies and partners, mission-sharing, and additional benefits to and burdens on the Armed Forces resulting from coalition operations; (iii) warning times; (iv) levels of engagement in operations other than war and smaller-scale contingencies and withdrawal from such operations and contingencies; (v) the intensity, duration, and military and political end-states of conflicts and smaller-scale contingencies; and (vi) the roles and responsibilities that would be discharged by contractors. (C) Any other matters the Secretary of Defense considers appropriate. (D) The full and complete assessment of the Chairman of the Joint Chiefs of Staff under subsection (b), including related comments of the Secretary of Defense. (3) FORM.—The report required under paragraph (1) may be submitted in classified or unclassified form. "USSOUTHCOM is responsible for providing contingency planning, operations, and security cooperation for Central and South America, the Caribbean (except U.S. commonwealths, territories, and possessions), Cuba; as well as for the force protection of U.S. military resources at these locations. USSOUTHCOM is also responsible for ensuring the defense of the Panama Canal and canal area." During World War II, the Roosevelt Administration established the U.S. Caribbean Defense Command (1941-1947), a prototype unified military organization, to defend the Panama Canal and surrounding area. The command organized and implemented an active system of regional defense, including antisubmarine and counterespionage operations. Located in Panama, the U.S. Caribbean Defense Command also established military training missions in Latin America; distributed military equipment to regional partners through the Lend Lease program; and opened U.S. service schools to Latin American soldiers, sailors, and airmen. At the height of the war, U.S. military planners assigned 130,000 uniformed personnel to duty stations in Latin America and the Caribbean. Roughly half of those forces were under the direct control of the U.S. Caribbean Defense Command. In 1947, U.S. strategists adopted a national security plan that transformed the wartime headquarters into the U.S. Caribbean Command. Beyond defending the Panama Canal, it assumed broad responsibilities for inter-American security cooperation in Central and South America. During the 1950s, defense officials also removed the Caribbean basin from the U.S. Caribbean Command's area of focus. In the event of a global war with the communist powers, they reasoned, U.S. Atlantic Command, based in Norfolk, VA, needed the Caribbean basin to conduct hemispheric antisubmarine operations. By 1960, the U.S. Caribbean Command carried a name that incorrectly described its geographic interests, Central and South America. The Kennedy Administration changed the name to USSOUTHCOM on June 6, 1963. During the 1960s, the USSOUTHCOM mission involved defending the Panama Canal, contingency planning for Cold War activities, and the administration of the U.S. foreign military assistance program in Central and South America. In particular, USSOUTHCOM personnel undertook civic-action projects with partner nation forces to accelerate regional development. During the 1970s the Joint Chiefs of Staff recommended disestablishing the command to trim the U.S. military presence abroad. For political reasons, the command narrowly survived, albeit with limited responsibilities and resources. In the 1980s, internal conflicts in El Salvador, Nicaragua, and elsewhere rekindled U.S. military interest in Latin America and the Reagan Administration revitalized USSOUTHCOM. When the Cold War ended, the command, like other U.S. military organizations, entered a period of dramatic change. In rapid succession, USSOUTHCOM was assigned responsibility for counter-drug operations, expanded its area of geographic focus to include the Caribbean, and enhanced its capacity for humanitarian missions. In September 1997, USSOUTHCOM moved to Miami, FL. ARSOUTH is located at Ft. Sam Houston, Texas, where its primary mission is to support regional disaster and counterdrug operations. ARSOUTH also is responsible for oversight, planning, and logistical support for humanitarian and civic assistance projects throughout the region. COMUSNAVSO/COMFOURTHFLT is located in Mayport Naval Base in Florida and supports USSOUTHCOM with a full range of naval capabilities. Its primary responsibility is to provide sea-based forward presence to ensure freedom of maneuver as well as developing cooperative relationships with partners in the region. AFSOUTH is located at Davis-Monthan Air Force Base in Arizona and is responsible for Air Force forces in the region. AFSOUTH serves as the executive agent for forward operating locations in the region and provides joint and combined radar surveillance and intra-theater airlift. USMARFORSOUTH is located in Miami, Florida, and advises USSOUTHCOM on the proper employment and support of Marine forces operating in the region. In addition, USMARFORSOUTH conducts deployment/redeployment planning and supervises mission execution for assigned Marine forces. USSOCSOUTH is located near Miami, Florida, and provides primary theater contingency response forces and plans for and conducts special operations in support of USSOUTHCOM. USSOCSOUTH can also serve as a Joint Special Operations Task Force when required. JTF-Bravo is located at Soto Cano Air Base, Honduras, and operates a forward, all weather, day/night C-5 Galaxy-capable air base. JTF-Bravo organizes multilateral exercises and, with partner nations, supports humanitarian and civic assistance, counterdrug, contingency and disaster relief in Central America. JTF-Guantanamo is located at the U.S. Naval Station Guantanamo, Cuba, and conducts detention and interrogation operations in support of worldwide U.S. counterterrorism operations. JIATF-South is located in Key West, Florida, and is an interagency task force that integrates and synchronizes U.S, counterdrug operations and is responsible for the detection and monitoring of suspect air and maritime drug activity in the region. JIATF South works in coordination with USNORTHCOM's JTF North on a variety of counterdrug and counter trafficking operations. CHDS is located in Washington, DC, and provides education, outreach, and research and knowledge-sharing activities on defense and policy making with regional military and political leaders. USSOUTHCOM is involved in a variety of exercises and military-to-military operations in support of the Theater Engagement Plan. On an annual basis, USSOUTCOM conducts medical readiness training exercises, engineering exercises, and disaster relief and humanitarian assistance exercises. For example, USSOUTHCOM conducted civic assistance exercises Beyond the Horizon and New Horizons in El Salvador, the Dominican Republic, and Haiti. In addition USSOUTHCOM conducts medical readiness training exercises and other annual military exercises designed to facilitate interoperability, build capabilities, and provide opportunities to share best practices with regional military and security forces. JTF-Guantanamo continues to serve as a detention and interrogation center for suspected terrorists. JTF-Bravo and JIATF-South are involved in a wide variety of day-to-day activities and operations designed to counter illicit trafficking of people, narcotics, money, and weapons. In addition to operations against Transnational Criminal Organizations, USSOUTHCOM task forces also work to counter violent extremist organizations from the Middle East which have been active in Latin America and the Caribbean and are considered a potential threat. The USSOUTHCOM Commander noted that illicit trafficking of drugs, weapons, and people and their associated TCOs constitute the primary threat to regional security. Working in conjunction with regional partners, USSOUTCOM is combating these criminal organizations through demand reduction; eradication and regulation of source materials; suppression of money laundering; and interdiction of illegal shipments as they transit to the United States and other end-user countries. These efforts not only involve regional partners but also various U.S. Interagency offices. The USSOUTHCOM Commander testified that natural disasters, poverty, and violence in the region have a negative impact on regional security and stability. Widespread and frequent natural disasters in the region have worsened economic and social conditions in countries that can ill-afford these types of setbacks and when governments cannot make discernible progress recovering in the aftermath of these events, citizens lose faith in government. While economic conditions in some countries have improved, poverty, particularly in Central America, creates conditions for social stagnation. These social conditions create openings for criminal organizations to recruit new members who both undermine legitimate governance and contribute to increasing violence against private citizens. While the USSOUTHCOM Commander noted there are economic benefits for countries in his AOR in establishing or renewing relationships with extra-regional actors such as China, Russia, and Iran, it also presents a number of challenges. Currently, 18 countries in Central and South America and the Caribbean receive military training from China, and in 2011 Venezuela became the largest importer of Russian arms in the world. In addition to extra-regional state actors, violent extremist organizations from the Middle East are active in Latin America and the Caribbean and are involved in fund-raising activities to finance worldwide activities. Congress is presented with a wide range of national security policy issues that are impacted by the provisions of the UCP as well as the COCOM construct. As the U.S. arguably moves to a post-Iraq/Afghanistan era where global military operations against terrorists could be the new "steady state," it might prove prudent to re-examine the UCP and COCOMs. The Administration's decision to shift U.S. national strategic emphasis to the Asia-Pacific region and Middle East also presents considerations for Congress. As new threats such as cyber attacks and TCOs take center stage and new international actors such as China and India emerge while established actors such as Russia and Iran transition to different types of security challenges, such a re-examination could serve to increase the efficacy of U.S. national security policy. The Administration's decision to shift strategic focus to the Asia-Pacific while maintaining an active role in the Middle East raises a number of issues for possible congressional consideration. Potential issues include the following: In terms of the UCP, will a new UCP need to be issued in the near future to codify this change in strategic emphasis? Will new Title 10 authorities be required to facilitate this shift? Does Headquarters, USPACOM require additional staff and resources to implement the Administration's new strategy? Is USPACOM's command infrastructure adequately geographically positioned to take on this new strategic challenge? Compared to USCENTCOM and USAFRICOM, the USPACOM region can be viewed as somewhat peaceful. In this regard, is focusing on the Asia-Pacific region the best course of action when there are, at present, a number of volatile conflicts and potential civil wars in the Middle East and Africa? What are the impacts to the other COCOM's as a result of the Asia-Pacific shift? What resources will they lose due to this shift and how do respective combatant commanders plan to compensate for a possible loss of resources? Are there UCP-directed missions and responsibilities that COCOM commander will no longer be able to accomplish as a result of shifting resources to the Asia-Pacific region? What has been the response of our allies and potential adversaries as a result of the announced strategic shift? In the Fall 2010 edition of the Interagency Journal, former U.S. Ambassador Edward Marks noted The geographic commands have essentially two tasks: war planning and fighting, and military engagement programs. Both tasks remain, and will always remain, fundamental responsibilities of the Department of Defense and the military services. However while the war planning and fighting responsibility obviously remains uniquely a duty of the Department of Defense and the military services, the engagement programs no longer can be handled as a discrete military activity. In today's world, military engagement programs with other countries can only be seen as part of the overall engagement activity of the U. S. government. The so-called "nexus" of security challenges—terrorism, narcotics, smuggling, international criminal networks, etc.—can no longer be managed as single agency programs but must be integrated into "whole of government" programs. The concept of a "whole of government approach to national security" has taken on renewed emphasis since September 11, 2001. Past and current senior military leadership have repeatedly called for greater participation in national security matters from other U.S. government agencies, even going so far as to publically advocate for greater funding levels for the State Department and U.S. Agency for International Development (USAID) so they can play a greater role in military operations. In the current strategic environment, COCOMs are being faced with security challenges that fall outside the traditional military realm. One such challenge, transnational criminal organizations or TCOs, is a stated concern of Combatant Commanders both in a domestic and international context. In this regard, if TCOs are expected to become a central security issue for COCOMs and the President and DOD include TCO-related responsibilities in the UCP, enhanced interagency involvement in the UCP process from the Justice Department, other U.S. law enforcement entities and others could prove to be beneficial. It can be argued while greater resources for other U.S. government agencies are important, of equal importance is participation in the UCP process. It has been noted that military engagement programs are at the forefront of geographical COCOM's responsibilities and as hostilities in Iraq and Afghanistan diminish over time, and the U.S. defense budget decreases, military engagement could become the primary focus of all geographical COCOMs. Under the current UCP development process, the U.S. Interagency has a degree of visibility but participation is limited. While Interagency participation in developing regional war plans might not be appropriate, a greater role in planning for military engagement activities might not only enhance these programs but might also identify areas of redundancy with other U.S. government regional engagement programs. This enhanced role could include more Interagency representatives in the early stages of the UCP review and development process and increasing military presence in key Interagency positions, particularly directorates that are responsible for strategic planning and resourcing. While the Interagency might welcome the opportunity to play a greater role, DOD might be less than enthusiastic with including a greater role for other U.S. government agencies in what it likely considers fundamental strategic military planning. In this regard, Congress might consider an in depth examination of the UCP development process. This examination could focus on the current level of Interagency participation and identifying areas in the process where greater Interagency involvement could be beneficial. In September 2000, Washington Post reporter Dana Priest published a series of articles whose central premise was Combatant Commanders wielded an inordinate amount of political influence within the countries in their areas of responsibility and "had evolved into the modern-day equivalent of the Roman Empire's proconsuls—well-funded, semi-autonomous, unconventional centers of U.S. foreign policy." Some national security experts consider this series as the catalyst of the continuing debate as to whether or not COCOMs have assumed too much influence overseas, thereby diminishing the roles other U.S. government entities play in foreign and national security policy. Despite the post-September 11, 2011, ascendancy of the Interagency in foreign policy and national security matters, the debate over the COCOM's role continues. In 2007, testimony from Mark Malan from Refugees International before the Senate Subcommittee on African Affairs of the Foreign Relations Committee he noted In some parts of the world, like Iraq and Afghanistan, the face of U.S. foreign policy is clearly a military one. In Africa, the DOD appears to be putting a civilian mask on the face of a combatant command, with its marketing pitch for USAFRICOM. This disingenuous strategy is not working. The veneer of the mask is simply too thin, and attempts to patch the holes that have emerged—by telling us "what AFRICOM is not about" and re-emphasizing a humanitarian and developmental role for the U.S. military in Africa—simply make the face of U.S. foreign policy much shadier. The notion of a benign U.S. combatant command is an enigma to those who clearly understand (and accept) the need for the U.S. to secure access to Africa's natural resources, especially oil; and to establish bases from which to destroy networks linked to Al-Qaeda. When the U.S. promotes a combatant military command in terms of development and humanitarianism, Africans will inevitably suspect that the true story is being kept from them. The assertion that COCOMs have usurped other U.S. government entities in the foreign policy arena may deserve greater examination. Geographic Combatant Commanders generally agree their role is more political than military. A former USEUCOM and Supreme Allied Commander, Europe (SACEUR) estimated he spent about 70% of his time on political-military issues, despite having ongoing combat operations in the Balkans. USCENTCOM commanders have reportedly spent a significant amount of time meeting with the senior Iraqi and Afghan political leadership over the past 10 years discussing issues of building and maintaining armed forces, civil-military relations, and other national security matters. While these discussions might not conform to what have been traditionally considered war fighting-related topics, the complexities of U.S. involvement in these two countries suggests Combatant Commanders have been required to play a more pronounced political role. Some U.S. government officials suggest the Combatant Commander/State Department relationship, as it currently exists, has proven beneficial. A former Under Secretary of State for Political Affairs noted he was a huge fan of the [regional commanders]. I was the ambassador to Turkey; in EUCOM, when the deputy [commander, the commander], and I were on the same page—there was nothing we couldn't achieve. In 6 years in Turkey as [deputy chief of mission] and ambassador, there was never a single conflict. Now, I'm dealing with Colombia; I've made five of my six visits with SOUTHCOM's commander. We do everything together. Yes, someone could goof. But the system works wonderfully—the [regional commanders] are some of the finest America has to offer. When the [commander] and ambassador are on the same page, it's a very powerful combination. I'm a complete believer. Congress has examined aspects of this COCOM-State Department relationship in terms of the broader topic of civil-military relations as well as how it pertains to USAFRICOM and its role in U.S. foreign policy. In a broader context Congress might wish to consider the role Geographic COCOMs play in U.S. foreign policy abroad. This consideration could take into account more than just the State Department, but also other U.S. government agencies that play a foreign policy role. While presence and access to resources have been cited as positive attributes for COCOM involvement overseas, it is possible a reallocation of resources might put a more "civilian" face on U.S. engagement and development efforts, possibly resulting in greater acceptance and efficacy in regions that are sensitive to U.S. military presence. In examining the respective roles of COCOMs, the State Department, and others, it might be possible to identify both areas of redundancy as well as areas requiring greater emphasis, thereby enhancing overall U.S. effectiveness in political-military relations with nations in respective regions. With many experts predicting shrinking or flat U.S. military and State Department budgets over the next few years, such an examination might lead to a more cost effective approach to U.S. foreign policy. While Geographic COCOMs suggest their regional perspective is their primary virtue, others argue the "strict geographic regionalism" the COCOMs were aligned under is no longer how the world is organized. These critics contend globalization at one end and localism (tribalism) at the other end has made the Geographic COCOM construct less than ideal. Given this view, some suggest there are opportunities to address this disparity. The Subcontinent or Indian Ocean or western Asia has been cited as one AOR that could merit a separate command. With long-term strategic emphasis on countering violent extremism in Afghanistan and Pakistan, it might be in the nation's best interest to establish a separate command rather than continuing to include them in USCENTCOM where the command's planners and decision makers must also focus on issues such as Iran's pursuit of nuclear weapons and regional influence, the Israel-Palestine impasse, and the fate of Syria and Egypt. India might also figure into this strategic recalculation, as its relationships with Pakistan and China have a significant political-military impact in the region. Some believe India—currently the responsibility of USPACOM—might be a better fit under a separate Subcontinent COCOM. Another area where a new COCOM could be warranted is Central Asia. Such a new command could include Turkmenistan, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan—all presently under USCENTCOM—and could be a natural complement to a Subcontinent COCOM as many of the region's issues are more "localized" as tribes in the region tend not to conform to established political borders. These cross-border tribal and ethnic issues are viewed by many as key contributors to regional instability. While the establishment of new COCOMs might have an academic appeal, critics note such a course of action might not be fiscally sustainable. Establishment of new COCOMs is viewed as being a resource-intensive undertaking—even if resources are taken from existing COCOMs. New COCOMs would require additional Joint-qualified senior and mid-level officers as well as supporting military, civilian, and possibly contractor staff. New COCOMs would also likely require additional physical infrastructure and if there is an intent to headquarter these new COCOMs in their AORs, there might also be political and diplomatic issues to consider. In a fiscally constrained environment, these considerations might outweigh any operational benefits that might be derived from the establishment of new COCOMs. Aside from Geographic COCOMs, there might also be cause to re-examine Functional COCOMs. One area for possible examination is if U.S. Cyber Command—currently a Subunified Command under USSTRATCOM—should be elevated to a full-fledged Combatant Command. Proponents cite the following five benefits of this course of action: Unity of Command/Effort: The current DOD approach to cyberwarfare is scattered across the services and defense agencies. The services, the Defense Information Systems Agency (DISA), the National Security Agency (NSA), the Intelligence Community, and the other COCOMs have unsynchronized cyberspace warfighting capabilities. A separate and distinct USCYBERCOM would have greater authority, responsibility, legitimacy, and visibility than the current arrangement. Synchronization: Under the current command arrangement, USCYBERCOM might not have sufficient authority to fully synchronize cyber operations across the services and COCOMs. This could lead to a situation in which a COCOM decides to conduct cyber operations within its AOR and, because there are no physical boundaries in cyber space, these actions could have an adverse impact on the other COCOMs. Mass: A central COCOM with exclusive authority could mass the cyber activities of the other COCOMs, services, and DOD agencies into a coordinated effort to achieve mass effects on their intended target. Offensive Operations: One perceived benefit of elevating USCYBERCOM to full combatant command status is it would enable the U.S. government to place greater emphasis on offensive cyber operations as opposed to the current disparate emphasis on defensive cyber operations which are viewed by some as less effective than offensive operations. Diverse Mission Focus: Supporters argue the current command arrangement results in a lack of direction and discipline amongst DOD and government entities that makes oversight and, ultimately, funding more difficult. An elevated USCYBERCOM could serve to provide a single mission focus for the U.S. military. While proponents suggest, in the long run, a separate USCYBERCOM would be cost efficient, such an undertaking in a fiscally constrained environment could prove to be a difficult undertaking. There might also be resistance from the other COCOMs to ceding their cyber-related responsibilities to an elevated USCYBERCOM, arguing that they better understand the cyber threats in their specific regions than would a single entity responsible for a wider range of cyber threats. Because it might be difficult to identify, recruit, and retain cyber-qualified personnel that would likely be needed for a separate USCYBERCOM, cyber professionals from the COCOMs might be sought after to staff a new USCYBERCOM which could cause resentment from the COCOMs. Some experts believe the COCOM construct is a relic of the Cold War where the central mission of the U.S. military was to prepare for and conduct combat operations in specific geographical regions against conventional armed forces. These experts suggest a more radical approach to the issue of COCOMs is required so they remain relevant in a post-September 11, 2001, world. Two possible alternatives to the current COCOM construct are usually discussed. This proposal advocates retaining the COCOM headquarters and substituting a number of JTFs for the service-centric Subcomponent Commands. This approach could streamline and reduce infrastructure and simplify command channels. These JTFs could be designed on a regional, functional basis, for specific operational tasks and would be more flexible and reduce response time to crises in the region. Larger COCOM AORs might also benefit from several JTFs that could provide focused planning and operational execution in smaller, more manageable portions of their AORs. Another perceived benefit of this construct is if a specific condition within a COCOM's AOR is resolved, the JTF established to address the issue could be rapidly disestablished, thereby reducing personnel, infrastructure, and operations and maintenance (O&M) costs. This proposal advocates replacing COCOMs with permanent standing, civilian-led interagency organizations that would have regional responsibility for all aspects of U.S. foreign policy. These organizations would be led by highly credentialed civilians, potentially with a four-star military deputy and would report directly to the President through the National Security Council (NSC). These organizations would include representatives from all major U.S. government agencies, including DOD. This construct would change only the authority to integrate all elements of U.S. national power and DOD would continue to exercise its Title 10 authority by means of JIATFs. A perceived benefit of this approach is it could result in a significant increase in unity of effort across all the instruments of U.S. national power through all phases of an operation to include pre and post-conflict. Another benefit is such an organization might better facilitate both coalition and alliance-based operations from a political standpoint as it may be more palatable for some nations to work with a civilian-led organization rather than a military-centric one. This new construct might also have benefits for both regional engagement and developmental efforts thereby reducing the military "face" of these operations, particularly in regions that are sensitive to U.S. military presence. These are but two possible alternatives to the current COCOM construct. While Congress might not choose to directly address COCOM reform (particularly if there is a general belief the current COCOM construct meets current and future security needs) it is possible that, as Congress, the Administration, and DOD continue to pursue government-wide efficiencies aimed at reducing federal spending, these and other alternatives might inform the debate. | The Unified Command Plan (UCP) and associated Combatant Commands (COCOMs) provide operational instructions and command and control to the Armed Forces and have a significant impact on how they are organized, trained, and resourced—areas over which Congress has constitutional authority. The UCP is a classified executive branch document prepared by the Chairman of the Joint Chiefs of Staff (CJCS) and reviewed and updated every two years that assigns missions; planning, training, and operational responsibilities; and geographic areas of responsibilities to COCOMs. Functional COCOMs operate worldwide across geographic boundaries and provide unique capabilities to geographic combatant commands and the services while Geographic COCOMs operate in clearly delineated areas of operation and have a distinctive regional military focus. There are currently nine COCOMs: USSOCOM: U.S. Special Operations Command, MacDill Air Force Base, FL. USSTRATCOM: U.S. Strategic Command, Offutt Air Force Base, NE. USTRANSCOM: U.S. Transportation Command, Scott Air Force Base, IL. USAFRICOM: U.S. Africa Command, Kelley Barracks, Stuttgart, Germany. USCENTCOM: U.S. Central Command, MacDill Air Force Base, FL. USEUCOM: U.S. European Command, Patch Barracks, Stuttgart, Germany. USNORTHCOM: U.S. Northern Command, Peterson Air Force Base, CO. USPACOM: U.S. Pacific Command, Camp H.M. Smith, HI. USSOUTHCOM: U.S. Southern Command, Miami, FL. This report provides information on the history, mission, and operational considerations for each of these organizations as well as a brief discussion of current issues associated with the UCP and these commands. The origins of the UCP and COCOMs are rooted in World War II. After the war, U.S. leaders, taking advantage of the lessons learned in both theaters, initiated a series of legislative changes that resulted in the current UCP process and COCOM construct. The UCP and COCOMs are covered under Title 10 - Armed Forces; Subtitle A - General Military Law; Part I–Organization and General Military Powers; Chapter 6–Combatant Commands. These provisions detail the responsibilities and authorities of COCOMs as well as legal requirements related to the UCP. Potential issues for Congress include the implications of a strategic shift to the Asia-Pacific region. Another issue is whether there is a need for greater interagency involvement in the UCP development process. A possible area for congressional concern is if Geographical COCOMs have made U.S. foreign policy "too militarized." Some have also suggested there might be a need for separate COCOMs apart from the current nine to better address emerging regional and ethnic alignments as well as emerging threats such as cyber warfare. Finally, if Congress believes the current COCOM construct does not meet contemporary or future security requirements, there are proposals for alternative organizational structures that might prove more effective. |
The Health Insurance Portability and Accountability Act of 1996 ( P.L. 104-191 , HIPAA) provided for changes in the health insurance market and imposed certain federal requirements on health insurance plans offered by public and private employers. It guaranteed the availability and renewability of health insurance coverage for certain employees and individuals, and limited the use of preexisting condition restrictions. The Act established federal standards for insurers, health maintenance organizations (HMOs), and employer plans, including those who self-insure. However, it allowed states and sometimes insurers substantial state flexibility for compliance with the federal requirements. HIPAA also included tax provisions relating to health insurance. It permitted a limited number of small businesses and self-employed individuals to contribute to tax-advantaged medical savings accounts (MSAs) established in conjunction with high-deductible health insurance plans. It increased the deduction for health insurance that self-employed taxpayers may claim. In addition, it allowed long-term care expenses to be treated like deductible medical expenses and clarified the tax treatment of long-term care insurance. HIPAA amended the Employee Retirement Income Security Act (ERISA), the Public Health Service (PHS) Act, and the Internal Revenue Code (IRC). In general, requirements on employer plans are found in the ERISA and IRC amendments; requirements on health insurance issuers, such as insurance carriers and health maintenance organizations (HMOs) are found in the PHS Act and ERISA amendments. The increased deduction for the self-employed, tax-favored MSAs, and long-term care provisions are amendments to the IRC. The basic intent of HIPAA's health insurance provisions is to lower the possibility that people and small employers will lose existing health plan coverage, and to make it easier for individuals to switch plans or to purchase coverage on their own if they lose employer-offered coverage. The health insurance reforms ensure that people who are moving from one job to another or from employment to unemployment are not denied health insurance because they have a preexisting medical condition (portability) and limit the waiting time before a plan covers any preexisting medical condition for participants and beneficiaries in group health plans. The reforms were also intended to guarantee that individuals and employers who choose to purchase coverage are able to find a plan (guaranteed issue) and that individuals already covered, as well as employers that offer coverage to their employees, are able to renew their coverage (guaranteed renewal). Finally, the health insurance provisions prohibit discrimination on the basis of health status (non-discrimination) and require plans to offer special enrollment periods. Other HIPAA provisions seek to make health insurance more affordable. The Act raised the tax deduction for health insurance premiums paid by the self-employed. MSAs coupled with qualified high deductible health insurance plans were made available on a trial basis to a limited number of individuals. New tax incentives were made available to encourage individuals and employers to purchase long-term care insurance. Finally, the Act included administrative simplification and privacy provisions instructing the Secretary of HHS to issue standards addressing the electronic transmission of health information and the privacy of personally identifiable medical information. Additional federal protections have been added since the passage of HIPAA. The protections required plans that cover newborn delivery to allow for a minimum two-day hospital stay under certain conditions, required plans that offer mental health services to offer them subject to similar limitations as other health benefits, and required plans that cover mastectomy to also cover reconstructive surgery. In addition, the deduction allowed for premium costs for the self-employed was changed. HIPAA's insurance provisions were designed to help insured Americans who have a preexisting medical condition and have stayed in a job because they fear that they would lose coverage for such a condition if they change to a new employer or move to an individual policy. It also would help those who have been denied the option to purchase insurance as an individual or through their employer because of their health status. They do not address the larger problem of the uninsured, estimated to be 45 million people in 2003, although other HIPAA provisions, such as the tax deductibility of health insurance costs for the self-employed, may encourage some uninsured, self-employed individuals to purchase coverage for themselves. It is also the case that HIPAA largely addresses the availability of insurance and does not regulate the price of health insurance coverage. Some evidence suggests that the cost of health insurance in the individual market for individuals taking advantage of HIPAA's group-to-individual portability provisions is significantly higher than the cost for individuals who could otherwise obtain insurance. This may be discouraging many "HIPAA eligibles" from buying insurance. Whether this experience continues over the long run remains to be seen. No, the Act does not require employers to offer or pay for health insurance for their employees. Also, the Act does not require employers to offer or pay for family coverage (spouses and dependents). Finally, the Act does not require employers to cover part time, seasonal, or temporary employees. However, an employer who elects to sponsor a group health plan has to comply with certain requirements of the Act. These requirements: (a) restrict the use of preexisting condition limitation periods; (b) prohibit an employer plan from discriminating on the basis of health status in determining the eligibility of an employee to enroll in a group health plan (and the employee's spouse and dependents if the plan provides family coverage); (c) prohibit an employer plan from requiring an individual to pay premiums or contributions which are greater than those charged to a similarly situated individual on the basis of health status; and (d) mandate documentation of creditable coverage. HIPAA's "portability" protection means that once a person obtains creditable health plan coverage, he or she can use evidence of that coverage to reduce or eliminate any preexisting medical condition exclusion period that might otherwise be imposed when moving to another health plan. The protections apply when a person moves from one group health plan to another, from a group health plan to an individual policy, or from an individual policy to a group health plan. The concept of portability is really one of being able to maintain coverage and being given credit for having been insured when changing health plans. It does not mean that an individual can take a specific health insurance policy from one job to another. The concept of creditable coverage is that individuals are given credit for previous insurance when applying for a new plan. Under the Act, creditable coverage is coverage under any of the following: (a) a group health plan; (b) health insurance coverage , including individual health insurance coverage; (c) Medicare; (d) Medicaid; (e) military health care; (f) a medical care program of the Indian Health Service or of a tribal organization; (g) a state health benefits risk pool; (h) the Federal Employee Health Benefits Program; (i) a public health plan (as defined in regulations); (j) a health benefit plan under Section 5(e) of the Peace Corps Act (22 U.S.C. 2504(e)); or (k) the State Children's Health Insurance Program (SCHIP). Under the Act, a preexisting medical condition is a physical or mental condition for which medical advice, diagnosis, care, or treatment was recommended or received within the 6-month period ending on the enrollment date. The enrollment date is the date of enrollment of the individual in the health plan or insurance, if earlier, the first day of the waiting period for such enrollment. Pregnancy is not considered a preexisting medical condition. Also, a preexisting medical condition limit or exclusion may not be imposed on covered benefits for newborns who are covered under creditable coverage within 30 days of birth. Finally, a preexisting medical condition limit or exclusion may not be imposed on covered benefits for newly adopted children or children newly placed for adoption, if the child becomes covered under creditable coverage within 30 days of the adoption or placement. Final regulations implementing the health coverage portability provisions of HIPAA addressed other types of benefit exclusions that are not designated as preexisting condition exclusions by the plan, but are considered to be so by the regulators. Examples of these specific benefit exclusions include provisions excluding coverage of pregnancy until 12 months after the individual is eligible for benefits, or provisions excluding treatment of injuries relating to accidents that occurred prior to enrollment. Plans are required to bring those exclusions into compliance with HIPAA portability provisions by July 1, 2005. The Act also prohibits the use of genetic information as a preexisting condition, unless there is a diagnosis of a preexisting medical condition related to the information. For example, evidence of a positive test for the gene that predisposes a woman to inheritable breast cancer cannot be treated as a preexisting condition, unless a diagnosis of breast cancer is made within the 6-month period described above. During this period, a plan may exclude or restrict coverage of a participant's or beneficiary's preexisting medical condition. Under the Act, a group health plan is prohibited from imposing more than a 12-month preexisting condition limitation period (18 months for late enrollees) on an HIPAA-eligible participant or beneficiary. As described below, that period is reduced by the amount of the individual's creditable coverage. In the individual market, HIPAA-eligible individuals also have portability protection, although the circumstances under which those protections apply are complex as described in more detail below. HIPAA requires group health plans (plans that are offered to an employment-based group—including both employers and employee organizations) that are covered by the Act to meet the following requirements related to portability: When a person with prior creditable coverage first enrolls in a group health plan, the plan cannot impose a limitation period on a preexisting condition that is longer than 12 months (18 months for late enrollees as defined below). The length of the allowed preexisting condition limitation period is based on any creditable coverage that an individual may have. The plan cannot apply any preexisting condition waiting period on pregnancy, a covered newborn, or on any covered child under 18 who is adopted (even if the adoption is not finalized). However, the employer may still require individuals to work for a period of time before they are allowed to participate in the health plan. This is called a "waiting period" and should not be confused with a "preexisting condition limitation period." Employers who sponsor group health plans are required to provide enrollees with a certificate that states the amount of creditable coverage accumulated and whether or not the enrollee was subject to a waiting period under the employer's plan. Individuals can use this certificate to demonstrate prior creditable coverage when moving to a new group or individual health insurance plan. The Act does not require an employer to continue offering coverage to enrollees who have left their jobs, except under COBRA continuation provisions as described below. To benefit from the Act, individuals should maintain coverage under a health insurance plan without experiencing significant lapses in coverage. Since the portability protection only applies to people with "continuous coverage", which the statute defines as coverage with no lapses of 63 or more days, individuals should not allow their insurance coverage to lapse for 63 or more days. Coverage of a preexisting medical condition may be limited or excluded for up to 12 months for those who enroll in a health plan when first eligible to enroll. In the case of late enrollment, the maximum permitted limitation is 18 months. For those moving from one group plan to another group plan, or from individual to group coverage, the new plan must reduce any preexisting condition limitation period by one month for every month that such individuals had creditable coverage under a previous plan, provided that they enroll when first eligible and had no break in previous coverage of 63 or more continuous days. For example, individuals with 6 months of prior creditable coverage could face a maximum preexisting condition limitation period of 6 months. Individuals with 11 months of prior creditable coverage could face a maximum limitation period of 1 month. Once a 12-month limitation period is met, no new limitation may ever be imposed as long as continuous coverage is maintained (that is, there is no break in coverage lasting longer than 62 days), even if there is a change in jobs or health plans. If there is a period of 63 consecutive days during which individuals have no creditable coverage, they may be subject to as much as a 12-month preexisting condition exclusion period (or an 18 month exclusion for late enrollees). Individuals establish eligibility for a waiver of preexisting condition limitations by presenting certifications that document prior creditable coverage. Health plans and health insurance issuers must supply written certifications of: the period of creditable coverage under the plan; coverage (if any) under COBRA continuation provisions; and any waiting or affiliation periods imposed. The certification must be provided: (1) when a participant is no longer covered under the plan or otherwise becomes covered under a COBRA continuation provision; (2) after termination of COBRA coverage, if applicable; and (3) upon a request which is made not later then 24 months after coverage ends. The interim rules issued by the three agencies administering the Act provide guidance and model certification forms to streamline this process. In general, the certification must be provided in writing. Late enrollment occurs when an individual enrolls in a group health plan other than during: (a) the first period in which the individual is eligible to enroll under the plan, or (b) a special enrollment period. As described above, a group health plan may require a late enrollee to wait 18 months before a preexisting condition is covered. A waiting period is a set amount of time an employee must wait before he or she is eligible to enroll in a health plan. For example, an employer may require an employee to work for 6 months before health insurance benefits become available. The Act does not limit this type of waiting period—employers and health insurance issuers are free to determine the length of a waiting period. However, the Act requires that any waiting period be applied uniformly without regard to the health status of potential plan participants or beneficiaries. Also, days in a waiting period are not taken into account when determining whether an individual has experienced a break in coverage of 63 or more days. This differs from a preexisting condition exclusion limitation period which allows plans to exclude coverage for certain preexisting health conditions for up to 12 months (or 18 months), as described above. Any waiting period required before an employee or his or family member can become a plan participant or beneficiary must run concurrently with any preexisting condition limitation period. For example, if an employer required an employee without any creditable coverage to work for 5 months before he or she could enroll in the firm's health plan, then the preexisting condition limitation period imposed on the coverage of that individual could not exceed 7 months from the date of actual enrollment in the plan. If that individual had 7 or more months of creditable coverage, then no preexisting condition limitation period could be imposed on the coverage under the new plan. Yes, when an individual changes plans, the new benefit package may cover some benefits that were not covered under his or her most recent prior plan, and the law allows the new plan or issuer some discretion in applying prior creditable coverage to those new benefits. Plans and issuers may choose between two alternatives when determining creditable coverage: 1) they can chose to include all periods of coverage from qualified sources and thus not look at any specific benefits; or 2) they can examine prior coverage on a benefit-specific basis, and are allowed to exclude from creditable coverage any categories or classes of benefits not covered under the most recent prior plan. The April 8, 1997 interim rule defines the categories of benefits that may be considered separately to be: (a) mental health; (b) substance abuse treatment; (c) prescription drugs; (d) dental care; or (e) vision care. Thus, for example, if a prior plan did not cover prescription drugs, and the new plan includes this benefit, the new plan may exclude coverage of prescription drugs for up to 12 months under this second method. If the second method is chosen, plans or issuers must disclose its use at the time of enrollment or sale of the plan, and apply it uniformly. Under a group health plan, an employer is not required to offer coverage to an individual's spouse or children. If the employer does offer family coverage, the same protections apply to a spouse and dependents. Coverage may not be denied because a family member is sick, and preexisting condition restrictions are limited as described above. HIPAA guarantees the availability of a plan and prohibits pre-existing condition exclusions for certain eligible individuals who are moving from group health insurance to insurance in the individual market. States have the choice of either enforcing the HIPAA individual market guarantees, referred to as the "federal fallback", or they may establish an "acceptable alternative state mechanism". In states using the federal fallback approach, HIPAA requires all health insurance issuers operating in the individual health insurance market to offer coverage to all eligible individuals and prohibits them from placing any limitations on the coverage of any preexisting medical condition. Issuers can comply with the Act's requirements in three ways: they must offer eligible individuals access to coverage to every individual insurance policy they sell in the state; or they must offer eligible individuals access to coverage to their two most popular insurance policies (based on premium volume); or they must offer eligible individuals access to a lower-level and higher-level coverage. These two policies must include benefits that are substantially similar to other coverage offered by the issuer in the state, and must include risk adjustment, risk spreading, or financial subsidization. Issuers can refuse to cover individuals seeking portability from the group market if financial or provider capacity would be impaired. This means, for example, that if a network-based plan like an HMO can demonstrate that it is filled to capacity, then it would not have to accept eligible individuals. It would have to apply this exception uniformly, without regard to the health status of applicants. An eligible individual must have: creditable health insurance coverage for 18 months or longer; most recent coverage under a traditional employer group plan, governmental plan, or church plan; exhausted any COBRA (or other continuation) coverage; no eligibility for coverage under any employment-based plan, Medicare or Medicaid; and no breaks in coverage of 63 or more days. Individuals purchasing insurance on their own who do not meet these eligibility criteria, are not protected by HIPAA's portability and guaranteed availability provisions. These individuals may be protected under state laws. The group-to-individual portability and guaranteed availability protections apply only to individuals whose most recent coverage was provided through traditional employer-based group arrangements, governmental plans or church-sponsored plans. Group plans are defined as those meeting the ERISA definition, which is limited to those sponsored through a traditional employer-employee relationship or an employment-based association. Governmental plans are also defined in ERISA. They are plans that are established or maintained for its employees by the Government of the United States, the government of a state or a political subdivision of a state. This limitation means that people whose most recent coverage was sponsored by the military (CHAMPUS and TRICARE), many college-sponsored student plans, the Peace Corps, the Veterans Administration, the Indian Health Service, Medicare, Medicaid and SCHIP are not eligible for the federal group-to-individual portability and guaranteed availability protections. (State laws, however, may offer these individuals such protections.) An acceptable alternative state mechanism for coverage of eligible individuals must: provide a choice of health insurance coverage to all eligible individuals; not impose any preexisting condition restrictions; and include at least one policy form of coverage that is comparable to either comprehensive health insurance coverage offered in the individual market in the state, or a standard option of coverage available under the group or individual health insurance laws in the state. In addition to these requirements, a state may implement one of the following mechanisms: certain National Association of Insurance Commissioners (NAIC) Model Acts ; a qualified high-risk pool that meets certain specified requirements; or other risk spreading or risk adjustment approach, or financial subsidies for participating insurers or eligible individuals; or any other mechanism under which eligible individuals are provided a choice of all individual health insurance coverage otherwise available. Examples of potential alternative state mechanisms include health insurance coverage pools or programs, mandatory group conversion policies, guaranteed issue of one or more plans of individual health insurance coverage, open enrollment by one or more health insurance issuers, or a combination of such mechanisms. Table 1 provides information on how each state has implemented the Act's group-to-individual portability provisions. As of December 2003, the District of Columbia and 10 states (Arizona, Delaware, Hawaii, Maryland, Missouri, Nevada, North Carolina, Rhode Island, Tennessee, and West Virginia) utilize the federal fallback mechanism. Missouri is also the only state that does not enforce these standards itself, and as a result CMS is responsible for enforcement in Missouri. As shown in Table 1 , many states have elected to provide group-to-individual portability through high-risk pools, while others utilize a combination of high-risk pools, existing state insurance reform laws, or other mechanisms. To obtain more information on a state's health insurance regulation of the individual market, individuals may wish to contact that state's department of insurance. As an adjunct to its portability requirement, the Act provides for two different special enrollment periods to ensure that people losing group health insurance coverage can more easily obtain other group coverage when it is available. The two special enrollment periods are: (1) Individual Losing Other Coverage . A group health plan or an issuer offering coverage in connection with a group health plan must allow an employee who is eligible, but not enrolled, to become covered under the plan if the following conditions are met: The employee or dependent was covered under a group health plan or had health insurance coverage at the time coverage was previously offered to the employee or dependent. For example, the employee may have been covered by a spouse's employer and declined coverage under his own employer's plan. The employee stated in writing at the time of declining enrollment that the reason for declining was that he or she was covered under another health insurance plan. This condition applies only if the plan sponsor or issuer requires such a written statement. The employee's or dependent's previous coverage was under a COBRA continuation provision that had become exhausted or was under some other coverage that had been terminated as a result of a loss of eligibility for the coverage (for reasons such as: legal separation, divorce, death, termination of employment, or reduction in the number of hours of employment), or because the employer contribution towards such coverage was terminated. To take advantage of a special enrollment period, the employee would have to request enrollment no later than 30 days after the date in which his or her prior coverage was exhausted or terminated. (2) Dependent Beneficiaries. This special enrollment period applies to individuals who become dependents through marriage, birth, adoption, or placement of adoption. Generally, this provision applies if a group health plan makes dependent coverage available, and the new dependent's spouse or parent is either a participant or eligible (including meeting any waiting periods) to be a participant under the plan. The newly dependent individual must be allowed to enroll as a beneficiary under the plan; however, enrollment must be sought within 30 days of the qualifying event (e.g., the marriage). Employees or spouses who are eligible, but not previously enrolled in the plan, may also enroll during this special enrollment. Coverage is effective on the date of the birth, adoption, or placement for adoption. In the case of marriage, coverage is effective no later than the first day of the month beginning after the date the request for enrollment is received. No, the Act prohibits a group health plan and an issuer offering group health coverage from establishing rules for eligibility for any individual to enroll under the plan based on health status-related factors. These factors include health status, medical condition (including both physical and mental illnesses), claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions arising out of domestic violence) and disability. Group health plans are also prohibited from failing to re-enroll a participant or beneficiary on the basis of health status-related factors. HIPAA also prohibits plans from charging differential premiums for enrollees within a group plan based on these health status-related factors. No, the Act prohibits employer plans and issuers of group health coverage from establishing rules of eligibility to enroll under the terms of the plan that discriminate based on one or more health-status related factors. No, these individuals cannot be denied enrollment in a group health plan, based on HIPAA's non-discrimination provision. Group plans or issuers offering group health coverage cannot use information about an individual's health status to either deny coverage or charge differential premiums. On January 8, 2001, the Department of Labor issued a preliminary final ruling with comment period, defining the nondiscrimination provisions of HIPAA. In this ruling, "health status" is defined very broadly to include "evidence of insurability" which in turn includes a provision that prohibits excluding coverage for individuals who participate in high-risk activities. Thus, this broad interpretation extends the nondiscrimination protections to individuals who engage in high-risk recreational activities. HIPAA's protection extend to enrollment policies and premiums. The protection does not address the benefits that are covered by these plans. Therefore, there is no federal requirement to cover treatments for injuries associated with high-risk activities, even if these treatments are otherwise covered under the plan. For example, a plan may exclude coverage for a broken leg if it occurs as a result of a high-risk activity. Under a group health plan, an employer is not required to offer coverage to an individual's spouse or children. If the employer does offer family coverage, the same non-discrimination protections apply to a spouse and any other dependents as defined under the terms of the plan. Coverage may not be denied because a family member is sick, and preexisting condition restrictions are limited as described above. No, the Act does not restrict premium amounts that an employer or insurer can charge. It also expressly permits an employer or group health insurer to offer premium discounts or rebates, or modify otherwise applicable copayments or deductibles, for participation in health promotion and disease prevention programs. However, the Act does prohibit a health plan from charging an individual a higher premium than the premium charged for another similarly situated individual enrolled in the plan on the basis of any health-related factor, such as a preexisting medical condition. The Act requires insurers, HMOs, and other issuers of health insurance selling in the small group market to accept any small employer that applies for coverage, regardless of the health status or claims history of the employer's group. This requirement is often referred to as "guaranteed issue." The Act defines a small employer as one with two to 50 employees. (If, on the first day of the plan year, the plan has fewer than two participants who are current employees, it is not considered a small group and would not be covered by this "guaranteed issue" requirement.) Under guaranteed issue, the issuer must accept for enrollment under the policy, not just the employer's group, as a whole, but also every eligible individual in the employers' group who is eligible for and applies for timely enrollment. Exceptions to guaranteed issue are provided in the Act for network plans that might otherwise exceed capacity limits or in the event that the employer's employees do not live, work, or reside in the network plan's area. Employer groups with more than 50 employees are not protected by this requirement unless otherwise required under state law. In the past, health insurance issuers usually did not examine the health status or medical history of larger employer groups when deciding whether to accept such groups for coverage. The Act requires the Secretary of Health and Human Services (HHS) and the General Accounting Office (renamed the Government Accountability Office in July 2004) to report every three years, beginning in December 2002, on access to health insurance in the large group market. No, the Act requires all health insurance issuers to continue coverage for any group, regardless of health status or use of services, if the group requests renewal. This requirement is known as guaranteed renewability. An issuer may drop coverage in cases of non-payment of premiums, fraud, or similar reasons not related to health status, such as violation of participation or contribution rules. But, there are no limits on amounts insurers may charge. As originally passed, HIPAA did not require an employer or issuer of group health insurance to offer specific benefits. Twice since its passage Congress added to HIPAA's protections by mandating specific benefits, but in each case only for plans that cover certain services. As part of the FY1997 appropriations bill for the Departments of Veterans Affairs and Housing and Urban Development (VA-HUD), Congress included provisions that (1) require plans that cover mental health services to provide limited mental health "parity", and (2) prohibit plans that cover newborn delivery from limiting hospital stays for newborn delivery to less than two days. The FY1999 Omnibus Appropriations Act incorporated the Women's Health and Cancer Rights Act, which requires plans that cover mastectomy as a treatment for breast cancer to also cover reconstructive surgery. Private health insurers often provide less coverage for the treatment of mental illnesses than they do for the treatment of other illnesses. For example, health plans may limit treatment of mental illnesses by covering fewer hospital days and outpatient office visits, and increase cost sharing for mental health care by raising deductibles and copayments. Twenty-two states have passed full-parity laws that require health plans to impose the same treatment limitations and financial requirements on their mental health coverage as they do on their medical and surgical coverage. Several other states have enacted legislation that requires health plans to provide certain specified mental health benefits (but not full parity). However, these state laws have a limited impact because they do not cover self-insured plans. ERISA exempts self-insured plans from state regulation. Nationwide, about 52% of covered workers are in a self-insured plan, according to the 2003 KFF/HRET survey of employer health benefits. In 1996, Congress passed the Mental Health Parity Act (MHPA), which amended ERISA and the Public Health Service Act to establish new federal standards for mental health coverage offered by employer-sponsored plans. Identical provisions were later added to the Internal Revenue Code. The MHPA is limited in scope and does not compel insurers to provide full-parity coverage. For group plans that choose to offer mental health benefits, the MHPA requires parity only for annual and lifetime dollar limits on coverage. Plans may still impose more restrictive treatment limitations and cost sharing requirements on their mental health coverage. The MHPA includes several other limitations. Employers with 50 or fewer employees are exempt from the law. In addition, employers that experience an increase in claims costs of at least 1% as a result of MHPA compliance can apply for an exemption. The MHPA currently is authorized through December 31, 2005. The 107 th Congress tried unsuccessfully to enact legislation ( S. 543 ) that would have amended and expanded the MHPA by requiring plans that choose to offer mental health benefits to provide full-parity coverage. Full-parity legislation is strongly supported by advocates of the mentally ill and enjoys broad bipartisan support among lawmakers. Employers and health insurance organizations oppose such legislation because of concerns that it will drive up health care costs. For more information, see CRS Report RL31657, Mental Health Parity: Federal and State Action and Economic Impact , by [author name scrubbed] and [author name scrubbed]. The Newborns' and Mothers' Health Protection Act was also passed as part of P.L. 104-204 . This Act prohibits group health plans and issuers offering group coverage from restricting the hospital length of stay for childbirth for either the mother or newborn child to less than 48 hours for normal deliveries and to less than 96 hours for caesarian deliveries. Enacted in 1998, Title IX of the FY1999 Omnibus Appropriations Act requires group plans and health insurance issuers that provide coverage for mastectomies also to cover prosthetic devices and reconstructive surgery. The provision included a requirement that beneficiaries be notified of available coverage for prostheses and treatment of physical complications of reconstructive procedures. Federal law does not prohibit employers from excluding treatment of specific illnesses or conditions from their health benefit plans. On the other hand, a number of factors limit certain employers' ability to exclude specific illnesses from coverage. Most states have enacted legislation requiring that specific benefits or coverage be included in insured products. Some employers, particularly small ones, purchasing insurance products have little or no discretion in choosing or excluding specific types of services or procedures. This is because many insurance companies and HMOs have a set menu of products that do not vary considerably from one employer group to another. For self-funded plans, however, ERISA prevents state laws from applying and benefits are crafted by each individual employer plan. Thus only the few federal requirements enacted in HIPAA and its amendments (described above) place specific coverage requirements on these self-funded plans. No, such specific benefit plans do not have to comply with the requirements of the Act if they meet certain conditions spelled out in the Act. To be exempt, for example, the dental-only policy would have to be provided under a separate policy, certificate, or contract of insurance or not otherwise be an integral part of the plan. Yes, association plans must comply with the various requirements of the Act relating to group health coverage. For example, the sponsor of an association plan cannot drop a group from coverage because of the use of medical services by the group's members. Moreover, the association plan must comply with the restrictions on the use of preexisting medical condition limitation periods, provide for creditable coverage, and renew coverage except in limited cases. However, nothing under the Act requires that an association plan accept for coverage individuals who are not members of the association. Yes, states may impose their own requirements. But HIPAA ensures that state laws do not prevent the application of its consumer protections. For example, state laws regulating rating continue to apply because the Act generally does not address rating practices. On the other hand, the Act's provisions relating to portability, such as restrictions on the use of preexisting medical condition limitation periods override state laws. Exceptions include specific types of state laws that provide for greater portability , such as state laws that: define a preexisting medical condition to be one that existed for less than 6 months prior to becoming covered (instead of the 6 months required under the Act); provide for preexisting medical condition limitation periods shorter than 12 (and 18) months in the Act; and allow for breaks in continuous coverage longer than the 62-day period specified under the Act. Thus, for example, a state may prohibit issuers selling to group health plans from imposing more than a 6-month preexisting medical condition limitation period on enrollees, instead of the 12-month limit in the Act. However, state laws that allowed such limitation periods in excess of 12 months would be overridden by the requirement of the Act. While there are no specific references in HIPAA or the subsequent benefits mandates that apply the requirements specifically to FEHBP, the plans provided by the FEHBP program are presumed to fall under the HIPAA definition of "group health plan." As a result, the federal Office of Personnel Management, which administers the FEHBP program, complies with the HIPAA requirements. No, the Act does not place any restrictions on the premium amount that issuers can charge. However, some states limit insurance premiums in the individual market and more may decide to do so in the future. Such limits would then apply because the Act does not preempt or override either current or future state laws regulating the cost of insurance. The Secretaries of HHS, Labor, and Treasury are required to jointly enforce the provisions of the Act. The Secretary of Labor enforces the requirements on employer plans under Title I of ERISA. The Secretary of Labor is also generally given authority to promulgate regulations necessary to carry out the provisions of the Act relating to group health plans and health insurance issuers in connection with any group health plan. The Secretary of Treasury enforces requirements on all group health plans under the Internal Revenue Code. Requirements on health insurance issuers (such as insurance carriers and HMOs) are enforced by the Secretary of HHS to the extent that such requirements are not enforced by the states. The Secretaries are required to coordinate their activities to avoid duplication of effort. States have the primary responsibility for enforcing HIPAA's access, portability and renewability standards applying to insurers in both the group and individual markets. If they do not pass laws that substantially enforce these standards, however, DHHS must do the enforcing itself. As of 2001, only Missouri had not enacted enabling legislation. Noncomplying group health plans covered under ERISA may be subject to civil money penalties, and both plans and issuers can be sued by participants and beneficiaries to recover any benefits due under the plan. The Secretary of Labor has the investigative authority to determine compliance with the law's requirements. For group health plans, generally the IRS can fine a noncomplying employer $100 per day per violation. Requirements on issuers will be enforced by the states. For Missouri, the Secretary of HHS enforces the provisions. The Secretary may impose a fine of $100 for each day the entity (the issuer or a nonfederal governmental plan) is out of compliance. The Act gives the Secretary of HHS the authority to promulgate regulations needed to carry out the provisions of the Act relating to requirements on issuers of coverage. The following table lists the regulations regarding HIPAA's insurance provisions. For regulations on HIPAA's administrative simplification and privacy provisions see CRS Report RL30620, Health information standards, privacy and security: HIPAA ' s administrative simplification regulations , by Stephen Redhead. A person's COBRA continuation coverage is considered creditable coverage in the case of an individual who moves from one group policy to another group policy or from a group policy to an individual policy. This allows an individual to move from COBRA to a new health plan without having to wait for coverage of any preexisting medical condition under the new plan, providing the individual does not have a lapse in coverage of 63 or more days. With respect to HIPAA's individual market protections, the situation is somewhat more complex. One of the requirements for eligibility for guaranteed availability and portability in the individual market is that an individual must first have elected and exhausted any available COBRA or other continuation coverage. Eligible individuals who do not have access to COBRA or other continuation coverage may move directly to the individual market. Additionally, in the individual market, it is important to note that the insurer accepting the eligible individual for coverage can charge whatever rate is allowed under state law. (The Act does not limit the premiums that insurers can charge.) Yes, the Act makes several changes to the laws providing for COBRA continuation of coverage. It provides: a clarification that a disabled qualified beneficiary and all other qualified family members of the beneficiary are also eligible for the additional 11 months of COBRA; that the qualifying event of disability applies in the case of a qualified beneficiary who is determined under the Social Security Act to be disabled during the first 60 days of COBRA coverage; that a qualified beneficiary for COBRA coverage includes a child who is born to, or placed for adoption with, the covered employee during the period of COBRA coverage; and that COBRA can be terminated if a qualified beneficiary becomes covered under a group health plan which does not contain any exclusion or limitation affecting a participant or his or her beneficiaries because of the requirements of the Act. It should also be noted that under the Medical Savings Account (MSA) provisions of the Act (see below), individuals may withdraw funds from their MSAs without penalty to pay their COBRA premiums. In addition to the insurance provisions discussed above, HIPAA includes other provisions affecting health care. This section briefly summarizes these provisions and refers readers to other CRS reports where available. In addition to provisions relating to private health insurance, HIPAA directed the Secretary of HHS to issue standards to support and promote the electronic transmission of health care information between payers and providers. The standards specify the content and format of electronic health care claims and other common administrative and financial health care transactions (e.g., health plan enrollment, referrals). They are intended to streamline administrative operations within the health care system, which currently stores and transmits health information in numerous paper and electronic formats. In 2001 Congress enacted the Administrative Simplification Compliance Act ( P.L. 107-105 ), which enabled payers and providers to seek a one-year extension on the October 16, 2002 deadline for compliance with the electronic transactions and codes standards. HIPAA's administrative simplification provisions also instructed the Secretary of HHS to develop security standards and safeguards, which health plans and providers must incorporate into their operations to protect health information from unauthorized access, use, and disclosure. Health care providers and most health plans must be in compliance with the security standards by April 21, 2005. In addition, HIPAA directed the Secretary to develop standards for unique health identifiers (i.e., ID numbers) for patients, employers, health plans, and providers. CMS has issued standards for both the employer and provider identifiers, but the health plan identifier remains under development. In each fiscal year since FY1999, Congress has prevented CMS from developing a standard for the unique patient identifier by inserting language in the agency's annual appropriations bill. The language prohibits the use of funds for developing a unique patient identifier standard unless legislation is enacted specifically approving such a standard. The growing use of information technology in the management, administration, and delivery of health care has led to increasing public concern over the privacy of medical information. Patients are worried about who has access to their medical records without their express authorization. They fear that their personal health information will be used against them to deny insurance, employment, and housing, or to expose them to unwanted judgment and scrutiny. Lawmakers addressed these concerns by including in HIPAA's administrative simplification provisions a timetable for developing standards to protect the privacy of health information. HIPAA gave Congress until August 21, 1999, to enact comprehensive health privacy legislation, otherwise the Secretary was instructed to develop privacy standards. Congress was unable to meet its own deadline and so the Secretary proceeded to develop a health information privacy rule. The final rule was issued on December 28, 2000, and modifications to the rule were published on August 14, 2002. For more information on the privacy rule, see CRS Report RS20500, Medical Records Privacy: Questions and Answers on the HIPAA Rule , by [author name scrubbed] . Information on the status and implementation of all the HIPAA administrative simplification standards is at http://aspe.os.dhhs.gov/admnsimp . HIPAA authorized tax-advantaged medical savings accounts (MSAs) under a demonstration that began in 1997. MSAs (now formally called Archer MSAs) are personal savings accounts for unreimbursed medical expenses. They can be used to pay for health care not covered by insurance, including deductibles and copayments. The legislation provided that MSAs may be established by taxpayers who have qualifying high deductible insurance (and none other, with some exceptions) and who either are self-employed or are employees covered by the high deductible plan established by their small employer. Employer contributions to MSAs are not subject to either income or employment taxes, while contributions made by individuals—allowed only if the employer does not contribute—are allowed as an above-the-line deduction (not limited to itemizers). MSAs are held in trust by insurance companies, banks, and other financial institutions, and whatever earnings they have are exempt from taxes. Withdrawals are not taxed if they are for medical expenses unreimbursed by insurance or otherwise, while other distributions, being non-qualified, are included in gross income and subject with some exceptions to an additional 15% penalty. HIPAA set a deadline(originally December 31, 2000) for establishing new accounts and limited the total to various ceilings, eventually 750,000 accounts. In October, 2002, the IRS estimated that there would be 78,913 MSA returns filed for tax year 2001; it also determined that 20,592 taxpayers who did not make contributions in 2001 established accounts in the first six months of 2002. These numbers were far less than the 750,000 statutory ceiling. Later amendments extended the deadline for new accounts to December 31, 2003. Although no new MSAs may be created, with some exceptions, current owners can maintain their accounts and, provided they have a qualifying high-deductible insurance, can continue to make contributions. However, most MSA owners can now have HSAs, and their MSA balances can be rolled over into the new accounts. For more information about MSAs and HSAs, see CRS Report RS21573, Tax-Advantaged Accounts for Health Care Expenses: Side-by-Side Comparison , by [author name scrubbed] and [author name scrubbed], and CRS Report RL32467, Health Savings Accounts , by [author name scrubbed], [author name scrubbed], and Neela K. Ranade. For current legislative activity on tax-advantaged accounts, see CRS Issue Brief IB98037, Tax Benefits for Health Insurance and Expenses: Current Legislation , also by [author name scrubbed]. HIPAA increased the portion of premiums that self-employed taxpayers may deduct from income for the purposes of determining federal taxes owed. Under prior law, the deduction was 30% of health insurance costs; HIPAA increased it to 40% in 1997; 45% in 1998 through 2002; 50% in 2003; 60% in 2004; 70% in 2005; and 80% in 2006 and thereafter. Subsequent legislation ( P.L. 105-34 and P.L. 105-277 ) accelerated and increased the percentages set by HIPAA. Beginning in 2003, 100% of health insurance costs can be deducted. As discussed below, HIPAA also allowed self-employed taxpayers to take account of long-term care insurance premiums in making this deduction. HIPAA provided that payments for personal injury or sickness through an arrangement having the effect of accident or health insurance are excluded from gross income (that is, they are exempt from taxation), provided the arrangement has adequate risk shifting and is not merely a reimbursement arrangement. Thus with respect to taxes, payments from self-insured plans covering self-employed individuals are treated like payments from commercial insurance. HIPAA established new rules regarding the tax treatment of long-term care insurance and expenses, effective January 1, 1997. Qualified long-term care insurance is treated as accident and health insurance, and benefits are treated as amounts received for personal injuries and sickness and reimbursement for medical expenses actually incurred. As a consequence, benefits are excluded from gross income (that is, exempt from taxation). The exclusion for benefits paid on a per diem or other periodic basis is limited to the greater of (1) $240 a day (in 2005) or (2) the cost of long-term care services. Employer contributions to the cost of qualified long-term care insurance premiums are excluded from the gross income of the employee. The exclusion does not apply to insurance provided through employer-sponsored cafeteria plans or flexible spending accounts. Unreimbursed long-term care expenses are allowed as itemized deductions to the extent they and other unreimbursed medical expenses exceed 7.5% of adjusted gross income. Long-term care insurance premiums can be counted as these expenses subject to age-adjusted limits. In 2005, these limits range from $270 for persons age 40 or less to $3,400 for persons over age 70. Self-employed individuals are allowed to include long-term care insurance premiums in determining their above-the-line deduction (not limited to itemizers) for health insurance expenses. Only amounts not exceeding the age-adjusted limits can be included. So limited, 100% of the cost of the insurance may be claimed as a deduction in 2005, as described above. Qualified long-term care insurance is defined as a contract that covers only long-term care services; does not pay or reimburse expenses covered under Medicare; is guaranteed renewable; does not provide for a cash surrender value or other money that can be paid, assigned, or pledged as collateral for a loan, or borrowed; applies all refunds of premiums and all policy holder dividends or similar amounts as a reduction in future premiums or to increase future benefits; and meets certain consumer protection standards. Policies issued before January 1, 1997, and meeting a state's long-term care insurance requirements at the time the policy was issued are considered qualified insurance for purposes of favorable tax treatment. Qualified long-term care services are defined as necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance or personal care services, which are required by a chronically ill individual, and are provided according to a plan of care prescribed by a licensed health care practitioner. However, amounts paid for services provided by the spouse of a chronically ill person or by a relative directly or through a partnership, corporation, or other entity will not be considered a medical expense eligible for favorable tax treatment, unless the service is provided by a licensed professional. Chronically ill persons are defined as those individuals: unable to perform without substantial assistance from another individual at least two of the following activities of daily living (ADLs)for a period of at least 90 days due to a loss of functional capacity: bathing, dressing, transferring, toileting, eating, and continence; having a level of disability similar to the level of disability specified for functional impairments (as determined by the Secretary of the Treasury in consultation with the Secretary of Health and Human Services); or requiring substantial supervision to protect them from threats to health and safety due to severe cognitive impairment. HIPAA required that a licensed health practitioner (physician, registered professional nurse, licensed social worker, or other individual prescribed by the Secretary of the Treasury) certify that a person meets these criteria within the preceding 12-month period. HIPAA clarified that accelerated death benefits (that is, benefits paid before death) received under a life insurance contract on the life of an insured terminally or chronically ill individual are excluded from gross income. Also excluded are amounts received from a viatical settlement provider for the sale or assignment of a life insurance contract. These exclusions do not apply to amounts paid to persons other than the insured if they have an insurable interest in the insured for business reasons. A terminally ill individual is one who has been certified by a physician as having an illness or physical condition which can reasonably be expected to result in death within 24 months of the date of certification. A chronically ill individual is defined the same way as for long-term care (see the previous section). In this case, the exclusion of accelerated death benefits is limited to the actual costs of long-term care incurred by the individual that are not compensated by insurance or otherwise. The exclusion for benefits paid on a per diem or other periodic basis is limited to the greater of (1) $240 a day (in 2005) or (2) the costs of long-term care services. Contracts must not pay or reimburse expenses which are reimbursable under Medicare or would be but for the application of a deductible or coinsurance amount. In addition, contracts are subject to the consumer protection provisions specified in the tax code for long-term care insurance, except for analogous standards specifically applying to chronically ill individuals that are adopted by the National Association of Insurance Commissioners or the state in which the policyholder resides. HIPAA added two types of organizations to the list of those expressly exempt from the federal income tax: (1) state-sponsored membership organizations that provide insurance coverage or medical care to high-risk individuals, and (2) state-sponsored workmen's compensation reinsurance organizations. Organizations in either classification must meet a number of requirements. HIPAA allowed health insurance providers (other than health maintenance organizations) that are organized and governed under state laws specifically and exclusively applying to not-for-profit health insurance or service organizations to deduct 25% of claims and expenses incurred during the year, less adjusted surplus. Previously this tax treatment applied only to Blue Cross and Blue Shield organizations. HIPAA provided that the 10% early withdrawal penalty would no longer apply to individual retirement account (IRA) distributions used to pay medical expenses in excess of 7.5% of adjusted gross income. In addition, it provided that the penalty would not apply to IRA distributions used to pay health insurance premiums after separation from employment in the case of an individual who receives 12 consecutive weeks of unemployment compensation. HIPAA required the Secretary of the Treasury to include organ and tissue donor information, to the extent practicable, in the mailing of individual income tax refunds from February 1, 1997 through June 30, 1997. authorized tax-advantaged medical savings accounts (MSAs) under a demonstration that began in 1997. | The Health Insurance Portability and Accountability Act (HIPAA) of 1996 (P.L. 104-191), provided for changes in the health insurance market. It guaranteed the availability and renewability of health insurance coverage for certain employees and individuals, and limited the use of preexisting condition restrictions. The Act created federal standards for insurers, health maintenance organizations (HMOs), and employer-provided health plans, including those that self-insure. It permitted, however, substantial state flexibility for compliance with the requirements on insurers. HIPAA also included tax provisions relating to health insurance. It permitted a limited number of small businesses and self-employed individuals to contribute to tax-advantaged medical savings accounts (MSAs) established in conjunction with high-deductible health insurance plans. It increased the deduction for health insurance that self-employed taxpayers may claim. In addition, it allowed long-term care expenses to be treated like deductible medical expenses and clarified the tax treatment of long-term care insurance. Finally, the Act included administrative simplification and privacy provisions instructing the Secretary of HHS to issue standards addressing the electronic transmission of health information and the privacy of personally identifiable medical information. Since the passage of HIPAA, there have been subsequent amendments. In 1996, new provisions required group health plans and insurers to cover minimum hospital stays for maternity care and for a limited period, to provide parity in certain mental health benefits. Parity was later extended for one year. In 1998, a provision was passed requiring health plans that cover mastectomy to also offer reconstructive breast surgery. Amendments have also increased the tax deduction for premiums paid by self-employed taxpayers. The Act, as amended, continues to generate numerous questions. What kinds of policies does it cover? Does it help people who are currently uninsured? Does it help people with preexisting medical conditions? How does it affect health insurance premiums? How do its requirements interact with the Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage? Answers to those questions, as well as other commonly asked questions, are provided, as well as descriptions of each of the major sections of HIPAA. Some of the answers provided may not be definitive. This is because, in some cases, final regulations have not yet been promulgated. Other regulations, such as those defining the administrative simplification provisions, remain under development. In addition, the answers to many questions about the requirements on the individual health insurance market depend upon particular state responses to the Act. For some provisions, states were allowed the choice of implementing the HIPAA requirements ("the federal fallback") or establishing acceptable alternative mechanisms. |
The Commodity Futures Trading Commission (CFTC) was created in 1974 through enactment of the Commodity Futures Trading Commission Act to regulate commodities futures and options markets. At the time these markets were poised to expand beyond their traditional base in agricultural commodities to encompass contracts based on financial variables, such as interest rates and stock indexes. The CFTC's mission is to prevent excessive speculation, manipulation of commodity prices, and fraud. The agency administers the Commodity Exchange Act (CEA), which was passed in 1936. Prior to the CFTC's creation, trading in agricultural commodities regulated by the CEA was overseen by the Commodity Exchange Administration, an office within the U.S. Department of Agriculture which was also formed in 1936. The CFTC oversees industry self-regulatory organizations (SROs)—such as the futures exchanges and the National Futures Association—and requires the registration of a range of industry firms and personnel, including futures commission merchants (or brokers), floor traders, commodity pool operators, and commodity trading advisers. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) significantly expanded the CFTC's jurisdiction to include over-the-counter (OTC) derivatives, also called swaps. As a result of Dodd-Frank, major participants in the swaps markets must register with the CFTC, and certain swaps must be cleared by clearinghouses and traded on electronic trading platforms similar to exchanges. Newly regulated swap market participants include swap dealers, major swap participants, swap clearing organizations, swap execution facilities, and swap data repositories. These entities are subject to new business conduct standards contained in the statute or promulgated as CFTC rules. Like the Securities and Exchange Commission (SEC), the CFTC does not generally regulate the safety and soundness of individual firms, with the exception of newly regulated swap dealers and major swap participants, for whom it will set capital standards pursuant to Dodd-Frank. Although most derivatives trading in today's market relates to financial variables (e.g., interest rates, currency prices, and stock indexes), congressional oversight remains vested in the House and Senate Agriculture Committees in part because of the market's historical origins in agricultural commerce. Appropriations for the CFTC are under the jurisdiction of the Agriculture Appropriations Subcommittee in the House and the Financial Services and General Government Appropriations Subcommittee in the Senate. To meet additional responsibilities for oversight of swaps, the Obama Administration has requested additional funding for the CFTC since FY2011, when the CFTC's budget was $202 million. For FY2016, the CFTC requested a budget of $322 million, and a staff of 895 full-time equivalent employees (FTEs). This represented an increase of $72 million (or 29%) and 149 FTEs over the FY2015 enacted appropriations amount of $250 million for the CFTC. The actual amount appropriated for FY2016 in P.L. 114-113 was $250 million. For FY2017, the CFTC requested $330 million and a staff of 897 FTEs. This would represent an increase of $80 million or 32% over the enacted FY2016 amount. Of the requested $80 million increase, the CFTC has targeted 36% of the amount toward information technology investments, and the remaining 64% toward an increase in staffing and related support, particularly in areas such as surveillance, enforcement, economic and legal analysis, and examinations. The President's budget request stated that "this increase is necessary because the Commission has not received budgetary increases sufficient enough to allow full implementation of its responsibilities, which have expanded greatly due to changes and growth in the markets and the enactment of the Dodd-Frank Act as well as growth in the markets." The House-reported Agriculture appropriations bill for FY2017 ( H.R. 5054 ) would provide $250 million, constant with the FY2016 enacted amount. The Senate-reported Financial Services appropriations bill ( S. 3067 ) would provide this same amount. The Financial Services Appropriations Act is expected to carry the FY2017 CFTC appropriation, according to the alternating placement with the Agriculture Appropriations Act in recent years. Organizationally, the CFTC is led by five commissioners appointed by the President, with the advice and consent of the Senate, to serve staggered five-year terms. No more than three commissioners at any one time may be from the same political party. The President designates one commissioner to serve as chair. The agency is organized around four divisions: Clearing and Risk , which oversees derivatives clearing organizations and other major market participants; Enforcement , which investigates and prosecutes alleged violations of the CEA and CFTC regulations; Market Oversight , which conducts trade surveillance and oversees trading facilities, such as futures exchanges and swap execution facilities, and swap data repositories; and Swap Dealer and Intermediary Oversight , which oversees registration and compliance by SROs, such as the futures exchanges (e.g., the Chicago Mercantile Exchange), the National Futures Association, and the registration of swap dealers and major swap participants. The CEA, the statute governing futures and swaps markets in which the CFTC administers, contains a sunset provision. This means Congress must periodically reauthorize appropriations to carry out the CEA. However, if an explicit authorization of appropriations for a program or activity is present—as in the CEA—and it expires, the underlying authority in the statute to administer such a program or engage in such an activity does not. In other words, the CFTC continues functioning and administering the CEA even if its authorization has expired—which has been the case since the last CFTC reauthorization expired on September 30, 2013. It has not been uncommon for Congress to pass CFTC reauthorization bills several years after the prior authorization had expired. The 114 th Congress is considering new CFTC reauthorization bills. Historically, the reauthorization process has often been one of the principal vehicles for modifying the CFTC's regulatory authority and evaluating the efficacy of its regulatory programs. Congress often uses the reauthorization process as a vehicle to consider a wide range of issues related to the regulation of derivatives trading. The current CFTC reauthorization process is the first since the Dodd-Frank Act's passage brought the more than $400 trillion U.S. swaps market under regulatory oversight. For some in Congress, it may be an opportunity to reexamine provisions of Dodd-Frank they feel may have created excessive regulatory burdens or industry costs. Others have been critical of any perceived weakening of derivatives oversight introduced in the wake of the financial crisis. Still others may be using the current CFTC reauthorization process to try to make changes to futures regulation that industry, or regulators themselves, have long sought. In the 114 th Congress, the House passed H.R. 2289 , the Commodity End-User Relief Act, on June 9, 2015, by a vote of 246 to 171. Among other changes to the CEA, H.R. 2289 as passed would reauthorize appropriations for the CFTC. The bill was referred to the Senate Committee on Agriculture, Nutrition, and Forestry on June 10, 2015. The Obama Administration threatened to veto H.R. 2289 , stating that the bill "undermines the efficient functioning of the CFTC by imposing a number of organizational and procedural changes and would undercut efforts taken by the CFTC over the last year to address end-user concerns." On April 14, 2016, the Senate Committee on Agriculture, Nutrition, and Forestry marked up and ordered to be reported a CFTC reauthorization bill, S. 2917 . On May 10, 2016, S. 2917 was reported to the Senate without written report and placed on the Senate legislative calendar under general orders. Among its other changes, H.R. 2289 as passed, and S. 2917 , would amend the short Authorization of Appropriations section in the CEA (7 U.S.C. §16(d)). The section currently authorizes the appropriation of "such sums as are necessary to carry out" the chapter of the CEA "through 2013," and H.R. 2289 as passed, and S. 2917 , would both amend it to read "through 2019." The next sections examine more closely selected major provisions of the House CFTC reauthorization bill, H.R. 2289 , and S. 2917 (each titled The Commodity End-User Relief Act), which have generally been the most actively debated—beginning with the bills' changes to required cost-benefit analysis in CFTC regulatory actions. This section analyzes the provision in H.R. 2289 that would expand the number of factors for the CFTC to consider in cost-benefit analysis, and include the need for quantitative as well as qualitative analysis, among other changes. It first examines the existing requirements for the CFTC to conduct cost-benefit analysis; then the changes in H.R. 2289 ; and then the academic research on how valuable cost-benefit analysis may be. S. 2917 does not have a similar provision on cost-benefit analysis. The CFTC already has certain requirements to perform cost-benefit analysis in its rulemakings under the CEA. The CFTC and other independent regulatory agencies (such as the SEC) are not subject to the general requirements that apply to other government agencies to conduct cost-benefit analysis under Executive Order 12866. For the CFTC, Section 15(a) of the CEA requires that "before promulgating a regulation under this chapter or issuing an order (except as provided in paragraph (3)), the Commission shall consider the costs and benefits of the action of the Commission." In addition, the costs and benefits of the proposed Commission action shall be evaluated in light of: (A) considerations of protection of market participants and the public; (B) considerations of the efficiency, competitiveness, and financial integrity of futures markets; (C) considerations of price discovery; (D) considerations of sound risk management practices; and (E) other public interest considerations. The CFTC also may have additional required considerations when issuing a particular rule. Section 15(a) of the CEA applies more broadly than E.O. 12866, which applies only to rules deemed to reach a certain "significance" threshold—Section 15(a) applies to all rules issued by the CFTC. In practice, the CFTC relies on guidance provided by the Office of Management and Budget's (OMB's) Office of Information and Regulatory Affairs (OIRA) when considering costs and benefits under Section 15(a) of the CEA, although it is not required to do so. This practice is documented in a May 2012 Memorandum of Understanding (MOU) between OIRA and CFTC regarding implementation of the Dodd-Frank Act. OIRA has issued a variety of documents to assist agencies in conducting their cost-benefit analyses, including OMB Circular A-4 and accompanying guidance documents. Thus, while the CFTC is not subject to the executive order's requirements, the CFTC's analyses conducted pursuant to the CEA likely share some similarities with analyses that are completed pursuant to the executive order. Section 202 of H.R. 2289 expands the CEA's current 5 cost-benefit analysis provisions listed above to 12 considerations. Some of the considerations are similar to requirements other agencies are subject to under E.O. 12866, and some are currently in Section 15(a) of the CEA. H.R. 2289 includes the following factors: (A) considerations of protection of market participants and the public; (B) considerations of the efficiency, competitiveness, and financial integrity of futures and swaps markets; (C) considerations of the impact on market liquidity in the futures and swaps markets; (D) considerations of price discovery; (E) considerations of sound risk-management practices; (F) available alternatives to direct regulation; (G) the degree and nature of the risks posed by various activities within the scope of its jurisdiction; (H) the costs of complying with the proposed regulation or order by all regulated entities, including a methodology for quantifying the costs (recognizing that some costs are difficult to quantify); (I) whether the proposed regulation or order is inconsistent, incompatible, or duplicative of other federal regulations or orders; (J) the cost to the Commission of implementing the proposed regulation or order by the Commission staff, including a methodology for quantifying the costs; (K) whether, in choosing among alternative regulatory approaches, those approaches maximize net benefits (including potential economic and other benefits, distributive impacts, and equity); and (L) other public interest considerations. Arguably, at least some of these considerations, such as liquidity and market efficiency, incorporate the existing statutory mission of the CFTC. In addition, Section 202 adds a requirement that the CFTC conduct quantitative as well as qualitative assessments of costs and benefits. The requirement for quantitative cost-benefit analysis appears to mark a change from previous practice. It also raises the question of how accurately one may quantify benefits involving economic externalities . In economics, an externality refers to a consequence of an economic activity that is experienced by unrelated third parties; it can be either positive or negative. Pollution is often used as an example of a negative externality, in which the effects may be widely dissipated and hard to quantify. Risks to the financial system could be another example of a negative externality. Quantifications of such externalities may involve judgments or estimates as to the value of intangible or speculative benefits that might be experienced differently by individuals, such as the value of financial stability, or, in the case of pollution, the value of avoiding certain diseases. In the realm of financial regulation, benefits are often widely dissipated (for instance, prospective investors broadly benefit from fuller and more accurate corporate disclosures and related investor protections), and are sometimes speculative (e.g., trying to measure the benefit of avoiding potential financial fraud). This, according to critics, can make benefits harder to reliably quantify. Costs of compliance, meanwhile, may be more easily measurable (e.g., through payment-hours for accountants, lawyers, and staff). Proponents of cost-benefit analysis argue that it can force agencies to focus on and clarify the benefits of their proposed rulemakings and better weigh the costs they will impose against those benefits. According to this line of reasoning, by putting cost-benefit requirements in statute, such as those in the CEA and those proposed in H.R. 2289 , Congress can have some influence over the considerations and outcomes in agency rulemakings. By contrast, some administrative law scholars have argued that the increased use of cost-benefit analysis has "ossified" the rulemaking process, slowing down the process or causing agencies to issue guidance documents rather than regulations, thereby avoiding rulemaking requirements altogether. Some academics argue that, particularly for financial rulemakings, costs can be easier to quantify than widely dispersed potential benefits (such as "a safer financial system" or "better investor disclosure"), and that this may lead to an overstatement of costs over benefits. Finally, critics argue that the practice opens the agency's rules to court challenges by industry groups on the grounds of inadequate cost-benefit analysis, tying up agency resources and at times leading to the invalidation of regulations. Sections 301 and 306 of H.R. 2289 , taken together, would expand the exception from certain Dodd-Frank swaps trading and clearing requirements granted to nonfinancial companies. Under current language, the Dodd-Frank Act requires many swaps deals to be cleared through a clearinghouse and traded on an electronic exchange. But it provides an exception from these two requirements to nonfinancial firms when certain conditions are met. The exception is commonly referred to as the end-user exception. Section 723 of Dodd-Frank states that the clearing and exchange-trading requirements shall not apply to the swap if one of the counterparties to the swap is "not a financial entity" and is using the swap to hedge or mitigate commercial risk. The exception applies to affiliates of non-financial entities when those affiliates are using the swap to hedge or mitigate the commercial risk of the non-financial entity. H.R. 2289 would expand the exception by amending the definition of financial entities ineligible to use the exception and by expanding the types of activities in which eligible affiliates may engage while using the exception. S. 2917 does not contain a provision involving trading by affiliates. As noted above, the Dodd-Frank Act requires many swap transactions to be cleared and traded on exchanges, but provides an exception for swaps and security-based swaps. The exception applies when one of the parties to the transaction is not a financial entity, is using swaps to hedge or mitigate commercial risk, and properly notifies the CFTC regarding how it meets its financial obligations. The exception is commonly referred to as the end-user exception. The statute currently allows affiliates of end-users to use the exception, but only "if the affiliate, acting on behalf of the person and as an agent, uses the swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity." Without further definition, the term "affiliated companies" can loosely refer to companies that are related to each other in some way, including foreign affiliates. However, the Dodd-Frank Act does provide that an affiliate cannot use the exception if the affiliate is a swap dealer; a security-based swap dealer; a major swap participant; a major security-based swap participant; a hedge fund; a commodity pool; or a bank holding company with more than $50 billion in consolidated assets. Proponents of a broader exception have argued that the hedging activities of corporate treasury units of non-financial parent companies could potentially be disqualified from using the exception. Treasury units aggregate similar risks within various parts of a parent company, and often consolidate the mitigation of those risks by engaging in one swap transaction that covers it all. Treasury units may serve other financial functions for an overall non-financial parent company as well. Under current statutory language, treasury units could engage in swaps activity with non-financial affiliates without clearing the swap because the affiliate itself could use the end-user exception. The treasury unit could also engage in an uncleared swap with another financial entity if it did so acting on behalf of a non-financial entity and as its agent. However, treasury units often hedge risks with other financial entities on their own behalf, as a result of the risks they have aggregated from the non-financial entities within the parent company. Consequently, these entities may not be able to use the "affiliate" end-user exception, and they may not be able to use the end user exception in their own right because they "predominantly engage in activities that are in the business of banking" which makes them "financial entities" that cannot use the exception. Any inability of treasury affiliates of non-financial entities to use the end-user exception would make it more expensive for their parent corporation to hedge risks using derivatives. A key question for policymakers in deciding whether to extend any exception for affiliates is: how widely? Would risks be posed to the financial system or to parent companies if the exception from derivatives clearing and exchange-trading requirements were extended to non-financial affiliates of financial companies? And under what circumstances should such exception be extended to financial affiliates of non-financial companies to minimize such risks? The CFTC, in its 2012 final rule on the end-user exception, addressed some of the questions involved in deciding which entities to appropriately exclude from the end-user exception, as financial entities. The CFTC found that treasury units that operate as separate legal entities and whose primary function is financial in nature would be precluded from the "end user" exception, but treasury units housed within a non-financial corporation, and in which the non-financial company enters into the swaps in its own name, could be eligible to use the end user exception. The CFTC also noted that some commenters had argued that the end-user exception "should be narrowly tailored to businesses that produce, refine, process, market, or consume underlying commodities and to counterparties transacting with non-financial counterparties"; and that a number of form letters had argued that extending the end user exception to certain financial entities could increase systemic financial risks from derivatives trading. More questions regarding the proper application of the end-user exception to treasury affiliates continued to arise, however, and in 2014, the CFTC attempted to address them. The CFTC indicated that it would not bring enforcement actions against certain treasury affiliates in its November 26, 2014, no-action letter on centralized treasury units. The CFTC defines an "eligible treasury affiliate"—which would qualify for the enforcement forbearance—as entities meeting each of six conditions. The conditions include, among other things, that the affiliate is neither affiliated with nor is itself a swap dealer or a major swap participant. The CFTC also requires that the affiliate's "ultimate parent" is not a financial entity (and defines this as the topmost, direct or indirect, majority owner of the entity). Some industry participants have not been satisfied by the "no-action" letter, however. Treasury affiliates that rely on the no-action letter for swaps which they neither clear, nor execute on an exchange, are technically in violation of the Dodd-Frank Act's clearing requirement as interpreted by the CFTC. The CFTC's No-action Letter (NAL), while it assures those that qualify to rely on it that they will not face an enforcement action for violating the clearing and exchange trading requirements, does not actually change the statute. Consequently, proponents of the language in Section 301 have argued that a statutory amendment is necessary to provide clarity and certainty to end-users that use treasury affiliates to hedge their commercial risk. Sections 301 and 306 of H.R. 2289 appear to attempt to address those concerns, though they may expand the exception beyond those entities covered by the CFTC's NAL as well. At issue for Congress in deciding whether to expand the existing exception is whether derivatives trading between affiliates within the same umbrella organization could pose substantial risk of losses to either the affiliate or the parent, or spread losses outside the organization. Various questions for policymakers to consider include the following: Might one affiliate have an incentive to gain through a swaps trade at another affiliate's expense? What repercussions could this have within the conglomerate? What would be the best way to control risks of excessive losses by a single affiliate from such trades? Is any proposed legislative exemption tailored narrowly enough to meet concerns from regulators that large swap market players might funnel swaps through an affiliate to avoid U.S. derivatives requirements? Would a legislative provision allow overseas affiliates to use this exception, and if so, what would be the cross-border regulatory implications? Proponents of the provision in H.R. 2289 argue that it would prevent the redundant regulation of inter-affiliate transactions and prevent capital from being tied up unnecessarily, such as through the duplicative posting of margin for derivatives trades. The expansion of the exception, they argue, would allow businesses that centralize their hedging activities to reduce costs, simplify financial dealings, and reduce their counterparty credit risk. Proponents contend that the provision would allow affiliates—such as centralized treasury units—within a corporate entity to trade swaps under the end-user exception to the clearing and exchange-trading requirements both within and outside the umbrella organization. Opponents of the provision in H.R. 2289 argue that it would allow financial firms with commercial business affiliates to "take advantage of exemptions from key Dodd-Frank risk controls that were meant to apply only to commercial end users." Opponents of widening the exception as it applies to affiliates from the Dodd-Frank requirements have also stated that "the potential for affiliates to cause massive losses to their parent companies cannot be denied." They cite examples such as the derivatives losses incurred by the large insurance conglomerate American International Group Inc.'s (AIG's) overseas affiliate in London and derivatives losses incurred by J.P. Morgan's so-called London Whale trading losses in its London affiliate. They argue that any expansions of the exception should be restricted only to 100%-owned subsidiaries of a parent company, and be subject to strict risk management controls. Section 301 of H.R. 2289 seemingly would expand the hedging activities in which affiliates of non-financial entities could engage while being able to use the end-user exception. Under current statutory language, affiliates may use the end-user exception "only if the affiliate, acting on behalf of the [non-financial entity] and as an agent, uses the swap to hedge or mitigate the commercial risk of the person or other affiliate." Section 301 would expand that language by allowing affiliates to engage in more hedging activities while using the exception. Specifically, Section 301 would permit affiliates to use the end-user exception "only if the affiliate enters into the swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity, provided that if the hedge or mitigation of such commercial risk is addressed by entering into a swap with a swap dealer or major swap participant, an appropriate credit support measure or other mechanism must be utilized." Removing the requirement that the affiliate act on behalf of the non-financial entity and as an agent could permit the affiliate to act in its own capacity as an independent entity while hedging the commercial risk of the non-financial entity. As noted above, affiliates of end users cannot use the end-user exception if they are swap dealers, security-based swap dealers, major swap participants (MSPs), major security-based swap participants, hedge funds, commodity pool operators (CPOs), or large bank holding companies (BHCs) with more than $50 billion in assets. This portion of the statute appears to prevent large BHCs, swap dealers, MSPs, hedge funds, and CPOs affiliated with a non-financial firm from using the end-user exception even if H.R. 2289 became law. However, barring further action from the regulators, this part of the statute would not appear to prevent affiliated financial firms with less than $50 billion in assets, or who did not otherwise fall into these categories, from using this end-user exemption from the derivatives requirements. Section 301 does not apparently restrict with whom the affiliate trades. It states only that the affiliate of the nonfinancial firm or end user may qualify for the end-user exception itself "only if the affiliate enters into the swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity." H.R. 2289 does not specify that such trades must occur within an umbrella organization. The hypothetical scenario in Figure 1 illustrates the issues: If a nonfinancial firm, such as an energy or metals business, had an affiliate that was a financial firm, could that financial firm engage in swaps trading with an unaffiliated large financial firm and still use the end-user exception under Section 301? While no restriction appears in Section 301 to prevent this scenario so long as the financial affiliate engaged in the swap "to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity," the prohibition on certain affiliates in Section 723 of Dodd-Frank would appear to preclude affiliates that were large banks with more than $50 billion in assets, or were swap dealers or MSPs, hedge funds, or commodity pool operators (CPOs), from using the end-user exemption as an affiliate even if H.R. 2289 passed. Financial firms with fewer assets (and that are not swap dealers, MSPs, hedge funds, or CPOs), however, would not appear to be prohibited from using the exception, so long as the standard for hedging or mitigating the commercial risk of the non-financial affiliate was met. Section 306 of H.R. 2289 as passed by the House would modify the definition of a financial entity, potentially enabling a wider range of companies to claim the end-user exception to the clearing requirement in the Dodd-Frank Act. As discussed above, the end-user exception is limited to a company that "is not a financial entity," as the term financial entity is defined by H.R. 2289 . Section 306 of H.R. 2289 would potentially allow certain nonbank financial entities to use the end-user exception even when trading on behalf of another financial entity, so long as neither entity has a prudential regulator. Section 306 would exclude from the definition of financial entity one "who is not supervised by a prudential regulator, and is not described in any of subclauses (I) through (VII) ... and is a commercial market participant, or enters into swaps, contracts for future delivery, and other derivatives on behalf of, or to hedge or mitigate the commercial risk of, whether directly or in the aggregate, affiliates that are not so supervised or described." Section 306 would define a commercial market participant as "any producer, processor, merchant, or commercial user of an exempt or agricultural commodity, or the products or byproducts of such a commodity." Under this language, entities that are not supervised by a prudential regulator and are not swap dealers, MSPs, hedge funds, large banks, or other enumerated financial entities that enter into swaps to hedge the commercial risk of other affiliates that also are not supervised by a prudential regulator and are not among the types of entities listed in subclauses I-VII of the Commodity Exchange Act (Section 2(h)(7)(C)) are not considered financial entities for the purposes of qualifying for the end-user exception. If these entities are not financial entities, then they may use the end-user exception in their own right and need not meet the affiliate requirements of Section 723 of the Dodd-Frank Act, as it would be amended by Section 301 of H.R. 2289 . To use the clearing and exchange-trading exceptions, these entities would only need to use the swaps to hedge or mitigate commercial risk of other qualifying nonfinancial entities and to notify the CFTC in accordance with agency regulations. H.R. 2289 would create a broader, statutory exception from the Dodd-Frank clearing and exchange-trading requirements. It potentially would allow certain nonbank financial entities that do not have banking regulators to be eligible for the exception if these entities could show that they were "commercial market participants" or that they met the requirements for trading on behalf of other non-prudentially supervised affiliates. The bill leaves to the CFTC to further clarify who would be a commercial market participant and to determine which types of nonbank financial firms would qualify for the end-user exception. S. 2917 takes a different approach to modifying the definition of a financial entity. This approach is discussed below. Section 206 of S. 2917 addresses the question of what it means, for the purposes of the Commodity Exchange Act section discussed above to be "predominantly engaged" in financial activities. This question is relevant for determining the scope of the end-user exception to the clearing requirement set out in the Dodd-Frank Act. Unlike H.R. 2289 , S. 2917 does not delete any of the eight prongs in Section 2(h)(7)(C) of the CEA, which controls the entities considered financial entities. Instead, S. 2917 adds a requirement at the end of Section 2(h)(7)(C) directing the CFTC to issue a new rule defining the term predominantly engaged in financial activities. S. 2917 also requires that, in its new rule, the CFTC must not consider an entity to be predominantly engaged in financial activities if the consolidated revenue derived from such activities constitutes less than 85% of the entity's total consolidated revenue. In addition, S. 2917 adds a requirement that, for the purpose of the new CFTC rule, all revenue that results from "transactions used to hedge or mitigate commercial risk shall be excluded" from the 85% threshold calculation. Section 313 of H.R. 2289 as passed by the House and Section 306 of S. 2917 would make changes to the definition of bona fide hedging in the CEA. Language in the two bills on this topic is substantially the same. The concept of bona fide hedging refers to transactions that in some way genuinely offset commercial risks. The CFTC relies on its established rules and guidance on what constitutes a bona fide hedge to help determine which types of swaps count toward the requirement to register as a swap dealer or MSP. The agency also uses the concept to determine which derivatives count toward limits on position size, referred to as position limits , and, similarly, which transactions count toward large trader reporting . Large trader reporting requirements refer to a system the CFTC uses to monitor how large any one trading party's position size is. The broad purpose of this system is to ensure that no one entity wields excessive market power. The CFTC has the discretion to raise or lower the large trader reporting levels in specific markets to strike a balance between collecting sufficient information to oversee the markets and minimizing the reporting burden on market participants. Similarly, a position limit broadly refers to the maximum position in any one type of future, option, or swap for one commodity that may be held or controlled by one person. The current definition of a bona fide hedge in the CEA specifies, among other factors, that (2) For the purposes of implementation of subsection (a)(2) for contracts of sale for future delivery or options on the contracts or commodities, the Commission shall define what constitutes a bona fide hedging transaction or position as a transaction or position that— (A) (i) represents a substitute for transactions made or to be made or positions taken or to be taken at a later time in a physical marketing channel; (ii) is economically appropriate to the reduction of risks in the conduct and management of a commercial enterprise; and... Among other changes, H.R. 2289 's Section 313 and S. 2917 would change (A)(ii) above so as to read: (ii) is economically appropriate to the reduction or management of current or anticipated risks in the conduct and management of a commercial enterprise; and... [emphasis added]. This change could potentially broaden the bona fide hedging definition so as to allow anticipated, as well as current, risks. In addition, it could potentially allow trades that were needed not only to reduce risks but also simply to manage risks. This change could potentially enable many more types of trades to be permitted under this bona fide hedging definition, in which case more swap trades potentially would not count toward the registration requirements or restrictions on position size. The topic of cross-border swaps broadly relates to the question of to what degree did Congress intend, and did the Dodd-Frank Act authorize, the CFTC to regulate swaps that may extend beyond U.S. borders or be transacted between U.S. and non-U.S. persons? Because the swaps market is international in nature, with considerable cross-border trading, this question is material. Section 722(d) of the Dodd-Frank Act stated that swaps reforms shall not apply to activities outside the United States unless the activities have "a direct and significant connection with activities in, or effect on, commerce of the United States." This mandate left much discretion to the CFTC as to how to interpret it. Former CFTC Chair Gary Gensler, under whom the CFTC first issued rules and interpretations implementing Section 722, stated that "Failing to bring swaps market reform to transactions with overseas branches and overseas affiliates guaranteed by U.S. entities would mean American jobs and markets would likely move offshore, but, particularly in times of crisis, risk would come crashing back to our economy." Gensler and others have noted that derivatives trading by overseas affiliates of U.S. financial conglomerates can and has resulted in significant losses to U.S.-based entities. They cite examples such as AIG's London-based Financial Products Group, which sold credit default swap derivatives related to mortgage-backed securities that incurred losses during the financial crisis, or the more recent J.P. Morgan "London Whale" derivatives trading losses of roughly $6 billion. By contrast, industry participants have warned that if CFTC rules were too burdensome or out of sync with other countries'—putting in place requirements that other jurisdictions lacked—then "swap business will migrate, in the short term, away from U.S. financial institutions to other jurisdictions that are putting in place similar regulatory reform initiatives but are not as far advanced in doing so as the United States"—and have warned that, once gone, such business would be unlikely to return to U.S. companies. The CFTC issued proposed guidance on the cross-border application of Title VII of Dodd-Frank. In it, the agency sought to clarify who would count as a "U.S. person" for the purposes of meeting the requirements of Dodd-Frank, such as the clearing requirement for swaps, among other questions. Subsequently, on December 21, 2012, the agency issued a temporary exemption, extending the deadline for meeting all the requirements for cross-border swaps, while it continued to try to work with foreign regulators to create a more uniform system of requirements. Then, on May 1, 2013, the SEC proposed a rule and interpretive guidance on cross-border security-based swaps—swaps related to a security, such as an equity—which the SEC regulates. The SEC's proposed rule has been widely interpreted as taking a narrower approach to defining who is a U.S. person than did the CFTC—and thus restricting the reach of Dodd-Frank requirements on security-based swaps to fewer overseas transactions or entities. The CFTC issued its final guidance on July 26, 2013, setting out the scope of the term U.S. person, the general framework for determining which entities had to register as swap dealers and major swap participants (MSPs), and which swaps involving non-U.S. persons who were guaranteed by U.S. persons were subject to U.S. requirements. On November 14, 2013, the CFTC issued a staff advisory aimed at determining when to apply U.S.-derivatives requirements to trades that were booked in an offshore affiliate, but in which the non-U.S. affiliate used U.S. personnel to arrange, negotiate, or execute the swap. The CFTC continues to issue rules aimed at clarifying how to apply Dodd-Frank derivatives requirements to cross-border trades. Other issues that have arisen more recently include the need for U.S. and foreign regulators to recognize one another's derivatives clearinghouses, trading exchanges, and data repositories for reporting trades as "equivalent," so that one trade spanning multiple jurisdictions need only be cleared, traded, and reported one time. This has proven challenging, as, among other things, the European Union has thus far not granted such an "equivalence" determination to U.S. clearinghouses and trading facilities. Section 314 of H.R. 2289 bears some similarities to H.R. 1256 in the 113 th Congress. H.R. 2289 drops the earlier bill's requirement that the CFTC and SEC must jointly issue a cross-border rule. But, similarly to H.R. 1256 , the current bill mandates that, starting 18 months from its enactment, the swaps regulatory requirements of the eight largest foreign swaps markets must be considered comparable to those of the United States—unless the CFTC issues a rule or order finding that any of those foreign jurisdictions' requirements are not comparable to or as comprehensive as those of the United States. It is not, however, immediately straightforward to list who those eight largest jurisdictions would be. For one thing, it would depend on how regulators treated the member countries of the European Union, for purposes of the statute. For another, the total notional value of swaps traded in a jurisdiction fluctuates over time, so how the 12-month period was drawn would likely impact the results. Further, regulators would have to determine "where" a swap is traded—that is, in whose jurisdiction it would fall—when a large portion of the market is considered "cross-border" in nature. This is essentially the same problem U.S. regulators are already facing in deciding when a swap qualifies as a "U.S. transaction." Under H.R. 2289 , if the CFTC were not to make such a determination (of non-comparability), then "a non-United States person or a transaction between two non-United States persons shall be exempt from United States swaps requirements" as long as they are in compliance with any of the eight permitted foreign jurisdictions. Effectively, the bill appears to substitute as a default, for trades that involved a non-U.S. person, the swaps requirements of the eight largest foreign swaps markets (which would encompass most of the world of swaps trading, particularly if countries in the European Union were treated as one swaps jurisdiction) for U.S. requirements—unless the CFTC found a foreign jurisdiction to be lacking. One question that would presumably be left to the CFTC to determine in a rulemaking would be how widely to apply this provision to "a non-United States person or a transaction between two non-United States persons," were the provision enacted. For instance, would any swap in which a non-U.S. person were at least one counterparty potentially be encompassed? If so, that would potentially encompass a large majority of swaps, the bulk of which appear to be transacted in some way between a U.S. and non-U.S. person. It would presumably be left to the regulator to interpret and clarify its application. Section 314 also includes a definition of a U.S. person, which, among other factors, includes "any other person as the Commission may further define to more effectively carry out the purposes of this section"—thereby apparently giving the CFTC some leeway. However, Section 314 also specifies that, in developing its cross-border rules, the CFTC "shall not take into account, for the purposes of determining the applicability of United States swaps requirements, the location of personnel that arrange, negotiate, or execute swaps." This requirement drew some criticism in congressional debate over the bill. The provision would appear to overturn CFTC Advisory 13-69, which had drawn much industry opposition. The advisory was aimed at resolving questions regarding the precise conditions in which swaps between U.S. and non-U.S. persons would be subject to Dodd-Frank requirements. The advisory, which technically represented the opinion of only one division of the CFTC, held that the Dodd-Frank requirements would apply to a swap between a non-U.S. swap dealer—even if it were an affiliate of a U.S. swap dealer—and a non-U.S. person, as long as the foreign swap dealer used "personnel or agents located in the U.S. to arrange, negotiate, or execute such swap." The advisory proved controversial and drew strong industry opposition. The CFTC has delayed its actual implementation several times. Presumably, H.R. 2289 would overturn it. Section 302 of H.R. 2289 would remove a requirement added in the Dodd-Frank Act's Title VII that foreign regulators indemnify a U.S.-based swap data repository (SDR) and the Commodity Futures Trading Commission (CFTC) for any expenses arising from litigation related to a request for market data. Indemnification generally refers to compensating someone for harm or loss. The provision instead requires the SDR and the CFTC, prior to sharing information, to first receive written agreements from the foreign regulator promising to abide by confidentiality requirements with respect to the data. The provision also does the same for security-based swap data repositories and for the SEC's information-sharing on security-based swaps with foreign regulators. In an effort to improve transparency in the opaque swaps market, Title VII of Dodd-Frank required all swaps to be reported to SDRs. Dodd-Frank included provisions requiring foreign regulators to indemnify U.S.-based SDRs, and the CFTC, for expenses arising from litigation related to requests for swaps transactions data. The original purpose of this Dodd-Frank provision appeared to be to try to encourage foreign regulators to more closely protect any shared information related to swaps by making it potentially more costly for them, should any information be leaked. In subsequent years after Dodd-Frank's passage, however, regulators testified that the indemnification requirement was creating barriers to information sharing with foreign regulators. At a February 12, 2015, House Agriculture Committee hearing, CFTC Chair Massad, questioned about this indemnification provision, noted that "If the legislation did remove this provision, this indemnification requirement, then it would facilitate the sharing of information ... across borders. Again, that would just make it easier for regulators to work together." In the 114 th Congress, H.R. 1847 , which is substantially similar to the provision in H.R. 2289 repealing the indemnification provision, passed the House on July 14, 2015, on a voice vote. Substantially the same provision was also included in Section 86001 of the conference report on the Fixing America's Surface Transportation Act ( H.R. 22 , H.Rept. 114-357 ). This provision in the Fixing America's Surface Transportation (FAST) Act was signed into law as P.L. 114-94 on December 4, 2015. It removed the requirement added in the Dodd-Frank Act's Title VII that foreign regulators indemnify a U.S.-based swap data repository (SDR) and the CFTC for any expenses arising from litigation related to a request for market data. In House floor debate over H.R. 1847 , proponents of the bill stated that the concept of indemnification did not exist in some foreign jurisdictions, making it impossible for some foreign regulators to agree to these requirements before sharing information, and thus hindering the sharing of market information between U.S. and foreign regulators. The provision in H.R. 2289 , as in H.R. 1847 , repeals the indemnification requirement but maintains the existing provisions that require confidentiality agreements to be signed prior to information sharing. H.R. 742 Officials from the SEC have also testified that they recommended removing this provision, which they viewed as a barrier to information sharing. The term residual interest generally refers to capital from a futures commission merchant (FCM) committed to temporarily make up the difference for insufficient margin in a customer's account. Both bills, S. 2917 in Section 104 and H.R. 2289 in Section 104, would essentially codify the deadline for FCMs to deposit any capital to cover residual interest as no earlier than 6:00 p.m. on the following business day. This move is broadly in line with the CFTC's March 17, 2015, final rule on residual interest. The CFTC's Regulation 1.22 sets the deadline for posting residual interest. That deadline then affects when customers are required to post their collateral to cover insufficient margin amounts. Regulation 1.22 provided that the deadline, currently set for 6:00 p.m. on the following day, would automatically become earlier in a couple of years, without further CFTC action. The CFTC's final rule on March 17, 2015, amended Regulation 1.22 so that the FCM's deadline to post residual interest would not become earlier than 6:00 p.m. the following day without an affirmative CFTC action or rulemaking that included an opportunity for public comment. CFTC Chair Massad noted in a statement on this rule that an earlier deadline could help to ensure that FCMs always held sufficient margin and did not use one customer's margin to support another customer's. But such a practice could also impose costs on customers who must deliver margin sooner. The March 17, 2015, final rule included a plan for the CFTC to conduct a study of how well the current rule and deadline function, the practicability of changing the deadline, and the costs and benefits of any change. | The Commodity Futures Trading Commission (CFTC), created in 1974, regulates futures, most options, and swaps markets. The CFTC administers the Commodity Exchange Act (CEA; P.L. 74-765, 7 U.S.C. §1 et seq) enacted in 1936 to monitor trading in certain derivatives markets. The CEA contains a sunset provision, meaning Congress periodically reauthorizes appropriations to carry out the CEA. If an explicit authorization of appropriations for a program or activity is present—as in the CEA—and it expires, the underlying authority in the statute to administer such a program does not, however. Thus, the CFTC continues functioning and administering the CEA even if its authorization has expired—which has been the case since the last CFTC reauthorization expired on September 30, 2013. It has not been uncommon for Congress to pass CFTC reauthorization bills several years after the prior authorization had expired. The current CFTC reauthorization process is the first since the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank; P.L. 111-203) brought the roughly $400 trillion U.S. swaps market under regulatory oversight. Historically, the reauthorization process has often been one of the principal vehicles for modifying the CFTC's regulatory authority and evaluating the efficacy of its regulatory programs. The House passed a CFTC reauthorization bill, H.R. 2289, the Commodity End-User Relief Act, on June 9, 2015, by a 246 to 171 vote. The Senate Committee on Agriculture, Nutrition and Forestry marked up and ordered to be reported an identically titled bill, S. 2917, which would also reauthorize such appropriations, as well as making other changes to the CEA. The Obama Administration threatened to veto H.R. 2289, stating that the bill " ... undermines the efficient functioning of the CFTC by imposing a number of organizational and procedural changes and would undercut efforts taken by the CFTC over the last year to address end-user concerns." A number of the provisions in H.R. 2289 discussed in this report do not appear in S. 2917. This report examines the following selected major provisions of H.R. 2289, and S. 2917, which have generally garnered the most attention: H.R. 2289 expands the current 5 cost-benefit analysis provisions in the CEA to 12. It adds a requirement that the CFTC conduct quantitative as well as qualitative assessments, which appears to mark a change from previous practice. H.R. 2289 includes a provision that would extend an exemption from certain Dodd-Frank swaps trading and clearing requirements granted to nonfinancial companies so as to also include certain of their affiliates. H.R. 2289 would modify the definition of a "financial entity," potentially enabling a wider range of companies to claim certain exemptions from the Dodd-Frank derivatives requirements. S. 2917 takes a different approach to modifying this definition. It directs the CFTC to issue a new rule defining the term predominantly engaged in financial activities to exclude hedging transactions. H.R. 2289 and S. 2917 would potentially broaden the bona fide hedging definition to allow anticipated, as well as current, risks to be hedged, which might increase the number of swaps that qualify as hedges. Bona fide hedging is often used to determine which swaps count toward registration requirements, position limits, large trader reporting, and other regulatory requirements. Language in the two bills on this topic is substantially the same. H.R. 2289 mandates that, starting 18 months from enactment, the swaps regulatory requirements of the eight largest foreign swaps markets must be considered comparable to those of the United States—unless the CFTC issued a rule finding that any of those foreign jurisdictions' requirements were not comparable to U.S. requirements. S. 2917 and H.R. 2289 would essentially codify the deadline for a futures commission merchant (FCM) to deposit any capital to cover residual interest as no earlier than 6:00 p.m. on the following business day. H.R. 2289 would remove a requirement in Dodd-Frank that foreign regulators indemnify a U.S.-based swap data repository for any expenses arising from litigation related to a request for market data. Indemnification generally refers to compensating someone for harm or loss. |
President Obama's budget outline for FY2010 includes several proposals to reduce federal spending by $16 billion over 10 years on the farm commodity and crop insurance programs. The issue was highlighted in the President's address to Congress on February 24, 2009, when he said, "In this budget, we will ... end direct payments to large agribusinesses that don't need them." Mr. Obama also highlighted the farm commodity programs when, as president-elect, he cited a GAO report on improper payments to farmers by remarking that, "There's a report today that, from 2003 to 2006, millionaire farmers received $49 million in crop subsidies even though they were earning more than the $2.5 million cutoff for such subsidies. Now, if this is true ... it is a prime example of the kind of waste that I intend to end as president." Criticism over parts of the farm subsidy program from an Administration is not new. Throughout the 2008 farm bill debate, the Bush Administration wanted tighter income eligibility limits on farm subsidies, and it vetoed the farm bill—albeit unsuccessfully—partly for such reasons. Reaction to the proposal has been generally negative from groups affiliated with or supportive of agriculture. The most vehement reaction has been to a proposal to eliminate direct payments to farms with more than $500,000 of sales. Several members of the House and Senate agriculture committees have spoken out against the proposal in part or in whole. Support, although not explicitly expressed, would likely originate from some groups or individuals who supported tighter payments limits in the 2008 farm bill and would want tighter payment limits in any form. The FY2010 budget proposal for the farm commodity and crop insurance programs is separate from the discretionary budget that funds USDA operations. The discretionary budget usually is the centerpiece of the Administration's annual proposal, but that element of the budget is delayed in the first year of a President's term, and is not expected until April. Pending that submission, the Administration has proposed a budget outline that, in the context of fiscal discipline, includes several proposals to reduce mandatory spending programs. The mandatory farm commodity programs are not subject to annual appropriations, but are part of the five-year 2008 farm bill ( P.L. 110-246 ). The FY2010 budget indicates that most of the proposed $16 billion in farm commodity reductions would be used to offset $9.9 billion of proposed increases in child nutrition, although the savings could be used in any number of ways throughout the federal government. Given the nature of the mandatory programs, it is important to note—relative to the Administration's proposal—that: any changes would require legislative action by Congress and would likely need to originate in the agriculture authorizing committees. They would not be part of the annual appropriations process. such action would be viewed as "reopening" the 2008 farm bill, which most in the agriculture community see as a five-year contract with farmers. The agriculture committees are neither obligated nor likely to take up the proposal (some committee members have spoken out against the proposal in part or in whole). if budget reconciliation is ordered by the budget committees, and the agriculture committees are tasked to find savings of a certain magnitude, then the President's farm proposals may draw more attention from Congress. Even then, the proposal likely would be modified or a different budget-saving approach chosen, given the reaction by farm groups and agriculture committee members. Specifically, the President's FY2010 budget proposes four reductions in the farm subsidies, including direct payments, payment limits, cotton storage payments, and crop insurance. The savings are estimated by the Administration to total $16 billion over 10 years ( Table 1 ). 1. Prohibit "direct payments" to farmers with sales exceeding $500,000 per year. 7 This would be a new and different type of "payment limit." About 76,500 farms in 2007 receiving government payments had sales over $500,000 (11% of farms receiving government payments, Table 4 ). Midwestern farms would be affected in the greatest number, but the proportion of cotton and rice farms affected would be greater than for corn, soybean, and wheat farms. The Administration estimates savings of $9.8 billion over 10 years. Relative to the $44 billion of direct payments that USDA expects to pay from FY2010-FY2019 in the baseline under the 2008 farm bill, the proposal would reduce total direct payments by 22% over 10 years ( Table 2 , Figure 1 ). 2. Tighten payment limits (maximum amount of subsidies paid) to $250,000 per person . The proposal is not detailed, but indications suggest it would re-impose limits on marketing loan benefits and tighten the limit on direct and counter-cyclical payments. This would be similar to prior-year proposals for the same amount (e.g., S.Amdt. 3695 , 110 th Congress). Current law has a per-person limit of $210,000 for direct and counter-cyclical payments, with no limit on marketing loan benefits. Prior law had a $360,000 limit that included marketing loans (although the limit could be avoided). The Administration estimates $126 million of savings over 10 years. 3. Eliminate storage payments for cotton. Only cotton has a payment program to pay storage costs for crops placed under government loan. The Administration estimates savings of $570 million over 10 years. 4. Reduce crop insurance subsidies. The proposal is not detailed, but savings could be achieved by reducing the subsidy on premiums that farmers pay, reducing underwriting gains received by the insurance companies that sell the policies, or reducing administrative and operating expense reimbursements to the insurance companies. The Administration estimates savings of $5.2 billion over 10 years. Relative to the $72 billion of crop insurance subsidies estimated from FY2010-FY2019 in the CBO baseline, the proposal would reduce the crop insurance baseline by 7.2% over 10 years ( Table 3 , Figure 2 ). The budget also mentions reductions in the Market Access Program (MAP) and elimination of the Resource Conservation and Development (RC&D) program, both of which are outside the scope of the farm commodity programs. Much of the attention given to the Administration's budget proposal has centered on the proposal to eliminate direct payments to farms with sales of more than $500,000. Several observations may be made about the effect of using a limit on sales, and on the number and types of farms that would be affected. A limit on sales would add a new type of "payment limit" for farm commodity support. Currently there is (1) a limit on amount of payments that a farmer can actually receive, and (2) an adjusted gross income (AGI) limit to determine eligibility. The proposal would add a third type of payment limit—an eligibility test of $500,000 of gross farm sales. A $500,000 limit on sales generally would be more restrictive than the existing AGI limit of $750,000 of "farm AGI" (after expenses) and $500,000 of "nonfarm AGI." The AGI measure is after expenses are subtracted from income; farms with $750,000 of farm AGI likely have sales exceeding $1-$2 million or more. The proposed limit on sales would be on a gross basis—that is, before expenses. Gross farm sales may be more variable than net farm sales ("farm AGI"). Net farm sales are less variable because higher expenses may offset higher sales. Thus, many opponents to the proposal have argued that farms exceeding a $500,000 sales limit may have very little profit or even a loss. The high magnitude of commodity price increases during 2007-2008 changed the share of farms with sales over $500,000 from the 3%-4% share of the previous nine years to 5.5% in 2007-2008. ( Figure 3 ). Although this share may decline in the future given the drop in commodity prices since the fall of 2008, it highlights that sales may be variable and more subject to "bracket creep" than net measures of income. Sales vary directly with prices and yields. Years with high prices or yields could push farms over the limit. In contrast, a net income measure may be more constant if higher production expenses occur or tax management tools are used. For example, expenses may vary in proportion to production (e.g., costs per acre, fertilizer-to-yield). Some expenses may be fixed regardless of production (e.g., land costs or sunk production costs). Other expenses may be manipulated to manage taxable income (e.g., purchasing equipment, and prepaying expenses), or delayed to reduce outlays in low-income years (e.g., postponing repairs or capital improvements, reducing withdrawals for family living expenses). USDA data show about 76,500 farms in 2007 receiving government payments and having sales over $500,000. They accounted for 11% of farms receiving government payments, and they received 47% of government payments ( Table 4 ). When estimating the number of farms affected, it is important to look both at farms receiving government payments and farms with sales greater than $500,000. About 116,000 farms (5.3% of all farms in 2007) had sales over $500,000, but only about 38% of all farms received government payments ( Figure 4 ). Many large fruit, vegetable, or livestock farms have sales over $500,000 but do not receive subsidies that accrue primarily to grains, oilseeds, and cotton. Large farms, although fewer in number, account for most of the production and government payments. The 116,000 farms with sales over $500,000 produced 74% of the value of production and received 47% of government payments. The effect on farms by region is visible in Table 4 . Overall, the states with the highest number of farms affected are Iowa (about 8,200 farms), Illinois (6,500 farms), Minnesota (5,300 farms), and Nebraska (5,100 farms). About one-third of the 76,500 affected farms in the nation are in these four states. About 13%-16% of farms in these states receive government payments and have sales over $500,000. The table also shows the importance of combining information about high sales and government payments, and the effect of producing non-subsidized commodities. For example, in California the effect of fruit and vegetable production on large farms is apparent with only 9% of farms receiving government payments. More California farms have sales over $500,000 (8,600 farms) than receive government payments (7,100 farms). Delaware has the highest ratio of farms (28%) with sales exceeding $500,000, likely an indicator of the state's concentrated poultry production on a relatively small amount of land (compare Figure 6 and Figure 7 ). By commodity, a limit on sales would affect a higher percentage of cotton and rice farms (in the southern tier of the United States) than corn, soybean, or wheat farms. Cotton and rice farms on average are larger than corn, soybean, or wheat farms, and their value of production per acre is much higher—making them more likely to exceed a sales threshold. Government payments to cotton and rice farms also are higher ( Figure 5 , Figure 7 ). This comparison is similar to arguments that have been made in the payment limits debate for many years. Specific to the Administration's proposal, about 17%-21% of farms selling corn, soybeans, or wheat have sales over $500,000. Their sales account for 51%-59% of the national production of corn, soybeans, and wheat ( Table 5 ). About 36% of farms selling cotton, and 43% of farms selling rice have sales over $500,000. Their sales account for 75% of the national production ( Table 5 ). But given the predominance of acreage devoted to corn, soybeans, and wheat compared with cotton and rice, the sheer number of corn, soybean, and wheat farms affected is larger than for cotton and rice. This is indicated by the number of farms with sales over $500,000 ( Table 5 ) and the rank of states like Iowa, Illinois, Minnesota, and Nebraska in Table 4 . | President Obama's budget outline for FY2010—in the context of fiscal discipline—includes several proposals to reduce federal spending by $16 billion over 10 years on the farm commodity and crop insurance programs. Reaction to the proposal has been generally negative from groups that are affiliated with or supportive of agriculture. The most vehement reaction has been to a proposal to eliminate direct payments to farms with more than $500,000 of sales. Any change would require legislative action by Congress; it would not be part of the annual appropriations process. Such action would be viewed as "reopening" the 2008 farm bill, which most in the agriculture community see as a five-year contract with farmers. The agriculture committees are neither obligated nor likely to take up the proposal. If budget reconciliation is ordered by the budget committees, and the agriculture committees are tasked to find savings, then the President's farm proposals may draw more attention—but even then, the proposal likely would be modified or a different budget-saving approach could be chosen. Specifically, the President's FY2010 budget proposes four reductions in the farm subsidies: Prohibit "direct payments" to farmers with sales exceeding $500,000 per year. This would add a new type of "payment limit." About 76,500 farms in 2007 receiving government payments had sales over $500,000 (11% of farms receiving government payments). They received 47% of government payments. Midwestern farms would be affected in the greatest number. Four states (Iowa, Illinois, Minnesota, and Nebraska) account for one-third of the number of farms affected nationally. But the proportion of cotton and rice farms affected would be greater than for corn, soybean, and wheat farms (36%-43% compared to 17%-21%, respectively). The Administration estimates savings of $9.8 billion over 10 years, a reduction of about 22% of expected direct payments. Tighten payment limits (the maximum amount of subsidies paid) to $250,000 per person. The proposal is not detailed, but indications suggest it would re-impose limits on the marketing loan program and tighten the limit on direct and counter-cyclical payments. The Administration estimates $126 million of savings over 10 years. Eliminate storage payments for cotton. Only cotton has a payment program to pay storage costs for crops placed under government loan. The Administration estimates savings of $570 million over 10 years. Reduce crop insurance subsidies. The proposal is not detailed, but savings could be achieved by reducing the subsidy on premiums that farmers pay, reducing underwriting gains to insurance companies that sell policies, or reducing administrative and operating expense reimbursements. The Administration estimates savings of $5.2 billion over 10 years, about 7.2% of expected outlays. |
The President is responsible for appointing individuals to positions throughout the federal government. In some instances, the President makes these appointments using authorities granted to the President alone. Other appointments, generally referred to with the abbreviation PAS, are made by the President with the advice and consent of the Senate via the nomination and confirmation process. This report identifies, for the 112 th Congress, all nominations submitted to the Senate for executive-level full-time positions in the 15 executive departments for which the Senate provides advice and consent. It excludes appointments to regulatory boards and commissions as well as to independent and other agencies. This report features a pair of tables presenting information for each of these 15 executive departments. The first table in each pair provides information on full-time positions requiring Senate confirmation as of the end of the 112 th Congress and the pay levels of those positions. The second table for each department tracks appointment activity within the 112 th Congress by the Senate (confirmations, rejections, returns to the President, and elapsed time between nomination and confirmation) as well as further related presidential activity (including withdrawals and recess appointments). In some instances, no appointment action occurred within an agency during the 112 th Congress. Information for this report was compiled using the Senate nominations database of the Legislative Information System (LIS) http://www.lis.gov/nomis/ , the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents , telephone discussions with agency officials, agency websites, the United States Code , and the 2012 Plum Book ( United States Government Policy and Supporting Positions ). Related Congressional Research Service (CRS) reports regarding the presidential appointments process, nomination activity for other executive branch positions, recess appointments, and other appointments-related matters may be found at http://www.crs.gov . Table 1 summarizes appointment activity, during the 112 th Congress, related to full-time PAS positions in the 15 executive departments. President Barack H. Obama submitted 116 nominations to the Senate for full-time positions to executive departments. Of these 116 nominations, 90 were confirmed; 11 were withdrawn; and 15 were returned to the President under the provisions of Senate rules. The length of time a given nomination may be pending in the Senate has varied widely. Some nominations were confirmed within a few days, others were confirmed within several months, and some were never confirmed. This report provides, for each executive department nomination confirmed in the 112 th Congress, the number of days between nomination and confirmation ("days to confirm"). For confirmed nominations, a mean of 151.4 days elapsed between nomination and confirmation. The median number of days elapsed was 131.5. Each of the 15 executive department profiles provided in this report is divided into two parts: a table listing the organization's full-time PAS positions as of the end of the 112 th Congress and a table listing appointment action for vacant positions during the 112 th Congress. Data for these tables were collected from several authoritative sources. In each department profile, the first of these two tables identifies, as of the end of the 112 th Congress, each full-time PAS position in that department and its pay level. For most presidentially appointed positions requiring Senate confirmation, the pay levels fall under the Executive Schedule. As of January 2013, these pay levels ranged from level I ($199,700) for Cabinet-level offices to level V ($145,700) for lower-ranked positions. The second table, the appointment action table, provides, in chronological order, information concerning each nomination. It shows the name of the nominee, position involved, date of nomination or appointment, date of confirmation, and number of days between receipt of a nomination and confirmation. It also notes actions other than confirmation (e.g., nominations returned to or withdrawn by the President). The appointment action tables with more than one nominee to a position also list statistics on the length of time between nomination and confirmation. Each appointment action table provides the average days to confirm in two ways: mean and median. Although the mean is a more familiar measure, it may be influenced by outliers in the data. The median, by contrast, does not tend to be influenced by outliers. In other words, a nomination that took an extraordinarily long time might cause a significant change in the mean, but the median would be unaffected. Examining both numbers offers more information with which to assess the central tendency of the data. For a small number of positions within a department, the two tables may contain slightly different titles for the same position. This is a result of the fact that the title used in the nomination the White House submits to the Senate, the title of the position as established by statute, and the title of the position used by the department itself are not always identical. The first table listing incumbents at the end of the 112 th Congress uses data provided by the department itself. The second table listing nomination action within each department relies primarily upon the Senate nominations database of the LIS. This information is based upon the nomination sent to the Senate by the White House. Any inconsistency in position titles between the two tables is noted in the notes following each appointment table. Appendix A provides two tables. Table A-1 relists all appointment action identified in this report and is organized alphabetically by the appointee's last name. Table entries identify the agency to which each individual was appointed, position title, nomination date, date confirmed or other final action, and duration count for confirmed nominations. The table also includes the mean and median values for the "days to confirm" column. Table A-2 provides summary data for each of the 15 executive departments identified in this report. The table summarizes the number of positions, nominations submitted, individual nominees, confirmations, nominations returned, and nominations withdrawn for each department. It also provides the mean and median values for the numbers of days taken to confirm nominations within each department. During the 112 th Congress, the Presidential Appointments Streamlining and Efficiency Act ( P.L. 112-166 ) was enacted, which eliminated the requirement for the Senate's advice and consent for 163 positions in federal agencies. A number of those positions, listed in Appendix B , have been included in previous versions of this tracking report. This report notes each agency and position affected. A list of department abbreviations can be found in Appendix C . Appendix A. Presidential Nominations, 112 th Congress Appendix B. Positions Affected by P.L. 112-166 Appendix C. Abbreviations of Departments | The President makes appointments to positions within the federal government, either using the authorities granted to the President alone or with the advice and consent of the Senate. There are some 349 full-time leadership positions in the 15 executive departments for which the Senate provides advice and consent. This report identifies all nominations submitted to the Senate during the 112th Congress for full-time positions in these 15 executive departments. Information for each department is presented in tables. The tables include full-time positions confirmed by the Senate, pay levels for these positions, and appointment action within each executive department. Additional summary information across all 15 executive departments appears in the Appendix. During the 112th Congress, the President submitted 116 nominations to the Senate for full-time positions in executive departments. Of these 116 nominations, 90 were confirmed, 11 were withdrawn, and 15 were returned to him in accordance with Senate rules. For those nominations that were confirmed, a mean (average) of 151.4 days elapsed between nomination and confirmation. The median number of days elapsed was 131.5. Information for this report was compiled using the Senate nominations database of the Legislative Information System (LIS) http://www.lis.gov/nomis/, the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents, telephone discussions with agency officials, agency websites, the United States Code, and the 2012 Plum Book (United States Government Policy and Supporting Positions). This report will not be updated. |
The 111 th Congress enacted the Health Care and Education Reconciliation Act of 2010 (HCERA; P.L. 111-152 ) to make changes to the Patient Protection and Affordable Care Act ( P.L. 111-148 ), to amend the Higher Education Act of 1965, as amended (HEA; P.L. 89-329), and for other purposes. Aside from health care-related provisions, the HCERA makes major changes to federal student financial assistance programs. The HCERA also extends mandatory appropriations for existing HEA programs and provides mandatory appropriations for a program authorized under the Trade Act of 1974 (19 U.S.C., Chapter 12). The HEA authorizes a broad array of federal student aid programs that assist students and their families with paying for or financing the cost of postsecondary education, as well as programs that provide aid to institutions of higher education (IHEs). In recent years, major amendments to selected HEA programs—particularly those that receive mandatory funding—have been made as part of recent budget reconciliation measures. In the 109 th Congress, the Federal Family Education Loan (FFEL) program and the William D. Ford Federal Direct Loan (DL) program were amended and extended under the Higher Education Reconciliation Act (HERA, part of P.L. 109-171 ). In the 110 th Congress, the College Cost Reduction and Access Act (CCRAA; P.L. 110-84 ) made significant changes to the FFEL and DL programs, the Federal Pell Grant program, and the federal need analysis formula. Additionally, in spring 2008, emergency changes to the federal student loan programs were made under the Ensuring Continuing Access to Student Loans Act of 2008 (ECASLA; P.L. 110-227 ). Finally, the 110 th Congress enacted the Higher Education Opportunity Act (HEOA; P.L. 110-315 ) to amend, extend, and authorize new programs under the HEA, including amendments to the FFEL, DL, and Pell Grant programs. Title II, Part A of the HCERA, entitled the SAFRA Act, contains several education-related provisions. Major proposals in the SAFRA Act amend the HEA as described below. The authority to make federal student loans through the FFEL program terminates after June 30, 2010. Beginning July 1, 2010, Subsidized Stafford Loans, Unsubsidized Stafford Loans, PLUS Loans, and Consolidation Loans will be made only through the William D. Ford Federal Direct Loan (DL) program. DL program loans will be serviced by private for-profit and not-for-profit servicers under contract with the U.S. Department of Education (ED). The income-based repayment (IBR) plan is amended for new borrowers of DL program loans on or after July 1, 2014. For new borrowers who repay according to the IBR plan, monthly payment amounts will be limited to 10% of their discretionary income. Also, new borrowers who repay according to the IBR plan will be eligible to have any loan balance that remains unpaid after 20 years of IBR plan repayment forgiven at that time. Effective March 30, 2010, indefinite mandatory appropriations are provided for the Federal Pell Grant program to supplement annual discretionary appropriations and to fund an increase above the annual appropriated Pell Grant maximum award. From AY2013-2014 to AY2017-2018, these annual increases to the Pell Grant award amount are indexed to the percent change in the Consumer Price Index for All Urban Consumers (CPI-U). Effective FY2011, an additional $13.5 billion in mandatory appropriations for Pell Grants will be available for obligation until September 30, 2012. Mandatory funding for the HEA College Access and Completion Grant program is provided for FY2010 through FY2014. Mandatory funding for HEA programs serving Historically Black Colleges and Universities (HBCUs) and other Minority-Serving Institutions is provided for FY2010 through FY2019. Title I, Part F of P.L. 111-152 contains an education provision that funds the Community College and Career Training Grant Program from FY2011 through FY2014. The remainder of this report summarizes the legislative history, estimated cost savings, and education-related provisions of P.L. 111-152 . The legislative history describes the budget reconciliation process. The cost estimate is subsequently presented and is followed by a description of the HEA programs and other programs that would be amended. This begins with a review of changes that affect the FFEL program and reduce federal spending. This is followed by a review of the corresponding revisions to the DL program. Finally, changes that increase spending under the Pell Grant program and other programs are described. The House and the Senate approved H.Rept. 111-89 , the conference report to accompany S.Con.Res. 13 , the Concurrent Resolution on the Budget for Fiscal Year 2010, on April 29, 2009. The FY2010 budget resolution includes six reconciliation instructions to three House committees and two Senate committees. The House Education and Labor Committee received two reconciliation instructions, each directing the committee to report changes in laws within its jurisdictions to reduce the deficit by $1 billion for the period of FY2009 through FY2014. The first reconciliation instruction included the term "Health Care Reform," and the second instruction included the term, "Investing in Education," although the committee has discretion to respond to each directive with any type of legislative language within their jurisdiction that would achieve the budgetary outcome included in the directive. H.R. 3221 , the Student Aid and Fiscal Responsibility Act of 2009, was introduced on July 15, 2009, to increase student aid through loan reform, improve college access and completion rates, invest in educational facilities and early childhood education, and other purposes. On July 27, 2009, the House Education and Labor Committee reported H.R. 3221 to the House. On October 7, 2009, the Committee also submitted H.Rept. 111-232 , which contained language identical to the text of H.R. 3221 , as reconciliation instructions to the House Budget Committee. On September 17, 2009, the House passed H.R. 3221 by a vote of 253 to 171. H.R. 3221 , as passed by the House, would amend the Higher Education Act (HEA) of 1965, as amended, by making changes to existing programs and by establishing several new programs and benefits. It would also establish several new non-HEA programs. Major proposals in H.R. 3221 include the following. The authority to make loans under the Federal Family Education Loan (FFEL) program would be terminated after June 2010. Beginning July 1, 2010, all student loans made under Title IV of the HEA would be made under the William D. Ford Federal Direct Loan (DL) program. Beginning July 1, 2010, a new Federal Direct Perkins Loan would be offered under the DL program, and authority to make new loans under the current Federal Perkins Loan program would end. Beginning in FY2010, indefinite mandatory appropriations would be provided for the Federal Pell Grant program to supplement annual discretionary appropriations. Effective for award year (AY) 2011-2012, the HEA, Title IV federal student aid need analysis methodology would be simplified and requirements for aid applicants to report certain asset-related financial information on the Free Application for Federal Student Aid (FAFSA) would be eliminated. Mandatory funding for HEA programs serving Historically Black Colleges and Universities (HBCUs) and other Minority-Serving Institutions would be provided for FY2010 through FY2019. For FY2010 through FY2014, mandatory funding would be provided for programs in a new HEA College Access and Completion Innovation Fund (CACIF) to promote success in postsecondary education, improve subsequent employment outcomes, and assist states in developing longitudinal data systems. Mandatory funding would be provided to establish and fund programs for the modernization, renovation, and repair of K-12 school facilities in FY2010 and FY2011; for the modernization, renovation, and repair of postsecondary school facilities in FY2010; and for the construction and renovation of K-12 school facilities in Louisiana, Mississippi, and Alabama in FY2010 and FY2011. For FY2010-FY2017, mandatory funding would be provided to establish and fund an Early Learning Challenge Fund to improve the standards and quality of state early childhood education programs. For FY2010-FY2019, mandatory funding would be provided to establish and fund the American Graduation Initiative grant program for the purpose of reforming community colleges, and to improve education and training for workforce development. The "Defund ACORN Act" would prohibit organizations that have run afoul of certain federal or state campaign finance, election, or voter registration laws from being awarded federal grants or contracts and from receiving federal funds. The House Budget Committee prepared the Reconciliation Act of 2010 ( H.R. 4872 ) by packaging education-related reconciliation instructions submitted by the House Education and Labor Committee with health care-related reconciliation instructions submitted by both the House Committee on Ways and Means and the House Committee on Education and Labor. On December 24, 2009, the Senate passed health care reform legislation, the Patient Protection and Affordable Care Act ( H.R. 3590 ). In early March 2010, the Congressional Budget Office (CBO) released revised estimates of the savings associated with eliminating the FFEL program. Whereas in July 2009, CBO estimated savings of $86.8 billion over the FY2009-FY2019 period, in March 2010, CBO estimated savings of $67 billion over the FY2011-FY2020 period. In part, as a result of the lower estimates of the savings that would result from terminating the FFEL program and because some of the education provisions might have violated Senate rules regarding reconciliation bills—rules that require provisions be related to spending or revenues —the House Rules Committee made public an amendment in the nature of a substitute to H.R. 4872 on March 18, 2010. The amendment in the nature of a substitute proposed to change several controversial elements contained in H.R. 3590 and removed or modified several education provisions contained in H.Rept. 111-232 ( H.R. 3221 ). On March 21, 2010, the House agreed to a special rule ( H.Res. 1203 ) that brought to the floor H.R. 4872 , as amended by the amendment in the nature of a substitute to H.R. 4872 . Later on March 21, 2010, the House passed H.R. 4872 by a vote of 220 to 211, after having passed H.R. 3590 by a vote of 219 to 212. H.R. 3590 ( P.L. 111-148 ) was signed into law by the President on March 23, 2010. In response to a ruling by the Senate parliamentarian, the Senate struck two provisions from H.R. 4872 before passing it on March 25, 2010, by a vote of 56 to 43. The provisions were deemed to be in violation of the Senate Byrd rule because they had no effect on federal outlays and revenue and thus were extraneous. One provision would have eliminated a requirement established in the CCRAA that the Secretary of Education either reduce or increase the additional mandatory Pell Grant amount in each award year if the budget authority provided for each year was insufficient or exceeded, respectively, the amount necessary to fully fund the prescribed additional mandatory amount in each year. This requirement had never been implemented by ED and would have had no effect on the new provisions offered in H.R. 4872 . The other provision would have established a new rule specifying that the additional mandatory Pell Grant award amount in each award year, as determined by a new formula in H.R. 4872 , could not be less than the additional mandatory award amount for the previous award year. Later on March 25, 2010, the House passed H.R. 4872 , as amended by the Senate, by a vote of 220 to 207, and it was signed into law by the President as P.L. 111-152 . According to the CBO estimate of the SAFRA Act dated March 20, 2010, terminating FFEL program lending and replacing it with increased lending under the DL program will reduce mandatory spending by $29 billion over the FY2010-FY2014 period, and by $61 billion over the FY2010-FY2019 period. CBO also estimates that the SAFRA Act will increase discretionary spending by $1.3 billion over the FY2010-FY2014 period, and by $5.0 billion over the FY2010-FY2019 period. Most of these discretionary costs are estimated to be for the administrative costs of increased DL program lending. The increase in mandatory appropriations for Pell Grants are estimated to increase mandatory spending by $21 billion over the FY2010-FY2014 period, and by $36 billion over the FY2010-FY2019 period. Overall, the CBO estimates that the SAFRA Act will reduce mandatory spending by $5 billion over the FY2010-FY2014 period, and by $19 billion over the FY2010-FY2019 period. These estimated savings exceed the $1 billion reduction in spending specified in S.Con.Res. 13 . ED administers three major federal student loan programs that are authorized under Title IV of the HEA: the FFEL program, the DL program, and the Federal Perkins Loan program. These programs are briefly described below, followed by descriptions of changes made to the federal student loan programs under the SAFRA Act. The origin of the FFEL program can be traced to the Guaranteed Student Loan (GSL) program, originally enacted in Title IV of the HEA. Under the FFEL program, capital for making loans is provided by private lenders, and the federal government guarantees lenders against losses due to borrower default. The federal government also provides private lenders a variety of subsidies designed to ensure that private capital will consistently be available to make FFEL program student loans. FFEL program loans are originated, held, and serviced by private lenders; and state and nonprofit guaranty agencies receive federal funds to administer the federal loan guarantee. Costs of the FFEL program are mostly mandatory. In 2008, as a financial crisis developed and following the enactment of reductions in lender subsidies under the College Cost Reduction and Access Act (CCRAA; P.L. 110-84 ), lenders began to experience difficulties raising capital to continue making FFEL program loans. As a response, the Ensuring Continued Access to Student Loans Act (ECASLA; P.L. 110-227 ) was enacted to facilitate the continuation of lending under the FFEL program. During FY2009, ED estimates that approximately 80% of new FFEL program loans were financed through ECASLA programs. During AY2009-2010, approximately 3,900 institutions of higher education (IHEs) are participating in the FFEL program. ED estimates that approximately 8.2 million new FFEL program loans (not including Consolidation Loans), averaging $4,309 and totaling $35.4 billion, will be made in FY2010. This would be a decrease from the 14.5 million loans, totaling $67 billion, made in FY2009. By the end of FY2010, ED estimates that there will be $497 billion in outstanding FFEL program loans. In 1993, authorization for the DL program was enacted under the Student Loan Reform Act of 1993, part of the Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ). The program was established with the goals of streamlining the student loan delivery system and achieving cost savings. When enacted, the program was originally intended to gradually expand and replace the FFEL program; however, provisions calling for a "phase-in" of the DL program were repealed under the Higher Education Amendments of 1998 ( P.L. 105-244 ). For nearly two decades, both programs have been in operation, and IHEs have been able to participate in the program of their choice. Under the DL program, the federal government essentially serves as the banker and makes loans to students and their families using federal capital (i.e., funds from the U.S. Treasury), and owns the loans. Schools may serve as direct loan originators, or the loans may be originated by an ED contractor. Loan servicing and collections are also performed by contractors. DL program subsidy costs are mostly mandatory, and administrative costs are mostly discretionary. In AY2009-2010, more than 2,000 IHEs are participating in the DL program. Many IHEs that participate in the FFEL program have taken steps toward becoming certified to participate in the DL program. ED's Office of Inspector General reports that as of May 7, 2009, all but 162 of the IHEs actively participating in the FFEL program (excluding foreign schools) had obtained approval to participate in the DL program. By March 4, 2010, ED reported that 47% of IHEs were "DL ready"; 40% were in transition to DL; 11% used the common origination and disbursement (COD) system, but had not taken steps to transition to the DL program; and 2% did not use COD and had not taken steps to transition. ED estimates that 15.2 million new DL program loans (not including Consolidation Loans), averaging $5,801 and totaling $88.4 billion, will be made in FY2010. This would be an increase over the 6.5 million loans totaling $42.3 billion made in FY2009. By the end of FY2010, ED estimates that there will be $207 billion in outstanding DL program loans. ED projects that upon the repeal of future lending through the FFEL program, in FY2011, 24.8 million loans, totaling $134 billion, will be made through the DL program. While the FFEL and DL programs rely on different sources of capital and different administrative structures, they make available essentially the same set of loans: Subsidized Stafford Loans and Unsubsidized Stafford Loans for undergraduate and graduate students; PLUS Loans for graduate students and the parents of dependent undergraduate students; and Consolidation Loans through which borrowers may combine their loans into a single loan. The SAFRA Act makes the following amendments relating to the FFEL program. The SAFRA Act amends the HEA to terminate the authority for new loans to be made or insured under the FFEL program after June 30, 2010. Beginning with AY2010-2011, all new Subsidized and Unsubsidized Stafford Loans, PLUS Loans, and Consolidation Loans will be made under the DL program. Holders of existing FFEL program loans will continue to be responsible for servicing the loans, and guaranty agencies will continue to administer the federal loan insurance. CBO projects that the termination of lending under the FFEL program and the shift to all HEA Title IV federal student loans (other than Perkins Loans) being made under the DL program will result in a reduction of $28.6 billion in mandatory spending over the period from FY2010 through FY2014, and of $61.0 billion in mandatory spending over the period from FY2010 through FY2019. These savings in mandatory spending are expected to result in part due to the shift of approximately $5.0 billion in administrative costs from mandatory spending under the FFEL program to discretionary spending under the DL program over the period from FY2010 through FY2019. The SAFRA Act provides $25 million for each of FY2010 and FY2011 for payments to servicers of FFEL program loans for the purpose of retaining jobs at locations in the United States where those servicers were operating in the capacity of FFEL servicers on January 1, 2010. The SAFRA Act amends the HEA to require that, effective July 1, 2010, all new Subsidized and Unsubsidized Stafford Loans, PLUS Loans, and Consolidation Loans will be made under the DL program. In addition, the SAFRA Act makes the following changes to the DL program. Through the end of AY2009-2010, the only form of federal student aid available under HEA, Title IV to eligible students enrolled in IHEs located outside the United States is loans made through the FFEL program. Effective July 1, 2010, and concurrent with the termination of lending under the FFEL program, the SAFRA Act extends the availability of DL program loans to eligible students enrolled in foreign schools. Consolidation Loans enable borrowers to simplify the repayment of their federal student loans by combining multiple loans into a single loan. In general, to be eligible to obtain a Consolidation Loan, a borrower must have an outstanding principal balance on at least one loan made under either the FFEL or DL programs that is eligible for inclusion in a Consolidation Loan. Applicants for Consolidation Loans must be either (1) in repayment status, (2) in the grace period before entering repayment, or (3) in default, but have made satisfactory repayment arrangements for their loans, or have agreed to repay according to the FFEL program income-sensitive repayment plan or the DL program income-based repayment (IBR) plan. Also, to obtain a Consolidation Loan under the DL program, an applicant must have borrowed one or more eligible loans under the DL program. Interest rates on Consolidation Loans are determined by taking the weighted average of the interest rates on the loans being consolidated and rounding the result up to the nearest higher one-eighth of 1%, with a cap of 8.25%. The SAFRA Act amends the eligibility requirements for certain borrowers to obtain DL program Consolidation Loans during the period from July 1, 2010, to June 30, 2011. During this one-year period, borrowers who have multiple types of federal student loans and who have not yet entered repayment on at least one of their loans will be eligible to consolidate their loans into DL program Consolidation Loans without having the interest rate rounded up to the nearest higher one-eighth of 1%. To be eligible to consolidate loans under this temporary provision, a borrower must have at least two of the following three types of federal student loans: DL program loans; FFEL program loans that have been purchased by the Secretary through any of the ECASLA programs; and FFEL program loans that are held by an eligible FFEL program lender. Origination, servicing, and collections on DL program loans are contracted out by ED according to procedures designed to ensure that these services are performed by qualified entities at competitive prices. In 2009, ED awarded performance-based contracts to four entities to service loans in its portfolio of federal student loans, including those made under the Direct Loan program. The servicing of DL program loans is an administrative expense, and discretionary funds for administrative expenses are appropriated through annual appropriations acts. Effective the date of enactment, the SAFRA Act amends the requirements of the DL program for the awarding of contracts to service DL program loans to establish a separate category of contracts specifically applicable to not-for-profit servicers. Not-for-profit servicers that satisfy certain requirements—including that they meet standards for servicing federal assets, that they have adequate capacity to service the loan volume they are assigned, and that they meet performance requirements—are entitled to service DL program loans. In accordance with this new provision, the Secretary is required to contract with eligible not-for-profit servicers for each to service 100,000 borrower loan accounts. Eligible not-for-profit servicers are to be compensated at competitive market rates. The Secretary is permitted to subsequently adjust the number of accounts serviced by each not-for-profit servicer based on its performance. The SAFRA Act provides mandatory funding for administrative costs for not-for-profit servicing contracts for FY2010 through FY2019. The SAFRA Act provides $50 million for FY2010 for technical assistance to IHEs that participate in or seek to participate in the DL program. The Secretary is required to provide technical assistance—which may include the provision of technical support, training, materials, and other technical or financial assistance—to assist IHEs in establishing and administering DL programs at their schools. The SAFRA Act amends the income-based repayment (IBR) plan for new borrowers of DL program loans on or after July 1, 2014. The threshold for these new borrowers to qualify for repayment according to the IBR plan and for setting maximum monthly payment amounts is reduced by 33⅓%, from 15% of income that exceeds 150% of the poverty line to 10% of income that exceeds 150% of the poverty line. For these new borrowers, the SAFRA Act also reduces the maximum IBR plan repayment period—after which any remaining federal student loan balance will be forgiven—by 20%, from 25 years to 20 years. The IBR plan is a repayment plan for federal student loans made under the FFEL and DL programs (except Parent PLUS Loans, and Consolidation Loans used to repay Parent PLUS Loans), that is designed to present qualified borrowers the opportunity to have the amount of their monthly student loan payments limited based on the relationship between their payments on federal student loan debt and what might be considered their "discretionary" income, or the portion of their adjusted gross income (AGI) that is in excess of 150% of the poverty line applicable to their family size. A borrower qualifies to repay according to the IBR plan on the basis of having a "partial financial hardship," which occurs if a borrower's total annual payments on eligible FFEL and DL program loans, as calculated according to a standard 10-year repayment schedule at the time the borrower's loans initially entered repayment, are greater than 15% of the amount by which the borrower's AGI exceeds 150% of the poverty line applicable to the borrower's family size. Payments made by borrowers repaying under the IBR plan must first be credited to interest due on the loan, then to any fees, and then to principal. If a borrower's required payment is not sufficient to cover the interest that accrues on a Subsidized Stafford Loan (or the subsidized portion of a Consolidation Loan), the interest not covered by the monthly payment is paid by the Secretary for a period not to exceed three years. Any unpaid interest that accrues on an unsubsidized loan or on a Subsidized Stafford Loan after the three-year period continues to accrue while the borrower has a partial financial hardship. However, accrued interest is only capitalized (i.e., added to the principal balance of the loan) once a borrower no longer demonstrates a partial hardship or elects to no longer repay according to the IBR plan. (The accrual and capitalization of unpaid interest on a loan is referred to as negative amortization.) If a borrower's required monthly payment is not sufficient to repay the amount of principal due, then the payment of any principal due will be postponed until the borrower no longer has a partial financial hardship or exits the IBR plan. Once a borrower's AGI increases to the point where he no longer has a partial financial hardship, the borrower's monthly payment amount will increase to an amount equal to the monthly payment amount that would have been required based on a standard 10-year repayment period calculated by using the amount owed when the borrower initially entered the IBR plan. According to the design of the IBR plan, this monthly payment amount will be no more than 15% of the amount by which the borrower's AGI exceeds 150% of the poverty line. If a borrower has any federal student loan balance remaining after repaying according to the IBR plan for 25 years, the remaining balance will be forgiven at that time. If a borrower makes 120 monthly payments (10 years of payments) on DL program loans repaid according to the IBR plan while concurrently employed in a public service occupation, any loan balance remaining at that time will be forgiven under the DL Loan Forgiveness for Public Service Employees program. The SAFRA Act amends two aspects of the IBR plan for individuals who, on or after July 1, 2014, are new borrowers of DL program loans. First, the SAFRA Act reduces by 33⅓% the thresholds used in determining whether borrowers have a partial financial hardship and in determining their maximum monthly payment amounts while they have a partial financial hardship. The thresholds are reduced from 15% of income in excess of 150% of the poverty line (or discretionary income) to 10% of discretionary income. For new borrowers, these changes will allow those with lower student loan balances relative to their incomes (or higher incomes relative to their loan balances) to qualify for IBR plan repayment. They would likely lead to increases in the number of borrowers who become eligible to repay according to the IBR plan. In addition, the changes will decrease the rate at which borrowers pay down their loan principal and will increase the time in repayment (subject to the 20-year repayment term limit discussed below). Second, the SAFRA Act reduces by 20%—from 25 years to 20 years—the period over which new borrowers repaying according to the IBR plan must remain in repayment status or economic hardship deferment before having the remainder of their federal student loan balance forgiven. When considered in combination with the amendment requiring new borrowers to make lower monthly payment amounts under IBR, this change may enable more borrowers to have their IBR repayment schedules extended to the point where they have an outstanding loan balance after 20 years of IBR plan repayment, and thus qualify to have a portion of their loan balance forgiven. Similarly, lower required monthly payment amounts under the IBR plan may also enable more borrowers who are employed in public service occupations to qualify for loan forgiveness through the DL Loan Forgiveness for Public Service Employees program after 10 years of IBR plan repayment. The Federal Pell Grant program, authorized by Title IV, Part A, Subpart 1 of the HEA, is the largest source of federal grant aid to low-income students for postsecondary education and is the foundation for all federal student aid awarded to undergraduate students. The Federal Pell Grant program is estimated to provide over $32 billion in aid to approximately 8.3 million undergraduate students in AY2010-2011. Pell Grants are need-based aid, and eligibility is limited to undergraduate students. There is no absolute income threshold that determines who is eligible and who is ineligible for Pell Grants, although Pell Grant recipients primarily have low incomes. For the most recent award year for which complete data are available (AY2007-2008), 83% of Pell Grant recipients considered to be dependent upon their parents for financial support had a total family income below $40,000. Of Pell Grant recipients considered to be independent of their parents, 84% had a total family income below $30,000. The Federal Pell Grant program is currently funded with both discretionary and mandatory appropriations, although the program is primarily funded with annual discretionary appropriations. The program has garnered considerable attention over the past several years in Congress, resulting in substantial increases in both mandatory and discretionary funding. Since the enactment of CCRAA, the Pell Grant program's cumulative total funding level (consisting of both discretionary and advance mandatory appropriations), for FY2007 through FY2010 and reflecting advance appropriations through FY2017, is approximately $113.6 billion. The statutory authority for the Pell Grant program was most recently reauthorized by the Higher Education Opportunity Act of 2008 (HEOA; P.L. 110-315 ). The maximum appropriated Pell Grant award amount is specified in annual appropriations measures. For AY2010-2011, the maximum appropriated Pell Grant award amount is $4,860. For AY2008-2009 through AY2012-2013, an automatic additional increase to the appropriated Pell Grant award amount is provided through mandatory funding. For AY2010-2011, the mandatory add-on is $690. In order to receive the additional mandatory increase, students must qualify for the minimum appropriated Pell Grant award, which, as defined for eligibility purposes, is 5% of the annually appropriated maximum Pell Grant award. For AY2010-2011, the total maximum Pell Grant award amount is $5,550, and the effective minimum award for a full-time student is $1,176. The SAFRA Act changes the method by which future additional mandatory Pell Grant award amounts are determined and increases mandatory spending by providing permanent mandatory budget authority for the program beginning March 30, 2010. The SAFRA Act, however, continues to preserve a larger role for annual discretionary appropriations in determining the base maximum Pell Grant award to which additional mandatory amounts are added each year. According to CBO, the provisions included in the SAFRA Act that affect the future determination of additional mandatory Pell Grant award amounts are estimated to increase mandatory spending by $23 billion from FY2010 to FY2019. In addition, mandatory spending increases by $13.5 billion as a result of additional appropriated mandatory funds for the Pell Grant program for use through FY2012. In total, the SAFRA Act is expected to increase mandatory spending for the Pell Grant program by $36 billion from FY2010 to FY2019. Provisions in the SAFRA Act that affect the future funding and determination of additional mandatory Pell Grant awards include the following. The SAFRA Act provides indefinite mandatory appropriations for the Pell Grant program beginning March 30, 2010. The Federal Pell Grant program remains authorized through FY2017 under the HEA, section 401(a)(1). Mandatory budget authority amounts authorized in the CCRAA for FY2010 through FY2017 are eliminated. Effective March 30, 2010, these permanent mandatory appropriations supplement annual discretionary appropriations and provide an additional amount to the annually appropriated Pell Grant maximum award each year beginning in AY2010-2011. Each fiscal year's mandatory appropriations level will be determined based on the total obligations required to provide the additional Pell Grant amount to all eligible students and will be available for use through the end of September of each succeeding year. For AY2010-2011 and AY2011-2012, the additional mandatory amount will remain $690, as authorized in the CCRAA. For AY2012-2013, the additional mandatory amount authorized in the CCRAA will be reduced by $400, from $1,090 to $690. Beginning in AY2013-2014, and for all subsequent years, a new statutorily defined formula will be established for the purposes of determining the additional mandatory Pell Grant award amount, as described below. For AY2013-2014 only, the formula will arrive at the additional mandatory Pell Grant award amount according to the following four steps: (1) determine the greater value between the AY2012-2013 total maximum award (i.e., the FY2012 discretionary maximum award amount, plus $690) and $5,550; (2) adjust the greater value by the percentage change in the Consumer Price Index for All Urban Consumers (CPI-U) as measured from December 2011 to December 2012; (3) subtract from this amount the greater of the previous year's discretionary appropriated maximum award amount or $4,860; and (4) round the resulting amount to the nearest $5 increment. For AY2014-2015 through AY2017-2018, a new statutorily defined formula is established for determining the additional mandatory Pell Grant award amount. The additional mandatory Pell Grant award amount will be determined according to the following three steps: (1) adjust the previous year's total maximum award (i.e., the discretionary maximum award amount, plus the mandatory additional amount) by the percentage change in the CPI-U as measured from the most recently completed calendar year before the start of the award year; (2) subtract from this amount the greater of the previous year's discretionary appropriated maximum award amount or $4,860; and (3) round the resulting amount to the nearest $5 increment. For AY2018-2019 and all subsequent award years, the additional mandatory Pell Grant award amount will be the same amount as determined for AY2017-2018 under the formula described above. Since the additional Pell Grant award amounts will be determined beginning in AY2013-2014 primarily by two factors that are not known at the present time—the annual discretionary appropriated maximum award amount and the annual percentage change in the CPI-U—future total maximum award levels are not available at this time. The SAFRA Act also includes provisions that change the award rules for determining eligibility for a Pell Grant award. These provisions include the following: Authorized maximum Pell Grant award amounts specified for AY2009-2010 through AY2014-2015 are eliminated, as is the additional mandatory Pell Grant award amount of $1,090 in AY2012-2013. Beginning in AY2013-2014, total maximum Pell Grant award amounts will be determined according to the revised formulas described above. Effective March 30, 2010, qualification for Pell Grant awards will be based on the total maximum Pell Grant award amount. Prior to enactment of the SAFRA Act, students had to qualify for the minimum appropriated Pell Grant award, which, as defined for eligibility purposes, is 5% of the annually appropriated maximum Pell Grant award, in order to receive the additional mandatory increase. This rule is eliminated under the SAFRA Act, and the new minimum Pell Grant award is based on 5% of the total maximum Pell Grant award. In effect, eligibility for the program will now be determined from 5% of a larger Pell Grant maximum amount, which would increase the number of recipients, but reduce the amount of the Pell Grant minimum award. Since this rule is effective March 30, 2010, there could be implications for students who have yet to apply for a Pell Grant in AY2009-2010, and for students who have already applied for a Pell Grant between the beginning of the application period for AY2010-2011 (January 2010) and March 30, 2010. Since the qualification parameters of the program and award amounts change under the SAFRA Act, ED may publish revised AY2010-11 Pell Grant Payment and Disbursement Schedules , although eligibility and awards have been determined since January 2010 under the statute as authorized prior to the SAFRA Act. Consequently, some students who did not qualify for a Pell Grant for the upcoming AY2010-2011 based on their calculated expected family contribution (EFC) of $4,816 or higher now qualify for a minimum Pell Grant award under the new rule. Additionally, Pell Grant awards calculated from the current payment schedule that are less than the maximum Pell Grant of $5,550 could be different under the new rule established in the SAFRA Act. The effective minimum award in AY2010-2011 for a full-time student changes from $1,176 to $555 under the SAFRA Act. Changes to expected Pell Grant award levels for the upcoming AY2010-2011 could affect aid packaging outcomes for some students. Effective FY2011, the SAFRA Act will provide an additional $13.5 billion in mandatory appropriations for Pell Grants, which will be available for obligation in any active award year prior to September 30, 2012. Ostensibly, these additional mandatory funds will be used to pay for the estimated $6.1 billion discretionary cumulative funding shortfall in AY2010-2011. Any remaining mandatory appropriations may be used to offset the costs of the base discretionary maximum Pell Grant award for AY2011-2012 in FY2011. Although the SAFRA Act provides significant mandatory appropriations for the Pell Grant program for use in the short term (i.e., $13.5 billion in FY2011 through FY2012) and provides permanent mandatory appropriations to supplement the base maximum award determined in annual discretionary appropriations over the long term, Congress still faces increasing discretionary costs associated with funding the annual base maximum award in the years beyond FY2011. Under March 2010 CBO estimates, these discretionary costs average $32.0 billion annually from FY2012 to FY2019, assuming a $4,860 maximum base award in each year. The College Access Challenge Grant Program (CACG; HEA Title VII, Part E; 20 U.S.C. § 1141) fosters partnerships between federal, state, and local governments and philanthropic organizations through matching formula grants that are intended to increase the number of low-income students who are prepared to enter and succeed in postsecondary education. The CACG was enacted under the CCRAA. The CCRAA provided mandatory funding of $66 million for the program in each of FY2008 and FY2009. The HEOA amended the CACG program to also authorize discretionary appropriations in such sums as may be necessary for FY2009 through FY2014. The program did not receive a discretionary appropriation in either FY2009 or FY2010. The SAFRA Act makes no changes to the purpose of the CACG program or the uses of funds except to provide mandatory funding of $150 million for each of FY2010 through FY2014. The SAFRA Act does not preclude additional discretionary appropriations through FY2014. The authority to award grants under the CACG program expires at the end of FY2014. Finally, the SAFRA Act increases the minimum state grant from 0.5% of the appropriation to 1.0% of the appropriation. The larger grants likewise increase the required non-federal share, which is 50% of the federal grant. ED may reduce the state award proportionately if the state is unable to provide the full amount of the requisite non-federal share. The proportionate reduction may be awarded to a philanthropic organization in the state if that organization is capable of providing the non-federal share. Title IV, Part J of the CCRAA provided mandatory appropriations for a set of new programs supporting minority-serving institutions. The programs provided funding to improve academic programs, provide professional development, maintain educational facilities and equipment, strengthen institutional management, and encourage fiscal stability. The institutions supported by the programs are Historically Black Colleges and Universities as defined in Title III, Part B of the HEA (20 U.S.C. § 1061); Hispanic-Serving Institutions as defined in Title V, Part A of the HEA (20 U.S.C. § 1101a); Tribal Colleges or Universities as defined in Title III, Part A, Section 316 of the HEA (20 U.S.C. § 1059c); Alaska Native- and Native Hawaiian-Serving Institutions as defined in Title III, Part A, Section 317 of the HEA (20 U.S.C. § 1059d); Predominantly Black Institutions as defined in Title III, Part F of the HEA (20 U.S.C. § 1059c); Asian American and Native American Pacific Islander-Serving Institutions as defined in Title III, Part F of the HEA (20 U.S.C. § 1059c); and Native American-Serving Nontribal Institutions as defined in Title III, Part F of the HEA (20 U.S.C. § 1059c). The CCRAA provided mandatory funding of $255 million for the programs in each of FY2008 and FY2009. The authority to award grants under the programs expired at the end of FY2009. The HEOA re-designated these programs under Title III, Part F of the HEA. The SAFRA Act makes no changes to the Part F programs except to extend mandatory funding of $255 million for each fiscal year from FY2008 through FY2019. The authority to award grants under Part F expires at the end of FY2019. The Trade Adjustment Assistance for Communities (TAAC) Program was incorporated into the Trade Act of 1974 (19 U.S.C., Chapter 12), as amended, under the Trade and Globalization Adjustment Assistance Act of 2009 (TGAAA), which is part of the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ), to offer assistance to trade-impacted communities in response to the economic recession that began in 2007. TGAAA amends the Trade Act of 1974 to extend and revise trade adjustment assistance to various constituents. TAAC, as reestablished through TGAAA, includes four subchapters. Subchapter A establishes the TAAC program within the U.S. Department of Commerce. Funds are competitively awarded to local governments in trade impacted areas in support of strategic planning and implementation activities aimed at diversifying and strengthening the area's economy. Subchapter B creates the Community College and Career Training Grant (CCCT) program, a competitive grant administered by the U.S. Department of Labor (DOL). The CCCT supports efforts to strengthen the role of community colleges in addressing the education and skills deficiencies of workers in trade impacted communities. Subchapter C establishes the Industry or Sector Partnership Grants program for Communities Impacted by Trade, also administered by DOL. Voluntary public private partnerships in trade impacted communities are awarded competitive grants with the aim of identifying and addressing training and employment gaps in targeted industries and developing strategies to address the labor needs of current or emerging industries. Subchapter D includes general provisions related to program implementation. The CCCT program (19 U.S.C. § 2372) authorizes DOL to award funds for the purpose of developing, offering, or improving educational or career training options for workers eligible for funds under Trade Adjustment Assistance for Workers. Eligible recipients are IHEs, including proprietary institutions and postsecondary vocational institutions, as defined in Section 102 of the HEA. Eligible programs are two-year and less-than-two-year educational and training programs. Title I, Part F of P.L. 111-152 amends Section 279(b) of the Trade Act of 1974, as amended, to provide $500 million in mandatory funding per year for FY2011 through FY2014 for the CCCT program, with the provision that each state receive no less than 0.5% of the funds appropriated for each year. Although ARRA terminates the program authorization on December 31, 2010, P.L. 111-152 implicitly authorizes the program through the appropriations. Under the statute as authorized prior to P.L. 111-152 , there was a stipulation that no eligible institution could be awarded more than one grant under this section or a grant under this section in excess of $1,000,000, This stipulation is repealed, along with the provision that funds had to be used to supplement, not supplant, other federal, state, and local public funds. | The FY2010 budget resolution (S.Con.Res. 13) included two reconciliation instructions directing the House Committee on Education and Labor to report changes in laws within their jurisdictions to reduce the deficit by $1 billion each for the period of fiscal year (FY) 2009 through FY2014. The reconciliation instructions specifically noted that $1 billion of the reduction from the House Committee on Education and Labor should be related to education. On October 7, 2009, in response to the FY2010 budget reconciliation instructions, the House Committee on Education and Labor submitted H.R. 3221 to the House Budget Committee as education-related reconciliation instructions. Certain provisions of H.R. 3221 were incorporated into H.R. 4872, the Health Care and Education Reconciliation Act of 2010 (HCERA). On March 30, 2010, President Obama signed H.R. 4872 into law (P.L. 111-152). The SAFRA Act, Title II, Part A of the law, terminates the authority under the Higher Education Act (HEA) of 1965, as amended, to make loans under the Federal Family Education Loan (FFEL) program after June 2010. The Congressional Budget Office (CBO) estimates that this will reduce mandatory spending by $29 billion over the FY2010-FY2014 period, and by $61 billion over the FY2010-FY2019 period. These savings are sufficient to achieve the $1 billion reduction in spending specified in S.Con.Res. 13, while offsetting an increase in mandatory spending as a result of expanding other HEA programs. A significant portion of the savings estimated to result from enactment of the SAFRA Act offsets additional mandatory appropriations for the Federal Pell Grant program. The SAFRA Act also makes the following changes to several HEA programs: the William D. Ford Federal Direct Loan (DL) program is amended to accommodate the termination of the FFEL program; and existing HEA programs for Historically Black Colleges and Universities (HBCUs) and other Minority-Serving Institutions and the College Access Challenge Grant (CACG) program are extended with mandatory appropriations. The law also amends the income-based repayment (IBR) plan. Overall, CBO estimates that the SAFRA Act reduces mandatory spending by $5 billion over the FY2010-FY2014 period, and by $19 billion over the FY2010-FY2019 period. Title I of the HCERA contains provisions regarding health coverage, Medicare, Medicaid, and various tax revenues. Title I, Part F amends and funds the Department of Labor's Community College and Career Training Grant Program (CCCT). This report begins with a brief legislative history of the education-related provisions in P.L. 111-152. It then identifies and describes selected amendments made to the HEA and other laws by P.L. 111-152. |
The Medicaid program covers a range of mandatory and optional health care services for low-income populations, primarily individuals with disabilities, the elderly, members of families with dependent children, and some pregnant women and children. Rehabilitation is an optional Medicaid service, meaning that states are not required to include it in their Medicaid programs. What is included as a rehabilitation service can be particularly difficult to describe, because it may encompass many medical and social service activities. Some have said that the term rehabilitation is so broad that it has become almost meaningless and these services might better be described as a catchall Medicaid service, if an "all other" category did not already exist. This broad definition of rehabilitation, coupled with limited and contradictory regulations, have had the unintended consequence of creating confusion about what can and cannot be included as Medicaid rehabilitation. States have used the rehabilitation benefit to cover many services, therapies, and treatments, and to even cover services that might be considered benefits of other state and/or federal health and human services programs. There is at least a perception that states are covering an increasing number of services that could be considered habilitative or custodial rather than rehabilitative. To address the confusion surrounding the rehabilitation benefit, clarify definitions, create a more transparent process, and ensure that the services states claim as rehabilitation actually are rehabilitative in nature, CMS issued a proposed rule on August 13, 2007. Federal law describes Medicaid rehabilitation services as "any medical or remedial services recommended by a physician or other licensed practitioner of the healing arts, within the scope of his or her practice under State law, for maximum reduction of physical or mental disability and restoration of a recipient to his best possible functional level." Rehabilitation might once only have been considered physical rehabilitation used mostly for beneficiaries who had strokes or disabling accidents. However, rehabilitation now encompasses a broader range of therapies and treatments. State Medicaid programs followed the development of additional rehabilitation therapies by using Medicaid's flexibility and the broad definition of rehabilitation to extend services to Medicaid-eligible beneficiaries beyond physical rehabilitation. Medicaid rehabilitation, as defined by states, often includes mental health and substance abuse treatment, occupational and speech therapy, and other services and treatments. Under Medicaid, rehabilitation services are delivered in a variety of settings, by a range of practitioners, and through diverse treatment models. For example, rehabilitation services are furnished in freestanding outpatient clinics, the offices of qualified independent practitioners, mobile crisis vehicles, and appropriate community settings, as defined by state Medicaid plans. Under the rehabilitation benefit, Medicaid beneficiaries are treated for mental illness, certain disabilities, substance abuse, strokes, diseases (HIV/AIDS, cancer), and other conditions. Medicaid programs cover rehabilitation treatments provided by physicians, nurses, social workers, case managers, speech therapists, recreation therapists, aides, counselors, and other health professionals. In 2006, 48 states and the District of Columbia covered rehabilitation services. Nationally, estimated Medicaid rehabilitation expenditures have increased. As shown in Table 1 , total FY2005 federal and state Medicaid expenditures reported to CMS's Medicaid Statistical Information System (MSIS) as rehabilitation services were approximately $6.4 billion. In FY1999, total state and federal rehabilitation expenditures reported by states to MSIS were approximately $3.6 billion. Between FY1999 and FY2005, federal and state Medicaid rehabilitation expenditures increased by 76.7%. In FY1999, 1.2 million beneficiaries received rehabilitation services; in FY2005, the number of beneficiaries receiving rehabilitation had increased by 36.2% to 1.6 million. Per beneficiary rehabilitation expenditures, among those receiving such services, increased by approximately 30% between FY1999 ($3,020) and FY2005 ($3,916). In comparison, overall Medicaid expenditures increased at an even more rapid rate over the same time period, rising from approximately $147 billion in FY1999 to approximately $276 billion in FY2005, approximately an 86.9% increase. The number of Medicaid beneficiaries also increased during this time period, rising by 43.1% from FY1999 (40.3 million) to FY2005 (57.7 million). During the same time period, spending per Medicaid beneficiary increased by 30.7% from $3,657 in FY1999 to $4,781 in FY2005. Although most states cover rehabilitation services, some do not show rehabilitation expenditures in their MSIS data compiled by CMS from state-reported information. There have been several attempts to clarify in statute and regulation what activities states may cover as rehabilitation services. These administrative and legislative activities strived to define how rehabilitation service benefits should be used, as well as to control or reduce states' rehabilitation service expenditures. For example, in the 1970s and 1980s, the Secretary of Health and Human Services approved 17 state plans to cover habilitative services for mentally retarded (a statutory term) individuals under the rehabilitation option. Habilitative, in contrast to rehabilitative services, are intended to help individuals acquire, retain, and improve self-help and adaptive skills, but are not intended to remove or reduce individuals' disabilities. The Secretary later withdrew approval for habilitative services, because the services were determined to not meet conditions to qualify for the rehabilitation benefit. In 1989, with passage of the Omnibus Budget Reconciliation Act of 1989 (OBRA 1989, P.L. 101-239 ), Congress intervened and permitted states that had received the Secretary's approval to continue to cover these services. Congress prohibited other states from gaining approval to cover habilitative services for mentally retarded individuals. CMS issued a state Medicaid director letter (SMDL) in June 1992 (FME-42) that provided guidance to states on using the rehabilitation option as a vehicle for providing services to mentally ill beneficiaries. This letter reiterated regulatory guidance that rehabilitation services were intended to be "medical and remedial in nature for the maximum reduction of physical or mental disability and restoration of a recipient to his best possible functional level." The letter offered examples of services that states could cover under the rehabilitation option, including basic living skills, social skills, counseling, and therapy. The SMDL also described examples of services CMS believed to fall outside of the definition of rehabilitation, including vocational training, direct personal care services, and case management (case management is covered under a separate Medicaid benefit option). In 2005, the Government Accountability Office (GAO) and Health and Human Services Office of Inspector General (HHS/OIG) issued reports that were critical of states' and CMS's practices on rehabilitation. Congressional testimony presented by CMS officials also was critical of state practices to maximize federal matching payments for rehabilitation and other Medicaid expenses. GAO's reports were critical of CMS for not issuing guidance that would clarify rules for states to follow in claiming federal financial participation (FFP) for Medicaid services, such as rehabilitation. These same GAO reports and testimony found that states increased federal matching payments for rehabilitation and other services by increasing Medicaid payments to other state government agencies—non-Medicaid human services agencies that serve Medicaid beneficiaries. In addition, HHS/OIG audits showed that states did not meet federal and state reimbursement requirements for rehabilitation services or comply with state and/or federal Medicaid rules. Even though statutory and regulatory guidance for states on claiming Medicaid rehabilitation expenditures have been inconsistent, states often receive explicit guidance on specific services that can be covered under the rehabilitation benefit when preparing and submitting state plan amendments (SPAs) to CMS's Regional and Central Offices. These CMS staff must review and approve all SPAs before a state may add or change services. Through the SPA approval process, states can receive considerable direction. SPA approvals, however, are dependent on states making changes to their Medicaid service offerings, and as long as the programs remain static, it is not necessary to seek CMS's approval. Further, CMS contends that new rehabilitation rules are needed to guide states in making changes to their rehabilitation benefit offerings; to provide states with clear, transparent, and consistent guidance; and to clarify definitions. Moreover, CMS states, a new rule is necessary to protect beneficiaries and to maintain the fiscal integrity of the Medicaid program. In August 2007, CMS issued a proposed rehabilitation services rule to more clearly define the scope of the rehabilitation benefit for states. CMS officials testified that the changes embodied in the proposed new rule were intended to clearly define allowable services that may be claimed as rehabilitative services under Medicaid. The major changes addressed in the proposed rule are outlined below. States would need to require written treatment plans from providers that describe therapeutic goals (and identify specific outcome objectives for each patient), treatments to achieve those goals, a specific time-line for treatment, and the health care provider responsible for developing the plan. Rehabilitation plans would need to provide for a process to engage the beneficiary as well as families and other responsible parties in the management of rehabilitation care. This "person-centered" approach is intended to improve transparency, help to speed recovery, and facilitate coordination with other non-Medicaid, human services programs. Rehabilitation services would need to be delivered under the direction of qualified providers who assume professional responsibility for ensuring all services are provided and are medically necessary. States that intend to continue to provide rehabilitation services would need to amend their state Medicaid plans. States also would need to include in their Medicaid plans, a description of the services offered as rehabilitation, providers delivering rehabilitation services and their qualifications (education, training, and credentials), and the reimbursement methodologies states would use to pay providers. States would need to specifically describe services that are reimbursable and their individual payment methodologies. The rule proposes to exclude FFP for services that are intrinsic elements of programs other than Medicaid. However, the rule stipulates that beneficiaries of other non-Medicaid programs may still be covered for Medicaid rehabilitation services if all Medicaid program requirements are met and the services are not the responsibility of the other, non-Medicaid, programs. For example, therapeutic foster care (TFC) is cited in the proposed rule as an example of a non-covered rehabilitation service. TFC, the rule contends, is a "model of care," not a medically necessary service. The proposed rule states that TFC is an intrinsic part of states' foster care service offerings and should be reimbursed through foster care, not Medicaid. States could receive FFP, the rule acknowledges, for other rehabilitation services delivered to Medicaid-eligible beneficiaries placed in TFC as long as the services were deemed medically necessary and described in a rehabilitation treatment plan supervised by a qualified provider. In addition, the proposed rule describes services that would not be considered rehabilitative. Services furnished through non-medical programs as benefits or administrative activities would not be considered rehabilitation under the proposed rule. The rule identifies non-Medicaid programs such as foster care, child welfare, education, child care, vocational and pre-vocational training, housing, parole and probation, juvenile justice, and public guardianship. Also, Medicaid rehabilitation would exclude room and board coverage for residents of community, home, or institutional settings, including beneficiaries residing in institutions for mental disease, such as community residential treatment facilities. Although rehabilitative services may be provided in a facility, home, or other setting, the proposed rule specifies that such care does not include room and board in an institution, community, or home setting, and thus is not an inpatient benefit. When rehabilitative services are provided in a residential setting and delivered by qualified providers, only the costs of the specific rehabilitative services would be covered under the rehabilitation benefit. The proposed rule seeks to clarify distinctions between rehabilitative and habilitative services, where rehabilitation focuses on restoration of functional level and habilitation services help people to acquire new functional abilities. Habilitation services, particularly in states approved prior to OBRA 1989, are associated with day treatment services for mentally retarded individuals (or individuals with related conditions). The proposed rule would prohibit habilitative services for states grandfathered under OBRA 1989. These states that were approved for habilitative services coverage under the clinic or rehabilitation benefits would need to transition those programs to other Medicaid authorities, such as (1) home and community-based service (HCBS) 1915(c) waiver programs or (2) the HCBS state plan option, 1915(i), established under the Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ). CMS was forbidden from taking adverse action against the 19 states that were approved to cover habilitation services until such time as the agency issued regulations that specify types of day habilitation services states may cover. CMS stipulates that with the proposed rehabilitation rule the agency has met OBRA 1989 conditions so that states that were permitted to cover habilitation under rehabilitation benefits would need to phase out those services. Estimates of the financial impact of the proposed rule vary. Some claim that CMS underestimated the impact of the rehabilitation proposed rule and other Medicaid regulations and that CMS is attempting to shift Medicaid costs to states. CMS estimated that the proposed rule would reduce federal Medicaid spending by approximately $180 million in FY2008 and $2.24 billion for the period FY2008-FY2012. In a recent estimate for the period FY2008-FY2012, the Congressional Budget Office (CBO) forecasted that federal Medicaid outlays would decrease by $1.4 billion for the five-year period. A survey of state Medicaid directors by the Majority Staff of the House Committee on Oversight and Government Reform estimated the financial impact of the rehabilitation proposed rule to be approximately $5.2 billion over five years from FY2009-FY2013. There are at least three distinct perspectives on rehabilitation policy issues: (1) the viewpoint of the federal regulatory agency, CMS, responsible for monitoring and enforcing states' compliance with federal Medicaid statutes; (2) the perspective of advocates representing children and adults who could receive Medicaid rehabilitation services; and (3) the stance of state governments and state Medicaid agencies. CMS believes there is evidence that additional guidance is needed to clarify what can and can not be claimed as rehabilitation services. CMS cites criticism from GAO and HHS/OIG. The agency also notes that through the SPA process it has discerned confusion among states about what is rehabilitation and habilitation and other issues related to rehabilitation. Further CMS claims, and as GAO also has recommended, without clarifying guidance, states could inappropriately claim excess FFP by paying for services and administrative components of other non-Medicaid state agencies that service Medicaid beneficiaries. Organizations representing individuals living with mental illness and their families, as well as child welfare and disability groups, have expressed concerns that "person-centered" care approaches, while well-intentioned, may be problematic with rehabilitation beneficiaries. These groups argue that rehabilitation therapy is often provided to individuals with serious mental health issues and these populations may be unable to be actively involved in their therapy decisions. These groups state that requirements for "person-centered" rehabilitation plans need to be more flexible when dealing with non-compliant beneficiaries, as opposed to a one-size-fits-all requirement for "person-centered" rehabilitation plans. Similarly, child welfare groups contend that requirements to engage parents in decisions about therapy for children in foster care may compound, delay, or undo therapy by returning an abused or neglected child to influences that are detrimental to the child's treatment. Organizations representing children, particularly special-needs children, are concerned that the rehabilitation proposed rule would make it more difficult for children to receive rehabilitation and related services by creating administrative barriers and restricting access by tightening the definition of rehabilitation. Advocates for special-needs children argue that the distinction between rehabilitation and habilitation is not a relevant factor in addressing children's needs for health services. Advocates say that because of early and periodic screening diagnostic and treatment (EPSDT) provisions in Medicaid, children should receive rehabilitation treatment whether it can be considered habilitation or rehabilitation. Medicaid's children's health benefits, known as the EPSDT benefits, ensure that children receive comprehensive coverage for at least categorically needy beneficiaries. According to special-needs children advocates, EPSDT coverage ensures that children receive treatment to ameliorate physical or mental conditions whether children were born with the conditions or developed them later. Similarly, other child welfare advocates indicate that it can be a much more complex judgment with children to determine when a beneficiary has lost functioning or when the child may not yet have developed certain skills or abilities in the first place. Children acquire and master skills at different times and may not be at age appropriate levels because of physical, emotional, social, or many other problems. These judgments are further compounded among special-needs children, which would include most children in foster care. Advocates for mentally retarded and developmentally disabled (MR/DD) individuals are concerned that the proposed rehabilitation regulations could reduce a key funding stream for community-based mental health services resulting in reductions in services for needy individuals, and incentives to treat MR/DD individuals in institutional settings. If MR/DD individuals and their families were unable to find suitable community-based care, the result might be increased Medicaid expenditures where the costs for institutional care might exceed community-based services. They argue that if the goal is to save money, the proposed rule could be counter-productive. Further, mental health advocates are concerned that the proposed Medicaid rehabilitation regulations requiring treatment plans to document skill recovery and lost functionality will diminish Medicaid-reimbursed services for individuals who are developing skills to cope with mental and emotional disabilities, but are not considered to have lost previously acquired skills. States are concerned that CMS's proposed rehabilitation service regulations would entail substantial new administrative and procedural burdens on states in bringing their Medicaid state plans into compliance. In addition, states claim that reductions in rehabilitation expenditures might be more costly in the long run as individuals, particularly children, would benefit from earlier interventions that might avert future, more costly care. Further, states note that Medicaid expenditures run counter to business cycles, so that when states' economic conditions deteriorate, Medicaid expenditures rise. Thus, state governors argue, as the economy contracts, federal Medicaid expenditures should not be reduced. Moreover, some states already report shortages of qualified mental health care professionals willing to participate in Medicaid. Additional administrative burdens, as well as requirements that mental health and other professionals assume responsibility for rehabilitation plans, might further reduce the supply of rehabilitation service providers. The Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA, P.L. 110-173 ) imposed a moratorium until June 30, 2008, on implementation of the rehabilitation proposed rule and other Medicaid program changes. In March 2008, the Protecting the Medicaid Safety Net Act of 2008 ( H.R. 5613 ) was introduced, which would extend until April 1, 2009, moratoria on regulations affecting Medicaid, including rehabilitation services. The House Energy and Commerce Committee sent H.R. 5613 to the full House on April 16, 2008. H.R. 5613 would require the Secretary to submit a report by July 1, 2008, to the House Energy and Commerce and the Senate Finance Committees. The Secretary's report would be required to cover three topics: (1) an outline of specific problems the rehabilitation and other Medicaid regulations were intended to correct, (2) an explanation of how the regulations would address these problems, and (3) the legal authority for the regulations. In addition, H.R. 5613 would require the Secretary to retain an independent contractor to prepare a comprehensive report by March 1, 2009, which also would be submitted to the House Energy and Commerce and the Senate Finance Committees. The independent contractor's report would describe the prevalence of the specific problems identified in the Secretary's report, identify existing strategies to address these problems, and assess the impact of the regulations on each state and the District of Columbia. In the Senate, a similar measure to H.R. 5613, the Economic Recovery in Health Care Act of 2008 ( S. 2819 ), was introduced in April. Like H.R. 5613, S. 2819 would impose a one-year moratorium on rehabilitation and other Medicaid regulations until April 1, 2009. On May 22, 2008, the Senate passed the Supplemental Appropriations Act of 2008 ( H.R. 2642 ), which contained a moratorium until April 1, 2009, on implementation of the rehabilitation regulation. H.R. 2642 was amended by the House and passed on June 19, 2008. The House amendments included moratoria for six Medicaid regulations, including rehabilitation services. In addition, H.R. 2642 retained requirements from H.R. 5613 for the Secretary to report to the House Energy and Commerce and Senate Finance Committees, and to hire an independent contractor to report on Medicaid regulation issues. On June 26, 2008, the Senate passed H.R. 2642 without changes to the House legislation, so that implementation of six Medicaid regulations, including rehabilitation services, would be delayed until April 1, 2009. H.R. 2642 also retains the requirements for the Secretary and an independent contractor to submit reports on the Medicaid regulations to the House Energy and Commerce and Senate Finance Committees. The President signed P.L. 110-252 into law on June 30, 2008. Earlier, on June 4 and 5, 2008, the Senate and House, respectively, adopted the final version of the budget resolution ( H.Rept. 110-659 accompanying S.Con.Res. 70 ). Among other provisions, the conference agreement establishes a number of deficit-neutral reserve funds and a sense of the Senate provision that would delay Medicaid administrative regulations, including Medicaid rehabilitation services. | Medicaid rehabilitation includes a full range of treatments that licensed health practitioners may recommend to reduce physical or mental disability or restore eligible beneficiaries to their best possible functional levels. Over the last seven years of available data (1999-2005), reported Medicaid expenditures for rehabilitation increased from $3.6 billion to $6.4 billion, an increase of 77%. In comparison, over the same period, total Medicaid spending increased from approximately $147.4 billion (FY1999) to $275.6 billion (FY2005), an 87% increase. Both the executive and legislative branches have addressed Medicaid rehabilitation services. For instance, in recent annual budget submissions, the Bush Administration proposed administrative changes to reduce Medicaid rehabilitation expenditures. Congressional and executive branch oversight organizations have documented inconsistent policy guidance and states' practices for claiming federal matching funds that failed to comply with Medicaid rules. The Centers for Medicare and Medicaid Services (CMS) issued a proposed rule on August 13, 2007, for Medicaid rehabilitation services. The proposed rule was intended to more clearly define for states the scope of the rehabilitation benefit and identify services that can be claimed as rehabilitation under Medicaid. CMS estimated that the proposed changes would reduce federal Medicaid expenditures by approximately $180 million in FY2008 and $2.2 billion between FY2008 and FY2012. The Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA, P.L. 110-173) imposed a moratorium until June 30, 2008, on implementation of the rehabilitation proposed rule. On May 22, 2008, the Senate passed the Supplemental Appropriations Act of 2008 (H.R. 2642), which contained a moratorium until April 1, 2009, on implementation of the rehabilitation regulations. H.R. 2642 was amended by the House and passed on June 19, 2008. The House amendments included moratoria until April 1, 2009, for six Medicaid regulations, including rehabilitation services. On June 26, 2008, the Senate passed H.R. 2642 without changes to the House legislation, so that implementation of six Medicaid regulations, including rehabilitation services, would be delayed until April 1, 2009. The President signed P.L. 110-252 into law on June 30, 2008. Earlier, on June 4 and 5, 2008, the Senate and House, respectively, adopted the final version of the budget resolution (H.Rept. 110-659 accompanying S.Con.Res. 70). The conference agreement established budget-neutral reserve funds that could be used to impose moratoria on Medicaid rules and administrative actions and also includes a sense of the Senate provision on delaying Medicaid administrative regulations including rehabilitation services. This report describes Medicaid rehabilitation services, discusses major provisions of the Medicaid rehabilitation regulation, and provides various perspectives on the rehabilitation proposed rule. This report will be updated with legislative and regulatory activity. |
The General Services Administration (GSA) manages the government's charge card program, known as SmartPay2. Through SmartPay2, agencies are able to select charge card products from contracts that GSA has negotiated with major banks. The contracts allow agencies to select different types of charge cards, depending on their needs. SmartPay2 charge card options include travel cards (for airline, hotel, and related expenses), purchase cards (for supplies and services), and fleet cards (for fuel and supplies for government vehicles). This report deals only with travel cards. The first government travel cards were introduced in the 1980s, but federal employees were not required to use them until passage of the Travel and Transportation Reform Act (TTRA) of 1998 ( P.L. 105-264 ). The TTRA mandated the use of travel cards in an effort to reduce travel costs and streamline the process of administering agency travel programs. All federal employees must now use travel cards for official business travel, unless they travel fewer than five times a year. Since enactment of the TTRA, the dollar volume of travel card transactions has increased 103%, growing from $4.39 billion in FY1999 to $8.93 billion in FY2009. The number of travel card transactions has risen 43% in the same time period, growing from 31.6 million in FY1999 to 45.3 million in FY2009. Audits conducted in the decade subsequent to the TTRA's enactment have found evidence of waste, fraud, and abuse in travel card programs at a number of agencies. According to auditors, many agencies have failed to implement adequate safeguards against card misuse. In response to these findings, Congress has held hearings and introduced legislation that would enhance travel card management and oversight. In addition, the Office of Management and Budget (OMB) has issued government-wide guidance that requires agencies to implement internal controls that are designed to minimize the risk of travel card misuse. This report begins by discussing the structure of agency travel card programs, and then discusses weaknesses in agency controls that have contributed to waste, fraud, and abuse. It then examines travel card legislation introduced or enacted in the 111 th Congress, and concludes with a discussion of potential oversight issues for the 112 th Congress. The federal travel card program is implemented by individual agencies, with the involvement of GSA and OMB. In broad terms, agencies establish and maintain their own programs, but they choose travel card services from contracts that GSA negotiates with selected banks, and their programs must conform to the government-wide guidance issued by OMB. Each agency is responsible for establishing its own travel card program. An agency, within the framework of OMB guidance and federal travel regulations, establishes internal policies and procedures for travel card use and management, issues travel cards to its employees, and handles billing and payment issues for agency travel card accounts. Two levels of supervision generally exist within an agency's travel card program. Individual cardholders are assigned to an approving official (AO). The AO is considered the "first line of defense" against card misuse, and agency policies often require the AO to ensure that all purchases comply with statutes, regulations, and agency policies. To that end, an AO may be responsible for reviewing travel requests and approving travel vouchers submitted by the traveler after the trip is completed. Each agency also appoints an agency program coordinator (APC) to serve as the agency's liaison to the bank and to GSA. Some agencies have APCs for major components or regional offices, in which case one APC is chosen to serve as the agency's lead APC. The APCs are also usually responsible for agency-wide activities, such as activating and deactivating travel cards, monitoring account activity, managing delinquencies, and ensuring that officials and cardholders receive proper training. GSA has two primary responsibilities. The first is to negotiate and administer contracts with card vendors on behalf of the government. Since November 2008, agency purchase card programs have been operating under GSA's SmartPay2 initiative. SmartPay2 permits agencies to select a range of credit card products from four banks with which GSA has negotiated contracts. These contracts establish the prices, terms, and conditions for credit card products and services offered by each bank. Travel card services include both individually and centrally billed accounts. Centrally billed accounts are held by the agency, and are used primarily to purchase transportation services, such as airline tickets. When a travel request has been approved, the agency charges the ticket to its central account and reimburses the bank directly for the cost. Individually billed accounts, by contrast, are held by cardholders, and are generally used to pay for lodging, rental cars, and other expenses, while on official travel. The bank sends the credit card bill directly to the cardholder, who claims reimbursement for non-transportation expenses from the agency. There is a key contractual distinction between the two types of accounts: agencies are liable for charges to centrally billed accounts, while cardholders are liable for charges made to individually billed accounts. GSA is also responsible for publishing the Federal Travel Regulation (FTR), which implements statutory requirements and executive branch policies for travel by federal civilian employees. The Joint Federal Travel Regulation (JFTR) applies to members of the Uniformed Services: the Army, Navy, Air Force, Coast Guard, National Oceanic and Atmospheric Administration Corps, and United States Public Health Service. The JFTR is promulgated by the Per Diem, Travel, and Transportation Allowance Committee, which is chartered under the Department of Defense (DOD). OMB issues charge card management guidance that all agencies must follow. This guidance, located in Appendix B of OMB Circular A-123, establishes agencies' responsibilities for implementing their purchase, travel, and fleet card programs. Chapter 4 of Appendix B identifies the responsibilities of charge card managers in developing and implementing risk management controls, policies, and practices (often referred to collectively as "internal controls") that mitigate the potential for charge card misuse. Agency charge card managers must ensure that cardholder statements and account activity reports are reviewed to monitor delinquency and misuse; employees are asked about questionable or suspicious transactions; payments are timely, accurate, and appropriate; disciplinary actions are initiated when cardholders misuse their cards; ATM cash withdrawals are reviewed for reasonableness and association with official travel; and appropriate training is provided for cardholders, approving officials, and other relevant staff. Chapter 4 also identifies administrative and disciplinary actions that may be imposed for charge card misuse, such as deactivation of employee accounts, and it requires managers to refer suspected cases of fraud to the agency's Office of Inspector General (IG) or the Department of Justice. To address delinquency in travel card programs, agencies are required to have split disbursement and salary offset procedures in place for individually billed accounts. Split disbursement is the process by which an agency divides a travel voucher reimbursement between the charge card vendor and the cardholder, sending each party the amount it is owed. Salary offset is the process by which an agency deducts from an employee's payroll disbursement the amount of an undisputed, delinquent travel card amount, on behalf of the charge card vendor. Chapter 2 of Circular A-123 provides OMB with oversight tools by requiring agencies to submit each year a charge card management plan that details their efforts to implement and maintain effective internal controls and minimize the risk of card misuse and payment delinquency. Delinquent payments to charge card vendors are costly to the government in two ways. First, the government must pay late fees for delinquent payments to centrally billed accounts. (Individual cardholders are responsible for paying late fees on individually billed accounts.) Second, the government loses rebate opportunities when payments are late. Agencies receive rebates from charge card vendors based on volume and timeliness of payments for both central and individually billed accounts, so late payments to either type of account reduces the amount of rebate funds earned. In an effort to monitor and reduce delinquent payments, Chapter 6 of Circular A-123 requires agencies subject to the Chief Financial Officers (CFO) Act of 1990, and the Department of Homeland Security, to report to OMB the percentage of delinquent individual and centrally billed accounts each month. In addition, agencies must assess the credit worthiness of all new applicants for individually billed travel cards prior to issuing a card. Based on an applicant's credit scores, agencies may reduce the dollar limit for the card, issue a pre-paid card that automatically restricts dollar amounts and types of transactions allowed, or restrict the use of the card at ATMs. GAO and IG audits of agency travel card programs have attracted congressional attention with their revelations of waste, fraud, and abuse. Audits have revealed that employees in a wide range of agencies have used their travel cards to purchase items or services for their personal use, and travel in premium-class accommodations without authorization. Audits have also found that agencies have failed to ensure that they claim reimbursement for unused airline tickets, or that their travel card invoices are paid in a timely manner. These findings indicate systemic weaknesses in agency travel card management policies and practices that cost the government millions of dollars annually. The following paragraphs discuss some of the weaknesses identified in audit reports published between FY2003 and FY2009. While these reports are the best available source of information about problems with agency travel card programs, most of them examine individual agencies, so the extent to which these weaknesses are shared with other agencies is not known. In addition, without follow-up audits, it is not known how many of these weaknesses have been partially or wholly resolved. As noted previously, OMB guidance requires agencies to monitor employee travel card activity for improper or unauthorized transactions. Audits of agency travel card programs, however, have identified egregious examples of fraudulent and abusive purchases at many agencies. Among the many examples of travel card misuse cited by auditors are a Federal Aviation Administration employee who charged $3,700 for laser eye surgery to his travel card, a DOD employee who requested and received reimbursements for 13 airline tickets totaling almost $10,000 that he did not purchase, and a Department of State employee who took an unauthorized trip to Hawaii on a first-class ticket. One of the primary reasons these types of fraudulent and abusive transactions occur is ineffective monitoring of cardholder transactions. Each cardholder is assigned to an approving official who is supposed to review their monthly statements and identify questionable or unauthorized transactions. This supervisory review is considered the first line of defense against card misuse, and when it is not done consistently or thoroughly, the likelihood that fraud or abuse might occur undetected increases. An audit of the Department of Housing and Urban Development's travel program, for example, found that 6.3% of all travel card purchases were improper—a consequence "largely due" to inconsistent transaction monitoring by approving officials. Approving officials, some note, have other workload requirements that compete with travel card review duties and limit the amount of time spent examining cardholder statements. Software to identify potentially fraudulent charges is available and could reduce the time administrating officers spend reviewing cardholder statements. Another tool for preventing card misuse is to block charges from certain merchant categories. It is possible for card vendors to block charges made at certain businesses, such as massage parlors, pawn shops, and escort services. While some agencies have declared merchant blocks to be a best-practice and utilized it extensively, other agencies have not. An audit of the Department of Transportation found that it had requested blocks on 46 merchant categories, as compared to DOD and Education, which had both requested blocks on over 200 merchant categories. Federal civilian and military travelers are required to purchase airline tickets from air carriers with which GSA has negotiated contracts, with limited exceptions. Tickets purchased under these contracts are fully refundable, and agencies are authorized to recover payments made to contract carriers for tickets they purchased but did not use. Because airline tickets are purchased through a centrally billed account rather than by individual cardholders, the agency is responsible for submitting the refund request. Agencies are therefore expected to have in place adequate policies for identifying unused tickets and initiating the refund process. Audits conducted within the past five years have found that some agencies have not independently determined whether tickets have been used; rather, they have relied on travelers to notify the travel office when tickets were unused. This means that if a traveler fails to provide notification of an unused or partially used ticket, then the agency would not know to claim a refund. This has proved to be a costly weakness. A GAO audit of the travel program at the Department of Defense found that over a period of seven years, DOD may have purchased more than $100 million in airline tickets that were not used and had not been processed for refunds, largely due to the want of traveler notification. Similarly, a GAO audit of the Department of State's centrally billed travel account concluded that over an 18-month period, the department had failed to request reimbursement for $6 million in unused airline tickets, also due to a breakdown in traveler notification. It is not known how many other agencies lack an independent method for identifying unused tickets, or the total cost to the government of lost refunds. Under the terms of their travel card contracts, agencies receive rebates from card vendors based on the dollar volume of their charge card transactions and their payment performance. Generally, the higher the net dollar volume of transactions, and the quicker the agencies and individual cardholders make their payments, the greater the rebates earned by the agencies. When centrally or individually billed accounts are delinquent—outstanding for more than 60 days—agency rebates are reduced. When payments on individual accounts are more than 180 days late, the charges are usually written off as bad debt by the card vendors, which also reduces agency rebates. According to GSA, federal agencies received approximately $255 million in rebates in FY2009 for purchases made with all types of government credit cards, including travel cards. Delinquencies, however, prevent the government from earning the maximum potential rebates. The most recent data available from the Office of Management and Budget at the time this report was published showed that in September 2010, the government-wide delinquency rates for centrally billed accounts stood at 3.10%, up from 2.06% in January 2010. The September 2010 rate is a marked improvement from January 2009, however, when the government-wide delinquency rate for centrally billed accounts stood at 19.23%, with four agencies reporting delinquency rates above 10.0%—DOD (19.92%), the National Aeronautic and Space Administration (NASA, 15.77%), the Agency for International Development (AID, 14.02%), the U.S. Department of Agriculture (USDA, 10.09%). The September 2010 data include only one agency with a delinquency rate close to 10.0%, the Department of Labor (DOL) at 9.80%. Indeed, the highest reported delinquency rate after DOL was 1.82% (the Department of Justice), and 17 agencies reported rates of 0.00%, including USDA and NASA. The government-wide individually billed account delinquency rate increased from September 2009 (1.97%) to September 2010 (2.37%). This was not a steady increase: the government-wide rate more than doubled between July 2009 and February 2010, before being cut in half again by July 2010. This fluctuation reflects in part the instability of individually billed delinquency rates at four agencies that have historically had some of the highest rates in the government—HUD, DOD, VA, and USDA. It is not clear, however, why their rates are fluctuating. Table 1 shows the travel card delinquency rates for individually billed accounts, from September 2009 through September 2010, for HUD, DOD, VA, and USDA, and the government-wide rate for that same period. Auditors have identified some of the causes of travel card account delinquency. Centrally billed accounts may become delinquent when an agency deducts potentially fraudulent charges from its payments without following the dispute process established in their travel card contracts. When an agency fails to properly dispute the charges it deducts, then the card vendor considers the payment incomplete, and the agency's rebate amount is reduced. However, when an agency notifies the card vendor that it is disputing part of its invoice, the agency is granted time to investigate the potentially fraudulent charges without causing the account to be considered delinquent. Payments to individually billed accounts are the responsibility of cardholders, and audits have found that workforce demographics influence delinquency rates: employees with higher pay and more years of work experience are more likely to pay their bills on time, while younger employees and those at lower pay rates are more likely to be delinquent. There also appears to be a link between travel card abuse and delinquency: agency employees who misuse their cards are more likely to have delinquent accounts. There are no publicly available data on the dollar value of potential rebates the government has lost due to account delinquencies, although it is estimated that delinquent accounts have cost individual agencies millions of dollars in lost rebates. The FTR mandates use of coach-class accommodations for both domestic and international travel, with a limited number of exceptions for the use of premium-class accommodations. The FTR identifies two types of premium class accommodations: first-class, which is generally the highest class of accommodation offered by airlines, in both cost and amenities, and business-class, which is above coach-class but below first-class. First-class accommodations may be used only when no coach or business-class accommodations are available, it is necessary to accommodate a disability, or when "exceptional" security circumstances require it. Business-class may be used under the same circumstances as first-class, but also when coach-class accommodations are available but unsanitary, the use of business-class accommodations results in overall cost-savings, when a non-federal source is paying for the ticket, when "required because of agency mission," or when the scheduled flight time, including stopovers and change of planes, is more than 14 hours, and the destination is outside of the continental United States. Some agencies failed to ensure that premium-class accommodations were used only when justified by the FTR, which may have increased the government's travel costs by tens of millions to hundreds of millions of dollars. An audit of the Department of State's centrally billed travel accounts, which are used to purchase transportation services for State Department employees and for employees of other foreign affairs agencies, found that nearly half of all airline tickets purchased were for premium-class travel. Moreover, auditors estimated that two-thirds of those premium-class tickets were either not justified by the circumstances, not authorized by the department, or both. Poor oversight resulted in numerous violations of the FTR and departmental travel regulations. The audit found, for example, that travelers signed their own upgrades, approved their own travel, or had a subordinate authorize premium-class accommodations. In addition, auditors determined that many executives used premium-class repeatedly on trips that were less than 14 hours, and diplomatic couriers used premium-class accommodations even when they were not transporting classified materials (which could have justified first-class or business-class travel on security grounds). The cumulative cost of these abuses may run into the millions of dollars, given that the Department of State spent nearly $140 million on premium-class travel during the audit period, and the cost of a premium-class ticket can be two to three times that of a coach-class ticket. A 2003 audit preformed by GAO identified similar weaknesses at DOD, where 72% of premium-class ticket purchases over a two-year period were found to be unauthorized and 73% were not justified. Thus, roughly $90 million of the $123 million in premium-class tickets purchased by DOD during those two years were not authorized, not justified, or both. One of the key internal control weaknesses identified by GAO was oversight: DOD "performed little or no monitoring" of premium-class travel. The 111 th Congress addressed charge cards generally, and travel cards specifically, through legislation. Section 738 of the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ) required agencies to evaluate the credit worthiness of an individual before issuing the individual a government travel card, and agencies were not permitted issue a government travel card if the individual either lacks a credit history or has an "unsatisfactory" credit history. It further required agencies to establish guidelines and procedures for disciplinary actions to be taken against agency personnel for improper, fraudulent, or abusive use of government charge cards. Both of these requirements were enacted in previous appropriations legislation, but had to be enacted for FY2010 because appropriations language is generally considered in effect only for the fiscal year of the appropriations act, unless language in the act specifies otherwise. The Government Charge Card Abuse Prevention Act of 2009 was introduced by Representative Joe Horn ( H.R. 2189 ) and Senator Charles Grassley ( S. 942 ) on April 30, 2009. The legislation included provisions applicable to purchase cards and travel cards. Section 3 would have required agencies to implement a series of internal controls over their individually billed accounts, including policies that ensured they maintain records of cardholder names and credit limits; periodically review each cardholder's need for a travel card; monitor and record rebates and refunds; provide adequate training on travel card policies and procedures; evaluate the creditworthiness of travel card applicants and use that information to determine whether a card should be issued; utilize effective systems, techniques, and technologies to prevent and identify card misuse; and close travel card accounts of employees that have left their agencies. Section 3 would also have required agencies to have policies in place that identify the penalties that could be applied to employees who misuse their travel cards, and to report semiannually to OMB on violations of travel card policies that have occurred and the actions taken by the agency in response to those violations. Section 3 also would have placed requirements on agency inspectors general (IGs). It would have required agency IGs to periodically assess agency travel card controls to identify the risk of illegal, improper, or erroneous travel charges and payments; periodically audit travel card transactions to identify potentially illegal, improper, or erroneous uses of travel cards; report audit findings to the agency head; and report to OMB, who would in turn report to Congress and the Comptroller General, about agency implementation of audit recommendations. Section 4 would have required agencies to (1) review travel vouchers to ensure they do not reimburse employees for purchases made through the centrally billed account; (2) dispute unallowable and erroneous charges and track disputed charges until they are resolved; and (3) submit requests for refunds for unused tickets and track refund requests until they are resolved. If enacted, the act would have addressed some of the weaknesses that auditors have identified in agency travel card programs. In particular, the required internal controls for centrally billed accounts were designed to improve the capacity of agencies to obtain refunds for unused tickets, dispute improper charges, and avoid reimbursing employees for charges which they did not incur. Proponents argue that these requirements would save the government tens of millions of dollars annually. In addition, the act would likely have expanded the role of IGs in travel card oversight by requiring them to audit agency travel card programs. This could have resulted in a significant increase in audit activity for programs which have been audited relatively infrequently, if at all. As a consequence of increased audit activity, agency managers, OMB, and Congress would arguably have had more information available for assessing the adequacy of agency travel card controls and determining the scope and nature of program weaknesses. The language of the bill, however, would have left it to the discretion of agency IGs to determine how often to conduct the audits, only requiring that audits be performed "periodically." The availability of information may therefore have varied widely among agencies, if, for example, some IGs audited their programs annually, while others did so only once every five years. While the act would have required agencies to implement a number of internal controls, transaction monitoring by approving officials was not specifically identified as one of them. Strengthening agency internal controls over transaction monitoring may be one of the most effective ways to reduce the risk of fraud, because, as noted earlier, auditors have found travel card misuse is often linked to poor transaction monitoring by approving officials. Congressional oversight of agency travel card programs might be hindered by the lack of current, comprehensive information on program weaknesses. Auditors have identified tens of millions of dollars of wasteful, fraudulent, and abusive travel card transactions; but these audit reports have examined a limited number of agencies and many are several years old. In addition, OMB does not report certain information that might be useful in assessing the costs of travel card waste, fraud, and abuse, such as the amounts of potential rebates agencies fail to earn. Without access to more timely and comprehensive information, Congress may not know the extent of the problems discussed in this report, or their causes. Key questions that cannot be fully answered without additional information include the following: Why do some agencies have such high delinquency rates? How many millions of dollars in rebates are lost each year due to delinquent payments? How widespread is the abuse of premium travel? How often do agencies fail to detect fraudulent travel card transactions, and at what cost to the government? One option for improving the travel card program information available to Congress might be to require GAO, agency IGs, or a combination of both, to conduct additional audits of agency travel card programs. Audits might be requested for every agency, as the Government Charge Card Abuse Prevention Act proposes, or only for agencies with higher-risk travel card programs—those with the highest dollar volume; the highest delinquency rates; or previous audit findings that indicate significant levels of waste, fraud, or abuse. Audits of the 10 largest travel card programs, for example, would encompass approximately 90% of federal travel card dollars spent annually. Congress might also require GAO and agency IGs to perform follow-up audits to determine the extent to which agencies had implemented the recommendations from the initial audit. Another option would be to require OMB to collect certain travel card data and report them to Congress. Information on potential and actual rebates earned, broken down by agency and by card type (travel, purchase, fleet, or integrated) is not currently available, for example, but might be useful in identifying agencies that are failing to maximize rebate opportunities. | Since the enactment of the Travel and Transportation Reform Act (TTRA) of 1998 (P.L. 105-264), which required federal employees to use travel charge cards to pay for the expenses of official government travel, the dollar volume of travel card transactions has increased significantly, growing from $4.39 billion in FY1999 to $8.93 billion in FY2009. While the purpose of mandating the use of travel cards was to reduce costs and improve managerial oversight of employee travel expenditures, audits of agency travel card programs conducted since the enactment of the TTRA have found varying degrees of waste, fraud, and abuse at a number of agencies. These findings indicated systemic weaknesses in agency travel card management policies and practices—collectively referred to as internal controls—that cost the government millions of dollars annually. Among some of the more egregious examples of card misuse identified by auditors are a Federal Aviation Administration employee who charged $3,700 for laser eye surgery to his travel card, a Department of Defense employee who requested and received reimbursements for 13 airline tickets totaling almost $10,000 that he did not purchase, and a Department of State employee who took an unauthorized trip to Hawaii on a first-class ticket. Auditors also determined that certain agencies have not collected reimbursement for millions of dollars worth of unused airline tickets, have repeatedly failed to pay their travel card invoices in a timely manner, and have permitted or failed to prevent abuse of premium-class travel privileges. In response to these findings, Congress has held hearings and introduced legislation that would enhance travel card management and oversight. In addition, the Office of Management and Budget (OMB) has issued government-wide guidance that requires agencies to implement internal controls that are designed to minimize the risk of travel card misuse. This report begins by discussing the structure of agency travel card programs, and then discusses weaknesses in agency controls that have contributed to waste, fraud, and abuse. It then examines relevant legislation introduced or enacted in the 111th Congress, including the Government Charge Card Abuse Prevention Act of 2009 (H.R. 2189 and S. 942), and concludes with a discussion of potential oversight issues for the 112th Congress. This report will be updated as events warrant. |
The 111 th Congress continues to take a strong interest in the health of the U.S. research and development (R&D) enterprise and in providing sustained support for federal R&D activities. The United States government supports a broad range of scientific and engineering research and development. Its purposes include addressing specific concerns such as national defense, health, safety, the environment, and energy security; advancing knowledge generally; developing the scientific and engineering workforce; and strengthening U.S. innovation and competitiveness in the global economy. Most of the R&D funded by the federal government is performed in support of the unique missions of the funding agencies. The federal government has played an important role in supporting R&D efforts that have led to scientific breakthroughs and new technologies, from jet aircraft and the Internet to communications satellites and defenses against disease. In May 2009, President Obama requested $147.620 billion for R&D in FY2010, a 0.4% increase over the enacted FY2009 R&D funding level of $147.065 billion (est.) (not including FY2009 R&D funding provided under the American Recovery and Reinvestment Act ( P.L. 111-5 )). According to the Obama Administration, preliminary allocations of R&D funding provided under P.L. 111-5 brings total FY2009 R&D funding to $165.400 billion. The President's proposed FY2010 R&D funding included an emphasis on increasing funding for the physical sciences and engineering, an effort consistent with the intent of the America COMPETES Act ( P.L. 110-69 ) and President Bush's American Competitiveness Initiative (ACI). President Obama would have achieved this objective largely through increased funding for the Department of Energy Office of Science and the National Science Foundation, and, to a lesser extent, the Department of Commerce National Institute of Standards and Technology's core laboratory research. More broadly, in a speech before members of the National Academy of Sciences, President Obama put forth a goal of increasing the national investment in R&D to more than 3% of the U.S. gross domestic product (GDP). President Obama did not provide details on how this goal might be achieved (e.g., how much would be funded through increases in direct federal R&D funding or through indirect mechanisms such as the research and experimentation tax credit ), however doing so likely would require a substantial increase in public and private investment. In 2007, total U.S. R&D expenditures were $368.1 billion, or approximately 2.7% of GDP. Based on 2007 figures, reaching President Obama's 3% goal would require a 12.5% real increase in national R&D funding. Increasing direct Federal R&D funding by 12.5% in FY2010 would have required an increase of more than $18 billion above President Obama's request. In addition, advocates for increased federal R&D funding—including President Obama's science advisor, John Holdren—have raised concerns about the potential negative effects of a "boom-bust" approach to federal R&D funding, i.e., rapid growth in federal R&D funding followed by much slower growth, flat funding, or even decline. The biomedical research community experienced a variety of challenges resulting from such a circumstance following the five-year doubling of the NIH budget that was completed in FY2003. With the NIH doubling came a rapid expansion of the nation's biomedical research infrastructure (e.g., buildings, laboratories, equipment), as well as rapid growth in university faculty hiring, students pursuing biomedical degrees, and grant applications to NIH. After the doubling, however, the agency's budget fell each year in real terms from FY2004 to FY2009. Critics assert a variety of adverse effects of this boom-bust cycle, including interruptions and cancelations of promising research, declining share in the number of NIH grant proposals funded, decreased student interest in pursuing graduate studies, and reduced employment prospects for the large number of biomedical researchers with advanced degrees. According to then-NIH Director Elias Zerhouni, the adverse ramifications have been particularly acute for early- and mid-career scientists seeking a first or second grant. , Analysis of federal R&D funding is complicated by several factors, including the Obama Administration's omission of Congressionally directed spending from the FY2010 budget request and inconsistency among agencies in the reporting of R&D. Another complicating factor for FY2009 and FY2010 is the inclusion of funding for R&D, facilities, and equipment, and related activities in the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ). ARRA funds supplement funding provided to agencies in P.L. 110-329 and P.L. 111-8 . Some ARRA funding will be spent in FY2009 and the balance of these funds will be spent in subsequent years. For purposes of this report, unless otherwise noted, comparisons of FY2009 and FY2010 R&D funding do not incorporate funding provided under P.L. 111-5 . As a result of these and other factors, the R&D agency figures reported by the White House Office of Management and Budget (OMB) and White House Office of Science and Technology Policy (OSTP) (and shown in Table 1 ) may differ somewhat from the agency budget analyses that appear later in this report. Federal R&D funding can be analyzed from a variety of perspectives that provide unique insights. The authorization and appropriations process views federal R&D funding primarily from agency and program perspectives. Table 1 provides data on R&D by agency for FY2008 (actual), FY2009 (estimate), ARRA, and FY2010 (request) as reported by OMB. Under President Obama's FY2010 budget request, six federal agencies would have received 95.1% of total federal R&D funding: the Department of Defense (DOD), 54.0%; the Department of Health and Human Services (HHS) (primarily the National Institutes of Health (NIH)), 21.0%; the National Aeronautics and Space Administration (NASA), 7.7%; the Department of Energy (DOE), 7.3%; the National Science Foundation (NSF), 3.6%; and the Department of Agriculture (USDA), 1.5%. This report provides an analysis of the R&D budget requests for these agencies, as well as for the Departments of Commerce (DOC), Homeland Security, the Interior (DOI), and Transportation (DOT), and the Environmental Protection Agency (EPA). In total, these departments and agencies accounted for more than 98% of current and requested federal R&D funding. In his FY2010 budget request, President Obama stated his intention to double the federal investment in three basic-research agencies over a decade from their FY2006 levels: DOE's Office of Science (up 3.9% above the estimated FY2009 level), NSF (up 9.4%), and DOC's National Institute of Standards and Technology (NIST) laboratories and construction funds (up 1.2%). This effort essentially continued the American Competitiveness Initiative (ACI) initiated by President Bush to double physical sciences and engineering research in these agencies over ten years (FY2007-FY2016). In 2007, Congress authorized substantial R&D increases for these agencies under the America COMPETES Act ( P.L. 110-69 ), setting a more aggressive seven-year doubling course. The largest agency R&D increases in the President's FY2010 request were for NASA, $1.038 billion; the Department of Health and Human Services, $521 million (due primarily to a $436 million increase in R&D funding for NIH); and the National Science Foundation, $455 million. DOD R&D funding would have been reduced by $1.929 billion in FY2010, and USDA R&D funding would be cut by $149 million. Federal R&D funding can also be examined by the character of work (basic research, applied research, and development) it supports, and funding provided for facilities and acquisition of major R&D equipment (see Table 2 ). President Obama's FY2010 request included $30.884 billion for basic research, up $1.003 billion (3.4%) from FY2009; $28.139 billion for applied research, down $627 million (-2.2%); $84.054 billion for development, up $167 million (0.2%); and $4.543 billion for facilities and equipment, up $12 million (0.3%). Combining these perspectives, federal R&D funding can be viewed in terms of each agency's contribution to basic research, applied research, development, and facilities and equipment (see Table 3 ). The federal government is the nation's largest supporter of basic research (funding an estimated 59.0% of U.S. basic research in 2007), primarily because the private sector asserts it cannot capture an adequate return on long-term fundamental research investments. In contrast, industry funded only 15.9% of U.S. basic research in 2007. In FY2009, the Department of Health and Human Services (primarily HHS's National Institutes of Health (NIH)) accounts for more than half of all federal funding for basic research. In contrast to basic research, industry is the primary funder of applied research in the United States, accounting for an estimated 61.1% in 2007, while the federal government accounted for an estimated 31.3%. Among federal agencies, HHS is the largest funder of applied research, accounting for nearly half of all federally funded applied research in FY2009. Industry also provides the vast majority of funding for development, accounting for an estimated 83.2% in 2007, while the federal government provided an estimated 15.7%. DOD is the primary federal agency funder of development, accounting for 87.6% of total federal development funding in FY2009. Federal R&D funding can also be viewed in terms of multi-agency efforts, such as the National Nanotechnology Initiative (see " FY2010 Federal R&D Appropriations Status " section below), and presidential initiatives, such as the Bush Administration's American Competitiveness Initiative (ACI). President Obama stated that he would seek to double funding for basic research over ten years at the agencies comprising the ACI—NSF, DOE's Office of Science, and NIST. Congress established authorization levels for FY2008-FY2010 in the America COMPETES Act that would put funding for research at these agencies on track to double in approximately seven years. However, FY2008 research funding provided in the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ) for these agencies fell below these doubling targets. Figure 1 illustrates how actual, estimated and requested appropriations (for FY2006 through FY2010) compare to seven- and ten-year doubling rates. For FY2010, President Obama has proposed $12.638 billion in funding for NSF, DOE's Office of Science, and NIST's core research and facilities, an increase of $731 million (6.1%) above the FY2009 funding level of $11.907 billion. For FY2009, Congress appropriated an estimated $11.907 billion in funding for these agencies, an increase of $1.176 billion (11.0%) above the FY2008 level of $10.731 billion. The American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) also provides funding for each of the three ACI agencies totaling approximately $5.182 billion (in addition to the enacted levels in P.L. 110-329 ) (see Table 4 ). Estimated FY2008 funding for ACI research totaled $10.731 billion, an increase of approximately $485 million (4.7%) over the FY2007 ACI funding level. As of December 19, 2009, all twelve of the regular FY2010 appropriations bills have been enacted. President Obama's FY2010 budget request provided funding for three multiagency R&D initiatives. Funding for the National Nanotechnology Initiative (NNI) was requested in the amount of $1.637 billion for FY2010, $17 million (-1.0%) below the estimated FY2009 level of $1.654 billion. The overall decrease in the FY2010 NNI funding request was due to a $85 million decrease (-18.3%) in funding for DOD nanotechnology R&D compared to its estimated FY2009 funding level. This decrease was offset somewhat by increases in other agencies, including NSF (up $26 million, 6.5%); HHS, including the NIH and the Centers for Disease Control and Prevention (up $19 million, 6.1%); and DOE (up $15 million, 4.4%). President Obama requested $3.927 billion in FY2010 funding for the Networking and Information Technology Research and Development (NITRD) program, $44 million (1.1%) above the estimated FY2009 level of $3.882 billion. The requested NITRD increase was due primarily to requested funding increases for NSF (up $107 million, 10.6%) and DOE (up $48 million, 10.9%), and offset, in part, by a proposed decrease in NITRD funding for DOD (down $140 million, -10.9%). The Obama Administration proposed $2.026 billion for the Climate Change Science Program (CCSP) in FY2010, $46 million (2.3%) above the estimated FY2009 level of $1.980 billion. , Two agencies would have received the bulk of the FY2010 CCSP funding increase: NSF (up $80 million, 36.4%) and DOI's U.S. Geological Survey (up $18 million, 40.0%). The increase in these and other agencies' CCSP proposed FY2010 funding was to be offset, in part, by reductions in proposed funding for DOC's National Oceanic and Atmospheric Administration (NOAA) (down $72 million, -19.5%) and NASA (down $15 million, -1.4%). Congress supports research and development in the Department of Defense (DOD) through its Research, Development, Test, and Evaluation (RDT&E) appropriation. The appropriation primarily supports the development of the nation's future military hardware and software and the technology base upon which those products rely. Nearly all of what DOD spends on RDT&E is appropriated in Title IV of the defense appropriation bill (see Table 5 ). However, RDT&E funds are also appropriated in other parts of the bill. For example, RDT&E funds are appropriated as part of the Defense Health Program and the Chemical Agents and Munitions Destruction Program. The Defense Health Program supports the delivery of health care to DOD personnel and their families. Program funds are requested through the Operations and Maintenance appropriation. The program's RDT&E funds support Congressionally directed research in such areas as breast, prostate, and ovarian cancer and other medical conditions. The Chemical Agents and Munitions Destruction Program supports activities to destroy the U.S. inventory of lethal chemical agents and munitions to avoid future risks and costs associated with storage. Funds for this program have been requested through the Army Procurement appropriation. The Joint Improvised Explosive Device Defeat Fund (JIEDDF) also contains additional RDT&E monies. However, the fund does not contain an RDT&E line item as do the two programs mentioned above. The Joint Improvised Explosive Device Defeat Office, which now administers the fund, tracks (but does not report) the amount of funding allocated to RDT&E. The JIEDDF funding is not included in the tables below. Typically, Congress has funded each of these programs in Title VI (Other Department of Defense Programs) of the defense appropriations bill. RDT&E funds also have been requested and appropriated as part of DOD's separate funding to support efforts in what the Bush Administration had termed the Global War on Terror (GWOT), and what the Obama Administration refers to as Overseas Contingency Operations (OCO). Typically, the RDT&E funds appropriated for GWOT/OCO activities go to specified Program Elements (PEs) in Title IV. However, they are requested and accounted for separately. The Bush Administration requested these funds in separate GWOT emergency supplemental requests. The Obama Administration, while continuing to identify these funds uniquely as OCO requests, has included these funds as part of the regular budget, not as an emergency supplemental. In addition, GWOT/OCO-related requests/appropriations often include money for a number of transfer funds. These include the Iraqi Freedom Fund (IFF), the Iraqi Security Forces Fund, the Afghanistan Security Forces Fund, the Mine Resistant and Ambush Protected Vehicle Fund (MRAPVF), and, beginning in FY2010, the Pakistan Counterinsurgency Capability Fund. Congress typically makes a single appropriation into each of these funds, and authorizes the Secretary to make transfers to other accounts, including RDT&E, at his discretion. For FY2010, the Obama Administration requested $78.634 billion for DOD's baseline Title IV RDT&E, roughly $2 billion (2%) less than Congress appropriated for baseline Title IV in FY2009. The FY2010 requests for RDT&E in the Defense Health Program and the Chemical Agents and Munitions Destruction program were $613 million and $401 million, respectively. In addition, the Obama Administration requested $310 million in OCO-related RDT&E. RDT&E funding can be broken out in a couple of ways. Each of the military departments request and receive their own RDT&E funding. So, too, do various DOD agencies (e.g., the Missile Defense Agency and the Defense Advanced Research Projects Agency), collectively aggregated within the Defensewide account. RDT&E funding also can be characterized by budget activity (i.e., the type of RDT&E supported). Those budget activities designated as 6.1, 6.2, and 6.3 (basic research, applied research, and advanced development, respectively) constitute what is called DOD's Science and Technology Program (S&T) and represent the more research-oriented part of the RDT&E program. Budget activities 6.4 and 6.5 focus on the development of specific weapon systems or components (e.g., the Joint Strike Fighter or missile defense systems), for which an operational need has been determined and an acquisition program established. Budget activity 6.7 supports system improvements in existing operational systems. Budget activity 6.6 provides management support, including support for test and evaluation facilities. Congress is particularly interested in S&T funding since these funds support the development of new technologies and the underlying science. Ensuring adequate support for S&T activities is seen by some in the defense community as imperative to maintaining U.S. military superiority. This was of particular concern at a time when defense budgets and RDT&E funding were falling at the end of the Cold War. As part of its 2001 Quadrennial Review, DOD established a goal of stabilizing its baseline S&T funding (i.e., Title IV) at 3% of DOD's overall funding. Congress has embraced this goal. The FY2010 baseline S&T funding request in Title IV was $11.650 billion, about $1.837 billion (13.6%) less than what Congress appropriated for baseline S&T in Title IV in FY2009 (not counting S&T's share of the $218 million general reduction in RDT&E for revised economic assumptions). Furthermore, the S&T request for baseline Title IV was approximately 2.2% of the overall baseline DOD budget request ($533.8 billion, not counting funds for the Global War on Terror), short of the 3% goal. Within the S&T program, basic research (6.1) receives special attention, particularly by the nation's universities. DOD is not a large supporter of basic research, when compared to the National Institutes of Health or the National Science Foundation. However, over half of DOD's basic research budget is spent at universities and represents the major contribution of funds in some areas of science and technology (such as electrical engineering and material science). The FY2010 request for basic research ($1.798 billion) was roughly $44 million (2%) less than what Congress appropriated for Title IV basic research in FY2008. The House passed its version of the FY2010 defense appropriations bill ( H.R. 3326 ) on July 30. The House approved $80.2 billion for baseline Title IV RDT&E. This included $13.2 billion for S&T, of which $1.9 billion was for basic research. In addition, the House approved $1.3 billion for RDT&E in the Defense Health Program. This includes a technical revision approved on the House floor that shifted $26 million from the operations account to the RDT&E account. The House presumably approved the full $401 million request for RDT&E within the Chemical Agents and Munitions Destruction program. The committee report ( H.Rept. 111-230 ) had recommended a cut of $50 million in the program's RDT&E account. The House voted to add $50 million back into the program, although the amendment did not specify that it was added to the RDT&E account. The House approved $214 million in RDT&E for Overseas Contingency Operations, reducing the Navy's request substantially by declaring three of the line item requests as being either non-emergency-related or as being insufficiently justified. The Senate passed its version of the FY2010 defense appropriations bill on October 6. The Senate approved $78.450 billion for baseline Title IV RDTE. This included $12.319 billion for S&T, of which $1.785 billion was for basic research. In addition, the Senate approved $999 million for RDT&E in the Defense Health Program and $401 million for RDT&E in the Chemical Agents and Munitions Destruction program. The Senate also reduced the OCO RDT&E request, providing $294 million, reducing the Navy and Defensewide requests, while increasing the Air Force request (part of which was due to a transfer request by the Air Force). Major differences between the House and Senate version, in terms of dollars, included how to reallocate funds within the Army's Future Combat System program (restructured earlier this year by DOD), the Army's Aerial Common Sensor program (which the House fully supported and the Senate eliminated), the Navy's Executive Helicopter Development program (for which the House provided $400 million more than the budget request and the Senate reduced to $55 million), the Air Force's Next Generation Tanker Development program (where the House chose to provide $440 million to the Tanker Replacement Transfer Fund while the Senate provided $410 million as requested in the Air Force's Title IV account), and the Joint Strike Fighter programs of the Navy and Air Force (from which the Senate cut $293 million each). In regard to the OCO budget, the House fully funded the Navy's Manned Surveillance Systems OCO request, while the Senate zeroed the request citing insufficient justification. The final enacted FY2010 DOD appropriation bill ( P.L. 111-118 ) provided $80.2 billion for Title IV RDT&E (including the $336 million general reduction in Section 8097). Of this, roughly $14 billion went toward S&T funding, representing roughly 2.2% of the approximately $600 billion baseline DOD appropriation. The bill also provided $1.3 billion for RDT&E in the Defense Health Program and $401 million for RDT&E in the Chemical Agent and Munitions Destruction Program. The bill provided $268 million for OCO-related RDT&E. The conferees basically split the differences between the House and Senate on the Army's Future Combat System funding and Aerial Common Sensor program. The bill provided $130 million for the Executive Helicopter Development program. Funding for the next generation tanker aircraft was split, with $15 million being provided as Title IV RDT&E funds in the Air Force account, and $292 million going to the Tanker Replacement Transfer Fund, from which the Secretary may transfer funds into RDT&E, Procurement, or Operations and Maintenance as necessary, with proper notification of Congress. The conferees agreed with the House on its recommendations for Joint Strike Fighter. The conferees agreed with the Senate where it disagreed with the House on OCO RDT&E funding. In addition, the conferees added $9 million in 6.3 funding in the OCO budget for a Marine Immersive Training program (transferring it from the Navy's Operations and Maintenance account). Although the Obama Administration included its FY2010 request for Overseas Contingency Operations as part of the baseline DOD FY2010 budget, it made an FY2009 supplemental OCO request as well. The House passed its version of the bill ( H.R. 2346 ) on May 14, 2009. The Senate passed its version, S. 1054 , on May 21 ( S.Rept. 111-20 ).The conference committee reported its version on June 12, 2009. The Administration requested $810 million in Title IV RDT&E funds, the House provided $722 million, the Senate recommended $886 million, and the conference committee recommended $833 million. The funds would be used to accelerate the development, testing, and demonstration of technologies and equipment needed in Iraq and Afghanistan. In addition, the Administration requested $34 million in RDT&E funding within the Defense Health Program for research in information technologies in support of the Wounded, Ill, and Injured program. The House provided $201 million, $168 million of which is directed toward additional research in traumatic brain injuries, psychological health, and orthopedics. The Senate recommended the requested level of $34 million. The conference committee recommended $160 million. As the total figures indicate, there are some substantial differences between the House and Senate versions. For example, the House sought to zero the Manned Reconnaissance Systems request of the Navy, the Senate sought to increase the request by $26 million. The Senate also added $61 million to the Air Force request for LINK 16 Support and Sustainment, which was not in the original request or the House version. Finally, the House voted to substantially increase RDT&E funding in the Defense Health Program, while the Senate did not recommend any additional funds beyond the request. The conference committee appears to have split the differences between the House and Senate versions, nominally taking House recommendations in the Navy and Defensewide accounts and the Senate recommendations in the Army and Air Force Accounts. The conference also nominally split the difference in its recommendation for RDT&E in the Defense Health Program. The House passed the conference bill on June 16; the Senate passed it on June 18. President Obama signed the act ( P.L. 111-32 ) on June 24, 2009. On February 13, 2009, Congress also passed the American Recovery and Reinvestment Act of 2009. The final version of the bill, P.L. 111-5 , appropriated $300 million for DOD Title IV RDT&E. These funds remain available for obligation through September 20, 2010. According to the May 15, 2009 update of Recovery.gov, DOD intended to begin awarding contracts in May and complete the awards by February 2010. The Department of Homeland Security (DHS) requested $1.354 billion for R&D and related programs in FY2010, an 8% decrease from FY2009. The total included $968 million for the Directorate of Science and Technology (S&T), $366 million for the Domestic Nuclear Detection Office (DNDO), and $20 million for Research, Development, Test, and Evaluation (RDT&E) in the U.S. Coast Guard. The House bill (H.R. 2892 as passed by the House) would have provided an increase of $50 million for DNDO, for a total of $1.403 billion. The Senate bill (H.R. 2892 as passed by the Senate) would have provided an increase of $19 million for S&T, the requested amount for DNDO, and an increase of $10 million for Coast Guard RDT&E, for a total of $1.384 billion. The final bill ( P.L. 111-83 ) provided a total of $1.401 billion: $999 million for the S&T Directorate, $375 million for DNDO, and $25 million for Coast Guard RDT&E. For details, see Table 7 . The S&T Directorate is the primary DHS R&D organization. Headed by the Under Secretary for Science and Technology, it performs R&D in several laboratories of its own and funds R&D performed by the national laboratories, industry, and universities. The Administration requested a total of $968 million for the S&T Directorate for FY2010. This was 4% more than the FY2009 appropriation of $933 million. The request for the Command, Control, and Interoperability Division included a proposed increase of $15 million for next-generation cyber security R&D, largely offset by reductions in the division's other activities. A proposed increase of $25 million for the Explosives Division included $10 million to develop technologies for high-throughput screening of air cargo and $15 million to develop technologies for detection of improvised explosive devices in mass transit and at large events. A proposed reduction of $31 million for the Infrastructure and Geophysical Division included the elimination of funding for local and regional initiatives previously established or funded at congressional direction. The request for Laboratory Facilities included $36 million for the planned National Bio and Agro Defense Facility (NBAF), about the same as in FY2009. A proposed increase of $16 million for the Transition program included $5 million for the Homeland Security Studies and Analysis Institute, formerly the Homeland Security Institute, which was funded as a separate item in FY2009. The House bill would have provided $15 million to the S&T Directorate to fund developmental testing of the BioWatch Generation 3 biological agent detection system. The Administration requested these funds for the Office of Health Affairs, which the House bill would have left in control of the BioWatch program other than Generation 3 development. The House bill would also have provided $10 million in the Infrastructure and Geophysical Division for local and regional initiatives. It would have eliminated the requested funding for NBAF construction and prohibited the obligation of any funds for that purpose until the Secretary of Homeland Security receives a non-DHS assessment of the risks of conducting R&D on foot-and-mouth disease on the U.S. mainland. The Senate bill would have provided $23 million more than the request in the Infrastructure and Geophysical Division for local and regional initiatives. It would have provided the full requested funding for NBAF construction but prohibited the obligation of funds for that purpose until 90 days after DHS completes a site-specific safety and security assessment and reports to the appropriations committees on its foot-and-mouth disease research permit procedure and emergency response plan. The Senate bill would also have rescinded $7.5 million appropriated in prior years but not yet obligated. Report language directed S&T to provide quarterly briefings to the Senate Appropriations Committee on the test and evaluation status of all level 1 DHS acquisition programs (i.e., programs with total lifecycle costs of $1 billion or more). The final bill provided a total of $1,006 million for the S&T Directorate, an increase of $38 million above the request. It provided $30 million more than the request for Infrastructure and Geophysical in order to fund local and regional initiatives. It provided $32 million for NBAF construction and included requirements for safety and security assessment and reporting that were similar to those of the Senate bill with an additional provision for the National Academy of Sciences to evaluate the assessment. It rescinded $6.9 million in unobligated appropriations from prior years. The conferees expressed their expectation that S&T will be "intricately involved" in the testing and evaluation of BioWatch Generation 3, but the bill did not remove Generation 3 activities from the Office of Health Affairs. The conference report directed the S&T Directorate to brief the appropriations committees jointly with Customs and Border Protection before beginning operational field testing of SBInet and to brief the appropriations committees each quarter on the test and evaluation status of all level 1 acquisitions. Among the issues facing Congress are the S&T Directorate's priorities and how they are set; its relationships with other federal R&D organizations both inside and outside DHS; its budgeting and financial management; the allocation of its R&D resources to national laboratories, industry, and universities; and plans over the next few years to establish new university centers of excellence and terminate or merge several existing ones. The start of NBAF construction in FY2011 will likely require significant increases in Laboratory Facilities funding over the next several years. It may also result in increased congressional oversight. For construction of NBAF and decommissioning of the Plum Island Animal Disease Center (PIADC), which NBAF will replace, DHS expects to need appropriations of $687 million between FY2011 and FY2014. The estimated total cost of the NBAF project, excluding PIADC decommissioning and site-specific infrastructure and utility upgrades, increased from $451 million in December 2006 to $615 million in May 2009. Decommissioning PIADC is expected to cost $190 million. In the Department of Homeland Security Appropriations Act, 2009 ( P.L. 110-329 , Div. D, Sec. 540) Congress authorized DHS to offset NBAF construction and PIADC decommissioning costs by selling Plum Island. Site-specific costs of $110 million will be contributed in-kind by Kansas State University and its partners. Congress has been interested for several years in the role the S&T Directorate plays in testing and evaluation of large acquisition projects. The Homeland Security Act of 2002 authorizes the Secretary of Homeland Security, acting through the Under Secretary for Science and Technology, to "issue necessary regulations with respect to ... testing and evaluation activities of the Department" (P.L. 107-296, Sec. 306). Current DHS policy is that the Director of the Test and Evaluation and Standards Division (TSD) in the S&T Directorate is to establish the department's testing and evaluation policies and processes, and the Director of Operational Test and Evaluation (OT&E) is to administer those policies and processes. The Director of OT&E is also to report independently to the department-level Acquisition Review Board on the status and progress of testing and evaluation for any acquisitions the board reviews. At present, the same person serves as the Director of the TSD and the Director of OT&E. This dual role may blur the distinction between the policy-setting function and the policy-administration function. Congress may also wish to consider whether the ability of the Director of OT&E to report independently on programs in other divisions and directorates is affected by the fact that TSD conducts programs of its own. The FY2010 appropriations bills and the associated committee and conference reports emphasized the involvement of the S&T Directorate in the testing and evaluation of BioWatch Generation 3, SBInet, and other large acquisition programs. In particular, report language directed the S&T Directorate, not the Director of OT&E, to provide briefings and status reports to the appropriations committees. Statutory authority for the Homeland Security Institute (HSI) expired in April 2009. Under its general authority to establish federally funded R&D centers, the S&T Directorate has replaced HSI with the Homeland Security Studies and Analysis Institute. It has also established a new Homeland Security Systems Engineering and Development Institute. Both institutes will be funded mostly on a cost-reimbursement basis by other S&T programs and other DHS and non-DHS agencies. The FY2010 DHS congressional budget justification estimated that reimbursable obligations by the two institutes would total $122 million in FY2009 and $143 million in FY2010. The Domestic Nuclear Detection Office (DNDO) is the primary DHS organization for combating the threat of nuclear attack. It is responsible for all DHS nuclear detection research, development, testing, evaluation, acquisition, and operational support. The Administration requested a total of $366 million for DNDO for FY2010. This was a 29% reduction from the FY2009 appropriation of $514 million. The requested funding for Management and Administration and Research, Development, and Operations was approximately the same as in FY2009. No funds were requested for Systems Acquisition, which received $153 million in FY2009. According to the DHS congressional budget justification, new funds for Systems Acquisition are not needed in FY2010 because unobligated funds are available from previous fiscal years and because secretarial certification of Advanced Spectroscopic Portal (ASP) technology has been delayed. A floor amendment to the House bill added $50 million to the Research, Development, and Operations account for activities previously funded by Systems Acquisition, including $40 million for Securing the Cities. The House bill would otherwise have funded DNDO at the requested levels. The Senate bill would have provided $10 million in Systems Acquisition for Securing the Cities and $2 million less than the request for Management and Administration. It would have rescinded $8 million appropriated in prior years but not yet obligated. Otherwise, it would have provided the requested amounts for DNDO. The final bill provided a total of $383 million for DNDO, an increase of $17 million above the request. It provided $20 million for Securing the Cities in the Systems Acquisition account. It rescinded $8 million that was appropriated in prior years but not obligated. Congressional attention has focused on the testing and analysis DNDO conducted to support its decision to purchase and deploy ASPs, a type of next-generation radiation portal monitor. A requirement for secretarial certification before full-scale ASP procurement has been included in each appropriations act since FY2007 (including P.L. 111-83 ). The expected date for certification has been postponed several times. For more information, see CRS Report RL34750, The Advanced Spectroscopic Portal Program: Background and Issues for Congress , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. The global nuclear detection architecture overseen by DNDO and the relative roles of DNDO and the S&T Directorate in research, development, testing, and evaluation also remain issues of congressional interest. For more information on the global nuclear detection architecture, see CRS Report RL34574, The Global Nuclear Detection Architecture: Issues for Congress , by [author name scrubbed]. The mission of DNDO, as established by Congress in the SAFE Port Act ( P.L. 109-347 ), includes serving as the primary federal entity "to further develop, acquire, and support the deployment of an enhanced domestic system" for detection of nuclear and radiological devices and material (6 U.S.C. 592). Congress may wish to consider whether the acquisition portion of that mission is consistent with the elimination of most new funding for Systems Acquisition and the following statement in the President's Budget Appendix (pp. 560-561): In the past, DNDO acquired and deployed radiation detection technologies for DHS components, primarily the Coast Guard and the Customs and Border Patrol, or state and local users. Funding requests for radiation detection equipment will now be sought by the end users that will operate them. President Obama's FY2010 budget request included an NIH program level total of $30.696 billion, a $443 million increase (1.5%) over the FY2009 level of $30.253 billion enacted in regular appropriations. Congress provided a total of $30.946 billion for FY2010, a $693 million increase (2.3%) over the FY2009 level (see Table 8 ). In addition to the FY2009 regular appropriations, which were provided in Division F of the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ), NIH received emergency supplemental appropriations in Division A of the American Recovery and Reinvestment Act of 2009 (ARRA), also called the economic stimulus package or Recovery Act ( P.L. 111-5 ). The Recovery Act provided a total of $10.400 billion to NIH, roughly half of which was slated to be obligated in FY2009 and the remainder in FY2010. NIH's funding comes primarily from the annual appropriations bill for the Departments of Labor, Health and Human Services, and Education, and Related Agencies (Labor/HHS), with an additional amount for Superfund-related activities from the appropriations bill for the Department of the Interior, Environment, and Related Agencies (Interior/Environment). Those two bills provide NIH's discretionary budget authority. In addition, NIH receives mandatory funding of $150 million annually that is provided in the Public Health Service (PHS) Act for a special program on diabetes research, and also receives $8.2 million annually for the National Library of Medicine from a transfer within PHS. Each year since FY2002, Congress has provided that a portion of NIH's Labor/HHS appropriation be transferred to the Global Fund to Fight HIV/AIDS, Tuberculosis, and Malaria. The transfer, currently $300 million, is part of the U.S. contribution to the Global Fund. The total funding available for NIH activities, taking account of add-ons and transfers, is called the program level. Because the "NIH program level" cited in the Administration's FY2010 budget documents does not reflect the Global Fund transfer, Table 8 shows the program level both before and after the transfer. Discussions in this section refer to the program level after the transfer. In congressional action on FY2010 appropriations bills, the House passed its Labor/HHS bill on July 24, 2009 (H.R. 3293, H.Rept. 111-220), and its Interior/Environment bill on June 26 (H.R. 2996, H.Rept. 111-180). The House bills would have provided NIH with a program level total of $31.196 billion, $943 million (3.1%) more than the FY2009 level and $500 million over the request. The Senate Appropriations Committee reported its version of H.R. 3293 (Labor/HHS) on August 4, 2009 (S.Rept. 111-66), but the bill was never considered by the full Senate. The Senate passed its version of H.R. 2996 (Interior/Environment) on September 24, 2009 (S.Rept. 111-38). The Senate bills would have provided a program level total of $30.696 billion, the same amount as requested, but the distribution among NIH institutes varied somewhat from the request. From October 1, 2009, until Congress completed action on its FY2010 appropriations, NIH operated at FY2009 rates with temporary funding provided by continuing appropriations resolutions. The Interior/Environment appropriation was enacted as P.L. 111-88 on October 30, 2009 ( H.Rept. 111-316 ). The Labor/HHS appropriation was enacted on December 16, 2009, as Division D of P.L. 111-117 , the Consolidated Appropriations Act, 2010 ( H.R. 3288 , H.Rept. 111-366 ). Seven years ago, in FY2003, NIH reached the peak of its purchasing power from regular appropriations when Congress completed a five-year doubling of the NIH budget. In each year since then, NIH's buying power has declined because its annual appropriations have grown at a lower rate than the inflation rate for medical research. Congress provided NIH with annual increases in the range of 14%-15% each year from FY1999 through FY2003. From FY2004 to FY2009, increases dropped to between 1.0% and 3.2% each year (except that the FY2006 total was a 0.3% decrease), at a time when, according to NIH, the biomedical research inflation rate ranged between 3.7% and 4.6% per year. The projected changes in the Biomedical Research and Development Price Index (BRDPI) are 3.8% for FY2009 and 3.3% for FY2010. Even though in current dollars, the FY2010 NIH total is 14.3% higher than it was in FY2003, in inflation-adjusted terms (converting all amounts to constant 2009 dollars), the FY2010 funding level represents an estimated 12.7% decrease in purchasing power from the FY2003 peak. The agency's organization consists of the Office of the NIH Director and 27 institutes and centers. The Office of the Director (OD) sets overall policy for NIH and coordinates the programs and activities of all NIH components, particularly in areas of research that involve multiple institutes. The institutes and centers (collectively called ICs) focus on particular diseases, areas of human health and development, or aspects of research support. Each IC plans and manages its own research programs in coordination with the Office of the Director. As shown in Table 8 , Congress provides a separate appropriation to 24 of the 27 ICs, to OD, and to a Buildings and Facilities account. (The other three centers, not included in the table, are funded through the NIH Management Fund.) The FY2010 request proposed increases of 1.1% to 1.7% for most of the ICs. Traditionally, budget requests and enacted appropriations have treated the various institutes and centers approximately equally in percentage terms, maintaining their relative sizes over the years. That pattern is, however, subject to alteration because of special initiatives or new developments in scientific or public health needs. Some past examples have included the substantial ramping up of funds for ICs doing research on cancer, HIV/AIDS, bioterrorism, and genome sciences. In the FY2010 request, the Administration proposed initiatives in cancer research and in research on autism spectrum disorders. Support of cancer research across NIH would have increased by $268 million (4.7%) to just over $6 billion, representing the first year of a proposed eight-year plan to double funding for cancer research by FY2017. The budget of the National Cancer Institute would have increased by 3.6%. The Administration also proposed an eight-year HHS initiative to invest an additional $1 billion in autism-related activities. The FY2010 request for NIH proposed a 15.6% increase in NIH's estimated spending on autism. Another area receiving a substantial boost in the request, at 4.8% across NIH, was nanotechnology-related research. In particular, the small program in the National Institute of Environmental Health Sciences (NIEHS) on the human health impact of nanotechnology was proposed for a $9 million (60.7%) increase to $24 million, contributing to a 3.2% increase in the proposed total for NIEHS. The House and Senate Appropriations Committees rejected the proposals to set specific funding levels for particular diseases. They expressed concern over establishing a precedent of congressional funding decisions made outside of the peer review system, noting that the proposed increases for cancer and autism would have absorbed nearly two-thirds of the overall increase proposed for NIH. The House Labor/HHS bill recommended an overall increase of 3.1% for NIH, with most of the ICs receiving a 3.6% increase, in line with the biomedical research inflation rate. The Senate committee recommended the same overall increase of 1.5% as the request, but provided most of the ICs with 1.7% increases. The two committees agreed on giving proportionally larger increases to NIEHS and to the National Center for Research Resources (NCRR). The final Labor/HHS appropriation provided an overall increase of 2.3% for NIH, with most of the ICs receiving increases of 2.7%. Funding for NIEHS was increased by 4.1%, and for NCRR by 3.5%. The two accounts in which final FY2010 funding decreased compared to FY2009 were the Office of the Director and the Buildings and Facilities account. The appropriation for the Office of the Director covers a variety of cross-cutting programs in addition to funding for OD's own leadership and management operations. Aggregate funding for OD was $1,247 million in FY2009. It dropped by $64 million (-5.1%) to $1,183 million in the FY2010 request, and by $70 million (-5.6%) to $1,177 million in the conference agreement, but only because the NIH Director's Bridge Award program was not funded. In FY2009, the program received $91 million to provide short-term awards to investigators whose renewal applications had just missed the funding cutoff; in FY2010, Recovery Act funds are available for similar purposes. The other programs managed or coordinated by OD were all proposed for sustained or increased funding. The House and Senate committees agreed with the OD request for the most part, except that the House amount, and the conference agreement, provided less for the Common Fund (see below). The conferees commented in general, "Unless otherwise noted in this statement, the conferees expect NIH to follow the budget policy assumptions of the President's fiscal year 2010 budget and the accompanying explanatory materials." ( H.Rept. 111-366 , p. 1029) The President requested funding of up to $194 million for continuation of the National Children's Study (NCS), to which the House and the conferees agreed. Both committees noted that the cost projections for the NCS have increased substantially, and that NIH is extending its pilot phase, leading the Senate committee to defer specifying an amount for the study. The request included $97 million for research on medical countermeasures against nuclear, radiological, and chemical threats (the House committee noted its agreement); $5 million for a new program in bioethics research and training (the House and the conference agreement funded the initiative through the ICs rather than in OD); $5 million to expand ongoing trans-NIH stewardship and oversight activities; and a total of $181 million (up 2.6%) for several program coordination offices that work with the ICs. Also funded through the OD account is the NIH Common Fund, which supports NIH Roadmap initiatives and other trans-institute research. The NIH Roadmap for Medical Research is a set of trans-NIH research activities designed to support high-risk/high-impact research in emerging areas of science or public health priorities. For FY2010, the President requested $549 million for the Roadmap/Common Fund, up $8 million (1.5%) from FY2009. The Senate committee bill agreed with that amount, the House bill provided a lower amount of $534 million, and the conferees provided $544 million, up $3 million (0.5%) from FY2009. Some Roadmap programs that have been supported for five years are ready to transition to the ICs for continued support. The Common Fund is also supporting a number of initiatives with Recovery Act money (see further discussion below). The NIH Buildings and Facilities (B&F) program supports both the design and construction of new facilities for NIH's intramural research programs, and the repair and improvement of existing clinical, laboratory, and other facilities. The request and the Senate committee recommendation would have kept the B&F appropriation at $126 million, while the House bill and the conference agreement provided $100 million, a 20.4% decrease from FY2009. There will be additional spending for repairs and construction with the $500 million that NIH received for the purpose in the Recovery Act. Of the funds appropriated to NIH each year, about 84% go out to the extramural research community in the form of grants, contracts, and other awards. The funding supports research performed by more than 300,000 scientists and technical personnel who work at more than 3,100 universities, hospitals, medical schools, and other research institutions around the country and abroad. The primary funding mechanism for support of the full range of investigator-initiated research is competitive, peer-reviewed research project grants (RPGs). In the FY2010 request, total funding for RPGs, at $16.4 billion, represented about 53% of NIH's budget. The request proposed to support an estimated 38,042 awards, 171 more than were projected to be supported with regular FY2009 appropriations. Within that total, 9,849 awards were to be competing RPGs, 7 more than in FY2009. ("Competing" awards means new grants plus competing renewals of existing grants.) The House committee said that its funding level would provide support for 38,888 total grants, an increase of 1,105 over FY2009, including 10,739 new and competing grants, an increase of 914. The request and the House bill would each have provided inflation-adjustment increases of 2% for noncompeting continuation awards, as well as a 2.0% increase in the average cost of competing RPGs. Under the request, the "success rate" of applications receiving funding was expected to be about 21%, the same as the estimated rate for FY2009. Estimated success rates for the various ICs were expected to range from 12% to 50%, although most would have ranged from 15% to 27%. Neither the Senate committee nor the conferees commented on numbers of awards or success rates. Several NIH efforts are focused on supporting new investigators to encourage young scientists to undertake careers in research and to help them speed their transition from training to independent research. The Pathway to Independence program provides, through all the ICs, mentored grants that convert to independent RPGs; the House committee specified $102 million for the program. The NIH Director's New Innovator Award program provides first-time independent awards to especially creative investigators; the Administration planned to spend $80 million to support about 35 New Innovator Awards through the Common Fund in FY2010. In FY2009, NIH began giving special consideration during peer review to applications for research support made by Early Stage Investigators (new investigators who are within 10 years of having completed their terminal research degree or residency). For the National Research Service Awards, NIH's regular training mechanism, the request proposed an increase of $8 million (1.0%) to $798 million. The funding would have supported 17,742 Full-Time Training Positions, an increase of 101. Although NIH did not request any increases in stipends or other training-related expenses for pre- or post-doctoral fellows, the House bill provided funding for a 2% average increase in research training stipends. The Senate committee did not identify a specific training stipend increase. The conference agreement included funding for a 1% increase. Changes proposed in the request for other funding mechanisms within the NIH budget included increased support for research centers, up $40 million (1.3%) to $3.056 billion. That included support of the Clinical and Translational Science Awards (CTSAs), funded at an estimated $467 million, including $25 million from the Common Fund. Support for grants in the Other Research category was proposed to increase by $25 million (1.4%) to a total of $1.844 billion. R&D contracts would have increased by $33 million (1.0%) to $3.412 billion, including $300 million for the Global HIV/AIDS Fund. A trans-NIH program launched in FY2009, the Therapeutic Rare and Neglected Diseases Initiative (TRNDI), was to continue at $24 million. The NIH intramural research program, representing about 10% of the NIH budget, was proposed to increase by $48 million (1.5%) to a total of $3.219 billion. The request included a proposed increase of $25 million (1.8%) to a total of $1.430 billion for research management and support. As has been the case for the past five years, no new funding was requested or provided for extramural research facilities construction and renovation. The Recovery Act provided $1.0 billion for this purpose, from which awards will continue to be made in FY2010. Funding for the intramural buildings and facilities account has already been discussed. NIH and three of the other Public Health Service agencies within HHS are subject to a budget tap called the PHS Program Evaluation Set-Aside. Section 241 of the PHS Act (42 U.S.C. § 238j) authorizes the Secretary to use a portion of eligible appropriations to assess the effectiveness of federal health programs and to identify ways to improve them. The set-aside has the effect of redistributing appropriated funds for specific purposes among PHS and other HHS agencies. Section 205 of the FY2010 Labor/HHS appropriations act capped the set-aside at 2.5%, instead of the 2.4% maximum that had been in place for several years. NIH, with the largest budget among the PHS agencies, becomes the largest "donor" of program evaluation funds, and is a relatively minor recipient. By convention, budget tables such as Table 8 do not subtract the amount of the evaluation tap, or of other taps within HHS, from the agencies' appropriations. As mentioned earlier, in addition to the FY2009 regular appropriations, NIH received a total of $10.400 billion in emergency FY2009 supplemental appropriations in the economic stimulus legislation, the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). The funds were made available for obligation for two years. NIH's current implementation plans indicate that more than $5 billion will remain to be obligated in FY2010. The funding given to NIH included $8.2 billion for extramural research; $1.3 billion for non-federal research facility construction, renovation, and equipment; $500 million for NIH buildings and facilities; and $400 million for comparative effectiveness research. Activities supported with NIH's ARRA funding are being tracked on the NIH Recovery website. On a webpage about current grant funding opportunities, NIH says: "While NIH Institutes and Centers have broad flexibility to invest in many types of grant programs, they will follow the spirit of the ARRA by funding projects that will stimulate the economy, create or retain jobs, and have the potential for making scientific progress in 2 years." The agency's implementation plans for the various funding categories are available on the HHS Recovery Plans website. NIH is focusing activities on (1) funding new and recently peer reviewed, highly meritorious research grant applications that can be accomplished in two years or less; (2) giving targeted supplemental awards to current grants to push research forward; and (3) supporting a new initiative called the NIH Challenge Grants in Health and Science Research (at least $200 million to fund 200 or more grants with budgets under $500,000 per year) for research on specific topics that would benefit from significant two-year jumpstart funds. NIH received about 20,000 applications in response to the Challenge Grant announcement. Another new program called Research and Research Infrastructure "Grand Opportunities" (GO) grants supports large-scale research projects (budgets over $500,000 per year) working in areas of specific knowledge gaps, creating new technologies, or developing new approaches to multi- and interdisciplinary research teams. On September 30, 2009, President Obama announced that NIH had awarded $5 billion in ARRA funding, supporting over 12,000 grants to research institutions in every state. A White House press release highlighted examples of research in cancer, heart disease, and autism, particularly over $1 billion in research applying the technology produced by the Human Genome Project. The Administration requested $11.464 billion for Department of Energy (DOE) R&D and related programs in FY2010, including activities in three major categories: science, national security, and energy. This request was 3% above the FY2009 regular appropriation of $11.131 billion. (In addition, DOE received $10.900 billion for R&D and related programs in the Recovery Act.) The House provided a total of $11.355 billion. The Senate provided a total of $11.379 billion. The final bill provided a total of $11.143 billion. See Table 9 for details. The request for the DOE Office of Science was $4.942 billion, an increase of 3.9% from the FY2009 regular appropriation of $4.758 billion. (The Office of Science also received $1.600 billion in the Recovery Act.) The Administration intends to double the combined R&D funding of the Office of Science and two other agencies over the decade from FY2006 to FY2016. This policy continues a goal established by the Bush Administration as part of its American Competitiveness Initiative. The 3.9% increase requested for FY2010 was less than the annual growth rate required to achieve a doubling in ten years, but that comparison is complicated by the planned expenditure of Recovery Act funds in both FY2009 and FY2010. The America COMPETES Act ( P.L. 110-69 ) authorized $5.814 billion for the Office of Science in FY2010. The House provided $4.944 billion. The Senate provided $4.899 billion. The final appropriation was $4.904 billion. Within the Office of Science, the request for basic energy sciences included $68 million for the establishment of two energy innovation hubs, one focused on materials for energy storage, and the other on direct production of fuels from solar energy. The House funded one hub. The Senate funded both. The final bill funded neither. A proposed 10.8% increase for advanced scientific computing research was to support additional design research on computer architectures for science and infrastructure improvements for the Leadership Computing Facility at Argonne National Laboratory. The House provided the requested amount for advanced scientific computing; the Senate provided $10 million less; the final bill provided $15 million less. In fusion energy sciences, an increase of $11 million was requested for the U.S. share of the International Thermonuclear Experimental Reactor (ITER). Press reports continue to raise concerns about cost increases and schedule delays for ITER. A revised official estimate of cost and schedule is expected in late FY2010 or FY2011. The House provided the requested amount for fusion, plus $20 million for laser fusion research at the Naval Research Laboratory. The Senate provided $416 million. The final bill provided $426 million, including "no explicit funding" for the Naval Research Laboratory. The request for the Advanced Research Projects Agency–Energy (ARPA-E) was $10 million, down from the regular FY2009 appropriation of $15 million. This is a new program authorized by the America COMPETES Act. DOE budget documents describe its mission as overcoming long-term, high-risk technological barriers to the development of energy technologies. The bulk of the agency's funding to date is the $400 million it received in the Recovery Act. Neither the House nor the Senate provided FY2010 funding for ARPA-E. The House committee report explained that this was because Recovery Act funds remain available, and "the decision not to provide any additional funding ... does not in any way suggest a lack of commitment to this program by the Committee." The final bill also provided no new funds for ARPA-E. The request for DOE national security R&D was $3.300 billion, a 2.9% increase from $3.206 billion in FY2009. A proposed increase of $175 million for the naval reactors program included $59 million more for R&D on reactor and power plant technology, as DOE and the Navy initiate development of a successor to the Ohio-class ballistic missile submarine, and $48 million more for refueling, overhaul, and modernization of a prototype reactor plant in upstate New York. A proposed decrease of $66 million for nonproliferation and verification R&D would have resulted mostly from a shift of funding to other DOE nonproliferation activities. The request included no funds for the reliable replacement warhead program. The House provided a total of $3.307 billion, including $25 million more than the request for inertial confinement fusion and $20 million less than the request for development of environmental cleanup technologies for use at DOE defense sites. The Senate provided $3.408 billion, including $16.5 million more than the request for inertial confinement fusion, $40 million more for increased development of nuclear detection technologies, and $30 million less for naval reactor development. The final bill provided a total of $3.296 billion, including $21 million more than the request for inertial confinement fusion, $20 million more for nuclear detection technology, $58 million less for naval reactor development, and $35 million less for defense site environmental cleanup technology. The request for DOE energy R&D was $3.212 billion, up 1.9% from $3.152 billion in FY2009. This total included increases for R&D on energy efficiency, renewable energy, and the electric power grid and decreases for fossil fuel and nuclear energy R&D. The increases for energy efficiency and renewable energy R&D included $145 million more for solar energy, including $35 million for a new solar electricity innovation hub; $60 million more for vehicle energy efficiency; $98 million more for building energy efficiency, including $35 million for a new innovation hub on energy efficient building systems; and $115 million for RE-ENERGYSE, a new program for education and workforce development in energy science and engineering. These increases would have been partly offset by a $100 million decrease for fuel cell technology. The request would have more than doubled funding for the electricity delivery and energy reliability R&D program, which is being restructured to reflect the Administration's goals for grid modernization; $35 million of the proposed increase would have funded a new energy innovation hub on grid materials, devices, and systems. A proposed 30% reduction for fossil energy R&D resulted from no new funding being requested for the Clean Coal Power Initiative; the department's budget documents noted that this initiative was "already strongly supported" by the $800 million it received under the Recovery Act. This decrease would have been partly offset by the $35 million proposed for a new innovation hub on carbon capture and storage. Within nuclear energy R&D, a proposed reduction of $158 million for Nuclear Power 2010, which is to be concluded in FY2010, was partly offset by a request for $70 million to establish two new energy innovation hubs, one on modeling and simulation and one on extreme materials. The House provided $3.104 billion for energy R&D. Relative to the request, this total included increases of $70 million for nuclear energy, $45 million for vehicle energy efficiency, $45 for fuel cell technology, and $10 million for water power; decreases of $61 million for solar energy, $27 million for building energy efficiency, and $69 million for program direction and support; and no funding for RE-ENERGYSE. The Senate provided $3.072 billion. Relative to the request, this total included increases of $82 million for fossil energy and $10 million for nuclear energy; a decrease of $35 million for smart grid R&D; and a net decrease of $197 million for energy efficiency and renewable energy. The Senate's net decrease for energy efficiency and renewable energy included increases for hydrogen, wind, and water power, decreases in fuel cell technology, solar energy, and program direction and support, and no funding for RE-ENERGYSE. The final bill provided $2.944 billion. Relative to the request, this total included increases of $54 million for fossil energy and $63 million for nuclear energy, a decrease of $49 million for smart grid R&D, and a net decrease of $338 million for energy efficiency and renewable energy. The final net decrease for energy efficiency and renewable energy included increases for hydrogen, wind, and water power, decreases for fuel cell technology, solar energy, and program direction and support, and no funding for RE-ENERGYSE. The FY2010 request for the National Science Foundation (NSF) was $7.045 billion, an 8.5% increase ($554.6 million) over the FY2009 estimate of $6.490 billion (see Table 10 ). Under President Obama's Plan for Science and Innovation, the Administration proposed doubling the federal investment in three basic research agencies (NSF, DOE Office of Science, and NIST) over a period of 10 years relative to the FY2006 level. The FY2010 request is intended as an installment toward that doubling effort and is structured to build on the scientific investments funded by the 2009 Omnibus Appropriations Act and the American Recovery and Reinvestment Act of 2009 (ARRA). The Administration anticipates that the largest increases in the Plan will occur in FY2012. NSF identified several strategies in the FY2010 budget request, including expanding the scientific workforce and broadening participation from underrepresented groups and geographical regions; increasing three-fold the number of new Graduate Research Fellowships awarded annually; expanding and enhancing international partnerships and interagency collaborations; performing effectively with the highest standards of accountability; and maintaining a portfolio of basic, high-risk, and transformative research across all disciplines. The NSF Director has described transformative research as "a range of endeavors, which promise extraordinary outcomes; such as, revolutionizing entire disciplines, creating entirely new fields, or disrupting accepted theories and perspective." Several reports have recommended that funds be allocated specifically for this type of research. NSF contends that in the global environment of science and engineering, support for transformative, high-risk, high-reward research is critical to U.S. competitiveness. The FY2010 strategies parallel some of the goals contained in the Plan for Science and Innovation and are designed to promote research that will drive innovation; support the design and development of world-class facilities, instrumentation, and infrastructure; and maintain an internationally competitive workforce. Included in the FY2010 request was $5.733 billion for Research and Related Activities (R&RA), a 10.6% increase ($550.1 million) above the FY2009 estimate of $5.183 billion. R&RA funds research projects, research facilities, and education and training activities. Some in the scientific and academic communities have voiced concerns about the imbalance between support for the life sciences and the physical sciences. Research can be multidisciplinary and transformational, and often discoveries in the physical sciences lead to advances in other disciplines. The America COMPETES Act authorized increased federal research support in the physical sciences, mathematics, and engineering. The FY2010 request would have provided $1.380 billion for the Mathematical and Physical Sciences (MPS) Directorate, a 9.9% increase over the FY2009 level. The MPS portfolio supports investments in fundamental research, facilities, and instruments, and provides approximately 43% of the federal funding for basic research in mathematics and physical sciences conducted at colleges and universities. R&RA includes Integrative Activities (IA), a cross-disciplinary research and education program that is also a source of funding for the acquisition and development of research instrumentation at institutions. The FY2010 request provided $271.1 million for IA. The IA also funds Partnerships for Innovation, disaster research teams, and the Science and Technology Policy Institute. In FY2008, support for the Experimental Program to Stimulate Competitive Research (EPSCoR) was transferred from the Education and Human Resources Directorate (EHR) to IA. NSF's FY2010 request for EPSCoR was $147.1 million, which is a part of the total IA funding request. The FY2010 request supported a portfolio of three complementary strategies—research infrastructure, co-funding, and outreach—for the 27 EPSCoR jurisdictions. Approximately half of the funding for EPSCoR was to be used for a combination of new awards and research infrastructure improvement grants. The remaining half of the funding was to be used to support grants made in previous years. The NSF asserts that international research partnerships are critical to the nation in maintaining a competitive edge, addressing global issues, and capitalizing on global economic opportunities. For FY2010, the Administration requested $49.0 million for the Office of International Science and Engineering (OISE), an 11.3% increase over FY2009. The OISE manages NSF's offices in Beijing, Paris, and Tokyo that analyze and report on in-country and regional science and technology policies and developments. The OISE serves as a liaison with research institutes and foreign agencies, and facilitates coordination and implementation of NSF research and education efforts. The Office of Polar Programs (OPP) is funded in the R&RA. The OPP is the primary source of U.S. support for basic research in polar regions. The NSF also serves in a leadership capacity for several international research partnerships in the Arctic and Antarctic. Research in the Arctic and Antarctic explores the various aspects of the global earth system that affect the global environment and climate. The FY2010 request for polar research was $516.0 million, a 9.6% increase over the FY2009 estimate. Increases in OPP in FY2010 are for arctic and antarctic sciences—glacial and sea ice, terrestrial and marine ecosystems, the ocean and the atmosphere, and biology of life in the cold and dark. Priorities of the OPP in FY2010 include support for national energy goals, support for transformative research, and resupply improvements at the research stations. From FY2006 through FY2008, NSF had the responsibility for funding the operational costs of the U.S. Coast Guard's (USCG) three icebreakers that support scientific research in the polar regions—Polar Sea, Polar Star, and Healy. NSF was responsible for the operation, maintenance, and staffing of the vessels under a Memorandum of Agreement (MOA) between NSF and USCG. Beginning in FY2009, the MOA no longer covers the Polar Star. The Polar Star will be refurbished by the USCG using FY2009 funds. The NSF intends to continue to operate and maintain the Polar Sea and Healy to conduct scientific research. NSF supported several interagency R&D priorities in its FY2010 request. It is a lead supporter in the U.S. National Nanotechnology Initiative (NNI), requesting $423.0 million for nanotechnology research. Funding would support research in emerging areas of nanoscale science and technology such as new drug delivery systems, advanced materials, and more powerful computer chips. This funding included $29.9 million for research to explore potential environmental, health, and safety affects of nanotechnology. NSF's other interagency priorities in its FY2010 request included funding for the Climate Change Science Program ($299.9 million), Homeland Security ($385.5 million), and Networking and Information Technology R&D ($1.111 billion). The NSF supports a variety of centers and center programs. The FY2010 request provided $57.8 million for Science and Technology Centers, $53.6 million for Materials Research Science and Engineering Centers, $66.0 million for Engineering Research Centers, $45.2 million for Nanoscale Science and Engineering Centers, $25.8 million for Science of Learning Centers, $24.0 million for Centers for Chemical Innovation, and $17.4 million for Centers for Analysis and Synthesis. The FY2010 request for the EHR Directorate was $857.8 million, $12.5 million (1.5%) above the FY2009 estimate. The EHR portfolio is focused on, among other things, increasing the technological literacy of all citizens; preparing the next generation of science, engineering, and mathematics professionals; and closing the achievement gap of underrepresented groups in all scientific fields. Support at the various educational levels in the FY2010 request was as follows: research on learning in formal and informal settings (including precollege), $229.5 million; undergraduate education, $289.9 million; and graduate education, $181.4 million. Priorities at the precollege level included research and evaluation on education in science and engineering ($43.0 million), informal science education ($66.0 million), project and program evaluation ($12.0 million), and Discovery Research K-12 ($108.5 million). Discovery Research is structured to combine the strengths of three existing programs and encourage innovative thinking in K-12 science, technology, engineering, and mathematics education. According to NSF, its undergraduate level programs are designed to "create leverage for institutional change." Priorities at the undergraduate level included the Robert Noyce Scholarship Program ($55.0 million); Curriculum, Laboratory and Instructional Development ($87.0 million); STEM Talent Expansion Program ($31.5 million); and Advanced Technological Education ($64.0 million). The Math and Science Partnership Program (MSP), an interagency program, was proposed at $58.2 million in the FY2010 request. The NSF coordinates its MSP activities with the Department of Education and state-funded MSP sites. At the graduate level, NSF's priorities were Integrative Graduate Education and Research Traineeship ($29.9 million), Graduate Research Fellowships ($102.6 million), and the Graduate Teaching Fellows in K-12 Education ($49.0 million). Additional EHR priorities supported a portfolio of programs directed at strengthening and expanding the participation of underrepresented groups and diverse institutions in the scientific and engineering enterprise. Among the targeted programs in the FY2010 request were the Historically Black Colleges and Universities Undergraduate Program ($32.0 million), Louis Stokes Alliances for Minority Participation ($44.8 million), and Increasing the Participation and Advancement of Women in Academic Science and Engineering Careers ($1.5 million). The Major Research Equipment and Facilities Construction (MREFC) account was funded at $117.3 million in the FY2010 request, a decrease of 22.8% from the FY2009 estimate. The MREFC supports the acquisition and construction of major research facilities and equipment that extend the boundaries of science, engineering, and technology. According to NSF, it is the primary federal agency providing support for "forefront instrumentation and facilities for the academic research and education communities." NSF's first priority for funding is support for ongoing projects. Second priority is given to projects that have been approved by the National Science Board for new starts. To qualify for support, NSF required MREFC projects to have "the potential to shift the paradigm in scientific understanding and/or infrastructure technology." The FY2010 request was indicative of NSF's tighter standards and requirements for receiving funding in this account. The FY2010 request includes support for five ongoing projects: Advanced Laser Interferometer Gravitational Wave Observatory ($46.3 million), Atacama Large Millimeter Array ($42.8 million), IceCube Neutrino Observatory ($1.0 million), Advanced Technology Solar Telescope ($10.0 million), and the Ocean Observatories Initiative ($14.3 million). On February 17, 2009, President Obama signed into law P.L. 111-5 , the American Recovery and Reinvestment Act, 2009 (ARRA). The law increased NSF's FY2009 funding by approximately $3.0 billion. The NSF directed funding from ARRA to the following priorities: Support highly rated proposals that would otherwise be declined; Encourage high-risk, transformative research with the potential to grow the nation's economy; Create and sustain research jobs through new awards, graduate research fellows, and early-career researchers; Train and develop the careers of STEM undergraduates, teachers, and professional; Strengthen the nation's overall cyberinfrastructure and enhance institutional broadband access connectivity; and Meet facilities and infrastructure needs, including deferred maintenance. On May 27, 2009, the NSF announced its first major award made with funding from ARRA—for construction of the Alaska Region Research Vessel ($148.0 million). This vessel has been designed to operate as both an ice-breaker and a research ship. This dual-purpose vessel has the ability to carry as many as 500 people and to stay at sea for as many as 300 days a year. The vessel has an operational life span of 30 years. NSF states that "The three-year construction phase of the project will support 4,350 total jobs, 750 directly at the shipyard and as many as 3,600 in the broader economy." The award announcement noted that NSF intends to ensure that the vessel will be built in a U.S. shipyard. On June 18, 2009, the House Committee on Appropriations passed H.R. 2847 , the Commerce, Justice, Science, and Related Agencies Appropriations Bill, 2010 ( H.Rept. 111-149 ). The House passed the bill on June 18, 2009. The bill would have provided a total of $6.937 billion for the NSF in FY2010, $108.5 million below the request and $446.1 million above the FY2009 estimate. Included in the total for FY2010 was $5.642 billion for R&RA, $114.3 million for MREFC, and $862.9 million for the EHR. The Senate Appropriations Committee reported the bill on June 25, 2009 ( S.Rept. 111-34 ), and the Senate passed the bill on November 5, 2009. The Senate measure would have provided $6.917 billion for the NSF, $19.7 million below the House-passed bill, $128.2 million below the Administration's request, and $426.4 above the FY2009 estimate. The Senate bill would have provided $5.618 billion for R&RA, $122.3 million for the MREFC, and $857.8 million for the EHR. On December 16, 2009, the President signed into law, P.L. 111-117 , the Consolidated Appropriations Act, 2010. The omnibus act includes funding for six appropriations for FY2010, including the CJS appropriations. P.L. 111-117 provides a total of $6.927 billion for the NSF, $436.0 million above the FY2009 estimate and approximately $118.0 million below the President's request. Included in the total for NSF, is $5,617.9 million for R&RA, $872.8 for EHR, and $177.3 million for MREFC. The National Institute of Standards and Technology (NIST) is a laboratory of the Department of Commerce with a mandate to increase the competitiveness of U.S. companies through appropriate support for industrial development of precompetitive, 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 Consolidated Appropriations Act, 2010, provides $856.6 million in funding for NIST, an increase of 4.6% over the FY2009 appropriation, 1.2% below the Administration's request, 9.7% above the amount in the original House-passed bill, and 2.5% below the figure in the version of the bill passed by the Senate. Support for in-house research and development under the Scientific and Technical Research and Services (STRS) account (including the Baldrige National Quality Program) increases 9.1% to $515.9 million. This figure represents a decrease of 3.7% from the President's budget proposal, an increase of 1.0% from the initial House-passed bill and 1.0% less than the appropriation in the bill originally passed by the Senate. The Manufacturing Extension Partnership Program (MEP) will receive $124.7 million, 13.4% more than FY2009, and the same amount included in the Administration's budget and both House and Senate bills. Financing for the Technology Innovation Program (TIP) is budgeted at $69.9 million, an increase of 7.5% over the FY2009 appropriation and identical to the funding in the budget proposal and the initial House and Senate legislation. Construction support totals $147.0 million. This figure is 14.5% below FY2009, 25.7% above the President's request, almost twice that included in the original House-passed bill, and 10.3% less than the amount included in the initial Senate-passed legislation. The President's FY2010 budget requested $846.1 million in funding for NIST, an increase of 3.3% over the FY2009 appropriation. The STRS account (including the Baldrige National Quality Program) would have increased 13.3% to $534.6 million. The Manufacturing Extension Program received $124.7 million, 13.4% more than FY2009, while financing for the Technology Innovation Program was budgeted at $69.9 million, an increase of 7.5% over the previous fiscal year. Construction funding would decline 32.0% to $116.9 million. (See Table 11 .) The FY2010 Commerce, Justice, Science, and Related Agencies appropriations bill, H.R. 2847 , as originally passed by the House, provided $781.1 million for NIST, 4.6% below FY2009 funding (due primarily to decreased funding for construction) and 7.7% less than the Administration's request. Included in this figure was $510.0 million for the STRS account, 8.1% more than FY2009, but 4.6% below the budget request. As in the President's budget, the $124.7 million in support for MEP represented a 13.4% increase while funding for TIP would have increased 7.5% to $69.9 million. Construction spending totaled $76.5 million, a 55.5% decrease from FY2009 and 7.7% below what the Administration requested. The version of H.R. 2847 initially passed by the Senate would have funded NIST at $878.8 million, 7.3% above the previous fiscal year, 3.7% above the President's budget request, and 12.5% more than the House-passed bill. Support for in-house R&D under the STRS account totaled $520.3 million, an increase of 10.2% over FY2009, 2.7% less than the Administration's request, and 2.0% more than the figure in the initial House-passed version. As in the budget request and the House-passed bill, funding for MEP would increase 13.4% to $124.7 million and financing for TIP would increase 7.5% to 69.9 million. The $163.9 million for construction represented a 4.7% decrease from FY2009, but 40.2% more than the Administration's budget figure and over twice that contained in H.R. 2847 as passed by the House. No final FY2009 appropriations legislation was enacted by the close of the 110 th Congress. P.L. 110-329 , the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009, provided, in part, funding for NIST at FY2008 levels through March 6, 2009. In the 111 th Congress, P.L. 111-8 , the FY2009 Omnibus Appropriations Act, funds NIST at $819.0 million with the STRS account receiving a 7.2% increase to $472.0 million (including the Baldrige Quality Program). Support for MEP totals $110.0 million, a 22.8% increase, and financing for TIP remains constant at $65.0 million. The $172.0 million for the construction budget reflects a 7.2% increase in funding. The American Recovery and Reinvestment Act of 2009, P.L. 111-5 , provided an extra $222.0 million for the STRS account to be used for "research, competitive grants, additional research fellowships and advanced research and measurement equipment and supplies," as noted in the Joint Explanatory Statement of the Committee on Conference. An additional $360.0 million was included for construction, of which $180.0 million "shall be for the competitive construction grant program for research science buildings." The law also directed the transfer of $20.0 million from the Health Information Technology initiative to NIST to "create and test standards related to health security and interoperability in conjunction with partners at the Department of Health and Human Services," according to the Joint Statement. As part of the American Competitiveness Initiative, the Bush Administration stated its intention to double over 10 years funding for "innovation-enabling research" performed at NIST through its "core" programs (defined as internal research in the STRS account and the construction budget). To this end, the former President's FY2007 budget requested an increase of 18.3% for intramural R&D at NIST; FY2007 appropriations for these in-house programs increased 9.6%. For FY2008, the omnibus appropriations legislation provided for a small increase in the STRS account. This was in contrast to the Bush Administration's FY2008 budget which included a 15.2% increase in funding, as did the original appropriations bill, H.R. 3093 (110 th Congress), as passed by the House, while the Senate-passed version contained a 15.6% increase. The former President's FY2009 budget request proposed a 21.5% increase in support for the STRS account. Increases in the STRS account were included in the House and Senate appropriations bills during the 110 th Congress, but at amounts less than the budget request. In the 111 th Congress, the Omnibus Appropriations Act, 2009 bill provides a 7.2% increase to both the STRS account and construction, while the American Recovery and Reinvestment Act of 2009 provides significant additional funding for both initiatives. The Consolidated Appropriations Act for 2010 includes an increase of 9.1% for the STRS account while construction spending is 14.5% below the FY2009 appropriation. Continued funding for the extramural programs at NIST has been a major issue. Support for the Advanced Technology Program was uncertain particularly because opponents objected to large companies receiving research grants. Although Congress maintained (often decreasing) funding for ATP, the initial appropriation bills passed by the House since FY2002 failed to include financing for the program. In FY2006, support for the program was cut 41% and in FY2007, P.L. 110-69 replaced ATP with the Technology Innovation Program, which focuses on small and medium sized firms. The Consolidated Appropriations Act, FY2008, provided funding for this new initiative. The Bush Administration's FY2009 budget request did not include financing for TIP, while the House and Senate bills provided support similar to FY2008. The budget for the Manufacturing Extension Partnership, another extramural program administered by NIST, has also been debated for several years. The former President's FY2009 budget proposal recommended curtailing the federally funded portion of the MEP and provided $2.0 million to accomplish this objective. During the 110 th Congress, the House and Senate appropriation bills included large increases in funding for the program; the FY2009 Omnibus Appropriations Act provided a 22.8% increase in MEP financing while TIP funding remained constant. The Consolidated Appropriations Act, 2010, includes a 13.4% increase in support for MEP and a 7.5% increase in funding for TIP. For additional information, see CRS Report 95-30, The National Institute of Standards and Technology: An Appropriations Overview ; CRS Report RS22815, The Technology Innovation Program ; and CRS Report 97-104, Manufacturing Extension Partnership Program: An Overview , all by [author name scrubbed]. The National Oceanic and Atmospheric Administration (NOAA) conducts scientific research in areas such as ecosystems, climate, global climate change, weather, and water; supplies information on the oceans and atmosphere; and conserves coastal and marine organisms and environments. NOAA was created in 1970 by Reorganization Plan No. 4. The reorganization plan was designed to unify the nation's environmental activities and to provide a systematic approach for monitoring, analyzing, and protecting the environment. The National Oceanic and Atmospheric Administration's (NOAA) R&D efforts focus on three areas: climate; weather and air quality; and ocean, coastal and Great Lakes resources. For FY2010, President Obama requested $568 million in R&D funding for NOAA, a 7.0% decrease in funding from the FY2009 appropriation level of $611 million. R&D accounted for nearly 12.7% of NOAA's total FY2010 discretionary FY2010 budget request of $4.474 billion. The R&D request consisted of approximately 93% research funding and 7% development funding. About 73% of the R&D request would fund intramural programs and 27% would fund extramural programs. NOAA's administrative structure has evolved into five line offices that reflect its diverse mission including the National Ocean Service (NOS), the National Marine Fisheries Service (NMFS), the National Environmental Satellite, Data, and Information Service (NESDIS), the National Weather Service (NWS), and the Office of Oceanic and Atmospheric Research (OAR). In addition to NOAA's five line offices, Program Support (PS), a cross-cutting budget activity, includes the Office of Marine and Aviation Services (OMAO). OAR is the primary center for research and development within NOAA. OAR would have received $305.9 million for R&D which is 53.9% of the total NOAA FY2010 R&D request and 77.6% of the total OAR request. This was nearly the same as the FY2009 OAR R&D appropriation of $307.1 million. The OAR budget request supported R&D activities such as climate research, weather and air quality research, and ecosystem management. The President's budget included $60.4 million for NOS R&D, $2.1 million less than FY2009 (-3.4%), and $27.6 million for NESDIS, a decrease of approximately $0.8 million (-2.8%). NWS R&D funding would have decreased by $9.4 million to $14.3 million (-39.7%) and OMAO funding would have fallen to $104.0 million, a decrease of $35.0 million (-25.2%). The Administration request would have expanded R&D funding for NMFS to $55.4 million, an increase of $4.9 million (9.7%) ( Table 12 ). The NOAA FY2010 Budget Summary also provided information on its FY2010 R&D funding request by function: ecosystems, 32%; climate, 31%; weather and water, 14%; commerce and transportation, 1%; and mission support (22%). R&D accomplishments highlighted by NOAA included upgrading the NOAA operation prediction system; developing fishery bycatch reduction devices; predicting harmful algal blooms in the Great Lakes; integrating radar data to enhance weather forecasts and warnings; and implementing the soil moisture observational network. Research and development funding of NOAA line offices includes both R&D and non-R&D activities. Therefore, there is insufficient information in the House and Senate bills and reports and in the conference report for P.L. 111-117 to determine the precise level of R&D funding for each line office. For the purposes of this report, where specific data are not available, FY2010 R&D line office funding levels provided in Table 12 have been estimated by assuming the proportion of R&D in the 2010 request is similar to line office funding reported in House, Senate, and conference reports. Total NOAA funding also is discussed to provide a general indication of how R&D funding is likely to have fared. On June 18, 2009, the House passed the Commerce, Justice, Science, and Related Agencies (CJS) FY2010 appropriations bill which recommended funding of $4.603 billion for NOAA. This was an increase of 5.5% from the FY2009 enacted funding level of $4.365 billion and a 2.9% increase over the Administration's request of $4.474 million. On June 25, 2009, the Senate passed CJS FY2010 appropriations and recommended funding of $4.773 billion for NOAA. This represented an increase of 9.3% compared to the FY2009 enacted level and an increase of 6.7% over the Administration's request. On December, 16, 2009, the President signed the Consolidated Appropriations Act, 2010 (P.L. 111-117) that provided $4.737 billion for NOAA. This represented an increase of 8.5% compared to the FY2009 enacted level and an increase of 5.9% over the Administration's request. On February 13, 2009, the 111 th Congress passed the American Recovery and Reinvestment Act (ARRA) of 2009 ( H.R. 1 ), also referred to as the stimulus package. ARRA provided $830 million to NOAA, but only $500,000 of this funding (provided to NWS) was classified as R&D. The Administration has requested $13.709 billion for NASA R&D in FY2010. This request is a 5.6% increase over FY2009, in a total NASA budget that would increase by 5.1%. The House bill ( H.R. 2847 as passed by the House) would provide $13.161 billion. The Senate bill ( H.R. 2847 as passed by the Senate) would provide $13.714 million. For details, see Table 13 . For the past several years, budget priorities throughout NASA have been 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 ) and the NASA Authorization Act of 2008 ( P.L. 110-422 ). The Vision includes returning the space shuttle to flight status (already accomplished) then retiring it by 2010; completing the International Space Station, but discontinuing U.S. use of it after 2015; returning humans to the moon by 2020; and then sending humans to Mars and "worlds beyond." The priorities established by the Vision are now in question. It is doubtful whether the future-year spending plans provided in NASA's FY2010 budget documents can accommodate the goal of returning humans to the moon. An Administration-requested independent review of NASA's human spaceflight activities (known as the Augustine report) estimated that this goal would require an additional $3 billion per year, even with some schedule delays. The Administration requested $4.477 billion for Science in FY2010, a 0.6% decrease. Within this total, increases for Earth Science, Planetary Science, and Heliophysics were offset by a decrease for Astrophysics. In Earth Science, NASA is considering its options following the loss of the Orbital Carbon Observatory (OCO), which was launched in February 2009 but failed to reach orbit. Building a replacement for OCO is one of the options being examined, but the funding that would be required was not included in the request. The House increased Earth Science by $15 million and Astrophysics by $50 million; these increases were partly offset by transfers of administrative and construction costs to other accounts, for a net increase in Science of $19 million above the request. The Senate increased Astrophysics by $49 million and Heliophysics by $42 million; these increases were partly offset by a reallocation of unobligated balances from prior years, for a net increase in Science of $40 million above the request. The final appropriation was $4.469 billion, which was $8 million less than the request. Within this amount, increases of $45 million for Earth Science, $32 million for Heliophysics, and $13 million for Planetary Science were more than offset by transfers of administrative and construction costs to other accounts and an unallocated reduction of $59 million. The increase for Earth Science included $25 million, to be supplemented by another $25 million in prior-year unobligated funds, to initiate a replacement for the OCO. The $3.963 billion requested for Exploration in FY2010 was a 13.1% increase, as the Constellation Systems program ramps up its development of the Orion crew vehicle and Ares I launch vehicle, successors to the space shuttle. According to NASA, the FY2010 request for Constellation Systems and the accompanying funding projections for FY2011 through FY2014 are consistent with achieving an initial operating capability for Orion and Ares I (i.e., a first crewed flight) in March 2015. It is doubtful, however, whether the projected FY2010-FY2014 funding for development of the heavy-lift Ares V launch vehicle, the Altair lunar lander, and lunar surface systems is consistent with returning humans to the moon by 2020. The Augustine report found that 2017 is a more likely date for an initial operating capability and that currently projected budgets would permit a return to the moon no sooner than "well into the 2030s, if ever." The House provided $670 million less than the request for Exploration. The House committee report described this as a deferral without prejudice, in light of the ongoing Augustine review, that "should not be viewed ... as a diminution of the Committee's support for NASA's human space flight program." The Senate provided $23 million less than the request, including the full requested amount for Orion and Ares I, an increase of $75 million for Ares V, a reduction for $46 million for Advanced Capabilities, and a reallocation of $52 million in unobligated balances from prior years. The final appropriation was $3.746 billion, a reduction of $217 million from the request. This total included reductions of $39 million for Constellation Systems and $21 million for Advanced Capabilities, transfers of administrative and construction costs to other accounts, and an unallocated reduction of $52 million. The final bill renamed the Constellation Systems funding line as Human Exploration Architecture Development but prohibited NASA from terminating any aspect of the Constellation architecture or initiating any new alternative unless permitted to do so by a subsequent appropriations act. The conference report stated that the Augustine committee's report raises issues requiring thoughtful consideration by the Administration and the Congress, before the Committees on Appropriations of the House and Senate can recommend detailed funding levels.... It is premature for the conferees to advocate or initiate significant changes to the current program absent a bona fide proposal from the Administration and subsequent assessment, consideration and enactment by Congress.... It is the expressed hope of the conferees that the Administration will formulate its formal decision soon, submit its recommendations for congressional review and consideration, and budget the necessary resources.... The House bill made most NASA funds available for only one year, rather than the usual two. Approximately 10% of most of NASA's appropriations accounts would have continued to be available for two years. Funds in the new Construction of Facilities and Environmental Compliance and Remediation account would have been available for six years. The Senate bill made all NASA funds available for two years as usual. The final bill made funds for Construction and Environmental Compliance and Remediation available for six years and all other funds available for two years. The FY2010 request for research and education activities in the U.S. Department of Agriculture (USDA) was $2.738 billion, a decrease of $54.0 million (-1.9%) from the FY2009 estimate of $2.792 billion (see Table 14 ). The Agricultural Research Service (ARS) is USDA's in-house basic and applied research agency, and operates approximately 100 laboratories nationwide. The ARS laboratories focus on efficient food and fiber production, development of new products and uses for agricultural commodities, development of effective biocontrols for pest management, and support of USDA regulatory and technical assistance programs. Included in the total support for USDA in FY2010 was $1.173 billion for ARS, $33.6 million below the FY2009 estimate. In ARS, the Administration proposed a reduction of $40.0 million in funding add-ons designated by Congress for research at specific locations. The amounts from the discontinued projects were to be redirected to critical research priorities of the Administration that include genetic and genomic databases, expansion of domestic and global market opportunities, development of new varieties and hybrids of feedstocks, addressing animal health and feed efficiency, and the development of new healthier foods with decreased caloric density. Included in the FY2010 request for ARS was $20.0 million for buildings and facilities. The National Institute of Food and Agriculture (NIFA), currently the Cooperative State Research, Education, and Extension Service (CSREES), was established in Title VII, Section 7511 of the 2008 Farm Bill. The NIFA will be effective September 20, 2009, and will be responsible for developing linkages between the federal and state "components of a broad-based, national agricultural research, extension, and higher education system." NIFA distributes funds to State Agricultural Experiment Stations, State Cooperative Extension Systems, land-grant universities, and other institutions and organizations that conduct agricultural research, education, and outreach. Included in these partnerships is funding for research at 1862 land-grant institutions, 1890 historically black colleges and universities, 1994 tribal land-grant colleges, and Hispanic-serving institutions. Funding is distributed to the states through competitive awards, statutory formula funding, and special grants. The FY2010 request provided $1.320 billion for NIFA, a decrease of $32.7 million from the FY2009 estimate. The NIFA FY2010 budget included the proposed elimination of $128.0 million in Congressional add-ons. Funding for formula distribution in FY2010 to the state Agricultural Experiment Stations was $288.5 million, almost level with the FY2009 estimate. One of the primary goals of the President's FY2010 NIFA request was to expand competitive, peer-reviewed allocation of research funding. Programs are to be designed that are more responsive to critical national issues such as agricultural security, local and regional emergencies, zoonotic diseases, and pest risk management. Support was given for a competitive program directed at developing training and expanding use of web-based and other technology applications. Funding was provided for programs that improve the quality of rural life and provide stress assistance programs to individuals engaged in agriculture-related occupations. The FY2010 request proposed $201.5 million for the Agriculture and Food Research Initiative (AFRI), level funding with the FY2009 estimate. In addition to supporting fundamental and applied science in agriculture, USDA maintains that the AFRI makes a significant contribution to developing the next generation of agricultural scientists by providing graduate students with opportunities to work on research projects. A focus of these efforts is to provide increased opportunities for minority and under-served communities in agricultural science. AFRI funding is to support projects directed at developing alternative methods of biological and chemical conversion of biomass, and research on the impact of a renewable fuels industry on the economic and social dynamics of rural communities. The Administration proposed support for initiatives in agricultural genomics, emerging issues in food and agricultural security, the ecology and economics of biological invasions, and plant biotechnology. Research was proposed that moves beyond water quality issues to extend to water availability, reuse, and conservation. The FY2010 request for USDA provided $82.5 million for the Economic Research Service (ERS), $2.5 million above the FY2009 estimated level. ERS supports both economic and social science information analysis on agriculture, rural development, food and the environment. ERS collects and disseminates data concerning USDA programs and policies to various stakeholders. Funding for the National Agricultural Statistics Service (NASS) was proposed at $161.8 million in the FY2010 request, $9.8 million above FY2009. The budget includes support to improve research efforts in analyzing the impacts of bioenergy production, and to examine concerns pertaining to feedstock storage, transportation networks, and the vagaries in commodity production. Additional research areas include production and utilization of biomass materials; stocks and prices of distillers' grains; and current and proposed ethanol production plants. Funding for NASS was to allow for the restoration of the chemical use data series on major row crops; post harvest chemical use; and alternating annual fruit, nuts, and vegetable chemical use. Also, funding was provided to fully fund the first year of the 2012 Census of Agriculture's five year cycle. Data from the Census of Agriculture is to be used to measure trends and new developments in the agricultural community. In the 111 th Congress, President Obama signed into law the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) (ARRA). The law increased USDA's FY2009 funding by $28.0 billion. Included in ARRA funds for USDA was $128.0 million for ARS buildings and facilities that is characterized as funding for R&D facilities. On October 21, 2009, President Obama signed into law the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, FY2010, P.L. 111-80 , H.R. 2997. The act provides $2.981 billion for USDA research and education for FY2010, $243.8 million above the Administration's request and $189.8 million above the FY2009 estimate. The appropriation includes $1.251 billion for the ARS, $77.1 million above the request, and $1.487 billion for NIFA, $166.7 million above the Administration's request. The act provides the same level of funding for the ERS and the NASS as the Administration, $82.5 million and $161.8 million respectively. President Obama requested $745.1 million for Department of the Interior (DOI) R&D in FY2010, an estimated increase of $44.6 million (8.6%) from FY2009 funding of $700.5 million (see Table 15 ). The U.S. Geological Survey (USGS) is the primary supporter of R&D within DOI, accounting for approximately 87% of the department's total R&D appropriations. President Obama proposed $649.3 million for USGS R&D in FY2010, an increase of $37.2 million (6.1%) from the estimated FY2009 level. This increase is due largely to additional funding requested for three secretarial initiatives—Climate Impacts, A New Energy Frontier, and Changing Arctic Ecosystems—as well as for adjustments for fixed costs and inflation. In FY2009, the American Recovery and Reinvestment Act ( P.L. 111-5 ) provided an additional $140 million to USGS for R&D related activities such as repair, construction and restoration of facilities; equipment replacement and upgrades; national map activities; and other deferred-maintenance and improvement projects. USGS R&D is conducted under several activity/program areas: geographic research, geological resources, water resources, biological research, enterprise information, and global change. The President's FY2010 request included increases in each of these areas, though 83.2% of the total USGS R&D increase is in two areas, biological research and global change. USGS geographic research efforts seek to describe and interpret America's landscape by mapping the nation's terrain, monitoring changes over time, and analyzing how and why these changes have occurred. President Obama's FY2010 budget for geographic research R&D proposed a $0.8 million increase (1.7%) to $46.3 million. Funding for USGS geological resources R&D in the FY2010 request increased by $4.7 million (2.2%) to $220.5 million from its estimated FY2009 level. The Geological Resources Program assesses the availability and quality of the nation's energy and mineral resources. The Geological Resources Program researches, monitors, and assesses the landscape to understand geological processes to help distinguish natural change from those resulting from human activity. Within the earth sciences, the USGS plays a major role in important geological hazards research, including research on earthquakes and volcanoes. Enterprise Information conducts information science research to enhance the National Map and National Spatial Data infrastructure. USGS water resources R&D is focused on water availability, water quality and flood hazards. President Obama's FY2010 budget for water resources R&D proposed a $0.7 million increase (0.6%) to $124.0 million. USGS biological research efforts seek to generate and distribute scientific information that can assist in the conservation and management of the nation's biological resources. President Obama's FY2010 budget request for biological research R&D proposed an increase of $13.5 million (7.2%) to $199.3 million. The USGS Biological Research program serves as DOI's biological research arm, using the capabilities of 17 research centers and associated field stations, one technology center, and 40 cooperative research units that support research on fish, wildlife, and natural habitats. Major research initiatives are carried out by USGS scientists who collect scientific information through research, inventory, and monitoring investigations. These activities develop new methods and techniques to identify, observe, and manage fish and wildlife, including invasive species and their habitats. Global climate change R&D received the largest boost in the USGS R&D budget, rising $17.5 million (43.2%) to $58.2 million in FY2010 under President Obama's FY2010 budget request. Enterprise information R&D received a small increase in FY2010 to $1.1 million. Among the other DOI agencies, the Minerals Management Service received $44.1 million in the President's FY2010 request, an increase of $5.3 million (13.8%) over the FY2009 appropriated level. This funding level included a $4.8 million increase for the agency's Environmental Studies Program and a reduction of $900,000 through the elimination of congressionally-directed funding provided in FY2009 for the Center for Marine Resources and Environmental Technology. The National Park Service received $29.0 million in the FY2010 request, $2.5 million (9.4%) more than in FY2009. The Bureau of Reclamation received $12.9 million in the FY2010 request, an increase of $0.7 million (5.8%) over FY2009 funding. The Bureau of Land Management received $9.7 million in the FY2010 request, a decrease of $1.3 million (-11.8%) below FY2009 funding. In late October 2009, Congress completed action on the Department of the Interior, Environment, and Related Agencies Appropriations Act, 2010, ( P.L. 111-88 ) and accompanying report (H.Rept. 111-316). On October 30, 2009, President Obama signed the act into law. Within the DOI agencies, R&D funding is generally provided through accounts that include both R&D and non-R&D activities. Therefore there is insufficient information in the House and Senate bills and reports and in P.L. 111-88 to determine the precise level of R&D funding. For purposes of this report, where specific data is not available, FY2010 funding levels have been estimated based on the amounts sought by the department in its request and the proportionate funding levels provided to each DOI agency in the bills and the act, excluding items that are clearly not intended to support R&D and related activities. Using this approach, it appears that total DOI R&D funding for FY2010 is approximately $759.0 million, an increase of $58.5 million over the FY2009 funding level and $13.9 million above the President's request. The USGS, which accounts for 87% of DOI R&D funding, received an estimated $660.9 million in FY2010 R&D funding, $48.8 million over the FY2009 funding level and $11.6 million above the President's request. The Environmental Protection Agency (EPA), the regulatory agency responsible for carrying out a number of environmental pollution control laws, funds a broad portfolio of R&D activities to provide the necessary scientific tools and knowledge to support decisions relating to preventing, regulating, and abating environmental pollution. Beginning in FY2006, EPA has been funded within the "Interior, Environment, and Related Agencies" appropriations bill. Most of EPA's scientific research activities are funded within the agency's Science and Technology (S&T) appropriations account. This account is funded by a "base" appropriation and a transfer from the Hazardous Substance Superfund (Superfund) account. These transferred funds are dedicated to research on more effective methods to clean up contaminated sites. Title II of P.L. 111-88 , the Interior, Environment, and Related Agencies appropriations for FY2010 as enacted, provided $872.9 million for the EPA S&T account, including transfers from the Superfund account. The total FY2010 enacted funding for the S&T account was $56.4 million (nearly 7 %) above the FY2009 appropriation of $816.5 million. The appropriations for the EPA's S&T account included in P.L. 111-88 represents 8.5% of the total $10.290 billion included for the agency overall for FY2010. As indicated in Table 16 below, the FY2010 enacted amount was less than that recommended by the House but more than the levels recommended by the Senate and included in the President's FY2010 request for EPA's S&T account, including transfers from the Superfund account. The EPA S&T account incorporates elements of the former EPA Research and Development (R&D) account, as well as a portion of the former Salaries and Expenses, and Program Operations accounts, which had been in place until FY1996. Although the Office of Management and Budget (OMB) reports historical and projected budget authority amounts for R&D at EPA (and other federal agencies), OMB documents do not describe how these amounts explicitly relate to the requested and appropriated funding amounts for the many specific EPA program activities. EPA's most recent annual appropriations have been requested, considered, and enacted according to eight statutory appropriations accounts, which were established by Congress during the FY1996 appropriations process. Because of the differences in the scope of the activities included in these accounts, apt comparisons before and after FY1996 are difficult to identify in historical trends in funding for EPA's R&D activities. The S&T account funds research conducted by universities, foundations, and other non-federal entities with grants awarded by EPA, and research conducted by the agency at its own laboratories and facilities. These R&D activities are managed primarily by EPA's Office of Research and Development (ORD). A large portion of the S&T account funds these activities managed by ORD. However, the account also provides funding for the agency's applied science and technology activities conducted through its program offices (e.g., the Office of Water). Many of the programs implemented by other offices within EPA have a research component, but the research is not necessarily the primary focus of the program. P.L. 111-88 , similar to the recommendations by the House and the Senate, and the FY2010 President's request, reflected increases of varying levels when compared with the enacted FY2009 appropriations for nearly all of the individual EPA research program and activity line items identified within the S&T account. Research program areas for which there were increases for FY2010 include the climate protection program, clean air and air toxics research, global change research, clean water research, and human health and ecosystem research. Many of these increases, with a few exceptions, were the same or similar to increases included by the House and Senate, and in the President's FY2010 request. However, there are also some increases and decreases when comparing the enacted amounts with those proposed by the House and the Senate, and with the amounts included in the President's FY2010 request. As an example, the largest increase above FY2009 appropriations for an individual program area included in P.L. 111-88 was $248.4 million for human health and ecosystem research for FY2010. This funding level was $19.0 million (more than 8%) above the $229.4 million FY2009 enacted appropriation, $3.0 million above the $245.4 million recommended by the Senate and included in the President's FY2010 request, but $2.0 million less than the House recommendation. The largest decrease for FY2010 within the S&T account compared to the President's request was for the Water Security Initiative, one of EPA's homeland security activities. The $18.7 million for this program activity included in P.L. 111-88 , the same as the House and the Senate, was above the FY2009 appropriations of $15.0 million, but nearly $5.0 million below the $23.7 million requested for FY2010; a 21.1% decrease. P.L. 111-88 included a provision in Title II requiring EPA to conduct a study on domestic and international black carbon emissions using appropriated funds under either the S&T or the Environmental Programs and Management (EPM) appropriations accounts. The study is to include an inventory of the major sources of black carbon, an assessment of the impacts of black carbon on global and regional climate, an assessment of potential metrics and approaches for quantifying the climatic effects of black carbon emissions (including its radiative forcing and warming effects) and comparing those effects to the effects of carbon dioxide and other greenhouse gases, and identification of the cost-effective approaches for mitigating black carbon emissions. EPA is to report the results of the study to committees of Congress as specified in the Conference Report within 18 months. The efforts of EPA and other federal agencies to address climate change and greenhouse gas emissions in general were an area of considerable interest to Congress during the debate on FY2010 appropriations. The operation and administration of the agency's laboratories and facilities necessitate significant expenditures for rent, utilities, and security. Prior to FY2007, a significant portion of the funding for these expenses had been requested and appropriated within EPA's EPM appropriations account. Beginning in FY2007 increasing portions of funding for these expenses were requested and appropriated within the S&T account. This change affects comparisons of the S&T appropriations over time. Funding for these latter expenses ranged from 8% to 11% of the total S&T account for FY2010, the FY2010 President's request, and the FY2008 and FY2009 enacted appropriations. Comparatively, these expenses were less than 5% in the FY2007 appropriations and 1% in the FY2006 appropriations. Some Members of Congress and an array of stakeholders have continually raised concerns about the adequacy of funding for scientific research at EPA. The adequacy of funding for EPA's scientific research activities has been part of a broader question about the adequacy of overall federal funding for a broad range of scientific research activities administered by multiple federal agencies. Some Members of Congress, scientists, and environmental organizations have expressed concern about the downward trend in federal resources for scientific research over time. The debate continues to center around the question of whether the regulatory actions of federal agencies are based on "sound science," and how scientific research is applied in developing federal policy. President Obama requested $939 million for Department of Transportation (DOT) R&D in FY2010 (see Table 17 ). Two DOT agencies—the Federal Highway Administration (FHWA) and the Federal Aviation Administration (FAA)—account for most of the department's R&D funding (more than 80% in FY2009). President Obama requested $360 million for FAA R&D, 8.7% above the FY2009 enacted level. The request included an increase in R&D funding for FAA's Next Generation Air Transportation System (NextGen) which is focused on addressing air traffic growth by increasing the nation's airspace capacity and efficiency and reducing emissions and noise. Funding for NextGen R&D line items in the FAA's Research, Development and Technology FY2010 budget request increased by $39 million (37.3%) under the President's request compared to FY2009 funding. No specific figure was available for FHWA R&D funding in the President's FY2010 request. The Department of Transportation receives R&D funds through both the regular appropriations process as well as from the Transportation Trust Fund through authorization legislation. For example, P.L. 109-59 , the Safe, Accountable, Flexible, Efficient Transportation Equity Act—A Legacy for Users (SAFETEA-LU), which became law in August 2005, set DOT surface transportation authorization levels for each fiscal year from FY2005 through FY2009, providing increased DOT R&D funding during this period. However, the SAFETEA-LU Act expired on September 30, 2009, presenting a challenge to agencies that receive funding through this mechanism in the preparation of their FY2010 budget. Thus, according to the Department of Transportation: The [Obama] Administration is developing a comprehensive approach for surface transportation reauthorization. Consequently, the [FY2010] Budget contains no policy recommendations for programs subject to reauthorization [which includes R&D], including highway programs. For this reason, the Federal Highway Administration and the National Highway Transportation Safety Administration (NHTSA) FY2010 budget justifications provided no specific data on R&D funding for FY2010. Under the President's budget, the Federal Transit Administration received a $0.9 million reduction in R&D funding in FY2010, a decrease of 5.9% from FY2009. The R&D funding levels requested for other DOT agencies remained essentially flat. The House passed H.R. 3288, the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act, 2010, on July 23, 2009. This bill is accompanied by H.Rept. 111-218 . The Senate passed its version of the bill on September 17, 2009, accompanied by S.Rept. 111-69 . The Legislative Branch Appropriations Act, 2010 ( P.L. 111-68 ), signed into law on September 30, 2009, incorporated a provision for continued funding at FY2009 levels for DOT and other agencies through October 31, 2010, or enactment of their regular appropriations bills. This provision was extended through December 18, 2009, by Division B, Further Continuing Appropriations, 2010, of the Interior-Environment Appropriations Act, 2010 ( P.L. 111-88 ). In December 2009, Congress merged the Transportation-HUD appropriations act and five other regular appropriations bills into the Consolidated Appropriations Act, 2010 ( H.R. 3288 ). This act was signed into law ( P.L. 111-117 ) on December 16, 2009. Within DOT agencies, R&D funding is generally provided through accounts that include both R&D and non-R&D activities. Therefore there is insufficient information in the House and Senate bills and reports and in P.L. 111-117 to determine the precise level of R&D funding. For purposes of this report, where specific data is not available, FY2010 agency R&D funding levels provided in Table 17 (and discussed below) have been estimated based on the amounts requested by the department in its request and the proportionate funding levels provided to each DOT agency in the bills and the act, excluding items that are clearly not intended to support R&D and related activities. Using this approach, it appears that total DOT R&D funding for FY2010 is approximately $954 million, an increase of $37 million over the FY2009 funding level and $29 million above the President's request. The FHWA received an estimated $430 million in FY2010 R&D funding, $8 million over the FY2009 funding level and $3 million above the request. The FAA received an estimated $363 million in FY2010 R&D funding, $32 million over the FY2009 funding level and $15 million above the request. | In his FY2010 budget request, President Obama sought $147.620 billion for R&D, a $555 million (0.4%) increase from the estimated FY2009 R&D funding level of $147.065 billion (not including FY2009 R&D funding provided under the American Recovery and Reinvestment Act (P.L. 111-5). According to the Obama Administration, preliminary allocations of R&D funding provided under P.L. 111-5 brought total FY2009 R&D funding to $165.400 billion. Unless otherwise noted in this report, comparisons of FY2009 and FY2010 R&D funding do not incorporate funding provided under P.L. 111-5. To the extent possible, the agency discussions in this report include an analysis of House and Senate actions with respect to R&D funding. In some cases, however, there is insufficient information to parse agency R&D funding from other spending to determine precise agency funding levels; estimated funding levels are provided for these agencies. Congress continues to play a central role in defining the nation's R&D priorities, especially with respect to two overarching issues: the extent to which the Federal R&D investment can grow in the context of increased pressure on discretionary spending and how available funding will be prioritized and allocated. A low or negative growth rate in the overall R&D investment may require movement of resources across disciplines, programs, or agencies to address priorities. Six federal agencies received 95.1% of total federal R&D spending in the President's FY2010 request: the Department of Defense (54.0%), Department of Health and Human Services (21.0%), National Aeronautics and Space Administration (7.7%), Department of Energy (7.3%), National Science Foundation (3.6%), and Department of Agriculture (1.5%). The President's FY2010 request included $30.884 billion for basic research; $28.139 billion for applied research; $84.054 billion for development; and $4.543 billion for R&D facilities and equipment. The FY2010 request included funding for three multiagency R&D initiatives: National Nanotechnology Initiative, $1.637 billion; Networking and Information Technology R&D program, $3.927 billion; and Climate Change Science Program, $2.026 billion. President Obama requested increases in the R&D budgets of the three agencies that were targeted for doubling in the America COMPETES Act and by President Bush as part of his American Competitiveness Initiative: the Department of Energy Office of Science (up 3.5%), the National Science Foundation (up 8.6%), and the Department of Commerce National Institute of Standards and Technology's core research and facilities (up 1.2%). Congress has completed action on all twelve regular FY2010 appropriations bills The final bill, the Department of Defense Appropriations Act, 2010, was passed by Congress and signed into law on December 19, 2009. For the past four years, federal R&D funding and execution has been affected by mechanisms used to complete the annual appropriations process—the year-long continuing resolution for FY2007 (P.L. 110-5) and the combining of multiple regular appropriations bills into the Consolidated Appropriations Act, 2008 for FY2008 (P.L. 110-161), the Omnibus Appropriations Act, 2009 (P.L. 111-8), and the Consolidated Appropriations Act, 2010 (P.L. 111-117). Completion of appropriations after the beginning of each fiscal year may cause agencies to delay or cancel some planned R&D and equipment acquisition. |
The Bureau of Labor Statistics (BLS) publishes job openings data from the Job Openings and Labor Turnover Survey (JOLTS). Data on job openings provide information on the number of workers that employers intend to hire in the near future. This information enriches knowledge of the U.S. labor market adding to current information on unemployment rates and employment. Many labor market indicators provide information on either the supply or demand for workers. Unemployment rates provide information on the supply of persons seeking work in excess of those currently employed. Alternatively, employment provides information on the demand for workers that is already met by employers. This report provides information on the ratio of unemployed persons per job opening, which may be useful to Congress in that it adds nuanced information to the current mix of labor market indicators. The ratio is unique in that it combines both supply and demand measures. Using unemployed persons from the Current Population Survey (CPS) and job openings from the JOLTS, the ratio divides the number of persons generally aged 16 and older who are not employed and actively looking for jobs by the number of job openings. The advantage to the statistic is that the ratio gauges the excess supply of labor relative to the unmet needs of employers. The ratio may add useful information to data on job openings or unemployment in that it takes into consideration how many persons are actively searching for work relative to the number of opportunities. Specifically, in this report, trends in the ratio of unemployed persons per job opening are tracked from January 2001 through February 2012. Comparisons are made with the unemployment rate, which has been used as a primary labor market indicator for many years. Figures and tables are provided that show the ratio in the aggregate for the United States and across industrial sectors. Four key findings arise from this analysis: 1. The ratio of unemployed persons per job opening is highly correlated with the unemployment rate between 2001 and 2012. 2. The ratio of unemployed persons per job opening rises during the recessionary periods covered in this data set. In the 2007-2009 recession, the ratio rises to very high levels, especially in the goods-producing industries (construction, manufacturing, mining, and logging). 3. Although the ratio is highly correlated with changes in the unemployment rate, the ratio saw modest improvements coming out of the recent recession sooner than the reductions in the unemployment rate. 4. Even though the ratio has reduced, it remains at higher levels than prior to the 2007-2009 recession. This section separately examines the two statistics in the ratio, unemployment and job openings. The ratio is built by placing the number of unemployed persons in the numerator and dividing by the number of job openings. Separately examining the trends in unemployment and job openings may add to understanding of policy issues related to the U.S. labor market. Comparing how these statistical indicators fluctuate through the economic cycles covered in this report may help in understanding trends in the ratio of unemployed persons per job opening. From January 2001 through February 2012, job openings fluctuated with the economy in countercyclical movement with the number of unemployed persons. Job openings are more numerous when the economy is growing and are fewer in number when the economy is in recession. During economic expansion, business establishments begin to sell more goods and services and correspondingly hire more workers. As the economy contracts or enters a recession, businesses need fewer workers and businesses may more likely freeze their job vacancies, close the opportunity or lay off workers. Unemployment rates rise during recessions as more persons are laid-off, and other persons looking for a job are unable to find work. Not all businesses hire and not all persons are employed during economic expansion, but the overall cyclical trend is observed at the aggregate level when summing across all employer establishments. Figure 1 depicts the monthly number of unemployed and job openings from January 2001 through February 2012. The upper line is the total number of unemployed and the lower line is the total number of job openings. Each point in both lines represents a month, where the months are listed along the x-axis. From the periods covered in this report, January 2001 through February 2012, the U.S. economy underwent two recessions, which are indicated by the shaded columns in Figure 1 . The beginning and ending dates of each recession are determined by the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER). The NBER declares a recession during the months when economic activity declines from its peak to its trough. The NBER further defines economic expansion as the period from trough to peak. The first recession begins in March 2001and ends in November 2001, which will be referred to as the 2001 recession. The second is from December 2007 through June 2009 and is referred to as the 2007-2009 recession. From January 2001 through February 2012, the number of unemployed persons fluctuates upward during recession and downward during most months of economic expansion. The number of unemployed persons decreases to 6.7 million in March 2007. In the following months, the total number of unemployed persons turns back upward reaching7.6 million during the first month of the 2007-2009 recession. In the months during the recession, unemployment rises more sharply reaching a high of 15.4 million persons in October 2009. Afterward, unemployment modestly decreases to 12.8 million in February 2012. Job openings also fluctuate with the business cycle, but increased during most expansionary months and decreased during recession. Figure 1 shows that in months following the 2001 recession, total job openings reaches its highest number of 4.7 million in November 2006 and again in March 2007. Afterward, job openings decrease as the economy entered the 2007-2009 recession. A low point of 2.2 million job openings is reached one month after the end of the recession in July 2009. After the recession, job openings turn back upwards and as of the end of the data on February 2012, the total number reached 3.6 million. Job openings differ from unemployment in that job openings led unemployment in the movement away from the troughs and peaks since 2006. Job openings began to increase in July whereas unemployment rates did not reach a high until October 2009. In 2007, job openings fell from the high point of 4.7 million in March of 2007, whereas the unemployment rate did not increase until two months later in May of 2007. If changes in job openings lead changes in unemployment, it may prove useful when considering some labor market policies. Whether job openings can anticipate a change in unemployment is uncertain. Although job openings led in the movement away from the high and low points after 2006, it may be coincidence, because job openings did not lead unemployment in 2003. Job openings reached a low of 3.1 million in September 2003 and unemployed persons reached a high of 0.2 million three months earlier in June 2003. More years of information would be needed to assess whether job openings might serve as an early indicator to changes in unemployment and under what circumstances. A further consideration is that even if job openings can serve as a leading indicator, its potential in practice is hampered because preliminary estimates are not published until two months after the survey is conducted and final estimates are published one month after the preliminary estimates. This means that preliminary estimates for November and final estimates for October are not available until January. This section introduces the ratio of unemployed persons per job opening and discusses trends in the ratio over time. A brief comparison with a few other commonly used labor market indicators is conducted to highlight the nuanced information added by the ratio. This section also includes some technical notes about the ratio and the data. As a brief introduction, the ratio of unemployed persons per job opening is constructed by taking the number of unemployed persons and dividing it by the number of job openings. Lower values for the ratio imply fewer unemployed persons for every job opening and possibly greater ease in finding a job. Higher values would indicate more unemployed persons searching for the same number of jobs and potentially more difficulty in finding work. The ratio uniquely combines supply and demand measures of the labor market. The number of unemployed persons is a measure of persons looking for work, or the supply of labor in excess of those currently employed. Job openings are a measure of the demand for workers that are not currently met by employers. It can be used to consider how easy it may be to find a job given both the number of other persons looking for work and the number of available job openings. Fewer unemployed persons or more job openings may both contribute to a greater ease in finding work. This section has four findings. The first sub-section on trends in the ratio establishes three of the basic findings: First, the ratio of unemployed persons per job opening is highly correlated with the unemployment rate between 2001 and 2012. Second, the ratio of unemployed persons per job opening rises during the recessionary periods covered in this data set. In the 2007-2009 recession, the ratio rises to very high levels. Third, even though the ratio has reduced, it remains at higher levels than prior to the 2007-2009 recession. The following section discussing the ratio of unemployed persons per job opening as a unique indicator identifies a fourth finding: While the ratio is highly correlated with changes in the unemployment rate, the ratio saw modest improvements coming out of the recent recession sooner than the reductions in the unemployment rate. Figure 2 graphs the monthly ratio of unemployed person per job opening from January 2001 through February 2012. The x-axis is in months and the y-axis on the left is the numerical value for the ratio. The figure also charts the unemployment rate, which is a commonly used labor market indicator. Values for the unemployment rate are listed on the y-axis on the right. Figure 2 establishes three basic findings in this dataset. Sections to follow will further refine the conclusions from this section. Finding 1 The ratio of unemployed persons per job opening is highly correlated with the unemployment rate between 2001 and 2012. Figure 2 shows that the unemployed persons per job opening ratio and the unemployment rate fluctuate with the business cycle. Both increase within months of the recession and decrease during economic expansion. Although not perfect, the two labor market indicators have roughly corresponded with the economy. The unemployed persons per job opening ratio rises with increases in the numerator (unemployment) or decreases in the denominator (job openings). An increase in unemployment raises the numerator suggesting more persons searching for work for the same number of jobs. Fewer job openings lower the denominator suggesting fewer opportunities for the same number of unemployed. As discussed in the previous section, job openings and unemployment follow the business cycle. The number of unemployed persons increases during periods of recession and decreases during most months of economic expansion. In contrast, job openings decrease during periods of recession and increase during most months of economic expansion. The unemployment rate divides the number of unemployed by the number of persons in the labor force, where persons in the labor force are 16 years and older and are either employed or actively searching for work. More unemployed persons raise the numerator to the unemployment rate. Alternatively, fewer labor force participants lower the denominator, which also raises the unemployment rate. Finding 2 The ratio of unemployed persons per job opening rises during the recessionary periods covered in this data set. In the 2007-2009 recession, the ratio rises to very high levels. Figure 2 shows that the ratio of unemployed persons per job opening rises throughout the 2001 recession reaching its high point in September 2003. The ratio declines during most of the months of economic expansion until March 2007, 10 months before the beginning of the 2007-2009 recession. Afterward, the ratio increases from 1.4 in March of 2007 to 1.8 in December of 2007. During the 2007-2009 recession, the ratio of unemployed persons per job opening rises to its highest level in the period covered for this report. During the first year, from December 2007 through November 2008, the ratio of unemployed persons per job opening increases from 1.8 to 3.3. From December 2008 to one-month after the end of the recession in July 2009, the ratio increases more sharply to a high of 6.7. This exceeds roughly two times the high point that occurs following the 2001 recession, which was equal to 2.9 in September 2003. The unemployment rate similarly fluctuates with the business cycle with higher rates during recession and lower rates during most months of economic expansion. The unemployment rate in January 2001 was 4.2%. The rate rises through the 2001 recession reaching a high of 6.3%. As the economy expanded, Figure 2 shows that the unemployment rate decreases to a low of 4.4% in October of 2006. Unemployment rates turn back upward again as the economy enters the 2007-2009 recession. During the recession, unemployment rates rise sharply, especially during the last year. The rate reaches a high of 10.0% in October 2009. Since then, unemployment rates have lowered to approximately 8%. Finding 3 Even though both ratios have reduced, they remain at higher levels than prior to the 2007-2009 recession. As of February 2012, the ratio of unemployed persons per job opening is 3.6. This is higher than the 2.9 that occurred in September of 2003, which is the high point of all the monthly ratios prior to the most recent recession. As seen in the next section, even though the ratio is high, when compared with the unemployment rate and other labor market indicators, it has improved more substantially since the end of the recession. This section highlights the uniqueness of the ratio by its virtue of combining both supply and demand measures. A key finding is that while the ratio is highly correlated with changes in the unemployment rate, the ratio saw modest improvements coming out of the recent recession sooner than the reductions in the unemployment rate. In addition, the correlation between the ratio and the unemployment rate has at least temporarily changed since the 2007-2009 recession, where the difference appears to arise from stagnant growth in the labor force. Finally, even though the ratio shows modest reductions, actual hires may have lagged behind job openings. This further highlights a potential issue in the labor market that jobs may currently be more difficult to find than indicated by the ratio in prior years. The ratio of unemployed persons per job opening may serve as a useful addition to other labor market indicators. First there may be some chance that the ratio of unemployed persons per job opening may be a leading indicator to changes in the unemployment rates. The ratio of unemployed persons per job opening reached a high in July of 2009, whereas the unemployment rate reached its high four months later in October 2009. Like job openings, however, this is uncertain because the ratio did not lead the decrease in unemployment rates after the 2001 recession. Second, Figure 2 shows the difference between the unemployment rate and the ratio of unemployed persons per job opening is fairly constant prior to the 2007-2009 recession. Afterward, the ratio of unemployed persons per job opening fell by a larger amount in comparison to the unemployment rate. The shift in the relationship seems to suggest that, at least temporarily, the same ratios of unemployed persons per job opening are associated with higher unemployment rates. A decrease in the ratio potentially indicating a greater ease in finding a job does not correspond with as large of a decrease in the unemployment rate. Whether the shift in the relationship is permanent may depend upon other labor market conditions. The differences in the measures arise because the unemployment rate is a measure of excess supply and the ratio of unemployed persons per job opening combines measures of supply and demand. More specifically, the difference is in the denominator. Both measures have the number of unemployed in the numerator. The unemployment rate divides the number of unemployed persons by the number of persons in the labor force. The ratio of unemployed persons per job opening divides the unemployed by the number of job openings. There has been a modest recovery in job openings yet labor force participation appears to remain at lower levels. Figure 1 shows that the number of job openings increased by 63.1% from July 2007 to February 2012 (from 2.2 to 3.6 million). By comparison, participants in the labor force increased by a smaller 0.2% during this same period (from 154.5 to 154.8 million). When examining other labor market indicators, the ratio appears to add some nuance to a description of current labor market conditions. A variety of labor market indicators show that the 2007-2009 recession is one of the most severe recessions in the post-World War II era. Unemployment, employment, labor force participation, and hours worked all indicated a substantial deterioration in labor market conditions. Since the 2007-2009 recession, the combination of statistics suggest modest growth in employment, but stagnant growth in labor force participation. The ratio of unemployed persons per job opening suggests more marked gains in the ease at which unemployed persons might find jobs, but even though jobs may be open, establishments may not be hiring as much. From the end of the recession in June 2009 to February 2012, unemployment and the unemployment rate modestly decreased. Employment increased by a modest 2.0%. Similar to stagnant growth in labor force participation, the employment to population ratio has decreased by 1.1% from July 2009 to February 2012. The job openings rate has increased by 52.9%. However, the hires rate, the proportion of hires relative to jobs plus new hires increases by a smaller 13.8%. These statistics suggest modest reductions in unemployment, modest gains in employment, but stagnant growth in the labor force and hires falling below job opportunities. Sector level information on the ratio of unemployed persons per job opening might lead to a better understanding of the trends in the aggregate ratio over time. Decomposing the aggregate ratio into its industrial sector shows substantial differences in trends, especially during the height of the 2007-2009 recession. The ratio for the goods-producing sector rises significantly above the other sectors serving to further drive upward the aggregate ratio of unemployed persons per job opening. This section examines the ratio of unemployed persons per job opening for four industrial sectors: (1) goods-producing, (2) producer services, (3) consumer services, and (4) government. Goods production is defined here as the production of tangible items, such as cell phones and HD-TVs. The goods-producing sector is made up of three sub-sectors, or industries. These are mining and logging, construction, and manufacturing. Services in turn are defined as the production of everything else within the private-business sector. Because services make up a significant percentage of the number of jobs (83% in February 2012), this sector is further divided in services that are purchased primarily by producers or by consumers. Examples of producer services include financial activities and information services. Consumer services include industries such as retail trade and education and health services. Table 1 shows the average monthly number of job openings, unemployed persons, and unemployed persons per job opening by sector and industry for 2011, where "unemployment from an industry" is the industry that the person last worked. The table helps show which industries are assigned to which sectors. Also, as shown by the numbers in the table, sectors can make up a large share of unemployed persons or job openings and still have a relatively small ratio of unemployed persons per job opening. A larger ratio of unemployed persons per job opening occurs when the sector has a larger share of unemployed persons relative to its share of job openings. For example, consumer services comprise the largest share of unemployed persons (48.1) and largest share of job openings (49.9%). However, the ratio of unemployed persons per job opening is 3.5, which is lower than the 8.2 for the goods-producing sector. The higher ratio in the goods-producing sector is reflected by the fact that it has a higher percentage of unemployment (24.1%) relative to its share of job openings (10.6%). Producer services have a relatively lower share of unemployment (19.1%) relative to its job openings (29.0%) and have the lowest ratio of unemployed persons per job opening at 2.4. What this further implies is that the ratio does not say anything about the size of the sector. A higher ratio of unemployed persons per job opening might occur in sectors with relatively few unemployed persons or job openings. To know something about the size of the sector, the actual numbers of unemployed persons and job openings are needed. Table 1 shows the ratio of unemployed persons per job opening by sector for each month from January 2001 through February 2012. The figure highlights several consistent patterns across industrial sectors. First the ratios are consistently higher for the goods-producing sector possibly indicating increased difficulty in finding work. As shown in the figure, from January 2001 through February 2012, the ratio is consistently higher in the goods-producing sector regardless of the economic cycle. Second, the ratio is much more variable within the goods-producing sector. By the end of the recession in June 2009, the ratio of unemployed persons per job opening rises to 22.2 for the goods-producing sector. This is in comparison to ratios of 4.7 for producer services, 4.4 for consumer services and 2.9 for the government sectors. After the recession, the ratio in the goods-producing sector fell by a larger amount than any other sector—by 14.4 unemployed persons for every job opening in the goods-producing sector, 2.2 for producer services, 1.2 for consumer services and 0.7 for government—from June 2009 to February 2012. The higher ratios in the goods-producing sector are accompanied by decreases in employment within this sector. Goods-producing employment drops from 22.0 million in December 2007 to a low of 17.7 million in February 2010, seven months after the end of the recession. The 4.3 million decreases in employment is larger than the 2.4 million decrease in producer services and 2.1 million decrease in consumer services, which occur during the same months. How much employment in the goods-producing sector relates to cyclical aspects of the economy, or how much is part of a long-term trend of decreased employment, is uncertain. In February 2012, employment in the goods-producing sector was 18.2 million, a 0.5 million increase from the depth of the recession, but still lower than months preceding the recession. At the beginning of the recession in December 2007, goods-producing employment was 22.0 million and was even higher yet in January 2001 at 24.5 million. To return to the January 2001 employment levels, goods-producing employment would have to increase by 34.6% (8.3 million). In manufacturing, which is the largest goods-producing industry, employment decreased from 13.7 million in December 2007 to 11.5 million in February 2010 and then up by 0.4 million to 11.9 million in February 2012. Manufacturing employment would have to increase by 43.7%, or 5.2 million to return to employment levels in January 2001. Fewer jobs in the manufacturing and goods-producing sector as a whole has led to a disproportionate rise in unemployment among male workers. Males, especially the non-college educated, are less likely to be employed in the 2007-2009 recession and previous recessions. The lower employment may relate to disproportionately more persons unemployed from the goods-producing industries like manufacturing and construction. Women on the other hand, have historically been more likely to be employed in less cyclical industries, such as services and public administration. Knowing that the goods-producing sector has decreased in employment for more than a decade and that the ratio of unemployed persons is consistently higher raises questions about the long-term prospects of the sector and whether policies might make a difference. Whether prospects exist to encourage growth in the manufacturing sector or whether there may be a need to facilitate the transition for unemployed persons in this sector is beyond the scope of this CRS report. Also, the disproportionate impact of the recession on manufacturing and construction industries raises questions on whether these industries might deserve additional attention during recessionary periods. Even though the ratio for goods-producing jobs has reduced, that may not imply that establishments are hiring all the formerly employed workers. Unemployed workers in these industries may be transitioning to other opportunities. The ratio of unemployed persons per job opening for consumer services is a relatively low 3.5 in 2011. This sector-wide ratio is lower partly because of lower ratios in the education and health services industry, which is 2.1. The remaining industries had ratios above the sector-wide average ranging between 4.2 and 4.6. This consumer services sector weathered the recession with a less significant decrease in employment. From December 2007 to February 2012, employment decreased in the consumer services sector by .001 million employees. By comparison, goods-producing employment decreased by 3.7 million. As shown in the previous section, the ratio of unemployed persons per job opening for the goods-producing sector largely fluctuates with the business cycle in larger proportion to other sectors. To further investigate changes in the ratio over time, each of the goods-producing industries—mining and logging, construction, and manufacturing—are graphed below. A finding in this section is that the ratio for manufacturing and construction rises to very high levels during the 2007-2009 recession. The ratio of unemployed persons per job opening for goods-producing industries may be of particular interest in that the U.S. Department of Commerce and others suggest that goods-producing industries may provide more benefits relative to other industries. For example, from 2002 through 2011, labor productivity for manufacturing increased more rapidly than aggregate productivity with an average annual increase of 3.4% for manufacturing and 2.3% for all businesses. Since the BLS began publishing hourly earnings, wage growth in the manufacturing industry has kept pace with the private sector increasing by 10.2% in the manufacturing industry and by 10.0% for the private sector. In addition, the Department of Commerce and the National Science Foundation note that the majority of expenditures for Research and Development, 70.1% in 2009, takes place within the manufacturing industry. Note, however, that employment in the manufacturing industry has been decreasing. From 2007 through 2011, total non-farm sector employment decreased by 4.5% in comparison to 15.5% in the manufacturing industry. Figure 4 shows the ratios of unemployed persons per job opening for the goods-producing industries of mining and logging, construction, and manufacturing. The figure shows that the goods-producing industries are hit hard by the recession. The not seasonally adjusted ratio of unemployed persons per job opening rises to its highest level since the beginning of the data in 2001—66.8 in April 2009 for construction, 31.6 in July 2009 for mining and logging, and 20.7 in May 2009 for manufacturing. Table A-1 in the Appendix lists the ratios of unemployed persons per job opening for individual industries within the producer services and consumer services for the years 2001 through 2011. The table shows that average monthly ratios of unemployed persons per job opening for the construction and manufacturing sectors are higher for all years, more than twice the other producer and consumer services and government sector. Also, at the high points within the recession, the ratios for the goods-producing industries are more than twice the ratios of the other services-producing industries (12.6 for mining and logging, 34.4 for construction, and 15.8 for manufacturing in comparison to the highest ratio in the services-producing sectors of 6.2 in trade, transportation and utilities). The analysis presented in this report highlights four key findings: 1. The ratio of unemployed persons per job opening is highly correlated with the unemployment rate between 2001 and 2012. 2. The ratio of unemployed persons per job opening rises during the recessionary periods covered in this data set. In the 2007-2009 recession, the ratio rises to very high levels, especially in the goods-producing industries (construction, manufacturing, mining, and logging). The higher ratio indicates more unemployed persons for every job opening. 3. Although the ratio is highly correlated with changes in the unemployment rate, the ratio saw modest improvements coming out of the recent recession sooner than the reductions in the unemployment rate. Because job openings was unable to anticipate the high point in unemployment rates after the 2003 recession and because of a limited number of years since the data were first collected (starting in 2001), more years of data would be needed to assess whether and under what circumstances might job openings serve as an early indicator to unemployment. 4. Even though the ratio has reduced, it remains at higher levels than prior to the 2007-2009 recession. Three years after the end of the recession, the ratio still remains higher than any month in the data set prior to the 2007-2009 recession. This may have to do with the depth of the recession and slow job growth since the end of the recession. A variety of labor market indicators show that the 2007-2009 recession is one of the most severe recessions in the post-World War II era. Unemployment, employment, labor force participation, and hours worked all indicated a substantial deterioration in labor market conditions. The ratio of unemployed persons per job opening is similar to the unemployment rate with higher ratios during recessions and lower ratios during periods of economic growth, but with some nuanced differences to unemployment rates. For four months following the 2007-2009 recession, unemployment rates continued to climb to 10.0 until October 2009, whereas the ratio of unemployed persons per job opening began to decrease one month after the end of the recession in July 2009. The ratio of unemployed persons per job opening may serve as a useful addition to other labor force statistics providing information on the demand for workers by employers and the population of persons who are currently available for work. This appendix provides data on the ratio of unemployed persons per job opening by industry and year and information about potential limitations of the data. Table A-1 shows the number of unemployed persons per job opening by industry for each year from 2001 through 2011. The table provides monthly averages for each calendar year and is constructed using data on unemployment from the Current Population Survey (CPS) and data on job openings from the Job Openings and Labor Turnover Survey (JOLTS) . Table A-2 provides additional information about the CPS and JOLTS data that may be useful in understanding the potential limitations of the statistics and analysis. | New information that adds to the mix of labor market indicators may be useful to Congress. The ratio of unemployed persons per job opening provides information on how many unemployed persons on average there are for every job opening. It adds to the current mix of labor market indicators such as the unemployment rate, which is a measure of the excess supply of workers. In addition, it adds to employment statistics, which measures the demand for workers that have already been met by employers. By dividing the number of unemployed persons with the number of job openings, the ratio gauges the excess supply of workers relative to the demand, where job openings serve as a measure of the unmet need for workers. The resultant statistic compares the number of persons who are actively searching for jobs to the number of available opportunities. Four key findings arise from this analysis: 1. The ratio of unemployed persons per job opening is highly correlated with the unemployment rate between 2001 and 2012. 2. The ratio of unemployed persons per job opening rises during the recessionary periods covered in this data set. In the 2007-2009 recession, the ratio rises to very high levels, especially in the goods-producing industries (construction, manufacturing, mining, and logging). 3. Although the ratio is highly correlated with changes in the unemployment rate, the ratio saw modest improvements coming out of the recent recession sooner than the reductions in the unemployment rate. 4. Even though the ratio has reduced, it remains at higher levels than prior to the 2007-2009 recession. The analysis in this report combines two data sources: The Job Openings and Labor Turnover Survey (JOLTS), which provide information from a survey of U.S. business establishments on the dynamic job market where job openings are created, persons are hired, and employees leave. The Current Population Survey (CPS), which provides information on economic and demographic information from U.S. households. |
The Office of Infrastructure Protection (OIP) in the Department of Homeland Security (DHS) has been developing and maintaining a National Asset Database. The Database contains information on a wide range of individual assets, from dams, hazardous materials sites, and nuclear power plants to local festivals, petting zoos, and sporting good stores. The presence of a large number of entries of the latter type (i.e., assets generally perceived as having more local importance than national importance) has attracted much criticism from the press and from Members of Congress. Many critics of the Database have assumed that it is (or should be) DHS's list of the nation's most critical assets and are concerned that, in its current form, it is being used inappropriately as the basis upon which federal resources, including infrastructure protection grants, are allocated. According to DHS, both of those assumptions are wrong. The purpose of this report is to discuss the National Asset Database: what is in it, how it is populated, what the Database apparently is, what it is not, and how it is intended to be used. The report also discusses some of the issues on which Congress could focus its oversight. This report relies primarily on a DHS Office of the Inspector General (DHS IG) report, released on July 11, 2006, but makes reference to other government documents as well. The genesis of the National Asset Database remains somewhat unclear. A list of critical sites was begun in the spring of 2003 as part of Operation Liberty Shield. The list contained 160 assets, including chemical and hazardous materials sites, nuclear plants, energy facilities, business and finance centers, and more. The assets were selected by the newly formed Protective Services Division within the Office of Infrastructure Protection, in what was then called the Information Analysis and Infrastructure Protection Directorate, Department of Homeland Security. The Secretary of DHS asked states to provide additional security for these sites. During the course of the year (2003), DHS continued to collect information on various assets from a variety of sources. By early 2004, DHS had accumulated information on 28,368 assets. Although Operation Liberty Shield was now considered over, the initial list of 160 critical assets, those judged to be in need of additional protection because of their vulnerability and the potential consequences if attacked, grew to 1,849 assets and became known as the Protected Measures Target List. It is not clear when the information being gathered became known as the National Asset Database. By January 2006, according to the DHS IG report, the Database had grown to include 77,069 assets, ranging from nuclear power plants and dams to a casket company and an elevator company. It also contains locations and events ranging from Times Square in New York City to the Mule Day Parade in Columbia Tennessee (which, according to the city's website, draws over 200,000 spectators each year for the week-long event). The IG report categorized entries in the National Asset Database by critical infrastructure/key resource sector (see Figure 1 ). Additionally, the DHS IG report identified some of the entries with more specificity. For example, the Database contained, at the time, 4,055 malls, shopping centers, and retail outlets; 224 racetracks; 539 theme parks and 163 water parks; 1,305 casinos; 234 retails stores; 514 religious meeting places; 127 gas stations; 130 libraries; 4,164 educational facilities; 217 railroad bridges; and 335 petroleum pipelines. The DHS gets information for the Database from a variety of sources. According to the National Infrastructure Protection Plan (NIPP) , sources include existing government and commercially available databases; sector-specific agencies and other federal entities; voluntary submittals by owners and operators; periodic requests for information from states and localities and the private sector; and DHS-initiated studies. The number of assets in the Database is expected to grow as additional information is gathered. The DHS IG report focused much of its attention on information provided by states and localities as the result of two data requests made by DHS. According to the DHS IG report, the vast majority of the 77,069 entries was collected as a result of those requests. According to the IG report, the first data call to the states, made by the Office of Domestic Preparedness in 2003, yielded poor quality data. The IG report described the guidance given states and localities as "minimal." The guidance apparently did tell states, however, to "consider any system or asset that, if attacked, would result in catastrophic loss of life and/or catastrophic economic loss." As a result, assets such as the petting zoos, local festivals and other places where people within a community congregate, or local assets ostensibly belonging to one of the critical infrastructure sectors, were among the assets reported. According to the IG report, many state officials were surprised to learn that additional assets from their states were added to the Database, which raises additional questions about how the information was collected. According to the IG report, the second request to the states for critical infrastructure information came from the Office of Infrastructure Protection in July 2004 and was "significantly more organized and achieved better results." Guidance was more specific, as was the information requested. DHS requested information for 17 data fields. Of those, DHS considered the following to be most important: address, owner, owner type, phone, local law enforcement point of contact, and latitude and longitude coordinates. States were also asked to identify those assets that they felt met a level of national significance. Criteria for identifying assets of national significance was provided by DHS. The criteria described certain thresholds, such as refineries with refining capacity in excess of 225,000 barrels per day, or commercial centers with potential economic loss impact of $10 billion or capacity of more than 35,000 people. Although the request was more specific, states were given much leeway as to what to include, and OIP accepted into the Database every submitted asset. As a result, additional assets of questionable national significance were added to the Database. The DHS IG report drew two primary conclusions. The first is that the Database contains many "unusual, or out-of-place, assets whose criticality is not readily apparent," while, at the same time, it "may have too few assets in essential areas and may present an incomplete picture." The second conclusion was that the types of assets that were included and the information provided are inconsistent from state to state, locality to locality. For example, California entries included the entire Bay Area Regional Transit System as a single entry, while entries listed for New York City included 739 separate subway stations. The IG report made 4 recommendations: review the National Asset Database for out-of-place assets and assets marked as not nationally significant, and determine whether those assets should remain in the Database; provide state homeland security advisers the opportunity to review their assets in the Database to identify previously submitted assets that may not be relevant; during future data calls, provide States a list of their respective Database assets to reduce ... duplicate submissions; and establish a milestone for the completion of a comprehensive risk assessment of critical infrastructure and key resources and ensure they are accurately captured in the National Infrastructure Protection Plan. The National Strategy for Homeland Security recognized that not all assets within each critical infrastructure sector are equally important, and that the federal government would focus its effort on the highest priorities. The National Strategy for the Physical Protection of Critical Infrastructure and Key Assets stated that DHS will develop a methodology for identifying assets with national-level criticality and using this methodology will build a comprehensive database to catalog these critical assets. Judging from the criticism leveled at it, many believe the National Asset Database is (or should be) DHS's list of assets critical to the nation. However, in his written response to the IG report, then-Undersecretary for Preparedness, George Foresman, to whom the Office of Infrastructure Protection reported, stated that the National Asset Database is "not a list of critical assets...[but rather] a national asset inventory...[providing] the 'universe' from which various lists of critical assets are produced." According to the National Infrastructure Protection Plan, the National Asset Database is a comprehensive catalog with descriptive information regarding the assets and systems that comprise the nation's critical infrastructure and key resources. The Assistant Secretary for Infrastructure Protection, Robert Stephan, has called the Database a 'phonebook' of 77,000 facilities, assets and systems from across the nation, needed to facilitate more detailed risk analyses. Some may ask why there should be this difference in perception regarding the National Asset Database. One possible explanation is that, as noted above, the National Asset Database started out as the Protected Measures Target List, which was a prioritized list of assets considered critical at the national level. Also, as reported in at least one media source, when asked for its list of critical assets, Members of Congress were shown the expanded list containing the questionable assets. Based on subsequent response, Congressional interest appears focused on a prioritized list. Also, what is meant by the term "critical infrastructure" continues to generate some confusion. The definition provided in the USA PATRIOT Act and in other policy documents refers to specific assets or systems within a selected set of sectors or categories. However, the term also is used often to identify the sectors and categories themselves. For example, the transportation sector is often called a critical infrastructure, when, according to the statutory definition, only those assets within the transportation sector whose loss would be debilitating to the nation should be called critical infrastructure. Given the varied usage of the term critical infrastructure, the National Infrastructure Protection Plan description of the National Asset Database above, is unclear. Is it a list of assets that are critical, or is it a list of assets that make up each of the critical sectors, with criticality to be determined later? There appear to be two primary uses for the Database: as a first step in a prioritization process that eventually will help focus risk reduction activities; and, to provide a degree of situational awareness. According to Assistant Secretary Stephan, the Database "does not drive the Department's funding decisions." Taking an inventory of one's assets is a standard first step for most risk management processes used to prioritize the protection of those assets. The second step is to screen this initial list for those assets considered critical to the organization (or country) using specific criteria. Further analysis is focused on these critical assets. The National Infrastructure Protection Plan establishes DHS's risk management process. According to the NIPP, identifying the assets that comprise the nation's 17 critical infrastructure sectors and key resources within the National Asset Database represents the first step in its process. As envisioned by the NIPP, DHS will then select those assets from the Database it considers critical to the nation as a whole. If the asset is judged not to be critical from a national perspective, DHS does not require any further information. If the asset does have the potential to be critical, DHS will ask for more information, which includes information that will support further risk and risk mitigation analysis (e.g., vulnerability to specific forms of attack or natural disasters and more detailed analysis of the consequences associated with the loss of the asset, including interdependencies with other assets). Vulnerability, consequences, and threat information then will be integrated to yield a risk score. According to the NIPP, those assets that pose the greatest risk are further analyzed to identify potential risk reduction initiatives, which are then prioritized (i.e., the risk reduction initiatives) based on their cost-effectiveness. According to the IG report, DHS officials acknowledge that many of the assets currently in the Database "will never be analyzed in depth or used to support any program activity." According to the Assistant Secretary, DHS has identified a shorter list of assets that it considers high priority, based on its analysis of vulnerability to attack or natural events and the possible consequences. This list is apparently prioritized further. The Assistant Secretary asserted that this shorter list does not contain petting zoos, popcorn factories or other such facilities. While it may be common practice to take an initial inventory of one's assets as a first step in a risk management process, detailed information on individual assets is not necessarily needed to determine their criticality. The presence of gas stations listed in the National Asset Database is a case in point. Gas stations could be considered a part of the oil and gas infrastructure, a subsector of the energy sector. In assessing the oil and gas infrastructure, one may want to identify, in general, all the assets that make up that infrastructure from production fields, to refineries, to distribution, and all the transport elements in between. Gas stations would be on that list, at the very end of the distribution chain. In determining which assets are the most critical, one does not need specific information on individual gas stations to determine that the loss of any individual gas station would have a minimal effect on the distribution of gasoline throughout the country, or on the economy, or national public health, beyond the immediate vicinity of the gas station itself. Yet the National Asset Database contains 127 gas stations. Unless these 127 specific gas stations have some unique characteristics (perhaps being located next to an identified critical asset which could be damaged if there were a loss of the gas station), maintaining specific information on those gas stations seems unnecessary to determine their criticality. DHS justifies keeping assets that have not been judged as being critical at the national level in the Database as a way to provide a degree of situational awareness. Undersecretary Foresman noted in his response to the IG report that, "Many assets not 'critical' are, in fact, critical depending upon the circumstances...." For example, as noted in the NIPP, "... the information may be used to quickly identify those assets ... that may be the subject of emergent terrorist statements or interest or that may be located in the areas of greatest impact from natural disasters." According to the NIPP, having this information (apparently regardless of the criticality level of the asset) will help inform decisions made regarding preparedness, response, and recovery to a wide range of incidents and emergencies. In defense of the contents of the National Asset Database, Assistant Secretary Stephan is quoted as saying: "What happens the very first day that al-Qaeda attacks a convenience store chain times a dozen across the country? ... we better have some of those things in the database so that we know what that universe of things is that we have to worry about." According to the FY2007 Congressional Budget Justification for the Infrastructure Protection and Information Security (IP/IS) Program, the Database will deliver something called the Risk/Readiness Dashboard to DHS management. The budget justification identified the Risk/Readiness Dashboard as a planning and management tool that will eventually fuse threat streams with critical infrastructure vulnerability information and consequences, and will visually present a risk profile for critical infrastructure assets. According to the budget justification, such a capability will provide real-time knowledge that can be used to support rapid decision-making during periods of heightened threats. Also, while a particular asset may not be critical at the national level, it may still be critical at the state or local level. Since DHS plans to allow many stakeholders eventually (with appropriate clearances) to have selected access to the Database, and the information in it or linked to it, the Database represents a common picture (i.e., a standard format and taxonomy) for all to use. Also, according to the Undersecretary, DHS does not support purging the Database of these non-nationally critical assets, because it is important to the Department to be informed about what is important to the states and localities. The statements above raise a number of issues. First, that assets may be critical under some circumstances and not others, or become critical because they have been identified by intelligence as possible targets, seems to conflict with the statutory definition of critical infrastructures. Under the conditions stated above, just about any asset could be considered critical and setting and implementing priorities would become even more complicated than it is now. Many would expect DHS to respond to such intelligence as part of its counter-terrorism efforts, which might include quickly deploying critical infrastructure resources such as sending out vulnerability assessment teams and establishing buffer zone protection plans. However, such efforts seem to lie beyond the fundamental goal of the critical infrastructure protection program, which is to identify those assets most critical to the nation as a whole. Also, if the National Asset Database is meant to be a comprehensive list of the nation's infrastructure assets, regardless of criticality, it is incomplete. As noted in the previous section, only 127 gas stations are in the Database. There are over 167,000 gas stations in the United States. Similarly, the Database contains only 140 defense industrial base assets, 417 postal and shipping sites, 669 banking and financial assets, and 7,542 agriculture and food assets. According to the National Strategy for the Physical Protection of Critical Infrastructures and Key Assets , DHS estimated that there are 250,000 defense industrial firms, 137 million postal and shipping delivery sites, 26,600 FDIC insured institutions, and almost 2 million farms and 87,000 food processing plants. To identify only a few a these assets, perhaps in some states, but not in others, limits the utility of the current National Asset Database to support situational awareness to those relatively few instances where the Database may have the appropriate information. The position that the National Asset Database holds data on those assets that states and localities have identified as important to them is contradicted by the DHS IG report. According to the report, state officials were repeatedly surprised to learn about the assets that were added as part of the ODP data call and which remain in the Database. The Database includes many assets not selected by the states. The role that the National Asset Database plays in allocating federal resources to states and localities for infrastructure protection is of obvious interest to Congress. In FY2006, allocations of Urban Area Security Initiative grants saw some significant changes based on new risk calculations by the DHS. A number of cities saw their grant levels drop. Some Members believe that allocations were based on what they consider to be a flawed National Asset Database. Over the last two grant cycles, according to the DHS IG report, ODP has made increased use of information in the National Asset Database to support its allocation of various critical infrastructure protection grants to states and localities. However, according to the Assistant Secretary, the National Asset Database does not drive DHS's funding decisions. The exception is the Buffer Zone Protection Plan grants, which were initiated to support the protection efforts associated with the original Protected Measures Target List and Operation Liberty Shield. The relationship between the ODP's grant-making process, the National Asset Database, and the NIPP is not explicitly stated in DHS documents. The NIPP risk assessment process was finalized June 30, 2006, but ODP has had some form of risk assessment process in place for determining initial grant allocations for programs such as the Urban Area Security Initiative since 2003. Also, for the FY2006 cycle, ODP indicated it had evaluated over 120,000 specific infrastructure assets, but the National Asset Database only contained 77,069 assets as of January 2006. It would appear that ODP's grant-making process operates independently from both the National Asset Database and the National Infrastructure Protection Plan. Assuming that the Undersecretary is not changing the definition of critical infrastructure, and accepting DHS's argument that the National Asset Database is not a prioritized list of critical assets, and that it is not the basis for determining grant allocations, two issues remain: the quality of the information contained in the Database; and, whether the value of keeping low criticality assets in the Database warrant the costs associated with maintaining them in the Database. Another potential issue could arise if the current voluntary nature of the Database changes. Congress may ultimately focus its oversight of the National Asset Database on these areas. Data quality is always an issue in generating any database. In the case of the National Asset Database, quality includes accuracy, consistency, and completeness. The quality of the information gathered early in the development of the Database has been questioned. For example, early in the evolution of the list, certain electric utility operators were presented with a list of critical electric power assets drawn up by DHS and noticed that some of the entries were not currently in use. Also, one Member of Congress noted that the location for Disneyland was incorrect. According to the IG report, DHS itself determined that the early Protected Measures Target List was unreliable. DHS has taken a number of steps to improve the quality of the information contained in the Database. The IG report noted that during the second data call to the states, DHS hired contractors to put the information it received into a consistent format, to research missing information, and to verify the accuracy of the information. DHS has approved a taxonomy which everyone submitting information can use to categorize and subcategorize assets. DHS plans to use this taxonomy in future data calls. The IG report also stated that DHS intends to use expert panels to review information in their sector of expertise. According the FY2007 budget justification, one of the responsibilities of the Protective Security Advisors is to verify critical infrastructure information. Of particular concern is the completeness of the information included. Beyond the issue that there appears to be an incomplete inventory of the less than critical assets, as noted above, the IG was particularly concerned that the Database does not include assets that one might conclude should be included. The IG attributed part of this problem to reluctance on the part of private sector owner/operators to share certain information with DHS, notwithstanding the Protected Critical Infrastructure Information Program. Insuring the quality of the information in the Database is likely to require a continuous effort, since quality also implies currency. If a particular site closes, moves, or changes ownership, the changes would logically need to be captured in the Database. The consideration of quality could include also the accessibility, flexibility, and security of the database. The NIPP suggested that the Database would be accessible to many type of queries, by many types of stakeholders. However, it is not clear that the Database yet has these capabilities. DHS intends to develop a second generation Database, one that includes the integration of vulnerability, risk, threat, and other relevant information. According to the IG report, DHS does not expect the second generation Database to be ready for two more years. In regard to security, the Undersecretary, in his response to the IG report, asserted that the Database currently "exceeds all security and protection standards." Assessing the accuracy of this assertion is beyond the scope of this report. The IG report asserted that maintaining unusual and out-of-place entries in the Database may: complicate efforts to develop a useful database; make resource allocation more challenging; obscure desired data; waste time and money in repeatedly filtering them out of analyses or trying to prioritize them; and taint credibility. The DHS IG report, however, does not explain how these entries would necessarily complicate, challenge, and obscure efforts. While the Database may not yet be as accessible or as searchable as eventually planned, it is not clear why less critical (or more critical) data could not be tagged as such. However, the presence of this data does involve cost in time and resources. At the very least, as discussed above, the information collected on all assets must be entered and verified (even the less critical ones) and missing data also may have to be located. Also, additional costs would likely be incurred if any further analysis (such as vulnerability assessment or more detailed consequence analysis) were done on these entries. The budget justification documents do not present data on how much money DHS spends on the Database, or how that expense is broken down. However, Congress did appropriate $20 million for the Database in FY2006. While the argument could be made that the costs might be marginal, the DHS IG report noted that, currently, those entries identified as not being critical at the national level outnumber, by 3 to 1, those that are identified as critical at the national level. Currently, DHS considers only about 2,500 assets as being the most critical, indicating that less than critical sites could actually dominate the cost of maintaining the Database. It is not clear how to evaluate the value of maintaining these non-critical assets in the Database, especially if their numbers are under-represented and the risk associated with them is relatively low. Currently the presence of a particular asset in the Database carries with it no specific obligations on the part of the owner/operator. They are not required by statute or regulation to provide information to the Database, per se, or to take any specific actions as a result of having an asset listed. Information solicited by DHS is voluntarily given. Presumably, publicly available information does not require the permission of the owner/operator for it to be included in the Database. However, if ever having an asset on the National Asset Database carries with it some legal or regulatory requirements, then what is in and not in the Database, or adding or removing assets from it, might result in much greater consequences for both the owners/operators and DHS. The House of Representatives, as part of the 110 th Congress's first 100 hours of legislation, passed H.R. 1 , Implementing the 9/11 Commission Recommendations Act of 2007 . Title IX of this act includes a section (Sec. 902) dealing with the National Asset Database. The Section did a number of things. It amended the Homeland Security Act to include the requirement that the Secretary of Homeland Security establish a National Asset Database. It also required the Secretary to establish within this Database a subset of assets that the Secretary determines are most at risk. This subset of assets shall be called the National At-Risk Database. This requirement indicated that the House disagrees with the Undersecretary that the National Asset Database should not include a prioritization of assets. Section 902 also established a National Asset Database Consortium, made up of representatives from at least two, but no more than four, national laboratories along with officials from other federal agencies with appropriate experience in working with and identifying critical infrastructure. The Consortium is to advise the Secretary on how to identify, generate, organize, and maintain the National Asset Database. In addition, the Secretary is to solicit comments from the Consortium on the appropriateness of the risk methodologies employed by the National Infrastructure Protection Plan and alternative methods for defining risk and identifying specific criteria by which to set priorities. The Secretary is to secure recommendations from the Consortium 60 days after this act is enacted. The Section also required the Secretary to annually review the Database to examine assets in the Database to determine if the information on these assets is incorrect or if they do not meet national asset guidelines used by the Secretary to determine which assets should remain in the Database. It required the Secretary to remove from the Database any asset whose information is not verifiable or which does not meet the nation asset guidelines. The requirement disagrees with the Undersecretary's position that less-than-nationally-critical assets should remain in the Database. Also, the Secretary is to provide the Database to states for review and to meet annually with the states to discuss guidelines their submissions of information for the Database. This requirement is in agreement with recommendations made by the Inspector General. Section 902 also required the Secretary to ensure that the information contained in the Database can be organized by sector, state, locality, and region. Section 902 required the Secretary to report to Congress annually on those assets in the Database considered to be most at risk. The report is to include name, location, and sector of each asset. It is also to include any changes in the criteria used to define or identify critical infrastructure and any changes in the compiling of the Database. It is also to include the extent to which the Database has been used as a tool for allocating resources. It is likely that DHS would classify much of the information specific to particular assets in the Database. Title XI in the Senate's companion bill, S. 4 , Improving America ' s Security Act of 2007 , although not mentioning a National Asset Database, also required the Secretary to develop a risk-based prioritized list of critical infrastructure and key resources. The list should consider those assets or systems that, if destroyed or disrupted, by attack or natural catastrophe, would cause significant loss of life, severe economic harm, mass evacuations, or lead to the loss of vital public services. The list should reflect a cross-sector analysis to determine priorities for prevention, protection, recovery, and reconstitution. The act also instructed the Secretary to report to Congress annually the criteria used to create the list, the methodology used to solicit and verify information submitted to the list, and how the list will be used in program activities, including grant making. In the compromise bill, Implementing the 9/11 Commission Recommendations Act of 2007 ( P.L. 110-53 ), the Senate agreed with the House with some modification. Title X established the National Asset Database in statute and instructed the Secretary of Homeland Security to establish and maintain a classified prioritized critical infrastructure list of systems and assets included in the Database that the Secretary determines would cause regional or national "catastrophic effects" if destroyed or disrupted. It instructed the Secretary to annually update the Database, including establishing data collection guidelines, reviewing those guidelines with State officials, and to work with State officials before finalizing what should be included in the Database. The Secretary was also instructed to identify and evaluate methods for soliciting relevant information on assets from the private sector, including use of the Protected Critical Infrastructure Information Program. The bill also required the Secretary to submit an annual report, that, among other items, should include the name, location, and sector classification of those assets listed in the classified prioritized list, those assets that are most at risk of terrorism, and the extent to which Database and/or the prioritized list have been used to allocate federal funds. This report shall be unclassified, although a classified annex may be included. The compromise bill also required an annual report on the comprehensive assessments carried out in each sector and should include any countermeasures or actions recommended or taken to address issue identified in those assessments. This report may be classified. The Secretary was also required to report annually on the actions taken by the federal government to ensure the preparedness of the private sector to reduce interruptions in the operations of critical infrastructures associated with acts of terrorism or natural catastrophe, or other national emergency, in accordance with the Defense Production Act of 1950 . This report is to go to the House Financial Services Committee and the Senate Banking, Housing, and Urban Affairs Committee, in addition to the respective homeland security committees. The compromise bill left the Consortium concept proposed by the House to the Secretary's discretion. The House version of the FY2008 Department of Homeland Security Appropriations Bill, H.R. 2638 , contained report language directing the National Protection and Programs Directorate to remove from the National Asset Database items it deems insignificant, and encouraged the Directorate to provide states and local partners the opportunity to review their assets listed in the Database and to recommend items for removal. The language also stated that the Directorate should clarify its guidance when soliciting information to ensure uniform and accurate information. The Senate version ( S. 1644 ) contained no similar language. | The Office of Infrastructure Protection (OIP) in the Department of Homeland Security (DHS) has been developing and maintaining a National Asset Database. The Database contains information on over 77,000 individual assets, ranging from dams, hazardous materials sites, and nuclear power plants to local festivals, petting zoos, and sporting good stores. The presence of a large number of entries of the latter type (i.e., assets generally perceived as having more local importance than national importance) has attracted much criticism from the press and from Members of Congress. Many critics of the Database have assumed that it is (or should be) DHS's list of the nation's most critical assets and are concerned that, in its current form, it is being used inappropriately as the basis upon which federal resources, including infrastructure protection grants, are allocated. According to DHS, both of those assumptions are wrong. DHS characterizes the National Asset Database not as a list of critical assets, but rather as a national asset inventory providing the 'universe' from which various lists of critical assets are produced. As such, the Department maintains that it represents just the first step in DHS's risk management process outlined in the National Infrastructure Protection Plan. DHS has developed, apparently in parallel with the National Asset Database, a list of about 2,200 assets that it has determined are critical to the nation. Also, while the National Asset Database has been used to support federal grant-making decisions, according to a DHS official, it does not drive those decisions. In July 2006 the DHS Office of the Inspector General released a report on the National Asset Database. Its primary conclusion was that the Database contained too many unusual and out-of-place assets and recommended that those judged to be of little national significance be removed from the Database. In his written response to the DHS IG report, the then-Undersecretary for Preparedness did not concur with this recommendation, asserting that keeping these less than nationally significant assets in the Database gave it a situational awareness that can assist in preparing and responding to a variety of incidents. Accepting the DHS descriptions of the National Asset Database, questions and issues remain. For example, the National Asset Database seems to have evolved away from its origins as a list of critical infrastructures, perhaps causing the differences in perspective on what the Database is or should be. As an inventory of the nation's assets, the National Asset Database is incomplete, limiting its value in preparing and responding to a wide variety of incidents. Assuring the quality of the information in the Database is important and a never-ending task. If DHS not only keeps the less than nationally significant assets in the Database but adds more of them to make the inventory complete, assuring the quality of the data on these assets may dominate the cost of maintaining the Database, while providing uncertain value. Finally, the information currently contained in the Database carries with it no legal obligations on the owner/operators of the asset. If, however, the Database becomes the basis for regulatory action in the future, what appears in the Database takes on more immediate consequences for both DHS and the owner/operators. |
On April 5, 2012, the Jumpstart Our Business Startups Act (JOBS Act; P.L. 112-106 ) was enacted with bipartisan support in the 112 th Congress. The statute, examined in depth in the CRS Report R42427, U.S. Initial Public Stock Offerings and the JOBS Act , by [author name scrubbed] and [author name scrubbed], aims to boost corporate capital formation through amending parts of federal securities laws some viewed as an impediment to that process. The 113 th Congress is currently considering legislation that would amend certain provisions in the JOBS Act. Currently, there are two areas of focus: (1) expanding parts of the JOBS Act that exempted certain banks and bank holding companies (BHCs) from various reporting requirements associated with Securities and Exchange Commission (SEC) registration to include savings and loan holding companies (SLHCs); and (2) expediting the pace of SEC rulemaking on a provision that expands the amount companies can raise through the federal securities law Regulation A (Reg A). Reg A exempts certain firms from having to register securities offerings with the SEC. In the case of the latter legislative initiative, H.R. 701 (McHenry) was passed by the House on May 15, 2013. This report provides an overview of current legislation that is attempting to accomplish the aforementioned actions by discussing (1) securities registration and disclosure requirements in federal securities laws; (2) modifications made by the JOBS Act; (3) the JOBS Act's amendment to Regulation A and subsequent criticisms; (4) legislation in the 113 th Congress to amend Regulation A in the JOBS Act; (5) the JOBS Act's bank registration and deregistration shareholder thresholds; (6) the costs and benefits of being an unregistered bank; (7) legislation to amend the JOBS Act's bank registration and deregistration shareholder thresholds; and (8) bank deregistrations after the JOBS Act and their potential legislative implications. The Securities Act of 1933 (the 1933 Act) makes it illegal to offer or sell securities to the public unless they have been registered with the SEC. Registration covers only the securities actually being offered and only for the purposes of the offering in the registration statement. The registration consists of two basic parts: (1) the prospectus, which must be provided to every purchaser of the securities, and (2) supplemental information, which contains information and exhibits that do not have to be provided to purchasers but are available for inspection by the public at the SEC. Section 7 of the 1933 Act sets forth the information that must be contained in the registration statement. The schedule requires such information as the underwriters, the specific type of business, significant shareholders, debt and assets of the company, and opinions as to the legality of the issue. Section 10(a) of the 1933 Act specifies what information the prospectus must contain. Numerous regulations issued by the SEC provide further details about the registration process under the 1933 Act. Certain transactions and securities are exempted from the registration requirements. Exempted transactions include private placements, intrastate offerings, and small offerings. The SEC may, by rules and regulations, exempt any class of securities if it finds that such an exemption is in the public interest and the issue of securities does not exceed $5 million. Among other exempted securities are government securities and short-term commercial paper, securities for which it is believed that other, adequate means of government regulation exist. The Securities Exchange Act of 1934 (the 1934 Act) addresses many different areas, one of which is the ongoing process of disclosure to the investing public through the filing of periodic and updated reports with the SEC. Any issuer that has a class of securities traded on a national securities exchange or has total assets exceeding $1 million and a class of equity securities with at least 500 or 750 shareholders, depending upon certain factors, must register with the SEC. Every issuer required to register under the 1934 Act must file periodic and other reports with the SEC. Section 12 requires the filing of a detailed statement about the company when the company first registers under the 1934 Act. Section 13 requires a registered company to file annual and quarterly reports with the SEC. These reports must contain essentially all material information, financial and otherwise, about the company that the investing public might need in making a decision about whether to invest in the company. Among the views that helped drive the passage of the JOBS Act were (1) that there has been a "steady decline in the U.S. share of the IPO [initial public offering] market" that needs to be addressed and (2) that after the last recession, it has been hard for small businesses to "get traditional bank financing so they [must] rely more on investors and capital markets for financing" and there is a need to make "it easier for them to do that." In addition to the changes to Reg A and the bank and BHC shareholder registration and deregistration thresholds described above, the JOBS Act contains several other components. Several key elements are described briefly below. The JOBS Act establishes a category of firm known as an emerging growth company (EGC), and relaxes various disclosure and accounting requirements for such firms. Criteria for EGC status include having up to $1 billion in annual gross revenue and having less than five years elapse since its initial shares were first sold to the public. Under federal securities law, certain provisions exist that exempt companies from having to register with the SEC when marketing securities to investors. One such exemption, Rule 506, is used by various start-ups when raising money. The chief limit imposed on companies using Rule 506 is that their securities offering must be principally limited to what are known as accredited investors and that there can be no general solicitation, meaning that the offering must entail a targeted solicitation of accredited investors. This has meant that companies could not broadly advertise their Rule 506 offerings through mass media such as television and print publications. Under the JOBS Act, companies are permitted to conduct general solicitation and advertising for a Rule 506 offering, which could include advertising through television or print media publications. Such offerings, however, are still limited to accredited investors. The SEC has not completed rulemaking required to implement these provisions of the act. Crowdfunding is a method by which companies or individuals can raise money through relatively small individual contributions from often large numbers of people. It is a fundraising approach that has been propelled by the Internet and social media. Crowdfunding websites solicit everything from charitable donations, to donations for movie production projects, to donations to help underwrite scientific research, to donations for artistic endeavors, and have become central to the crowdfunding process. In return for their funding, donors may receive everything from a thank-you item like a t-shirt, to a product produced by the donation's recipient. Under the 1933 Act, donors could not be given ownership interests, or shares in the profits of a soliciting crowdfunder, as these constitute securities. Subject to limitations on the amount that individuals can invest in them over a 12-month period, the JOBS Act created a special exemption that permits crowdfunding companies to sell securities to those individuals. The SEC has not yet completed rulemaking to implement the crowdfunding provisions in the JOBS Act. Regulation A is an SEC regulation that exempts certain small businesses from some registration and disclosure requirements. Reg A allows the SEC, through the issuance of rules and regulations, to exempt any class of securities from the registration requirement under the 1933 Act if it finds that the exemption is in the public interest and the issue of securities does not exceed $5 million during any 12-month period. According to a report released by the U.S. Government Accountability Office (GAO), Reg A offerings cleared by the SEC have fallen significantly since the late 1990s. The GAO study found that after peaking at 116 in FY1997, the number of Reg A offerings fell to 19 by 2011. Title IV of the JOBS Act, often called Reg A+, raises the offering limit under Reg A to $50 million over the course of a year from the previous $5 million. In addition, if the securities are offered or sold on a national securities exchange, or are offered or sold to "qualified purchasers," they will be considered "covered securities," which would exempt them from state securities law regulation. Otherwise, securities offered under Reg A+ are still subject to state securities regulatory review. Proponents of the Reg A+ provision in the JOBS Act have spoken of its potential to expand capital availability for smaller firms. For example, after the act's passage, then House Financial Services Committee Chairman Spencer Bachus observed, Amending Regulation A to make it viable for small companies to access capital will permit greater investment in these companies, resulting in economic growth and more jobs. By reducing the regulatory burden and expense of raising capital from the investing public.... A number of questions have, however, been raised about whether the expanded Reg A will attract significant numbers of new issuers. The concern is that the demands of additional costs and time from state securities regulatory reviews required for Reg A issues that are not covered securities could be a deterrent to taking advantage of Reg A+. State securities regulators, as represented by the North American Securities Administrators Association (NASAA), an association of state and provincial securities regulators, have argued that, whatever rule the SEC eventually issues concerning Reg A, the states must maintain some authority over these offerings. To facilitate Reg A+, the JOBS Act requires the SEC to issue implementation rules for the disclosures that are required in Reg A offerings. For example, the SEC may require disclosures involving the delivery of the offering statement and other information about the entity issuing the security. The agency also has the authority to impose other rules that it deems to be in the public interest for the protection of investors. The rules could also require issuers to file offering statements and related documents with the SEC, including audited financial statements, a description of the issuer's business operations, and commentary on the company's financial status. The SEC has also been directed to issue regulations fleshing out the details of the new offering limit, such as the definition of a qualified purchaser of a Reg A offering. The JOBS Act did not specify a deadline for the SEC's promulgation of Reg A+ rules. To date, the agency has not proposed any such rules. Agency officials testified before Congress in April 2013 that agency staff had begun developing rule recommendations for Title IV for formal SEC consideration. H.R. 701 (McHenry) was passed by the House on May 15, 2013, with bipartisan support. The bill would amend Title IV of the JOBS Act by requiring the SEC to implement the Reg A+ rules by October 31, 2013. H.R. 701 passed the House with bipartisan support on May 15, 2013. The bill's sponsor, Representative Patrick McHenry, has said that the bill ... simply codifies an intended deadline for Regulation A as part of the JOBS Act. The [bill's] target date is reasonable, nearly 19 months after the JOBS Act was signed into law and 5 months before the official Reg A review would need to occur. Our economy needs efficient, vibrant capital markets to thrive and this legislation is a step in the right direction. A biotech industry trade group known as BIO spoke of the implications of delayed SEC rulemaking on the provision. [D]elays at the SEC have blunted the potential impact of the other capital formation reforms in the law, including Regulation A. BIO applauds Rep. McHenry for introducing legislation to speed the implementation of this important provision.... Emerging biotech companies that do not yet have product revenue must cultivate a wide range of public and private investors to finance the development process. Changing the eligibility threshold for Regulation A offerings will provide a new source of capital to fund the search for cures and breakthrough medicines. Bringing groundbreaking cures and treatments from bench to bedside is a long and arduous road, and biotechnology companies are at the forefront of the effort." In March 2013, SEC Chair Mary Jo White testified that the agency was pursuing Reg A rulemaking "as quickly as possible … [b]ut … some [rulemakings] are easier to move and faster to move than others." SEC officials have also said that they generally prioritize rulemaking obligations based on their statutory deadlines. They have argued that the agency is facing multiple demands for rulemaking related to the JOBS Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act; P.L. 111-203 ). At the same time, they have also described resource constraints that they said challenged their pursuit of the obligations: [T]he Commission is facing an unprecedented work load when you factor in all of the Congressionally mandated rule-makings. There's over 90 Dodd-Frank provisions that have rule-writing requirements and over 20 studies. Although we've completed 80 percent of those and 17 of those studies, there's still plenty to do. And some of those, some of the rule-makings that are, that are left to do, particularly the ones in John's division are related to systemic risk. And then, and then when you add the JOBS Act rule-making, sort of the three main rule-makings, but there's ancillary rule-makings and studies and reports to do. That is an unprecedented level of work, and the ones related to the JOBS Act as I, as I, as I mentioned earlier, those are fundamental changes to the way that the capital markets, the private offering markets will work. [To properly implement these] … requires us to make sure that we're getting the rules done right. That being said, we need to get them. We appreciate that you gave us deadlines, and those deadlines have passed, but we are focused on getting those rules done. It also has been clear to me from the outset that the significant expansion of the SEC's responsibilities [under the Dodd-Frank Act] cannot be handled appropriately with the agency's current resource levels.... [T]he SEC does not yet have all the resources necessary to fully implement the law. In March 2013, Chairman Darrel Issa of the House Oversight and Government Reform Committee; Chairman Jeb Hensarling of the House Financial Services Committee; Chairman Jim Jordan of the House Subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending of the Committee on Oversight and Government Reform, and Chairman Patrick McHenry of the House Subcommittee on Oversight and Investigations of the House Financial Services Committee, sent a joint letter to then-SEC Chair Elisse Walter. The letter criticized the agency's pace in carrying out required rulemaking on the Dodd-Frank Act and the JOBS Act. It also cited reports suggesting that the agency was "using its limited resources to draft a discretionary rule requiring the reporting of corporate expenditures on political activities." Given what it said was the agency's "discretionary" use of its resources that were unrelated to the agency's mandate "to protect investors, maintain fair, orderly and efficient markets, and facilitate capital formation," it questioned Ms. Walter's assertions that the agency lacked adequate resources to "fully implement" statutorily required rulemaking. In April 2013, an SEC spokesperson told journalists that the agency's staff was considering whether to make a formal recommendation on mandating the disclosure of political expenditures to the commission. He also emphasized that in the event that there is such a recommendation, its timing "will be influenced by the [SEC's] ongoing workload" as dictated by the Dodd-Frank Act and the JOBS Act. Addressing subjects that included the SEC's alleged resource constraints and dilatory engagement rulemaking projects, SEC commissioner Daniel Gallagher has spoken of the difficult decisions faced by the agency in prioritizing and managing its large and complex work portfolio with respect to obligated statutory rulemaking requirements as well as the conduct of its core missions: [A major challenge faced by the agency] is regulatory distraction.... a state of affairs in which a regulatory body is so inundated with external mandates that it risks losing focus of its core responsibilities. Given the mandates flowing from Congress … this is a condition that we at the Commission must be very careful to avoid.... Because of [its] … disparate statutory mandates, many of which are not grounded in the [financial] crisis, the SEC is left with a long list of decisions to make. Decisions about how to prioritize and sequence the rulemakings, decisions about how to give effect to each separate mandate as we tackle them, and decisions about the utility of pursuing certain mandates instead of going back to Congress to seek reconsideration when the mandates simply don't make sense given our statutory mission.... [T]he SEC can't do everything. The Commission and its staff's time and attention are more limited commodities than are policy options in Washington - especially if our solutions need not address any demonstrable problem. And we, as an agency, no less than individually, find ourselves surrounded with many superficially attractive ways to distract ourselves. Our agenda is necessarily shaped by legislation. Dodd-Frank and the JOBS Act are the current headline-grabbers. But, we must not forget the fundamentals; we must not lose sight of our core mission.... [This mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation is, however, often undermined by] the Commission's scatter-shot menu of short-term and reactive priorities. It is difficult to predict with confidence the behavioral impact on the SEC's RegA+ rulemaking if H.R. 701 or similar legislation were to become law. There are, however, a number of possible resulting scenarios, including two discussed below. If such legislation were to become law, the SEC might be encouraged to prioritize its RegA+ rulemaking ahead of rulemaking obligations with later deadlines or no deadlines at all or other non-rulemaking projects. Whether the legislation is enacted, its mere existence could send a message to the SEC that getting certain rulemaking done is of special importance to its congressional overseers, a message that could lead to expedited RegA+ rulemaking. An alternative scenario is that the bill is enacted, but the SEC does not complete its Reg A+ rulemaking by its deadline, a situation that has occurred in a number of cases with Dodd-Frank Act and JOBS Act rulemaking obligations that have deadlines in statutes. Historically, under the 1933 Act, banks and BHCs have generally been required to register securities with the SEC if they have total assets exceeding $10 million and the shares are held (as per shareholders of record ) by 500 or more shareholders. Banks and BHCs were also allowed to no longer register securities with the SEC, a process known as deregistration, if the number of their shareholders of record fell to 300 or fewer. Title VI of the JOBS Act raised the shareholder registration threshold with the SEC from 500 to 2,000 and increased the upper limit for deregistration from 300 to 1,200 for those financial entities. The provision went into effect immediately upon the enactment of the JOBS Act on April 5, 2012. An official at the Independent Community Bankers of America, a bank trade group that supported the provision, spoke of its dual benefits: This reform will make it easier for community banks to raise capital without tripping costly registration requirements, enhancing their ability to serve their customers and communities. It would also permit some community banks that are already registered with the SEC to deregister and thus significantly reduce their overall regulatory burden, freeing them up to make more small business and consumer loans in the communities they serve. Title VI of the JOBS Act makes it easier for banks and BHCs to (1) increase their number of shareholders, while remaining unregistered private banks; and (2) if already registered, to voluntarily deregister even while adding shareholders. Potential benefits of being unregistered may include Resource and Cost Savings from Reduced Reporting Burdens . Unregistered institutions must still file call reports and BHCs must make FR Y-6 submissions (annual reports to regulators that are also filed by SLHCs, and other reports with the applicable prudential regulatory authorities). However, they are not required to file certain 1933 Act reports with the SEC (or, in the case of a bank without a holding company, the Federal Deposit Insurance Corporation or the Office of the Comptroller of the Currency). The preparation and filing of those disclosure documents arguably tends to require non-trivial amounts of time, attention, and training for personnel in finance, administration, human resources, legal, and other departments. Being unregistered eliminates such reporting, freeing up personnel for other areas of concern. In addition, by ending various SEC reporting obligations, deregistered institutions may be able to lower their accounting, legal, insurance, and compliance costs. Anecdotal reports from banks who deregistered after the passage of the JOBS Act indicate that a number of them reported cost savings of upwards of a couple of hundred thousand dollars. A bank's shareholders may also financially benefit from such cost savings. The Ability to List on the Over-the-Counter Bulletin Board . Registration under the 1934 Act is required in order to list a security on exchanges such as the Nasdaq stock exchange or the New York Stock Exchange (NYSE). Provided that they meet certain reporting requirements, unregistered banks and BHCs may, however, have their shares traded on the Nasdaq-owned Over-the-Counter Bulletin Board (OTCBB). To be traded there, they must provide copies of the reports that they submit to their primary federal financial regulator and other certain notices or forms as specified in OTCBB rules, including notices of dividend payments to the Financial Industry Regulatory Authority (FINRA). As a consequence of being able to trade on the OTCBB, an institution's shareholders may mitigate the loss in their equity's liquidity that can occur when their formerly exchange-listed bank or bank holding company deregisters. Stocks traded on the OTCBB tend to be less liquid than those traded on stock exchanges like the NYSE and Nasdaq, a potential shortcoming for their shareholders. Reduced Personal Liability for Certifying Officers . The chief executive officer and the chief financial officer of registered companies are required to certify the completeness and the material accuracy of company filings under the 1934 Act. If these certifications are false, the officers can be held personally liable. Such risks may discourage otherwise qualified persons from serving in those capacities. This kind of risk is removed when an entity is unregistered and the certifying obligations are not applicable. Bank shareholders may benefit from this. Potential costs of being unregistered may include Potential Reductions in Shareholder Information about the Banks . Because unregistered banks and BHCs are no longer subject to SEC reporting and disclosure requirements associated with registered entities, current and prospective bank shareholders may be deprived of material information about the banks. Greater Potential of Bank Fraud that Could Harm Shareholders . Investor advocates such as officials from the Council of Institutional Investors, an association of large investors, say that unregistered entities are legally able to avoid the provision of material disclosures about themselves to the public through the SEC. They have concerns that this more opaque disclosure environment can lead to a greater likelihood of bank fraud, which may ultimately harm bank shareholders. Such concerns may take on added currency given reports that in the context of depository institutions in general, small banking and savings and loan institutions are reportedly experiencing a disproportionate amount of financial stress. Others, such as the Independent Community Bankers of America, argue that financial prudential regulators such as the Federal Deposit Insurance Corporation and the Federal Reserve already regulate and oversee many banks to ensure safety and soundness and that SEC registration is essentially unnecessary. Considerable research exists on the importance of required SEC financial disclosures by SEC registered entities for the investment decisions of institutional investors, professional investors, and retail investors. A caveat is that this research has generally not involved entities that were also subject to other extensive and publicly available reporting requirements such as the disclosures to financial regulators required of BHCs and SLHCs. Some experts outside of the banking industry have also argued that from an investor information standpoint, there is redundancy between the disclosures required of SEC-registered entities and the financial regulatory disclosures required of depository institutions. Shareholder Perception Problems . Deregistration involves a reduction in the amount of public information that is available about a corporation's operations. Because of this, such entities run the risk of being perceived as having "something to hide." Potential Reduction in Available Capital from Stock Buybacks . One bank deregistration strategy may entail reducing the number of an entity's shareholders by purchasing their stock. Such stock buybacks, however, involve bank capital that has alternative uses such as provision of additional loans. Reports indicate that after the passage of the JOBS Act, a number of privately-held banks and BHCs took advantage of Title VI's reduction in shareholder ownership registration triggers by raising capital from additional shareholders without having to register with the SEC. Banks have also taken advantage of the law to deregister from the SEC. For example, as of late December 2012, SNL Financial, a research firm, reportedly found that of the 208 publicly traded banks and thrifts with fewer than 1,200 shareholders, 101 of the banks had filed to deregister after the passage of the JOBS Act. SNL also reportedly found that the number represented an historically unprecedented increase in the incidence of deregistrations over those done before the passage of the act. At present, two bills, S. 872 (Toomey) and its companion bill, H.R. 801 (Womack), would amend Title VI of the JOBS Act to also apply its shareholder registration and deregistration numerical triggers to SLHCs. H.R. 801 was ordered to be reported by the House Financial Services Committee on May 7, 2013. H.R. 801 's sponsor, Representative Stephen Womack, observed that the JOBS Act gave "community banks the flexibility they needed to raise capital without having to comply with the onerous SEC regulations intended for larger banks.... [ H.R. 801 ] extends the same flexibility to savings and loans, ensuring that they along with community banks across the country can deploy capital throughout the communities they serve." The Independent Community Bankers of America, which supported passage of the legislation, described the bill as correcting a key shortcoming in Title VI's differential treatment of banks and thrifts: While the banking agencies have so far interpreted the deregistration provisions of the JOBS Act to cover thrifts, the SEC still has not clarified whether thrift holding companies are covered. Thrifts and thrift holding companies are subject to the same oversight and supervision as banks and bank holding companies and are subject to the same financial reporting requirements. The enhanced oversight and regulation of banks is the rationale for affording them higher shareholder registration and deregistration thresholds under the JOBS Act. That being the case, there is no policy reason for denying thrift holding companies, subject to the same oversight and regulation, the benefits of the higher thresholds. As Congress deliberates on legislation that would expand the JOBS Act to SLHCs, some empirical research has also examined the financial impact on community banks who took advantage of the JOBS Act threshold changes to deregister. One academic study concluded that the act was generally, but not entirely, financially beneficial to them. It found that on average, the legislation resulted in $1.31 in higher net bank income and $3.28 lower pretax expenses for every $1.00 of bank assets, and was responsible for $1.54 million in increased assets per bank employee. The study, however, found that on average, each examined bank had $2.13 lower pretax income and $2.34 lower equity capital for every $1.00 of bank assets. Another academic study compared banks that deregistered before the JOBS Act with banks that did so afterwards. Its key finding was that the JOBS Act had a real, and generally beneficial, financial effect on community banks that deregistered in response to the act's shareholder threshold change. The authors of the study also interpreted their findings to suggest that Congress "should pass" legislation such as H.R. 801 , which would extend the JOBS Act's liberalized deregistration threshold to SLHCs. The reasoning was that because SLHCs are also required to provide significant disclosures to their prudential regulators in a manner that is identical to the BHCs already covered by the JOBS Act, they should also be covered. The authors also indicated that their findings suggested that the JOBS Act's deregistration cutoffs should be further liberalized to allow banks and BHCs with more than 1,200 shareholders of record to also deregister. | On April 5, 2012, the Jumpstart Our Business Startups Act (JOBS Act; P.L. 112-106) was enacted with bipartisan support in the 112th Congress. The statute, examined in depth in the CRS Report R42427, U.S. Initial Public Stock Offerings and the JOBS Act, by [author name scrubbed] and [author name scrubbed], aims to boost corporate capital formation through amending parts of federal securities laws some viewed as an impediment to that process. The 113th Congress is currently considering legislation to amend the act in two ways: (1) expand coverage of the JOBS Act to more companies; and (2) accelerate Securities and Exchange Commission (SEC) rulemaking required for the implementation of a specific provision in the act. Regulation A (Reg A) of the Securities Act of 1933 allows the SEC to exempt publicly offered securities from having to be registered if the value of the securities does not exceed $5 million during any 12-month period. Title IV of the JOBS Act raised that ceiling to $50 million during any 12-month period. Proponents of the provision said that it would provide new sources of capital for private enterprises. However, Title IV imposed no deadline on the SEC, which must adopt rules necessary for the provision's implementation. To date, the agency has not completed the rulemaking process. H.R. 701 (McHenry), which passed the House with bipartisan support on May 15, 2013, would impose a deadline of October 31, 2013, for completion of SEC rulemaking needed to implement the provision. The legislation is a congressional response to concerns that the SEC is not acting expeditiously enough to finish its rulemaking on what some regard as an important provision. SEC officials have indicated that they have begun the rulemaking process for the provision, but that they have been challenged by a multitude of rulemaking and regulatory obligations amidst resource constraints. Historically, under federal securities laws, banks and bank holding companies (BHCs) were generally required to register their publicly offered securities with the SEC if they have total assets exceeding $10 million and the shares are held by 500 or more shareholders. They were also allowed to stop registering the securities, and cease or reduce attendant reporting requirements, a process known as deregistration, when their shareholders of record fell to 300 or fewer. Title VI of the JOBS Act raised the shareholder registration threshold with the SEC from 500 to 2,000 and increased the deregistration threshold from 300 to 1,200, a provision that went into effect immediately after the JOBS Act's enactment. As of December 2012, this has resulted in about 100 banks and BHCs deregistered since the provision went into effect, an unprecedented number. Some say that the provision will make it easier for community banks to raise capital without triggering costly SEC registration requirements and enable some SEC-registered community banks to deregister, reducing their regulatory burdens and freeing up bank capital. Various community banks have taken advantage of Title VI's liberalized registration trigger and have been able to raise shareholder equity capital without having to incur registration expenses. S. 872 (Toomey) and a companion bill, H.R. 801 (Womack), which has been ordered reported by committee, would expand the Title IV shareholder registration and deregistration thresholds to savings and loan holding companies. This report discusses these proposed amendments in more detail. It will be updated as developments warrant. |
Recent media reports suggest possible movement in the negotiations on legislation to amend the Foreign Intelligence Surveillance Act (FISA). These negotiations are the most recent development in a wide range of legislative and oversight activity in the 110 th Congress regarding FISA. During the 110 th Congress, several House and Senate committees have engaged in oversight activities, including hearings and requests for expeditious production of documents and information regarding the Administration's warrantless foreign intelligence surveillance programs, as possible changes to the Foreign Intelligence Surveillance Act of 1978, as amended, were explored. In July 2007, an unclassified summary of the National Intelligence Estimate on "The Terrorist Threat to the U.S. Homeland" was released. It expressed the judgment, in part, that the U.S. Homeland will face a persistent and evolving threat over the next three years, the main threat coming from Islamic terrorist groups and cells, particularly Al Qaeda. On August 2, 2007, the Director of National Intelligence (DNI) released a statement on "Modernization of the Foreign Intelligence Surveillance Act." In his statement, Admiral McConnell viewed such modernization as necessary to respond to technological changes and to meet the Nation's current intelligence collection needs. He deemed it essential for the intelligence community to provide warning of threats to the United States. He perceived two critically needed changes. First, he stated that a court order should not be required for gathering foreign intelligence from foreign targets located overseas, although he did agree to court review of related procedures after commencement of the needed collection. Second, he contended that liability protection was needed for those who furnished aid to the government in carrying out its foreign intelligence collection efforts. On August 5, 2007, the Protect America Act of 2007 (PAA), P.L. 110-55 , was enacted into law with a 180-day sunset provision, providing a temporary solution to concerns raised by the Director of National Intelligence. On January 28, 2008, a cloture motion on an amendment proposed by Senator Reid to S. 2248 to extend the sunset on the Protect America Act for an additional 30 days ( S.Amdt. 3918 ) fell short of the required votes. On January 29, 2008, both the House and the Senate passed H.R. 5104 , a 15-day extension to the sunset for the Protect America Act, to allow further time to consider proposed legislation to amend FISA, while ensuring that the intelligence community would have the authority it needed in the intervening period. It became which became P.L. 110-182 . On February 13, 2008, the House rejected H.R. 5349 , which would have extended the sunset provision for an additional 21 days. Bills have been introduced in the Senate to extend the sunset from 180 to 210 days ( S. 2541 , S. 2556 , and S. 2615 ), or to extend it to July 1, 2009 ( S. 2557 ). The Protect America Act sunseted on February 16, 2008. Under transitional provisions in Section 6 of P.L. 110-55 , acquisitions authorized while the PAA was in force and related directives would remain in effect until their expiration dates. Under the terms of the PAA, such acquisitions could be authorized for up to one year. The House and the Senate each have passed bills to provide a longer-term statutory approach to these concerns. H.R. 3773 , the Responsible Electronic Surveillance That is Overseen, Reviewed, and Effective Act of 2007 or the RESTORE Act of 2007, was introduced in the House of Representatives on October 9, 2007, and was referred to the House Judiciary Committee and the House Permanent Select Committee on Intelligence. The bill was reported out of the House Judiciary Committee, as amended, on October 12, 2007, H.Rept. 110-373 , Part 1. The same day, the measure was reported out of the House Permanent Select Committee on Intelligence, as amended, H.Rept. 110-373 , Part 2. On October 16, 2007, H.Res. 746 was reported out of the House Committee on Rules, H.Rept. 110-385 , providing for consideration of an amendment in the nature of a substitute, as modified, to H.R. 3773 , in lieu of the amended versions of H.R. 3773 reported out of the House Judiciary Committee and the House Permanent Select Committee on Intelligence. The resolution was agreed to on October 17, 2007. On November 15, 2007, the House passed H.R. 3773 . On October 26, 2007, S. 2248 , the Foreign Intelligence Surveillance Act of 1978 Amendments Act of 2007 or the FISA Amendment Act of 2007, an original bill, was reported out of the Senate Select Committee on Intelligence by Senator Rockefeller, S.Rept. 110-209 . S. 2248 was referred to the Senate Judiciary Committee on November 1, 2007. On November 16, 2007, S. 2248 was reported out of the Senate Judiciary Committee by Senator Leahy with an amendment in the nature of a substitute, without a written report. The written report was filed on January 22, 2008, S.Rept. 110-258 . On December 14, 2007, Senator Reid made a motion to proceed with consideration of S. 2248 , and presented a cloture motion on the motion to proceed. The motion to proceed was then withdrawn. On December 17, 2007, the Senate considered the motion to proceed with the measure. Cloture on the motion to proceed was invoked by a vote of 76-10. After some debate in the closing hours before the Senate broke for the holidays, a decision was made to revisit the measure when the Members returned in January. Senate floor activities on S. 2248 resumed on January 23 and 24, 2008. On January 24, 2008, a modified version of the Senate Judiciary Committee's amendment in the nature of a substitute to S. 2248 was tabled by a vote of 60-36. Senator Reid sought unanimous consent for consideration of the House-passed bill, H.R. 3773 , but Senator McConnell objected. Senator Rockefeller, for himself and Senator Bond, proposed an amendment in the nature of a substitute to S. 2248 ( S.Amdt. 3911 , the Foreign Intelligence Surveillance Act of 1978 Amendments Act of 2008 or the FISA Amendments Act of 2008). On January 28, 2008, a cloture motion by Senator McConnell on this amendment failed to pass. A number of other amendments to S.Amdt. 3911 to S. 2248 were proposed and considered between January 24 and February 12, 2008. On February 12 th , pursuant to an agreement and order of January 31, 2008, S.Amdt. 3911 to S. 2248 , as amended, was agreed to, and the bill was read for the third time. The Senate then agreed to a cloture motion on S. 2248 . After debate, the Senate passed S. 2248 , as amended, by a vote of 68-29. Pursuant to the previous order, H.R. 3773 was taken up, all but the enacting clause was stricken and the text of S. 2248 , as amended, was inserted in lieu thereof. The bill was advanced to the third reading, passed, and the motion to reconsider was laid upon the table. Passage of S. 2248 was then vitiated and the bill was returned to the calendar. A message on the Senate action was sent to the House the following day. On March 12, 2008, the House Rules Committee reported H.Res. 1041 to the House. The resolution passed the House two days later. Pursuant to the resolution, the House considered and agreed to a House amendment to the Senate amendment to H.R. 3773 , also entitled the Foreign Intelligence Surveillance Act of 1978 Amendments Act of 2008 or the FISA Amendments Act of 2008, by a vote of 213-197, with one voting present (Roll no. 145). The House and Senate have not gone to conference on FISA legislation. Instead, negotiations are ongoing to find a means of resolving their differences. Both the Senate amendment to H.R. 3773 and the House amendment to the Senate amendment to H.R. 3773 include amendments to the Foreign Intelligence Surveillance Act. The House amendment differs in a number of ways from the Senate-passed version of the bill. For example, the Senate amendment to H.R. 3773 provides, in new section 701 of FISA, that nothing in the definition of "electronic surveillance" under subsection 101(f) of FISA, 50 U.S.C. § 1801(f), shall be construed to encompass surveillance that is targeted in accordance with proposed title VII of the Foreign Intelligence Surveillance Act (FISA) at a person reasonably believed to be located outside the United States. The House has no parallel provision in its bill. The two bills differ in their treatment of the role of the Foreign Intelligence Surveillance Court (FISC) with respect to procedures for acquisitions for the purpose of gathering foreign intelligence information of the contents of communications of U.S. persons and non-U.S. persons located outside the United States. In the absence of an emergency authorization, the House amendment requires prior approval by the FISC of the applicable targeting procedures, minimization procedures, and certification before the Attorney General and the Director of National Intelligence (DNI) may authorize acquisition of the contents of communications of non-U.S. persons reasonably believed to be located outside the United States. The FISC would have 30 days after a certification is submitted to review the certification and the targeting and minimization procedures and to approve or deny an order regarding such an acquisition. The House bill also requires the Attorney General, in consultation with the DNI, to adopt guidelines to ensure compliance with limitations imposed by the bill on such acquisitions and to ensure that an application is filed under section 104 or 303 of FISA, if required by that act. The guidelines are to be submitted to the FISC, the congressional intelligence committees, and the House and Senate Judiciary Committees. Under the House bill, if the FISC finds that the certification satisfies statutory requirements and targeting and minimization procedures are consistent with statutory standards and constitutional requirements under the Fourth Amendment, the FISC is to approve the certification and use of the procedures for the acquisition. In a non-emergency situation, if the FISC finds that a certification or applicable procedures fall short of these requirements, the court would deny the order, identify any deficiency in the certification or the procedures, and provide the government with an opportunity to correct such deficiency. If the Attorney General and the DNI determine that an emergency situation exists, that immediate action by the Government is required, and that time does not permit the completion of judicial review prior to the initiation of an acquisition, they may authorize the acquisition and submit a certification to the FISC as soon as possible but in no event more than seven days after the determination is made. In the context of an emergency authorization, the FISC would enter an order directing the government, at the government's election and to the extent required by the FISC's order, to correct any deficiency within 30 days or cease the acquisition. In contrast, the Senate bill does not require prior approval by the FISC of applicable certifications, targeting procedures and minimization procedures in connection with the acquisition of communications of non-U.S. persons abroad, nor does it require adoption and submission of compliance guidelines. Rather, the Senate bill requires submission of a certification or a targeting or minimization procedure, or an amendment thereto, to the FISC within five days of making or amending the certification or adopting or amending the procedure. Where the Attorney General and the DNI determine that immediate action is required and time does not permit preparation of a certification prior to initiation of an acquisition, the Senate bill requires the Attorney General and the DNI to prepare the certification, including such determination, within seven days after the determination is made. If the FISC finds that a certification meets statutory requirements and targeting and minimization procedures are consistent with statutory requirements and meet constitutional standards under the Fourth Amendment, the FISC would enter an order approving continued use of the procedures involved. If the court finds that the required standards are not met, then the FISC would enter an order directing the government, at the government's election and to the extent required by the FISC order, to correct any deficiencies within 30 days or cease the acquisition. The House provides that nothing in its bill is to be construed to require an application under section 104 of FISA for an acquisition that is targeted in accordance with new section 703 of FISA at a non-U.S. person reasonably believed to be located outside the United States. The Senate bill has no similar language. Both bills provide for targeting of U.S. persons reasonably believed to be located outside the United States for up to 90 days pursuant to a FISC order if statutory criteria are met. Such an order could be renewed for additional 90 day periods upon submission of renewal applications meeting the same standards. In the case of an emergency authorization by the Attorney General of an acquisition, each bill requires notice to a FISC judge by the Attorney General or his designee at the time the decision is made to conduct such an acquisition and requires the filing of an application for a FISC order within seven days of the Attorney General's authorization of the emergency acquisition. Applicable minimization procedures would apply to such an acquisition. In the absence of a judicial order approving an acquisition originally authorized by the Attorney General on an emergency basis, the acquisition would terminate when the information sought is obtained, when an application for the order is denied, or when seven days have elapsed, whichever is earliest. Without a FISC order, no information acquired or evidence derived from an emergency acquisition, except under circumstances where the target of the acquisition is determined not to be a U.S. person, may be received in evidence or disclosed in federal, state, or local proceedings; nor could any information concerning a U.S. person acquired from such acquisition subsequently be used or disclosed in any other manner by federal officers or employees without the consent of such person, except with the approval of the Attorney General if the information indicates a threat of death or serious bodily harm to any person. The House and Senate bills differ as to how they craft language emphasizing the exclusivity of FISA as a means of engaging in electronic surveillance to gather foreign intelligence information. The House amendment would add a new section to FISA, providing that "the procedures of chapters 119, 121, and 206 of title 18, United States Code, and [FISA] shall be the exclusive means by which electronic surveillance and the interception of domestic wire, oral, or electronic communications may be conducted," except for "an express statutory authorization for electronic surveillance or the interception of domestic wire, oral, or electronic communications, other than as an amendment to this Act or chapters 119, 121, or 206 of title 18, United States Code." The Senate amendment to H.R. 3773 would add a new section FISA, providing that "[t]he procedures of chapters 119, 121, and 206 of title 18, United States Code, and [FISA] shall be the exclusive means by which electronic surveillance (as defined in section 101(f), regardless of the limitation of section 701) and the interception of domestic wire, oral, or electronic communications may be conducted." Both bills would expand the definition of "foreign power" and "agent of a foreign power" under FISA to address groups or individuals, other than U.S. persons, that engage in international proliferation of weapons of mass destruction or activities in preparation therefor, although the House and Senate definitions of these terms differ somewhat. Both bills would also permit federal officers who engage in electronic surveillance or physical searches to obtain foreign intelligence information to consult with federal, state, or local law enforcement personnel to coordinate to investigate against international proliferation of weapons of mass destruction. While both the House and the Senate provide prospective limitations of liability for those who furnish aid to the government in connection with acquisitions authorized under their respective bills, they differ in their treatment of electronic communication service providers who assisted the government with warrantless electronic surveillance for foreign intelligence purposes between September 11, 2001 and January 17, 2007. Title II of the Senate's version includes retroactive immunity for electronic communication service providers who may have furnished aid to the government from September 11, 2001, through January 17, 2007, if certain criteria are satisfied. The House measure does not afford retroactive immunity to electronic communications service providers who may have furnished aid to the government in connection with the Terrorist Surveillance Program or other intelligence activities in the wake of the terrorist attacks of September 11, 2001. Title II of the House amendment provides a procedure by which a court, while taking steps to protect classified information, could examine submissions, arguments and information with respect to which state secrets privilege has been asserted in covered civil actions against such electronic communications service providers and other persons who may have furnished such aid to the government. The Senate amendment contains no parallel language. In addition, the House amendment provides for an audit by the Inspector General of the Department of Justice of the Terrorist Surveillance Program and any similar programs. Within 30 days of completion of the audit, the bill would require that the report be submitted to the House and Senate intelligence committees and the House and Senate judiciary committees, along with any underlying documentation. The Senate bill has no similar provision. The House bill would also establish a Commission on Warrantless Electronic Surveillance within the legislative branch. No parallel provision exists in the Senate Amendment to H.R. 3773 . The House bill provides additional manpower and training to facilitate submission to and disposition of applications to the FISC. The Senate amendment to H.R. 3773 does not address this issue. In the following table, this report provides a detailed side-by-side comparison of the provisions of these two measures, using H.R. 3773 as passed by the Senate as the basis for the comparison. As title I of FISA defines a number of key terms critical to understanding the import of the bills' language, a glossary of FISA terms as defined in section 101 of FISA, 50 U.S.C. § 1801 is attached to assist in understanding the effect of these measures. As used in title I of FISA, 50 U.S.C. § 1801 et seq .: (a) "Foreign power" means— (1) a foreign government or any component thereof, whether or not recognized by the United States; (2) a faction of a foreign nation or nations, not substantially composed of United States persons; (3) an entity that is openly acknowledged by a foreign government or governments to be directed and controlled by such foreign government or governments; (4) a group engaged in international terrorism or activities in preparation therefor; (5) a foreign-based political organization, not substantially composed of United States persons; or (6) an entity that is directed and controlled by a foreign government or governments. (b) "Agent of a foreign power" means— (1) any person other than a United States person, who— (A) acts in the United States as an officer or employee of a foreign power, or as a member of a foreign power as defined in subsection (a)(4) of this section; (B) acts for or on behalf of a foreign power which engages in clandestine intelligence activities in the United States contrary to the interests of the United States, when the circumstances of such person's presence in the United States indicate that such person may engage in such activities in the United States, or when such person knowingly aids or abets any person in the conduct of such activities or knowingly conspires with any person to engage in such activities; or (C) engages in international terrorism or activities in preparation therefore; or (2) any person who— (A) knowingly engages in clandestine intelligence gathering activities for or on behalf of a foreign power, which activities involve or may involve a violation of the criminal statutes of the United States; (B) pursuant to the direction of an intelligence service or network of a foreign power, knowingly engages in any other clandestine intelligence activities for or on behalf of such foreign power, which activities involve or are about to involve a violation of the criminal statutes of the United States; (C) knowingly engages in sabotage or international terrorism, or activities that are in preparation therefor, for or on behalf of a foreign power; (D) knowingly enters the United States under a false or fraudulent identity for or on behalf of a foreign power or, while in the United States, knowingly assumes a false or fraudulent identity for or on behalf of a foreign power; or (E) knowingly aids or abets any person in the conduct of activities described in subparagraph (A), (B), or (C) or knowingly conspires with any person to engage in activities described in subparagraph (A), (B), or (C). (c) "International terrorism" means activities that— (1) involve violent acts or acts dangerous to human life that are a violation of the criminal laws of the United States or of any State, or that would be a criminal violation if committed within the jurisdiction of the United States or any State; (2) appear to be intended— (A) to intimidate or coerce a civilian population; (B) to influence the policy of a government by intimidation or coercion; or (C) to affect the conduct of a government by assassination or kidnapping; and (3) occur totally outside the United States, or transcend national boundaries in terms of the means by which they are accomplished, the persons they appear intended to coerce or intimidate, or the locale in which their perpetrators operate or seek asylum. (d) "Sabotage" means activities that involve a violation of chapter 105 of title 18, or that would involve such a violation if committed against the United States. (e) "Foreign intelligence information" means— (1) information that relates to, and if concerning a United States person is necessary to, the ability of the United States to protect against— (A) actual or potential attack or other grave hostile acts of a foreign power or an agent of a foreign power; (B) sabotage or international terrorism by a foreign power or an agent of a foreign power; or (C) clandestine intelligence activities by an intelligence service or network of a foreign power or by an agent of a foreign power; or (2) information with respect to a foreign power or foreign territory that relates to, and if concerning a United States person is necessary to— (A) the national defense or the security of the United States; or (B) the conduct of the foreign affairs of the United States. (f) "Electronic surveillance" means— (1) the acquisition by an electronic, mechanical, or other surveillance device of the contents of any wire or radio communication sent by or intended to be received by a particular, known United States person who is in the United States, if the contents are acquired by intentionally targeting that United States person, under circumstances in which a person has a reasonable expectation of privacy and a warrant would be required for law enforcement purposes; (2) the acquisition by an electronic, mechanical, or other surveillance device of the contents of any wire communication to or from a person in the United States, without the consent of any party thereto, if such acquisition occurs in the United States, but does not include the acquisition of those communications of computer trespassers that would be permissible under section 2511(2)(i) of title 18; (3) the intentional acquisition by an electronic, mechanical, or other surveillance device of the contents of any radio communication, under circumstances in which a person has a reasonable expectation of privacy and a warrant would be required for law enforcement purposes, and if both the sender and all intended recipients are located within the United States; or (4) the installation or use of an electronic, mechanical, or other surveillance device in the United States for monitoring to acquire information, other than from a wire or radio communication, under circumstances in which a person has a reasonable expectation of privacy and a warrant would be required for law enforcement purposes. (g) "Attorney General" means the Attorney General of the United States (or Acting Attorney General), the Deputy Attorney General, or, upon the designation of the Attorney General, the Assistant Attorney General designated as the Assistant Attorney General for National Security under section 507A of title 28, United States Code. (h) "Minimization procedures," with respect to electronic surveillance, means— (1) specific procedures, which shall be adopted by the Attorney General, that are reasonably designed in light of the purpose and technique of the particular surveillance, to minimize the acquisition and retention, and prohibit the dissemination, of nonpublicly available information concerning unconsenting United States persons consistent with the need of the United States to obtain, produce, and disseminate foreign intelligence information; (2) procedures that require that nonpublicly available information, which is not foreign intelligence information, as defined in subsection (e)(1) of this section, shall not be disseminated in a manner that identifies any United States person, without such person's consent, unless such person's identity is necessary to understand foreign intelligence information or assess its importance; (3) notwithstanding paragraphs (1) and (2), procedures that allow for the retention and dissemination of information that is evidence of a crime which has been, is being, or is about to be committed and that is to be retained or disseminated for law enforcement purposes; and (4) notwithstanding paragraphs (1), (2), and (3), with respect to any electronic surveillance approved pursuant to section 1802(a) of this title, procedures that require that no contents of any communication to which a United States person is a party shall be disclosed, disseminated, or used for any purpose or retained for longer than 72 hours unless a court order under section 1805 of this title is obtained or unless the Attorney General determines that the information indicates a threat of death or serious bodily harm to any person. (i) "United States person" means a citizen of the United States, an alien lawfully admitted for permanent residence (as defined in section 1101(a)(20) of title 8), an unincorporated association a substantial number of members of which are citizens of the United States or aliens lawfully admitted for permanent residence, or a corporation which is incorporated in the United States, but does not include a corporation or an association which is a foreign power, as defined in subsection (a)(1), (2), or (3) of this section. (j) "United States," when used in a geographic sense, means all areas under the territorial sovereignty of the United States and the Trust Territory of the Pacific Islands. (k) "Aggrieved person" means a person who is the target of an electronic surveillance or any other person whose communications or activities were subject to electronic surveillance. (l) "Wire communication" means any communication while it is being carried by a wire, cable, or other like connection furnished or operated by any person engaged as a common carrier in providing or operating such facilities for the transmission of interstate or foreign communications. (m) "Person" means any individual, including any officer or employee of the federal government, or any group, entity, association, corporation, or foreign power. (n) "Contents," when used with respect to a communication, includes any information concerning the identity of the parties to such communication or the existence, substance, purport, or meaning of that communication. (o) "State" means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Trust Territory of the Pacific Islands, and any territory or possession of the United States. | During the 110th Congress, several House and Senate committees have engaged in oversight activities, including hearings and requests for expeditious production of documents and information regarding the Administration's warrantless foreign intelligence surveillance programs, as possible changes to the Foreign Intelligence Surveillance Act of 1978, as amended, (FISA) were explored. In July 2007, an unclassified summary of the National Intelligence Estimate on "The Terrorist Threat to the U.S. Homeland" was released. It expressed the judgment, in part, that the U/S. Homeland will face a persistent and evolving threat over the next three years, the main threat coming from Islamic terrorist groups and cells, particularly Al Qaeda. On August 2, 2007, the Director of National Intelligence (DNI) released a statement on "Modernization of the Foreign Intelligence Surveillance Act." In his statement, Admiral McConnell viewed such modernization as necessary to respond to technological changes and to meet the Nation's current intelligence collection needs. He deemed it essential for the intelligence community to provide warning of threats to the United States. In his view, there were two critically needed changes: that a court order should not be required for gathering foreign intelligence from foreign targets located overseas; and that liability protection was needed for those who furnished aid to the government in carrying out its foreign intelligence collection efforts. Both the House and the Senate have taken action on proposals to address these concerns, but the measures differ somewhat in content and approach. On November 15, 2007, the U.S. House of Representatives passed H.R. 3773, the RESTORE Act of 2007. On February 12, 2008, the Senate passed S. 2248, as amended, then struck all but the enacting clause of H.R. 3773, and inserted the text of S. 2248, as amended, in its stead. On March 14, 2008, the House passed an amendment to the Senate amendment to H.R. 3773. Both the House amendment and the Senate amendment include significant changes to FISA, including provisions on the acquisition of communications of non-U.S. persons and of U.S. persons abroad. The two bills take different approaches to some issues that have played a significant role in the ongoing debate. For example, the Senate amendment would provide retroactive immunity for electronic communications service providers who assisted the government in intelligence activities between September 11, 2001 and January 17, 2007. The House amendment would provide for presentation to a court, with certain safeguards, of evidence and arguments with respect to which state secrets privilege has been asserted in covered civil actions against such electronic communications service providers and other persons who furnished such aid to the government. The House bill also provides for an audit of the Terrorist Surveillance Program and any other wireless electronic surveillance programs, with reporting requirements, while the Senate bill does not. This report provides an overview, a review of legislative activity, and a detailed side-by-side comparison of the provisions of these two bills. |
Article II Section 1 of the U.S. Constitution, as modified by the 12 th Amendment, provides for an indirect election of the President and Vice President by presidential electors. Although the states are authorized to appoi nt them "in such Manner as the Legislature thereof may direct," today, presidential electors are themselves elected by qualified voters in all the states. In order to win, candidates must win a majority of the electoral votes. Although the words do not appear in the Constitution, the electors are known collectively as the electoral college, and this arrangement is generally referred to as the electoral college system. It has proved to be a durable institution or process, due in part to the fact that the U.S. Constitution is, by design, not easily amended. Its longevity may also be due to the fact that it has delivered a chief executive who commanded a majority of electoral votes in 53 of 54 presidential contests since the 12 th Amendment took effect in 1804. Also important from the standpoint of democratic principle and majority rule is the fact that the electoral college system has elected the candidates who won the most popular votes—"the people's choice"—in 49 of these 54 elections. Despite its origins as the handiwork of the Constitution's framers, the electoral college system has been criticized as undemocratic, archaic, cumbersome, and weighted in favor of—or against—different states and groups since the first presidential elections. At the same time, electoral college defenders have asserted that it is a key foundation of federalism, it contributes to a stable and moderate political party system, and that it has delivered "the people's choice," the popular vote winner in 91% of presidential elections since 1804. Congress actively considered electoral college reform for nearly 30 years between the late 1940s and 1979, bringing multiple proposals to the floor of the Senate and House of Representatives during this period. Reform advocates, however, were never able to achieve the two-thirds vote required to propose a constitutional amendment in both houses during the same Congress. By the early 21 st century, the questions of reforming electoral college constitutional provisions or substituting direct popular election of the President and Vice President gradually disappeared from the congressional agenda. In 2016, however, for the second time in 16 years, and for the fourth time in the nation's history, a President and Vice President were elected who won a majority of electoral votes, but fewer popular votes than their principal opponents. This outcome occurred because the system requires a majority of electoral votes, rather than of popular votes, to win the presidency. This feature, which is original to the Constitution, has been the object of both criticism and proposals for change since the early days of the republic; its recurrence in 2016 contributed to renewed interest among some in replacement of the electoral college by direct popular election. Following the election, four proposals to establish direct popular election were introduced in the last weeks of the 114 th Congress, while two more have been offered to date in the 115 th Congress. This report identifies and provides an analysis of these proposals and will be updated to report on any additional developments in electoral college reform. Aside from the electoral vote majority requirement, the Constitution gave broad discretion to the states with respect to other elements of the system. Many of the additional features associated with the electoral college system are the product of federal and state laws and party actions. 1. With today's total of 538 electors, a majority of 270 is necessary to elect the President and Vice President. 2. The voters elect presidential electors in all 50 states and the District of Columbia. 3. Candidates for the office of elector are nominated by the political parties in the states using a broad range of procedures. 4. The electors are chosen on general election day, the Tuesday after the first Monday in November of presidential election years. 5. Forty-eight states and the District of Columbia award their electors on a winner-take-all basis known as the general ticket system. Maine and Nebraska award their electors on a basis of the states' congressional district and statewide popular vote winners. 6. In December, five weeks after the general election, the electoral votes are cast by the electors, who meet separately in their respective states. 7. By tradition, electors are expected, but not constitutionally required, to vote for the candidates to whom they are pledged. 8. The electoral votes are counted by Congress on January 6 of the following year, when the winners are declared. 9. If no candidate receives a majority of electoral votes, then the President is elected by the House of Representatives and the Vice President by the Senate in a process known as contingent election. Critics of the electoral college have offered proposals for its reform or replacement since the early days of government under the Constitution. Constitutional and structural criticisms have centered on several of its features: critics note that it is not fully democratic, because it provides indirect election of the President. It can, they assert, result in (1) the election of candidates who win the electoral college but receive fewer popular votes than their opponents, an eventuality referred to by reform advocates as "wrong winner" or an electoral college "misfire"; and (2) contingent election in Congress if no candidate wins an electoral college majority. They further maintain that it results in electoral vote under- and over-representation in the states between censuses and House reapportionment and the reallocation of electoral votes. They also note that "faithless" electors can vote for candidates other than those to whom they are pledged. Legislative and political criticisms include the winner-take-all or general ticket system mandated in all but two states, which is said to disenfranchise voters who prefer the losing candidates in the states; various asserted "biases" that are alleged to favor different states and groups; and the electoral college "lock," a phenomenon that has been claimed to provide a nearly insuperable advantage to one or the other of the political parties at various points in time. Public opinion has consistently and historically supported reform. The Gallup Poll reported as early as 1967 that 58% of respondents supported direct election, compared with 22% who favored retaining the electoral college; Gallup's 2013 survey recorded that 63% of respondents favored an amendment providing for direct election, while 29% favored retention of the electoral college. Following the 2016 election, however, Gallup reported a shift to greater support for the electoral college system by respondents who identified themselves as "Republican" or "Lean Republican." Conversely, already high levels of support for direct popular election among respondents who identified themselves as "Democratic" or "Lean Democratic" rose to new heights in the post-2016 election Gallup Poll. Reform options have included plans to remedy perceived flaws while retaining the basic electoral college system. Nearly all reform plans of the past century would start by eliminating the office of presidential elector but continue to award electoral votes; this would remove the potential for faithless electors, a major point of criticism of the existing system. Beyond this common feature, three principal options for reform have been advocated over time: the automatic plan, which would mandate the general ticket system in all states and the District of Columbia; the district system, adopted by Maine and Nebraska, which would allocate electoral votes by congressional district and at-large; and the proportional system, which would award electoral votes in direct proportion to the percentage of votes gained by the competing candidates in each state. Moving beyond "reform" of the system, the most popular proposal since the late 20 th century has been to eliminate the electoral college system entirely and replace it with direct popular election of the President and Vice President, with either a plurality or majority of the popular vote necessary to win. Electoral college supporters and those who favor a reformed electoral college system reject the claim that it is undemocratic, noting that electors are chosen by the voters in free elections. They assert that the electoral college system is a major component of American federalism, maintaining that the Constitution prescribes a federal election of the President by which votes are tallied in each state, and in which the voters act both as citizens of the United States and members of their state communities when choosing a President. They also cite federalism in defense of the allocation of electors among the states, and deprecate the claims that various groups or political parties are advantaged under the system. Further, they maintain that the electoral college system has historically promoted broad-based and generally moderate political parties. They reject the faithless elector argument: even counting the seven votes cast against instructions in 2016, unfaithful electors have never come close to influencing the outcome of an election. Moreover, they note, most electoral college reform plans would remove even this eventuality by eliminating the office of elector and awarding electoral votes directly. On a practical level, they note that the general ticket system actually tends to magnify the winning ticket's electoral vote margin beyond the popular vote margin, which they claim brings closure to the election process and promotes the winning candidates' legitimacy. As noted previously, the electoral college system has been the subject of discussion and controversy since the first presidential elections. Reform proposals to remedy fatal defects in the original system, by which electors cast two undifferentiated votes for President, were introduced in Congress as early as 1797, and a tie vote for President in the 1800 election led to the nation's first constitutional crisis. When the crisis was resolved by contingent election in the House of Representatives, Congress acted quickly to approve a proposal to require distinct ballots by the electors for President and Vice President. This measure was ratified in 1804 as the 12 th Amendment, becoming the first, and to date the only, specific constitutional reform of the electoral college system. Since that time, amendments have been introduced to reform or replace it with direct popular election in almost every session of Congress. Estimates vary, but reform proposals number at least 752 through the 115 th Congress. For a period of almost three decades in the mid-20 th century, Congress gave the issue of electoral college reform a prominent place on its agenda. Between the late 1940s through 1979, numerous electoral college reform proposals were introduced in both the House of Representatives and the Senate. They embraced a wide range of approaches to the question, but generally followed the outlines set out in the previous section: "ending it" by eliminating the entire electoral college system and establishing direct popular election, or "mending it" by reforming its more controversial provisions. The question of electoral college reform or replacement was actively considered throughout these years. In the post-World War II era, direct popular election became increasingly popular, but several versions of reform were also considered, most of which started with keeping electoral votes but eliminating the office of elector, thus ending the possibility of faithless electors. Proceeding from that baseline, the most prominent reform variants, as noted previously, included the automatic plan /system , which would award the popular vote winners in each state all that state's electoral votes; the district plan /system , which would award electoral votes to the popular vote winners in congressional districts and the two at-large or "senatorial electors" to statewide vote winners; and the proportional plan /system , which would award electoral votes in each state in direct proportion to the number of popular votes won by competing candidates. Proposed amendments were the subject of hearings in the Senate and House Judiciary Committees on 17 different occasions between 1948 and 1979, and, most notably, electoral college reform proposals were debated in the full Senate on five occasions and twice in the House during this period. Proposals were approved by the necessary two-thirds majority twice in the Senate and once in the House, but never in both chambers during the same Congress. Following these three decades of legislative activity, the questions of revising electoral college constitutional provisions or substituting direct popular election of the President and Vice President gradually fell from the congressional agenda by the end of the first decade of the 21 st century. This decline was reflected by the number of constitutional amendments to reform or abolish the electoral college introduced in the House or Senate during the ensuing three decades. Proposals to reform the electoral college system or adopt direct election declined from 26 in the 96 th Congress (1979-1981) and an average of eight per Congress for the 101 st (1989-1991) through 110 th (2007-2009) Congresses, to none in the 113 th Congress (2013-2015). Moreover, no electoral college reform proposal has received floor action since 1979. Following the presidential election of November 8, 2016, proposals to establish direct popular election of the President and Vice President were introduced in Congress for the first time since 2011. Four resolutions were offered late in the 114 th Congress and two more have been offered to date in the 115 th Congress. These measures were introduced as joint resolutions, the traditional legislative vehicle for proposed constitutional amendments. They fall into one of two categories; the first includes resolutions that would establish direct popular election but otherwise make few, if any, other changes in the Constitution. The second category would establish direct popular election, and would also enable Congress to provide by law for additional federal authority over a range of election-related issues. These vary from measure to measure, but generally include provisions to enhance and extend federal jurisdiction in such areas as residence standards, definition of citizenship, national voter registration, inclusion of U.S. territories and other associated jurisdictions in the presidential election process, establishment of an election day holiday, and ballot access standards for parties and candidates. The following amendments were introduced in the 114 th Congress; they are arranged by House and Senate origin and chronological order. This measure was introduced on November 17, 2016, by Representative Gene Green and 19 co-sponsors. This resolution included establishment of direct popular election and various other provisions. Section 1 of the proposed amendment provided for election of the President and Vice President "by the people of the several States" and the District of Columbia. Section 2 defined electors for these offices as persons eligible to vote for Senators and Representatives in Congress from each state, but authorized state legislatures to prescribe "less restrictive qualifications with respect to residence." It also authorized Congress to establish uniform residence and age requirements. Section 3 set a plurality requirement for election: "[t]he persons having the greatest number of votes ... shall be elected." Section 4 incorporated the traditional joint candidacies for President and Vice President as a constitutional requirement and prescribed that voters would cast a single vote for a joint candidacy. Section 5 authorized Congress to provide by law for the case of a candidate's death before the election, and for the case of a tie vote. Section 6 set an effective date for the amendment of one year after the date of ratification, should it have been approved by the states. H.J.Res. 102 was referred to the Subcommittee on the Constitution and Civil Justice of the House Judiciary Committee on December 5, 2016. No further action was taken. H.J.Res. 102 was an example of a presidential election reform measure that would provide for direct popular election while also enhancing congressional ability to legislate additional federal authority over the elections process. For instance, Section 2 would have authorized Congress to "establish uniform age and residence qualifications." With respect to age, this would presumably have empowered Congress to set a lower voting age than 18, since the 26 th Amendment effectively prohibits the denial of the right to vote to anyone age 18 or older. With respect to residence, it would have provided Congress the authority to "establish uniform ... residence qualifications" and set "less restrictive [residence] qualifications" in the states. While two Supreme Court cases effectively limited state residency requirements in the 1970s, legislation implementing this section would arguably constitute an extension of federal authority over a process that has traditionally been administered at the state level, and which has previously been considered a settled question. It may also be noted that H.J.Res. 102 included the customary seven-year ratification deadline for constitutional amendments. It is, however, specifically incorporated in the resolution's preamble or authorizing section, rather than the body of the amendment. This opens the possibility of extending the ratification deadline by congressional action and arguably avoids the amendment expiration issues most notably associated with the proposed Equal Rights Amendment. H.J.Res. 103 was introduced by Representative Charles Rangel on November 17, 2016. Representatives Steve Cohen and Jackie Speier joined as co-sponsors. It would have provided for direct election of the President and Vice President, expanded the right to vote in presidential elections, and established congressional authority to provide by legislation for certain elements of the presidential election process. Section 1 proposed direct election of joint tickets of candidates for President and Vice President. It also extended the right to vote for President to "qualified electors of the ... territories." It defined "electors" as persons qualified to vote for the most numerous branch of the legislature in their jurisdiction. Section 2 would have empowered Congress to choose the time, place, and manner of holding the election, determine entitlement to inclusion on the presidential ballot, and provide for counting and declaration of the vote. H.J.Res. 103 was referred to the Subcommittee on the Constitution and Civil Justice of the House Judiciary Committee on December 5, 2016. No further action was taken. H.J.Res. 103 proposed elimination of the electoral college system and its replacement by direct popular election of the President and Vice President. It also would have authorized Congress to provide by legislation for certain aspects of the presidential election process. Since Section 1 did not set a margin for victory, a plurality of the popular vote presumably would have been sufficient to elect. Arguably its most significant provision would have been Section 1's extension of the right to vote in presidential elections to qualified electors in U.S. territories. This would have been the first amendment specifically aimed at expansion of the presidential electorate since the 23 rd Amendment authorized voting for presidential electors in the District of Columbia. The section's definition of electors notably proposed language similar to that of the Constitution's Article 1, Section 2, which similarly defined qualified electors for the House of Representatives as those qualified to vote for "the most numerous branch of the legislative body where they reside." Section 2 of the resolution would have added additional authority to regulate the "times, places, and manner" of holding presidential elections. Here again, the resolution drew on language from the Constitution, in this case Article I, Section 4, clause 1, with respect to elections for Senators and Representatives. Another noteworthy provision of this section was the extension to Congress of authority over "entitlement to inclusion on the ballot" and "the manner in which the results of the election shall be ascertained and declared." These functions have traditionally been provided for in state law and administered by state election authorities. H.J.Res. 103 incorporated the seven-year ratification window for constitutional amendments in its authorizing section or preamble, thus opening the possibility of extending the ratification deadline by congressional action. This resolution was introduced by Representative Steve Cohen on December 1, 2016. Representative Jim Cooper joined as a co-sponsor. It proposed elimination of the electoral college system and its replacement by direct popular election of the President and Vice President. It also would have empowered Congress to provide by legislation for authority over certain elements of the presidential election process. H.J.Res. 104 was distinguished by its inclusion of a comprehensive preamble, which presented a range of arguments in favor of replacement of the electoral college system by direct popular election. These noted the evolution of democratic government since the Constitution was drafted in 1787; cited constitutional amendments that guarantee universal suffrage and the right to vote; noted the spread of modern information technology that ensures nationwide availability of information on the presidential candidates and the election process; quoted Thomas Jefferson's assertion that "as new truths are discovered and manners and opinions change, with the change of circumstances, institutions must advance also to keep pace with the times.... "; and traced the growth of the right to vote and the development of universal suffrage in the United States. The resolution was also noteworthy in that it did not set the customary seven-year ratification deadline for ratification. It would, therefore, have been eligible for ratification indefinitely. Sections 1 and 2 provided for direct election; set qualifications for electors as those eligible to vote for the most numerous chamber of their state legislature; and empowered Congress to establish uniform age qualifications. Section 3 established the traditional joint candidacies for President and Vice President within the Constitution, while eliminating the arguably archaic prohibition against electors voting "for a candidate for President or Vice President because either candidate, or both, are inhabitants of the same state as the elector." Section 4 established a plurality requirement for the popular vote winners. Section 5 authorized Congress to determine the "times, places, and manner of holding such elections and entitlement to inclusion on the ballot." Section 6 authorized Congress to provide for death or disqualification of a candidate before the election or for the case of a tie vote in any election. Section 7 provided that the amendment would have taken effect on January 1 of the year following ratification. H.J.Res. 104 included many provisions similar or identical to H.J.Res. 102 , the Every Vote Counts Amendment, including direct election on a plurality basis, joint tickets, congressional authority over voter qualifications, "times, places, and manner" of holding presidential elections, and instances in which candidates may have died or been disqualified before the election. The non-inclusion of the customary seven-year ratification deadline was arguably particularly noteworthy in H.J.Res. 104 . Amendments that are proposed without this provision are theoretically capable of being ratified for an indefinite period after Congress proposed them. This was the case of the 27 th Amendment, which was proposed without a ratification deadline in 1789, languished for two centuries, and was ultimately revived and ratified in 1992. This resolution was introduced on November 15, 2016, by Senator Barbara Boxer. She was joined by three co-sponsors: Senators Dianne Feinstein, Kirsten E. Gillibrand, and Bill Nelson. Section 1 authorized direct popular election of a joint ticket for President and Vice President by "qualified" electors of the states, the territories, and the "District constituting the seat of Government.... " It defined electors as those qualified to vote for the most numerous branch of the legislature where they reside. Section 2 authorized Congress to determine "the time, place, and manner of holding the election, standards for ballot inclusion, and procedures by which the results may be "ascertained and declared." S.J.Res. 41 was referred to the Senate Committee on the Judiciary on November 15, 2016. No further action was taken. S.J.Res. 41 incorporated provisions similar to those included in contemporary related House of Representatives proposals. The resolution would have established direct popular election, presumably on a plurality basis, although this is not specified in the measure. It would also have established the familiar and traditional joint ticket of presidential and vice presidential candidates as part of the Constitution, and made reference to the original constitutional language governing qualification for electors of the House of Representatives. As with H.J.Res. 103 , it would have expanded the right to vote in presidential elections to qualified voters in U.S. territories. Also in common with previously-cited contemporary House measures, it would have provided congressional authority over the "time, place, and manner" of holding presidential elections, ballot access, and procedures concerning ascertainment and declaration of result. Two amendments to establish direct popular election have been introduced to date in the 115 th Congress, both in the House of Representatives. This resolution was introduced on January 5, 2017, by Representative Steve Cohen. To date, he has been joined by five co-sponsors. It is identical to H.J.Res. 104 in the 114 th Congress. The resolution also opens with an identical preamble citing the sponsors' justification for electoral college reform. Sections 1 and 2 would provide for direct election; set qualifications for electors as those eligible to vote for the most numerous chamber of their state legislature and empower Congress to establish "uniform age qualifications," here again presumably lower age qualifications, but not higher than those established by the 26 th Amendment. Section 3 would extend constitutional authorization to the traditional joint candidacies for President and Vice President, while eliminating the arguably archaic prohibition against electors voting "for a candidate for President or Vice President because either candidate, or both, are inhabitants of the same state as the elector." Section 4 would implicitly set a plurality requirement for the popular vote winners. Section 5 would authorize Congress to determine the "times, places, and manner of holding such elections and entitlement to inclusion on the ballot.... " Section 6 would authorize Congress to provide for death or disqualification of a candidate before the election or for the case of a tie vote in any election. Section 7 provides that the article would take effect on January 1 of the year following ratification. H.J.Res. 19 was referred to the House Committee on the Judiciary on January 5, 2017, and to its Subcommittee on the Constitution and Civil Justice on January 11. With respect to voting age, the provisions of Section 2 would arguably empower Congress to set a lower voting age than 18, since the 26 th Amendment effectively prohibits the denial of the right to vote to anyone age 18 or older. Another noteworthy provision in H.J.Res. 19 is the absence of the traditional seven-year ratification deadline. As noted previously, amendments proposed without a ratification deadline, either in the preamble/authorizing resolution, or in the body of the amendment, are theoretically capable of being ratified for an indefinite period after Congress sends them to the states. For example, as noted previously, the 27 th Amendment was proposed without a ratification deadline in 1789; after nearly two centuries of neglect, it was revived and ratified in 1992. The proposal was introduced on February 7, 2017, by Representative Gene Green, who has been joined by 23 co-sponsors at the time of this writing. The amendment is identical to H.J.Res. 102 , introduced by Representative Green in the 114 th Congress. Section 1 would provide for election of the President and Vice President "by the people of the several States" and the District of Columbia. Section 2 defines electors as persons eligible to vote for Senators and Representatives in Congress from each state, but authorizes state legislatures to prescribe "less restrictive qualifications with respect to residence." It also authorizes Congress to establish uniform residence and age requirements. Section 3 sets a plurality requirement for election: "[t]he persons having the greatest number of votes ... shall be elected." Section 4 incorporates the traditional joint candidacies for President and Vice President into the Constitution and prescribes that voters would cast a single vote for a joint candidacy. Section 5 authorizes Congress to provide by law for the cases of a candidate's death before the election, and for the case of a tie vote. Section 6 sets an effective date for the amendment of one year after the date of ratification, should it be approved by the states. H.J.Res. 65 was referred to the House Judiciary Committee on February 7, 2017, and to its Subcommittee on the Constitution and Civil Justice on February 14. H.J.Res. 65 , like its 114 th Congress predecessor, H.J.Res. 102 , would provide for direct popular election on a plurality basis, while also incorporating joint presidential-vice presidential tickets into the Constitution. It also proposes congressional authority to provide by law for certain elements of the presidential elections process traditionally administered by the states, such as age and residence requirements, the former presumably within the requirements of the 26 th Amendment, as identified previously. H.J.Res. 65 follows traditional amendment procedures by establishing the customary seven-year ratification window in its preamble, rather than in the body of the amendment. This arguably makes it possible for Congress to extend the ratification deadline by congressional action. Aside from the introduction of new proposals late in the 114 th and the early 115 th Congress, the question of electoral college reform has been largely absent from the congressional agenda in recent years. The issue has, however, been the subject of considerable action in the states and the non-governmental sector over the past decade. Following the presidential elections of 2008 and 2012, a number of states considered alterations in their provisions for awarding electoral votes. Pennsylvania, Wisconsin, and Virginia all considered the district system; Colorado voters rejected a proposal to incorporate a proportional system for awarding votes in that state, while Nebraska considered abandoning the district system and a return to the general ticket, winner-take-all method of awarding electoral votes. To date, however, none of these initiatives has been enacted in the states. They are identified and analyzed in CRS Report R43824, Electoral College Reform: Contemporary Issues for Congress . In the non-governmental sector, a public interest organization, National Popular Vote, Inc., has proposed the National Popular Vote initiative (NPV), which would establish direct election of the President and Vice President through an interstate compact. The origin of, asserted rationale for, and progress of the NPV are examined in CRS Report R43823, The National Popular Vote Initiative: Direct Election of the President by Interstate Compact . Within the context of contemporary congressional interest in electoral college reform and direct election of the President and Vice President, two trends may be identified. Amendments introduced in the past decade have all embraced the "end it" option, substituting direct popular election for the electoral college. No proposal to reform the electoral college has been introduced since the 107 th Congress. The scope of proposed direct popular election amendments has arguably evolved in complexity and detail. Given the contemporary context, some observers might suggest that the first development reflects a decline in electoral college support, lack of interest in reform proposals, or, alternatively, the absence of a sense of urgency on the part of its potential defenders. There is at present no organization of electoral college advocates or defenders, but that may be due to the issue's relative dormancy in recent years. If a proposal for direct election appeared to be developing momentum in Congress, however, it is arguably likely that supporters of the electoral college would coalesce to defend the current system, reformed, or "as is," if its existence were seriously challenged. The second noteworthy trend in congressional proposals for reform is that, in addition to proposing direct popular election of the President and Vice President, some of them have also included provisions that would enable Congress to provide by law for enhanced federal authority in areas traditionally administered by state and local governments. Some of these elements, most notably "times, places, and manner," uniform residence standards, and candidate vacancy provisions, have been included in most reform proposals since the 1970s, and are derived from similar constitutional language. Other provisions, such as those providing a definition of citizenship for the purposes of voting, national voter registration, inclusion of U.S. territories and other associated jurisdictions in the presidential election process, establishment of an election day holiday, and congressionally-legislated federal ballot access standards for parties and candidates, are proposals that have more recently appeared in reform measures. If approved and ratified, an amendment that includes provisions such as these would provide Congress with enhanced authority to provide by law for broad national election standards, potentially superseding a range of current state, local, and political party practices and requirements, at least with respect to presidential elections. The prospect of an enlarged federal role in the administration of presidential elections raises several potential issues. Would expanded federal involvement in traditionally state and local practices impose additional responsibilities and uncompensated costs on state and local governments? If so, such requirements might be considered to be unfunded mandates, as they could impose additional costs on sub-federal governments, and as such would be subject to points of order on the floor of both the House and Senate. One response by the affected state and local governments might be to call for federal funding to meet the increased expenses imposed by federal requirements. Precedent for this exists in the grant program incorporated in the Help American Vote Act of 2002 (HAVA). Alternatively, would some election-administration functions formerly performed at the state and local level be transferred to the federal government? If so, what level of administrative support and infrastructure would be required, and what would the costs be of federal assumption of the management of substantial elements of the presidential election process? A related issue centers on perceptions that such an amendment and resultant legislation might be regarded as federal intrusion in state and local responsibilities. For instance, a far-reaching scenario could include the gradual nationwide assumption of election administration by the federal government. In this hypothetical case, questions could be raised by opponents as to (1) the costs involved; (2) whether a national election administration system could efficiently manage all the varying nuances of state and local conditions; and (3) what would be the long-term implications for federalism. Conversely, it could be asserted by supporters that (1) a national or federal election administration structure is appropriate for national elections; (2) state or local concerns are counterbalanced by the urgent requirement that every citizen be enabled and encouraged to vote; and (3) every vote should be accurately counted. The electoral college system has endured since the first presidential elections in 1789, notwithstanding over 700 reform proposals, three decades of congressional action from the 1940s through the 1970s, and the fact that in two of the five most recent elections a President has been elected with an electoral college majority but fewer popular votes than his principal opponents. What are some of the constitutional and political elements that may have contributed to its longevity? Perhaps the most important factor contributing to the durability of the electoral college is Article V of the Constitution, which establishes procedures for constitutional amendments. The founders intentionally made it difficult to revise the Constitution, establishing requirements for three separate super-majority votes: by two-thirds in both houses of Congress and in three-quarters of the states. To this may be added the fact that Congress exercises still further influence on the amendment process because it can choose ratification by state legislatures, or by ad hoc state ratification conventions, at its discretion. In practice, the standard for ratification is even higher, since it is customary to attach a seven-year deadline for ratification to all proposed amendments. To date, no electoral college reform amendment has been able to meet these exacting requirements, notwithstanding sometimes vigorous action in Congress over the years. Most successful constitutional amendments have emerged as responses to the stimulus of sudden transformative events, such as the 22 nd Amendment, which established a two-term limit for Presidents in most instances, or benefitted from the "ripeness" of an idea that had been before the public for many years, such as the 26 th Amendment, which extended the right to vote to citizens 18 years of age or older. Sometimes both factors contributed to the successful proposal and ratification of a proposed change to the Constitution, as was the case with the 25 th Amendment, which governs presidential succession and disability. Committed and persistent advocacy and leadership among senior Members of both houses of Congress is another factor that has proved essential to the success of proposed constitutional amendments. Public awareness of the issue in question and a broad national consensus that reform was necessary have also historically contributed to the success of proposed amendments. The 12 th Amendment, to date the only major constitutional change to the electoral college system that met these qualifications, was a direct response to turmoil accompanying the presidential election of 1800. The failure of the original constitutional electoral college provisions led to a constitutional crisis that, once surmounted, motivated Congress to propose, and the states to ratify, the 12 th Amendment, in what could be described as record time, considering the era. Although "public opinion" in its modern sense can scarcely be said to have existed at the time, America's political elites had been strongly influenced by the election and its aftermath. Today, by comparison, although substantial majorities of Americans, as measured by survey research, approve of direct popular election, neither a compelling national consensus nor the urgency of reform has been demonstrated with respect to the electoral college. Finally, as noted above, successful amendments have almost always depended on support and focused effort by congressional leaders who helped move amendments through the legislative process in both chambers of Congress to proposal to the states and ratification by them. For instance, both the 25 th and 26 th Amendments enjoyed the approval and active support of then-House Judiciary Committee Chairman Emanuel Celler and Senator Birch Bayh, then-Chairman of the Senate Judiciary Committee's Subcommittee on the Constitution. In summation, demonstrated need for an amendment, and in some instances demonstrated urgency, widespread awareness of, and a favorable consensus toward, the measure among the public, and committed congressional involvement, particularly in guiding proposals through the rigors of the amending process, have been key to the success of constitutional amendments in the past. The concurrent alignment of these factors would arguably be necessary for the advancement of electoral college reform in the 115 th Congress. | American voters elect the President and Vice President of the United States indirectly, through presidential electors chosen by voters in the states—the electoral college. For further information see CRS Report RL32611, The Electoral College: How It Works in Contemporary Presidential Elections. Article II, Section 1 of the U.S. Constitution, as revised by the 12th Amendment in 1804, requires winning candidates for President and Vice President to gain a majority of electoral votes. Since 1804, Presidents who won a majority of electoral votes and at least a plurality of popular votes were elected in 49 of 54 presidential elections. In four elections, however—1876, 1888, 2000, and 2016—candidates were elected with a majority of electoral votes, but fewer popular votes than their principal opponents. In the presidential election of 1824, none of the four major candidates won a majority of electoral votes (or popular votes); the President, therefore, was chosen by contingent election in the House of Representatives. For information on contingent election, see CRS Report R40504, Contingent Election of the President and Vice President by Congress: Perspectives and Contemporary Analysis. The election of Presidents who won a majority of electoral votes but fewer popular votes than their opponents is sometimes referred to, particularly by reform advocates, as an "electoral college misfire." This is possible because the Constitution requires a majority of electoral votes to elect the President, but it does not require a majority or plurality of popular votes to be elected. Critics of the electoral college have called for its reform or abolition since the earliest days of government under the Constitution. Proponents of reform, especially of direct popular election, claim the built-in potential for so-called misfires is undemocratic and cite it as a principal argument for change. For additional information on electoral college reform, see CRS Report R43824, Electoral College Reform: Contemporary Issues for Congress. Although reform of the electoral college by constitutional amendment was proposed in Congress through the 1960s, the focus later turned to amendments that would replace it with direct popular election, which proponents claim would ensure that future Presidents received a popular vote majority or plurality. Reform or replacement proposals were once familiar items on the congressional agenda; for instance, 26 amendments were introduced to abolish or reform the electoral college in the 96th Congress (1979-1980). In recent years, however, the number of related constitutional amendments introduced in the House or Senate dropped from an average of eight per Congress for the 101st through 110th Congresses, to none in the 113th Congress (2013-2014). Moreover, none of the measures introduced received consideration beyond committee referral. Following the 2016 election, however, four constitutional amendments introduced late in the 114th Congress proposed eliminating the electoral college and replacing it with direct election. To date in the 115th Congress, two amendments to establish direct popular election have been introduced: H.J.Res. 19, offered on January 5, 2017, by Representative Steve Cohen, would replace the electoral college with direct popular election of the President and Vice President by plurality vote. It would also authorize Congress to set voter qualifications, times, places, and manner of holding presidential elections, and other election-related policies. H.J.Res. 65, the "Every Vote Counts Amendment," introduced by Representative Gene Green on February 7, 2017, provides for direct popular election by plurality, and also provides Congress with additional authority over related activities. Both resolutions have been referred to the House Committee on the Judiciary and to its Subcommittee on the Constitution and Civil Justice. This report provides an analysis of these measures in the 115th Congress. |
In 2000, Congress passed the African Growth and Opportunity Act (AGOA), a U.S. trade preference program, in order to help spur market-led economic growth and development in sub-Saharan Africa (SSA) and deepen U.S. trade and investment ties with the region. Since its enactment, Congress has amended AGOA several times, making some technical changes and renewing the trade preferences through September 30, 2015. Bills to renew the preference program ( H.R. 1891 / S. 1009 ) were introduced in the House and Senate on April 17 and April 20. A related measure, H.R. 1295 , which includes AGOA reauthorization among other tariff reforms, passed the House and Senate in different forms requiring the two chambers to resolve the differences in the bill before it can be sent to the President and become law (see " Proposed Renewal Legislation " section for details). According to the United States Trade Representative (USTR), "AGOA has been the cornerstone of America's economic engagement with sub-Saharan Africa over the past fourteen years." Economic conditions in Africa have changed considerably since Congress passed the initial AGOA legislation. Annual real gross domestic product (GDP) growth in SSA was a half percentage point lower than global GDP growth (2.7% vs. 3.3%) in the decade leading up to AGOA's passage (1990-2000). Since AGOA was enacted (2001-2013), however, SSA's growth averaged 6.3%, more than 2 points higher than the 3.9% world average. While the region still contains many of the world's poorest countries and faces significant economic challenges, some observers and policymakers argue that changing economic conditions warrant an evolution in U.S. policy toward SSA, focused more strongly on private sector investment and increasing two-way trade. In recent years, SSA's growing economic potential and abundant natural resources have attracted other foreign investors, including state-supported enterprises from countries such as China, which is now the region's largest trading partner. Some Members of Congress, the Obama Administration, and many African governments have highlighted the successes of AGOA and have called for an expedited reauthorization process. As part of this process, Congress may wish to consider whether AGOA, in its current form, is achieving the initial goals of the program, including whether it addresses effectively the changing economic circumstances in Africa. Most interested observers are positive about the AGOA preference program, but some have expressed concerns about specific provisions of the program, such as the lack of coverage for certain agricultural products, or would like to see the AGOA preferences granted to a broader range of least-developed countries beyond just Africa. Others would like to see a broader program that addresses concerns over U.S. businesses' ability to effectively compete in the region, though this could also be addressed in complementary legislation or Administration initiatives. This report seeks to inform the discussion on the potential reauthorization of AGOA through analysis of (1) the components of the AGOA legislation; (2) U.S. import trends associated with AGOA; (3) the impact of AGOA on African economies and U.S.-Africa trade; and (4) the issues surrounding the reauthorization process. AGOA (Title I, P.L. 106-200 ), as amended, is a nonreciprocal preference program that provides duty-free access into the United States for qualifying exports from eligible SSA countries. Among the products that qualify for this duty-free treatment, apparel products have particular economic significance for several countries, in part due to special provisions granted to least-developed AGOA countries (" Third-Country Fabric Provision "). In addition to the tariff preferences, the AGOA legislation includes mandates for an annual meeting of U.S. and African government officials to discuss trade and economic issues—the AGOA Forum—as well as specific guidelines on U.S. development assistance directed toward SSA. Countries must meet specific eligibility requirements to qualify for these benefits. Table A-1 in the Appendix provides a list of SSA countries, as defined by AGOA. It highlights the 39 current AGOA beneficiary countries, and notes their eligibility status for other aspects of the AGOA preferences and the Generalized System of Preferences (GSP). It also lists U.S. imports under AGOA and GSP for each country and its GDP/capita—a rough measure of a country's level of economic development. At the core of AGOA are the tariff benefits that provide duty-free access to the U.S. market for certain products from eligible SSA countries. In terms of these tariff benefits and country eligibility requirements, AGOA is essentially an expansion of GSP, a U.S. trade preference program that applies to over 120 developing countries, including SSA countries. AGOA builds on GSP by providing preferential access to the U.S. market for more products, such as apparel, and sets out additional eligibility criteria. AGOA also includes other trade and development components, beyond preferences, that are not part of GSP. AGOA, like other U.S. trade preference programs, is nonreciprocal and unilateral. The preferences apply to U.S. imports and not to U.S. exports, so reauthorization only requires action by the U.S. government. These one-way preferences are granted to developing countries with the goal of enhancing export-led economic growth, and typically exclude items that may be considered import sensitive. This distinguishes them from other U.S. trade liberalization efforts such as free trade agreements (FTAs) or multilateral agreements through the World Trade Organization (WTO), which reduce and/or eliminate tariffs for both U.S. imports and exports. AGOA included a provision requiring the President to explore potential FTA negotiations with interested AGOA beneficiaries, suggesting that Congress envisioned AGOA as a stepping stone to potential broader trade pacts with African countries. FTA negotiations with South Africa and its regional partners in the South African Customs Union (SACU) sprang from this mandate in AGOA, but were ultimately unsuccessful and suspended in 2006. The tariff benefits provided by AGOA include all products covered by GSP, as well as additional products the President determines are not import-sensitive with regard to imports from SSA. According to a report by the Government Accountability Office (GAO) in 2008, the U.S. Harmonized Tariff Schedule (HTS) includes some 10,500 individual tariff lines for U.S. goods imports, of which roughly 3,800 have no most-favored nation (MFN) tariff (i.e., all WTO members may export them to the U.S. duty-free). GSP removes the tariff on an additional 3,400 products (4,800 for least-developed countries), and AGOA makes another 1,800 tariff lines duty-free, though a large share of these are included in the GSP benefits for least-developed countries (LDCs). AGOA extends duty-free treatment to certain apparel and footwear products, which are not eligible under GSP (even for LDCs). Agricultural products subject to tariff-rate quotas (TRQ) remain ineligible for duty-free treatment under both AGOA and GSP. AGOA beneficiaries are also exempt from certain caps on allowable duty-free imports under the GSP program ("competitive need limitations"). Products from AGOA countries must meet certain rules of origin (ROO) requirements in order to qualify for duty-free treatment (see the textiles and apparel section for sector-specific rules of origin). First, duty-free entry is only allowed if the article is imported directly from the beneficiary country into the United States. Second, at least 35% of the appraised value of the product must be the "growth, product or manufacture" of a beneficiary developing country, as defined by the sum of (1) the cost or value of materials produced in the beneficiary developing country (or any two or more beneficiary countries that are members of the same association or countries and are treated as one country for purposes of the U.S. law) plus (2) the direct costs of processing in the country. Up to 15% of the required 35% of the appraised value may be of U.S. origin, and any amount of production in other beneficiary SSA countries may also contribute to the value-added requirement ("regional cumulation"). AGOA includes duty-free treatment for certain apparel and textile products, though some are subject to quantitative limitations. These provisions in AGOA are significant, because (1) apparel production has played a unique role in the development process of some countries; and (2) the duty-free benefits apply to a sector with relatively higher U.S. tariff rates than average overall U.S. tariff rates. Not all AGOA beneficiaries are eligible for the apparel provisions. Duty-free treatment for apparel products under AGOA requires beneficiary countries to adopt an efficient visa ("tracking") system to prevent unlawful transshipment—production shipped through and exported from, but not actually produced in, a given country, often for particular tariff or quota benefits. Apparel production has been a significant component in some countries' economic development. Unlike textile production, it typically requires low-skilled labor and minimal capital expenditures, allowing lesser-developed countries to become globally competitive. Some research suggests that success in low-skill and export intensive industries such as apparel may help lead to a more diversified manufacturing sector. Nonetheless, the U.S. apparel sector is deemed "import sensitive," and has some specific safeguards. For example, in U.S. free trade agreements (FTAs), apparel tariff lines typically have "yarn forward" general rules of origin (which govern how much of the product must be made in the beneficiary country and longer tariff phase outs), and most preference programs either exclude these articles (GSP) or have caps on duty-free treatment (including AGOA). The existing general restrictions on U.S. imports of apparel make AGOA's preferential treatment for these product lines especially advantageous. The average U.S. applied tariff on apparel is 11.4% compared to an average for all products of 3.5%. This relatively high preference margin may help explain how some AGOA producers, especially the LDCs, are competitive with lower-cost producers in Asia and elsewhere. Textile and apparel articles qualifying for duty-free treatment include Apparel assembled in one or more AGOA beneficiary countries from U.S. yarn and fabric; Apparel made of SSA (regional) yarns and fabrics, subject to a cap until 2015; Apparel made in a designated LDC of third-country yarns and fabrics, subject to a cap until 2015; Apparel made of yarns and fabrics not produced in commercial quantities in the United States (determination must be made that the yarn or fabric cannot be supplied by the U.S. industry in a timely manner, and to extend preferential treatment to the eligible fabric); Certain cashmere and merino wool sweaters; Textiles and textile articles produced entirely in an LDC SSA beneficiary country; and Certain handloomed, handmade, ethnic printed fabrics, or folklore articles (certain countries only). AGOA's third-country fabric provision is a special rule that allows U.S. apparel imports from least-developed SSA countries to qualify for duty-free treatment even if the yarns and fabrics used in the production of the apparel are imported from non-AGOA countries. This provision, which was reauthorized in August 2012 ( P.L. 112-163 ), is currently set to expire in September 2015, along with the overall AGOA program. Eligibility for the AGOA trade preference program consists of two separate steps. First, the country must be included in a statutorily created list of sub-Saharan African countries, described in AGOA (19 U.S.C. 3706). This list has been updated periodically by new legislation (e.g., the 112 th Congress added South Sudan in P.L. 112-163 ). The second step requires the President to determine annually which eligible countries, from those on the list of SSA countries defined by Congress, should become beneficiaries of the AGOA preferences. There are two different sets of criteria for the President's consideration in this process: Section 104 of AGOA (19 U.S.C. 3703) and Section 502 of the Trade Act of 1974, or GSP (19 U.S.C. 2462). Section 104 is specific to AGOA and requires the President to consider a number of factors related to the prospective AGOA country's economy; rule of law; elimination of barriers to U.S. trade and investment; poverty reduction efforts; protection of worker rights; support of terrorist activities; and interference with U.S. national security and foreign policy efforts. Section 502 , as amended, sets out the eligibility requirements of the Generalized System of Preferences (GSP), which must also be met by any AGOA beneficiary country. These also include a number of economic and political factors. In two separate proclamations in 2014, the Obama Administration has made changes to AGOA country eligibility. In June, the President reinstated AGOA eligibility for Madagascar effective immediately, and terminated AGOA eligibility for Swaziland, due to issues with worker rights, effective January 1, 2015. Swaziland has been a top exporter under AGOA—the fifth largest, excluding energy products, in 2014. In December, the President reinstated benefits for Guinea-Bissau, and terminated benefits for South Sudan and The Gambia, due to issues with human rights. AGOA, like GSP, has additional benefits for least-developed beneficiary countries (LDCs). Under GSP, these countries qualify for duty-free treatment on an additional 1,400 products. Under AGOA, the additional benefits are more flexible rules governing the duty-free treatment of textiles and apparel. Unlike GSP, which provides the President broad latitude in determining LDC status, AGOA defines LDCs as countries with a per capita gross national product (GNP) of less than $1,500 in 1998 as measured by the World Bank. Botswana, Namibia, and Mauritius are also explicitly granted LDC status in AGOA, despite GNP per capita levels above that threshold. This exemption is particularly economically significant for Mauritius; it is the fourth-largest exporter under AGOA (excluding oil trade) and exports primarily apparel products under the preference program. AGOA requires the President, in consultation with Congress and the other governments concerned, to hold annually a United States-Sub-Saharan Africa Trade and Economic Cooperation Forum. The purpose of the Forum, which is held in alternate years in the United States and Africa, is to "discuss expanding trade and investment relations between the United States and Sub-Saharan Africa and the implementation of [AGOA] including encouraging joint ventures between small and large businesses." The Forum typically includes a Ministerial among government officials, as well as sessions focused on civil society representatives and the business community. The 13 th AGOA Forum took place in Washington DC, from August 4-6, 2014, as part of the larger U.S.-Africa Leaders Summit, and focused heavily on AGOA's potential reauthorization. In his speech at the 2014 Forum, Secretary of State John Kerry announced that the 2015 AGOA Forum will be held in Gabon, a first for Central Africa. Unlike other U.S. preference programs, AGOA directs the President to target U.S. government technical assistance and trade capacity building (TCB) in AGOA beneficiary countries. This assistance is intended to encourage governments to (1) liberalize trade policy; (2) harmonize laws and regulations with WTO membership commitments; (3) engage in financial and fiscal restructuring; and (4) promote greater agribusiness linkages. AGOA also includes assistance for developing private sector business associations and networks among U.S. and SSA enterprises. Technical assistance must be targeted to increasing the number of reverse trade missions; increasing trade in services; addressing critical agricultural policy issues; and building capabilities of African states to participate in the WTO, generally, and, particularly, in services. In FY2013, the United States reported obligating approximately $209 million in TCB assistance to AGOA countries, up from $191 million in 2012, but down considerably from 2006-2011, during which TCB funding averaged over $600 million per year. From 2001 to 2013, TCB assistance has been provided primarily through the Millennium Challenge Corporation (MCC, 58%) and the U.S. Agency for International Development (USAID, 31%), with 53% of funds obligated for trade-related infrastructure, 15% for trade-related agriculture projects, 11% for trade facilitation, and 21% for other TCB categories. In addition to these broad mandates, AGOA includes language pertaining to the following agencies: Overseas Private Investment Corporation (OPIC) . Section 123 expresses the sense of Congress that OPIC should exercise its authority to support projects in SSA and directs OPIC to increase funds directed to SSA countries. Export-Import Bank (Ex-Im Bank). Section 124 of AGOA expresses the sense of Congress that the Ex-Im Bank should continue to expand its financial commitments to its loan guarantee and insurance programs to African countries and commends the Bank's sub-Saharan Africa Advisory Committee for its work in fostering economic cooperation between the United States and SSA. Established in Ex-Im Bank's 1997 reauthorization legislation, the advisory committee originally was set to expire in 2001. Subsequent Ex-Im Bank reauthorizations have typically extended the committee's termination, most recently through September 30, 2014. The current Ex-Im Bank reauthorization (through June 30, 2015), however, did not explicitly authorize the committee, and it is not currently operational. United States Trade Representative (USTR) . Section 117 supports the creation of an Assistant USTR for Africa to serve as the "primary point of contact in the executive branch for those persons engaged in trade between the United States and sub-Saharan Africa," and the chief adviser to the U.S. Trade Representative (USTR) on trade and investment issues pertaining to Africa. This position previously had been established by President Clinton in 1998. U.S. Foreign Commercial Service (CS). Section 125 notes that the CS presence in SSA had been reduced since the 1980s and the level of staffing in 1997 (seven officers in four countries) did not "adequately service the needs of U.S. businesses attempting to do business in sub-Saharan Africa." Accordingly, the legislation required the posting of at least 20 CS officers in not less than 10 countries in SSA by December 31, 2001, "subject to the availability of appropriations." According to data provided by the Department of Commerce for FY2014, there are 15 CS officers in sub-Saharan Africa, up from 5 in FY2012. These are located in Angola (4), Ethiopia (1), Ghana (1), Kenya (2), Mozambique (1), Nigeria (2), South Africa (3), and Tanzania (1). U.S. Agency for International Development (USAID). Aside from MCC compacts that include TCB, USAID funds much of the trade capacity building efforts related to AGOA ($1.6 billion since 2001). In 2011, the Administration announced the African Competitiveness and Trade Expansion (ACTE) initiative, a trade and investment initiative with funding of up to $30 million annually, subject to appropriations. ACTE supports the three African Trade Hubs, one of USAID's most oft-cited AGOA-related projects. Based in Ghana, Kenya, and Botswana, the Trade Hubs attempt to help potential exporters become globally competitive and make full use of their AGOA benefits. As part of the Administration's Trade Africa Initiative, the East Africa Trade Hub has been renamed the East Africa Trade and Investment Hub and is expanding its focus to include two-way trade and investment between the United States and the East African Community. Originally, AGOA also required the President to submit an annual "comprehensive report on the trade and investment policy of the United States for sub-Saharan Africa." In a subsequent reauthorization of the AGOA trade preferences, this requirement was not extended. The most recent report was in 2008. U.S. imports from AGOA countries represent a small share of overall U.S. imports. In 2014, the United States imported $2,314 billion in goods, of which $25.6 billion, or slightly more than 1%, came from AGOA countries. 56% of these imports ($14.2 billion) received duty-free treatment, under either AGOA or GSP, though crude oil accounts for a significant portion of this. Excluding crude oil, 35% of U.S. imports from AGOA countries received duty-free treatment under AGOA or GSP. Energy-related products (e.g., crude oil) dominate U.S. imports from SSA under AGOA and GSP, representing 69% of such imports in 2014, though these imports have fallen sharply in the past three years. Given SSA's abundant natural resources and the already low U.S. tariff on oil ($0.05-$0.10 per barrel), much of this trade would likely occur regardless of the preference program. The discussion that follows focuses on non-energy trade between the United States and SSA. (See the text box below for more information on U.S. oil imports under AGOA.) In 2014, U.S. imports from SSA under AGOA and GSP, excluding energy products, were $4.4 billion ( Figure 1 ). These imports have increased nearly three-fold (up from $1.3 billion) since 2001, the first full year of AGOA eligibility. They fell by $500 million from 2013 to 2014, but this was primarily due to lower auto imports from South Africa. Apparel products remain one of the largest non-oil import categories; however, these imports peaked in 2004 prior to the dismantling of the complex multilateral quota system, known as the Multifiber Agreement (MFA). The MFA limited U.S. apparel imports from certain countries, thus eliminating the extent of competition faced by AGOA apparel exporters. Though U.S. apparel imports still face relatively high tariffs, removal of these strict quantitative limitations reduced the AGOA countries' competitive advantage in producing apparel. U.S. apparel imports under AGOA, though very significant for some AGOA countries, represent only 1% of overall U.S. apparel imports. U.S. apparel imports totaled $82.7 billion in 2014, with $30.7 billion from China, $9.2 billion from Vietnam, and less than $1 billion total from AGOA beneficiaries ( Table 1 ). While U.S. apparel imports from AGOA countries have declined from their peak in 2004, imports of other products have been rising rapidly. Vehicle imports have seen strong growth, rising from $289 million in 2001 to nearly $2.2 billion in 2013, although they declined considerably to $1.4 billion in 2014. These and other more advanced manufactured products, such as chemicals, come almost exclusively from South Africa. Imports of products with more widespread origins have grown on a more modest scale. U.S. imports of food and agriculture products under AGOA and GSP, including nuts, fruits, cocoa, sugar, beverages, and tobacco, have increased from $139 million to $467 million during the same period. Such imports grew by $20 million from 2013 to 2014. U.S. imports from SSA under AGOA and GSP are heavily concentrated in a few countries. Figure 2 highlights the top exporters of non-energy products to the United States under both programs. Excluding energy products, U.S. preferential imports from South Africa totaled $3.1 billion in 2014, accounting for 70% of all such U.S. imports from SSA. Other top non-energy exporters under AGOA/GSP in 2014 were the major apparel producers: Kenya ($423 million), Lesotho ($289 million), Mauritius ($227 million), and Swaziland ($77 million), as well as Cote d`Ivoire ($70 million) and Malawi ($60 million), who exported primarily cocoa products and tobacco under the preference programs, respectively. Aside from these top countries, however, the preferences were not heavily utilized. U.S. preferential imports were less than $1 million for over half of the 40 AGOA beneficiary countries in 2014. Through AGOA Congress set out to improve the economic development of SSA and increase U.S. trade ties with the region. A handful of countries have made strong use of the preference program and have increased employment in economic sectors that benefited from duty-free treatment under AGOA. For example, the government of Lesotho, one of the major apparel exporters under AGOA, estimates that employment in manufacturing rose from 19,000 in 1999 to 45,700 in June 2011. A peer-reviewed economic study found a direct link between the AGOA preferences and increased U.S. imports from beneficiary countries, and concluded that these increased SSA exports were not merely diverted from other potential export destinations (e.g., the European Union). This relationship was strongest for the apparel sector and other sectors with high U.S. import tariffs. Despite these achievements, challenges remain, such as the limited number of countries making significant use of the preferences, and doubts as to whether AGOA countries have been able to translate these short-term preference benefits into transformative changes in their manufacturing capabilities and overall competitiveness. As highlighted above, the majority of AGOA non-oil imports come from South Africa. Among the other countries that have made significant use of the preferences, apparel exports account for most of their AGOA exports. While the apparel sector has been acknowledged as a potential launching point for more advanced manufacturing industries, the manufacturing sectors in many AGOA beneficiary countries remain highly underdeveloped. One study asserts that AGOA apparel production is concentrated in the lowest-skill tasks with little knowledge transfer to local workers and that the global competitiveness of AGOA exporters still depends on their preferential treatment. In addition to AGOA's tangible goals related to economic development and trade, AGOA also supports the achievement of other strategic objectives. AGOA serves as a focal point for U.S. economic relations with SSA. If the recent period of high economic growth in much of SSA continues, the United States may have an increasing interest in the region's potential as a consumer market and destination for both U.S. exports and foreign direct investment (FDI). A study by McKinsey estimated that the number of African households making above $5,000 per year, the point where discretionary spending begins, would rise from 85 million in 2008 to 128 million in 2020. Though AGOA focuses specifically on U.S. imports, it spurs dialogue between the United States and SSA countries on two-way trade and investment issues through the annual AGOA Forum. Through the eligibility criteria required for the program, the United States maintains some influence over the political and economic structure of the beneficiary countries. These strategic aspects of AGOA may become more important as other foreign countries, such as China, continue to increase their commercial and political ties with SSA. AGOA's authorization is set to expire on September 30, 2015. President Obama, some Members of Congress, officials from beneficiary countries, and other stakeholders support renewing the preferences, and have various suggestions for reform. The Obama Administration, in order to inform its reauthorization proposals, initiated a review of AGOA during the 2013 AGOA Forum, which ultimately included a request for four investigations by the U.S. International Trade Commission (ITC). The ITC published its first report on AGOA's trade and investment performance in April 2014 following a public hearing in January. The other three reports, which cover AGOA's impact on U.S. industries and consumers, rules of origin, and the EU-South Africa FTA, are confidential. Ambassador Froman identified some of the Administration's main conclusions from its AGOA review and subsequent recommendations for AGOA's reauthorization in his July 2014 written testimony before the Senate Committee on Finance. These include the need for a sufficiently long renewal, potential expansion of product coverage, more flexible rules of origin, updated eligibility criteria with a more flexible review process, and eventually a more reciprocal trade program with the region. He also suggested that the Administration's review of AGOA pointed largely to "supply-side" constraints, such as inadequate infrastructure, as the main barriers to greater AGOA utilization. Congress, too, has sought greater study of the AGOA preference program, and various Members have expressed interest in its renewal. During the 113 th Congress, relevant committee leadership, bicameral and bipartisan, requested that GAO report on the effectiveness of AGOA, including utilization of the preferences and its impact on two-way trade. GAO has published four reports, which address (1) AGOA import competitiveness and diversification; (2) ways to enhance AGOA's trade capacity building (TCB) component; (3) AGOA's eligibility process; and (4) other countries' trade agreements with sub-Saharan Africa. A primary observation was the need for better development of country export strategies. In addition, both the Senate Committee on Finance and the Trade Subcommittee of the House Committee on Ways and Means held hearings in July 2014 to examine AGOA and its potential reauthorization, during which committee leadership expressed strong support for the program. At the start of the 114 th Congress, Chairman Ryan of the House Committee on Ways and Means cited AGOA's reauthorization as a top legislative priority. Other stakeholders have also added their voices to the debate on AGOA. The AGOA Ambassadors Working Group, the AGOA civil society network, and the East African Community (EAC) have all produced recommendations for AGOA's potential renewal. In addition, several think tanks, non-governmental organizations, and business groups have weighed in on AGOA's reauthorization. The following are some of the issues identified through these various studies and policy proposals, which may merit congressional consideration during AGOA's reauthorization debate. Private sector actors have argued that uncertainty regarding the duration of AGOA preferences, due to periodic reauthorizations, hinders investment in the region. Some have called for a longer and uniform reauthorization (i.e. , 10-15 years) for all AGOA preferences, including the third-country fabric provision in order to reduce uncertainty and encourage greater capital investment, which, they argue, will be necessary to generate more value-added production in the region. Lengthened periods of authorization, however, could also limit the incentive for more advanced economies, such as South Africa, to engage in more comprehensive trade liberalization efforts, such as FTA negotiations, or as part of the World Trade Organization (WTO) Doha Round negotiations. A range of ideas have been proposed to modify AGOA's eligibility criteria. For example, some argue that the existing criteria increase investor uncertainty, putting firms and workers at risk of shutdowns due to government actions beyond their control. Others see these as an effective tool and some support additional criteria in areas ranging from the business environment to worker rights. Removing portions of the eligibility criteria could decrease the potential leverage AGOA provides to encourage economic and political reform in beneficiary countries, while adding additional criteria could limit country participation. Stakeholders, including the Administration, have also argued for modifications in the enforcement of eligibility criteria including the timing and scope of the withdrawal of preferences. For example, some recommend more precise targeting for failure to meet mandatory eligibility criteria, such as removal of preferences for a particular industry rather than an entire country. Debate over the timing of the withdrawal of preferences includes both proponents of shorter and longer phase-outs. Some argue that immediate withdrawal of preferences following failure to meet eligibility criteria would be more effective while others suggest a longer phase-out would ensure businesses have time to reallocate resources. Currently, termination of benefits occurs at the start of the year immediately following the President's proclamation that a country has failed to meet eligibility criteria. Intra-African trade and economic integration have been cited as a critical but often absent component of economic development in the region. Regional integration efforts are one way to improve intra-African trade ties, and AGOA calls for "expanding U.S. assistance to sub-Saharan Africa's regional integration efforts." In the first decade of AGOA's enactment, African intra-regional trade stayed flat at around 10%. It may be worthwhile to evaluate the impact, if any, that AGOA and corresponding U.S. development assistance have had in improving regional integration efforts and intra-African trade, and determine whether AGOA should further address these issues. Graduation of more advanced AGOA countries, discussed below, could impact intra-African trade integration goals, as these countries are typically also the largest markets in the region and may be important in regional supply chains. Like other U.S. preference programs, AGOA provides preferential access to the U.S. market with no reciprocal preferential U.S. access to the beneficiary countries. In light of economic improvements in the region, some observers are calling for a greater focus on two-way trade in AGOA. One related goal included in the original AGOA legislation mandates that the Administration seek out possible FTA partners among SSA nations. Subsequent negotiations with South Africa and its regional partners in SACU began in 2003, but were ultimately unsuccessful and postponed indefinitely in 2006. The European Union (EU), however, successfully concluded an Economic Partnership Agreement (EPA) with South Africa and other countries in the region, providing reciprocal preferential tariff treatment to EU exports, though these agreements exclude a range of products. GSP currently includes language related to such occurrences, declaring a country ineligible if it "affords preferential treatment to the products of a developed country, other than the United States, which has, or is likely to have, a significant adverse effect on United States commerce." Several relevant policy questions follow: (1) is the United States willing to negotiate less comprehensive and high-standard FTAs than it normally negotiates to gain greater access to emerging markets like South Africa, or are countries in the region more prepared to engage in comprehensive, reciprocal trade talks; (2) should AGOA include its own graduation process, which, like that for GSP, removes more economically advanced countries from the preference program once they reach a certain level of economic development (e.g. , GDP/capita level); (3) should AGOA include language requiring the removal of benefits if a beneficiary country affords preferential treatment to a third party; (4) what is the policy on enforcement of the existing GSP rules on this issue; and (5) how would the removal of such benefits impact other AGOA goals such as increased intra-African trade? Over half of the current AGOA beneficiaries exported less than $1 million to the United States under AGOA in 2014. Many of these are LDC AGOA countries that are eligible for duty-free treatment on apparel exports and enjoy the more flexible rules of origin (" Third-Country Fabric Provision "), giving them a competitive advantage over other producers. A handful of AGOA countries, particularly Kenya, Lesotho, and Mauritius, provide the bulk of apparel exports under AGOA. Congress may wish to examine why these countries have been so successful in utilizing the preference program, and if there are potential AGOA reforms that could help spur similar success in other AGOA LDCs. AGOA country exporters face numerous challenges. These include poor infrastructure, inadequate access to electricity, and skilled labor shortages. AGOA sets out broad aims for TCB, which are administered through different agencies, particularly USAID. Since 2001, $5 billion has been allocated to TCB funding in AGOA countries by various U.S. government agencies, particularly USAID and MCC. Yet discussions on AGOA often center on the need for more TCB funding, with many suggesting this amount is inadequate or ineffective. In 2011, GAO reported that USAID needed better evaluation of its TCB programs, and in its most recent AGOA report, GAO argued that USAID could enhance AGOA utilization with a greater focus on and assistance toward the creation of country strategies. Beneficiaries may also be able to improve their utilization of AGOA through the timely implementation of the recent WTO Trade Facilitation Agreement. Congress may wish to consider how AGOA-directed TCB funding could support this implementation process. On August 4, during the U.S.-Africa Leaders Summit, President Obama announced an initiative to develop a government-wide TCB strategy that includes among its goals improving AGOA utilization. The steering group established for this task, which includes representatives from related government agencies, is to report to the President on this strategy within 180 days of the announcement. Depending on the timing and dissemination of this strategy, it could impact TCB considerations in AGOA's reauthorization. AGOA and GSP provide duty-free access on U.S. imports of approximately 5,200 tariff lines, which together with the products already duty-free in the U.S. tariff schedule, grant AGOA beneficiaries duty-free access to roughly 86% of U.S. products. While a majority of products are covered under AGOA, some of the excluded products are competitively produced in AGOA countries, particularly agricultural products. Though some agriculture products are included in AGOA, those subject to tariff-rate quotas (TRQs) are limited in the amount that may enter duty-free. Congress may wish to examine expanding the products or quantities covered under AGOA, which could potentially allow a greater number of AGOA beneficiaries to make use of the trade preference program. To address related U.S. import sensitivities, some have suggested reassigning current quota allocations as an alternative method to expand agricultural market access for AGOA countries. For some products, such as chocolate, these groups argue, a portion of the quota is not assigned to a specific country and may go unfilled. They assert that allocating this quota to AGOA countries could be politically feasible and also encourage downstream production in some cocoa exporting countries. Others contend that changing quota allocations could require approval from the WTO, limiting its feasibility. In addition to challenges posed by tariffs and quotas, agriculture producers in AGOA countries may also face difficulty exporting due to failure to meet U.S. food safety standards, suggesting that such exporters may also benefit from targeted TCB funding to help them better meet these standards. In comparison with other preference programs, AGOA has relatively liberal rules of origin. For example, the third-country fabric rule allows for a certain quantity of AGOA apparel exports to be produced from yarns and fabrics of any origin. AGOA, unlike GSP, also allows for regional cumulation, whereby multiple AGOA beneficiaries can contribute toward a product's required 35% regional value content, and the United States can contribute 15% of the 35%. Despite this existing flexibility, restrictions remain, which some groups would like to ease. These stakeholders seek, for example, an increase in the allowable value content attributed to the United States or easing technical constraints on what costs count toward cumulation. In addition, certain AGOA countries have argued that existing rules of origin prevent canned tuna from qualifying for AGOA preferences, and have sought a general modification of the rules or a product-specific exception. They argue it is difficult to achieve the 35% threshold as most of the value in canned tuna is the fish itself, which is attributed to the country of the fishing vessel. Press reports suggest the U.S. tuna canning industry opposes such a change. Some Members of Congress who support AGOA have concern over South Africa's imposition of antidumping duties on U.S. poultry exports. These Members support AGOA conditioned on resolution of this dispute, arguing that they "will need to consider strengthening AGOA to prevent South Africa from benefitting from duty preferences while continuing to discriminate against U.S. goods, specifically poultry." AGOA's current eligibility criteria require beneficiary countries to make progress toward the elimination of barriers to U.S. trade and investment, including bilateral trade and investment disputes. In June 2015, a joint statement released by the United States and South Africa stated that industry and government officials agreed to renew market access in South Africa for U.S. exports of certain poultry products. Press reports suggest that the details of the agreement include the removal of a prohibitive anti-dumping duty on 65,000 tons of U.S. chicken exports, annually. Exports under this threshold will be charged South Africa's MFN duty. Recent statements from Members who had been pressuring the South African government on this issue suggest that the agreement may resolve their concerns. AGOA's tariff benefits, which include apparel products, are broader than those provided by GSP. Some argue, including in the context of the current WTO Doha negotiations, that broader duty-free quota-free tariff preferences should be granted to all least-developed countries, not just those in Africa. LDCs throughout the world face relatively high U.S. import tariffs given the particular items they export, such as apparel and agricultural products. For example, in 2014, U.S. import duties on all imports from Cambodia ($460 million) were higher than on those from France ($451 million). Providing broader DFQF access to LDCs would erode some of the competitive advantage AGOA apparel producers currently receive. A recent study estimates that apparel exports from AGOA countries would fall considerably if AGOA-like benefits were expanded to all LDCs. Other studies, however, estimate that a broader DFQF program could actually benefit AGOA LDCs by including protected sectors such as agriculture, despite potential losses in apparel production. In addition, proponents of DFQF argue that apparel products currently produced in AGOA countries could be targeted for exemption from a broader DFQF program. Bills to renew the AGOA preference program ( H.R. 1891 / S. 1009 ) were introduced in the House and Senate on April 17 and April 20. Key issues addressed in the bills include (1) a ten year renewal of the overall program including the regional apparel article program and the third-country fabric provision; (2) modifications to the rules of origin allowing for the "direct costs of processing operations" to count toward a product's required regional value content to qualify for duty-free treatment; (3) changes to the eligibility review process administered by the President, including a required 60-day notification to Congress before termination of preferential treatment for beneficiary countries, a requirement to seek public comments and hold a public hearing on eligibility reviews as well as establish a public petition process open at all times, authorization of an out-of-cycle review process and a sense of Congress that the President should initiate such a review of South Africa within 30 days of enactment, and the ability to withdrawal, suspend, or limit preferential treatment rather than full termination; (4) sense of Congress that beneficiary countries should develop utilization strategies together with U.S. trade capacity building agencies; (5) policy statement to expand trade and investment by negotiating trade and investment framework agreements (TIFAs), bilateral investment treaties (BITs), FTAs with beneficiary countries and through accession to the World Trade Organization (WTO) agreements for beneficiary countries; (6) a biennial report on U.S. trade and investment relations with the region, eligibility status, regional integration efforts, and trade capacity building efforts; and (7) a report one year after enactment and five years thereafter that discusses the status of negotiating FTA's with sub-Saharan African countries. H.R. 1891 was reported by the House Committee on Ways and Means without amendment. The Senate Finance Committee considered a related measure, S. 1267 , which includes modifications to the U.S. harmonized tariff schedule, in addition to the preference renewal language in S. 1009 . The Senate Finance Committee reported S. 1267 with two amendments, which would require the President to initiate an out-of-cycle review of South Africa's AGOA eligibility within 30 days and would add language on "promoting the role of women in social, political, and economic development" to AGOA's eligibility criteria. On May 14, the Senate passed the provisions of S. 1267 , by including them as an amendment in the nature of a substitute to H.R. 1295 . On June 11, the House passed with further amendment, the Senate amended version of H.R. 1295 . The two chambers must resolve the differences in the bill before it can be sent to the President and become law. | The African Growth and Opportunity Act (AGOA) is a nonreciprocal trade preference program that provides duty-free treatment to U.S. imports of certain products from eligible sub-Saharan African (SSA) countries. There are 49 candidate SSA countries with 39 currently eligible for the preference benefits. Congress first authorized AGOA in 2000 to encourage export-led growth and economic development in SSA and improve U.S. economic relations with the region. Its current authorization expires on September 30, 2015. Bills to renew the preference program (H.R. 1891/S. 1009) were introduced in the House and Senate in April. H.R. 1891 was reported by the House Committee on Ways and Means without amendment. The Senate Finance Committee reported a related measure, S. 1267, with two amendments. On May 14, the Senate passed the provisions of S. 1267, by including them as an amendment in the nature of a substitute to H.R. 1295. On June 11, the House passed a further amended version of H.R. 1295. The two chambers must resolve the differences in H.R. 1295 before the AGOA renewal legislation can be sent to the President and become law. In terms of tariff benefits and general eligibility criteria, AGOA is similar to the Generalized System of Preferences (GSP), a U.S. trade preference program that applies to more than 120 developing countries. AGOA, however, covers more products and includes additional eligibility criteria beyond those in GSP. Additionally, AGOA includes trade and development provisions beyond its duty-free preferences. U.S. imports from AGOA beneficiary countries (AGOA countries) represent a small share (1%) of total U.S. imports and are largely concentrated in energy-related products. Oil is consistently the top duty-free U.S. import from AGOA countries, accounting for 68% of such imports in 2014. Despite remaining the top U.S. import under AGOA, U.S. oil imports from the region have fallen by 80% or nearly $40 billion since 2011. Among non-energy products, apparel is the top export for a number of AGOA countries. U.S. apparel imports typically face relatively high tariffs and are excluded from duty-free treatment in GSP, but are included in the AGOA preferences, giving AGOA countries a competitive advantage over other apparel producers. A handful of countries, primarily Lesotho, Kenya, and Mauritius, make significant use of the apparel benefits. Apart from apparel and energy products, South Africa accounts for the bulk of U.S. imports under AGOA. As the most economically advanced country in the region, South Africa also exports a much more diverse range of manufactured goods than other AGOA countries; vehicles in particular have become a major South African export under AGOA. Most observers agree that AGOA has successfully led to increased and more diversified exports to the United States from sub-Saharan African countries. Despite this, Congress may wish to address a number of issues and challenges as it considers possible reauthorization of AGOA. Among these challenges is how current and potential AGOA beneficiaries can better utilize the AGOA program and its duty-free benefits. Studies suggest that even among some countries that do make significant use of the AGOA preferences, the lower-skill apparel production which AGOA has spurred has not led to the production of higher-skill manufactured products. Other issues relate to the nonreciprocal nature of the AGOA preferences. Some argue that the United States should focus more on two-way trade agreements with the region, particularly with more advanced countries such as South Africa, given improving economic conditions in Africa in recent years. The European Union (EU), for example, has negotiated Economic Partnership Agreements (EPAs) with several African countries that provide some reciprocal tariff benefits, potentially placing U.S. firms at a competitive disadvantage relative to European firms in some markets. |
This report provides a detailed description of five of the six educational assistance programs (GI Bills ® ) that are currently available to veterans or other eligible individuals through the U.S. Department of Veterans Affairs (VA). The GI Bills provide financial assistance while enrolled in approved programs of education or training programs to individuals whose eligibility is based on a qualifying individual's service in the uniformed services. The sixth program, which is the most recently enacted, is the Post-9/11 GI Bill (Title 38 U.S.C., Chapter 33). It is described in CRS Report R42755, The Post-9/11 Veterans' Educational Assistance Act of 2008 (Post-9/11 GI Bill): A Primer . Congress regularly considers potential operational and benefit improvements for these programs and enacts legislation accordingly. Over the decades since 1944, during which the GI Bill programs have been in existence, two themes have been emphasized. The benefits promote development of work-related skills to facilitate entry or re-entry into the civilian workforce, and the base benefit is equitable regardless of rank or military occupation specialty. All of the educational assistance programs administered by the VA require some period of military service before benefits can be received. The most salient ongoing discussions have been related to how much eligible individuals should contribute to their education in time or money, which types of service warrant a benefit, and how liberal (i.e., valuable) the benefit should be. All of the benefit programs provide eligible persons an entitlement to educational assistance. This entitlement, usually 36 months, is measured in months and days. A dollar value is also associated with each month and day of entitlement. Educational assistance payments reduce the entitlement period based on the training period for which the payment was made or in proportion to the dollar value associated with each month and day of entitlement. In general, once the entitlement is exhausted eligible persons continue receiving educational assistance through the end of the academic term if more than halfway through, or for up to a 12-week period if not on an academic term schedule. The entitlement period is not reduced if an individual is called to active duty and if, as a result, the individual must discontinue studies and fails to receive credit or training time. Entitlement is restored for an incomplete course or program for which the individual is unable to receive credit or lost training time as a result of an educational institution closing; for a course or program if a necessary course is disapproved by a subsequently established or modified policy, regulation, or law; and for the interim (through the end of the academic term but no more than 120 days) housing allowance paid following either a closure or disapproval. This report describes the five GI Bills enacted prior to 2008 and related veterans' educational assistance programs. It is organized into five sections. The first section provides an explanation of the rationale and impetus behind veterans' educational assistance programs. The second section describes the eligibility requirements and benefits of the GI Bills. The GI Bills are discussed in descending order based on the number of current participants. The third section reviews the linkages and commonalities between the programs. A summary of selected characteristics of the various programs is presented in Table 2 . The fourth section provides a brief overview of related VA programs. The final section provides information on participation and expenditures for the programs. A detailed look at earlier GI Bills that are no longer available to participants and the lessons learned is available in the appendices. Since the Revolutionary War, the United States has provided benefits to injured or disabled war veterans; however for much of this period, benefits were not provided to the same extent to able-bodied veterans. Prior to World War II (WWII), "poor, jobless, and disgruntled veterans … had led to unrest and fear of revolt throughout American history." In 1932, after World War I, the military was called in to forcibly remove 20,000 still unemployed and often homeless veterans and burn their encampment near the Capitol and White House. In early U.S. history, military service was thought of as "a fundamental obligation of [male] citizenship." Because the 16.1 million personnel who served in the U.S. Armed Forces during WWII accounted for over one-third of the 41.1 million working-age males (between 20 and 64 years of age) in 1947, the consequences of mass unemployment were feared. Before the end of WWII, Congress and the American Legion worked together to pass the original GI Bill, or Serviceman's Readjustment Act of 1944 (P.L. 78-346). The act provided a full range of resources to veterans including the construction of additional hospitals; educational assistance to non-disabled veterans; home, business, and farm loans; job counseling and employment placement services; and an unemployment benefit. The original GI Bill was generally considered successful in averting unemployment, raising the educational level and thus the productivity of the U.S. workforce, and confirming the value that Americans place on those that provide military service. Subsequent GI Bills providing educational assistance have been passed ( Table 1 ). The Korean Conflict GI Bill was enacted under the Veterans' Readjustment Assistance Act of 1952 (P.L. 82-550) and codified in Title 38, U.S.C., Chapter 33. The purpose of the program was to prepare returning veterans to enter the workforce. In 1956, the War Orphans' Educational Assistance Act of 1956 (P.L. 84-634) was passed to provide educational assistance to the children of servicemembers who died as a result of injury or disability incurred in the line of duty. This program was later expanded to include spouses and children of servicemembers who died, became permanently or totally disabled, were missing-in-action, were captured, or were hospitalized as a result of service. The Post-Korean Conflict and Vietnam Era GI Bill was enacted under the Veterans Readjustment Benefits Act of 1966 (P.L. 89-358) and codified in Title 38, U.S.C., Chapter 34. In addition to providing benefits to veterans, it provided benefits to active duty servicemembers to encourage retention in the Armed Forces. The Veterans' Readjustment Assistance Act of 1974 ( P.L. 93-508 ) created a short-lived veterans and dependents education loan program to cover educational costs not provided for under the GI Bill. It was codified in Title 38, U.S.C., Chapter 36 before being repealed in 1981. Beginning with the Korean Conflict GI Bill, there has been much debate on the level of educational assistance that should be provided to veterans and servicemembers. Some believed that requiring individuals to make a monetary contribution in addition to their military service would increase their sense of responsibility and purpose. Some believed that the educational assistance benefits were a necessary compensation for compulsory service or reimbursement for voluntary service. Some believed that high levels of assistance promote attrition from the military. And some believed that the benefits are a necessary recruitment tool. Congress allowed the compulsory military draft to expire on June 30, 1973. The educational assistance programs enacted subsequently were designed to encourage recruitment and retention of high-quality military personnel while still providing a considerable benefit to those who choose to leave active duty military service. Since 1973 upon initial enactment of new GI Bills, Congress has generally limited the approved programs of education to a more traditional college education. As the programs mature, other types of education and training such as apprenticeships and flight training are added. Currently, there are several educational assistance programs available to veterans, servicemembers, and their spouses and children. The oldest of these programs for veterans and servicemembers is the Post-Vietnam Era GI Bill, enacted in 1976. Fewer than 10 individuals are still receiving benefits from this program, which provides educational assistance in direct proportion to contributions deducted from servicemembers' pay while on active duty. The Montgomery GI Bill-Active Duty (MGIB-AD) requires most servicemembers to contribute an established amount, although the eventual benefits are not related to the contribution. The Montgomery GI Bill-Selected Reserve (MGIB-SR) only provides educational assistance to those currently serving in the Selected Reserve. Because reliance on the Reserves and National Guard increased after September 11, 2001, the Reserves Educational Assistance Program (REAP), enacted in 2005, allows reservists to receive an increased educational assistance benefit in comparison to the MGIB-SR after serving on active duty. The Survivors' and Dependents' Educational Assistance (DEA) program, previously War Orphans' Educational Assistance, provides benefits to the spouses and children of servicemembers who, as a result of service, are seriously disabled, die, or are detained. Finally in comparison to the MGIB-AD, the Post-9/11 GI Bill increased the educational assistance benefit for all individuals with active duty service after September 10, 2001, in recognition that the United States has not been at peace since 2001. The following sections describe the active programs in greater detail, in descending order based on the number of current participants. A description of the inactive programs is provided in the appendices. The Survivors' and Dependents' Educational Assistance Program (DEA) was first established by the War Orphans' Educational Assistance Act of 1956 (P.L. 84-634). The DEA program is codified under Title 38 U.S.C., Chapter 35. The benefit allows eligible individuals to attain the education they would have or maintain the standard of living they would have if the servicemember had not become disabled or delayed, or died as a result of military service. Educational assistance benefits are available to the children and surviving spouse of a veteran who died of a service-connected disability; the children of a veteran who died while having a disability evaluated as a total permanent disability resulting from a service-connected disability; the children and spouse of a veteran or servicemember who has a total permanent disability resulting from a service-connected disability; the children and spouse of an active duty servicemember who is, and has been for more than 90 days, listed as missing in action, captured in the line of duty by a hostile force, or forcibly detained or interned in the line of duty by a foreign government or power; and the surviving spouse of a veteran who died while having a disability evaluated as a total permanent disability resulting from a service-connected disability, arising out of active military, naval, or air service. Children must be under the age of 26 at the time of the above eligibility event. The military service of the person who was disabled or delayed, or died must not have terminated under dishonorable conditions. Children include acknowledged children born out of wedlock, children adopted legally, stepchildren who are members of the eligible individual's household, and children of any marital status. Neither the spouse nor child may receive educational assistance under DEA while in the Armed Forces or if released under dishonorable conditions. An individual who is eligible for both the Post-9/11 GI Bill Marine Gunnery Sergeant John David Fry Scholarship (Fry Scholarship) and DEA benefits based on the death of the one parent must elect the program from which to receive a benefit. The Fry Scholarship is available to the children of individuals who, on or after September 11, 2001, die in the line of duty while serving on active duty as a member of the Armed Forces. The eligible programs of education include a wide variety of types of education and training. The programs include courses at nonaccredited and accredited educational institution s (see below for the definition) that lead to an educational, vocational, or professional objective, including a certificate or graduate degree; a preparatory course for a test that is required or used for admission to an institution of higher education or a graduate school; licensing or certification tests for a predetermined vocation or profession, provided such tests and the licensing or credentialing organizations or entities that offer such tests are approved; national tests for admission to institutions of higher learning (IHLs) or graduate schools (such as the Scholastic Aptitude Test (SAT)); national tests providing an opportunity for course credit at IHLs (such as the Advanced Placement (AP) exam); cooperative programs; apprenticeship or other on-the-job training programs at a training establishment (see below for the definition); secondary education for those without a high school diploma or its equivalent or in preparation for postsecondary education; specialized vocational courses required because of a mental or physical handicap; and special restorative training. The eligible programs of education must be approved by a state approving agency (SAA) or the VA. Educational institutions are defined as public or private elementary or secondary schools; vocational, correspondence, business, normal, or professional schools; colleges or universities; scientific or technical institutions; other institutions offering education for adults; state-approved alternative teacher certification program providers; private entities that offer courses toward the attainment of a license or certificate generally recognized as necessary for a profession or vocation in a high technology occupation; and qualified providers of entrepreneurship courses. A training establishment is defined as an establishment providing apprentice or other on-the-job training; an establishment providing self-employment on-the-job training consisting of full-time training for a period of less than six months that is needed or accepted for purposes of obtaining licensure to engage in a self-employment occupation or required for ownership and operation of a franchise that is the objective of the training; a state board of vocational education; a federal or state apprenticeship registration agency; the sponsor of a program of apprenticeship; and an agency of the federal government authorized to supervise such training. Most DEA participants receive a monthly allowance. Special assistance is available to educationally disadvantaged individuals. Additional payments are available for tutorial assistance and qualified tests. For those children and spouses who may also be eligible for a VA-administered pension, compensation, or dependency and indemnity compensation, legislation bars some recipients from accepting DEA and pension, compensation, or dependency and indemnity compensation. A spouse, a child under 18 years of age, and a helpless child may receive DEA and pension, compensation, or dependency and indemnity compensation concurrently. Once a child over 18 years of age begins receiving DEA, the child can no longer receive payment or increased rates, or additional amounts of pension, compensation, or dependency and indemnity compensation based on school attendance. A monthly allowance for subsistence, tuition and fees, supplies, books, and equipment is paid directly to recipients. Maximum monthly benefit amounts may be adjusted at any time by Congress and are adjusted annually according to the consumer price index (all items, U.S. city average). For FY2018, individuals receive up to $1,041.00 monthly for full-time institutional enrollment and reduced amounts for three-quarter-time and half-time institutional enrollment. For FY2019, the maximum for full-time institutional enrollment is $1,224. Individuals enrolled less than half-time at an institution receive no more than actual tuition and fees. For individuals in apprenticeship or on-the-job training, the FY2018 monthly allowance is $760.00, $571.00, $375.00, and $191.00 for the first six months, second six months, third six months, and thereafter, respectively. Individuals receive up to $837.00 monthly for farm cooperative training in FY2018 and reduced amounts for three-quarter-time and half-time pursuit. Only spouses may pursue education exclusively by correspondence, and they receive 55% of the institution's established charges for completed courses. Participants may choose to receive the monthly allowance in the form of an advance payment or accelerated payment if they meet the following requirements: An advance payment is the first partial and first full month of the monthly allowance and is available to individuals who are planning to enroll more than half-time and who have not received educational assistance benefits in 30 days or more. Advance payments are sent to the educational institution for disbursal to the student within 30 days of the start of the academic term. An accelerated payment of the monthly allowance is available for education leading to employment in a high-technology occupation in a high-technology industry. If the costs of the program of education are more than double the monthly assistance allowance to which the individual would have been entitled, the individual may receive the lessor of 60% of the program's costs for the term or the individual's remaining dollars of entitlement. The individual's entitlement period is reduced in proportion to the amount that the payment is to the monthly assistance allowance to which the individual would have been entitled. Special assistance to the educationally disadvantaged allows individuals who do not have a high school diploma or its equivalent and who are in need of some secondary school preparation in order to pursue a postsecondary education to receive a monthly educational assistance allowance. Benefits do not reduce the basic entitlement period for the first five months. Individuals pursuing a high school diploma may receive the lesser of actual tuition and fees or the full-time institutional monthly rate. Special restorative training is available to overcome, or reduce, the effects of a manifest physical or mental disability which would handicap a person (other than the spouse of a person delayed) in the pursuit of a program of education. The entitlement period may be extended to accomplish the special restorative training. For FY2018, individuals receive $1,041.00 monthly for full-time special restorative training and may receive an additional amount equal to the amount that the tuition and fees charges calculated on a monthly basis exceed $322. An individual is entitled to payment for tutorial assistance, not to exceed $100 monthly and up to a maximum of $1,200 over the course of the entitlement period. The individual must be enrolled at least half-time, and the educational institution must certify as to the necessity and customary nature of the cost. Entitlement is not charged for tutorial assistance under DEA. A fee of up to $2,000 may be reimbursed for each approved licensing or certification test as long as the payment does not exceed the individual's remaining DEA entitlement. The benefit is available regardless of whether the individual passes the test. An individual's entitlement period is reduced one month for each amount paid that is equal to the monthly benefit otherwise payable to such individual. An individual may receive reimbursement for a national test for admissions to an IHL and a national test providing an opportunity for course credit at an IHL. An individual's entitlement period is reduced one month for each amount paid that is equal to the monthly benefit otherwise payable to such individual. The number of full-time months (or the equivalent in part-time attendance) of educational and training benefits to which an individual is entitled is limited to 45 months if the individual first enrolls using DEA before August 1, 2018; and 36 months if the individual first enrolls using DEA on or after August 1, 2018. The time period during which individuals may use their entitlement differs depending on their eligibility. Educational benefits may be paid to the spouse for 10 years from the date of eligibility or from the date of VA notification of eligibility. If the servicemember dies on active duty, or total permanent disability as a result of a service-connected disability is determined within three years of discharge, the spouse may use the benefits for 20 years. Generally, educational benefits may be paid to children after they achieve a high school diploma or its equivalent, or after they reach 18 years of age, but before they reach 26 years of age. Special restorative or specialized vocational training may begin if the child is at least 14 years of age. The Montgomery GI Bill-Selected Reserve (MGIB-SR), passed under Section 705 of the same legislation as the MGIB-AD, is a Title 10 U.S.C. DOD program administered by the VA. Each service component of the Selected Reserve is required to establish an educational assistance program to encourage membership in the Selected Reserve: Army, Navy, Air Force, Marine Corps, and Coast Guard Reserve; Army National Guard; and the Air National Guard. The benefit is an incentive to stay in the Reserves and was established in recognition of the fact that many states offer educational assistance to reservists. The MGIB-SR program is available to individuals serving in the Selected Reserve, including the National Guard, who agree to a six-year service obligation. Educational assistance benefits are available to Selected Reservists who enlist, re-enlist, or extend an enlistment for six years after June 30, 1985, and reserve officers who agree to serve an additional six years above any existing obligation. The reservists also have to complete the initial active duty training period, have a high school diploma or its equivalent, and satisfactorily meet the necessary training requirements of the Selected Reserve. Individuals who fail to satisfactorily meet the training requirements of the Selected Reserve may be ordered to active duty or required to repay some or all of the educational assistance including interest. The service requirement excludes full-time active duty or full-time National Guard duty for the purpose of organizing, administering, recruiting, instructing, or training the reserve components in a position which is included in the end strength. MGIB-SR benefits can be used to support students pursuing approved programs of education at a variety of training establishments and educational institutions, including institutions of higher learning (IHLs). The eligible programs of education are courses at nonaccredited and accredited educational institutions that lead to an educational, vocational, or professional objective, including a certificate or graduate degree; courses required by the Administrator of the Small Business Administration as a condition for obtaining financial assistance under the provisions of Section 7(i)(1) of the Small Business Act (15 U.S.C. 636(i)(1)); licensing or certification tests for a predetermined vocation or profession, provided such tests and the licensing or credentialing organizations or entities that offer such tests are approved; courses offered by a qualified provider of entrepreneurship courses; national tests for admission to IHLs or graduate schools (such as the Scholastic Aptitude Test (SAT)); national tests providing an opportunity for course credit at IHLs (such as the Advanced Placement (AP) exam); national tests that provide an opportunity for course credit at an IHL by evaluating prior learning and knowledge; a preparatory course for a test that is required or used for admission to an institution of higher education or a graduate school; full-time programs of apprentice or other on-the-job training at a training establishment , for individuals not on active duty; cooperative programs for individuals not on active duty; a refresher, remedial, or deficiency course; preparatory or special education or training courses necessary to enable the individual to pursue another approved program of education; and a course for which the individual is receiving Tuition Assistance from DOD (see " Tuition Assistance "Top-Up" Program "). Most MGIB-SR participants receive a monthly allowance. Additional payments are available for certain purposes, and the monthly allowance may be increased under certain circumstances (see Table 2 ). Effective October 1, 2017, reservists receive up to $375.00 monthly for full-time enrollment and a reduced amount for three-quarter-time, half-time, and less-than-half-time enrollment. Maximum monthly benefit amounts may be adjusted at any time by Congress and are adjusted annually according to the consumer price index for all urban consumers (CPI-U). Individuals enrolled less-than-half-time who are also eligible for DOD tuition assistance cannot receive MGIB-SR benefits. For an individual in apprenticeship or on-the-job training, the monthly allowance is 75%, 55%, and 35% of the monthly benefit otherwise payable to that individual for the first six months, second six months, and thereafter, respectively. Individuals pursuing education exclusively by correspondence receive 55% of the institution's established charges for completed courses, and individuals pursuing education consisting exclusively of flight training receive 60% of the institution's established charges for completed courses. MGIB-SR participants, like DEA participants, may choose to receive the monthly allowance in the form of an advance payment or accelerated payment. The Tuition Assistance "Top-Up" program was established under the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001 ( P.L. 106-398 ) to promote retention. Through Tuition Assistance (TA) programs, military service branches may pay a certain amount of tuition and expenses for the off-duty education and training of active duty personnel. Under Tuition Assistance Top-Up, MGIB-SR servicemembers who have served for at least two years on active duty and who are approved for TA benefits may elect to receive MGIB-SR benefits to pay for tuition or expenses charges above the amount paid by their military service branch. Top-Up is limited to 36 months of payments. Use of the Top-Up benefit reduces the individuals' MGIB-SR entitlement period at a rate determined by dividing the amount of the Top-Up payment by the individuals' full-time monthly rate. An individual is entitled to payment for tutorial assistance, not to exceed $100 monthly and up to a maximum of $1,200 over the course of the entitlement period. The individual must be enrolled at least half-time, and the educational institution must certify as to the necessity and customary nature of the cost. Unlike DEA, the first $600 does not reduce the entitlement period; however, any amount in excess of $600 reduces the individual's entitlement period by one month for each amount paid that is equal to the amount of monthly educational assistance the individual is otherwise eligible to receive for full-time pursuit of a residence course. A fee of up to $2,000 may be reimbursed for each approved licensing or certification test as long as the payment does not exceed the individual's remaining MGIB-SR entitlement. The benefit is available regardless of whether the individual passes the test. An individual's entitlement period is reduced one month for each amount paid that is equal to the monthly benefit otherwise payable to such individual. Individuals may receive reimbursement for a national test for admission to an IHL, a national test providing an opportunity for course credit at an IHL, and a national test that evaluates prior learning and knowledge and provides an opportunity for course credit at an IHL. An individual's entitlement period is reduced one month for each amount paid that is equal to the monthly benefit otherwise payable to such individual. Military service branches may use supplemental assistance for additional years of service and supplemental assistance for critical skills (Kickers) to recruit and retain highly capable individuals in the Armed Forces. The promised and expected benefit amount is deposited into the DOD Educational Benefits Trust Fund until the individuals take advantage of the benefit, at which time the benefit amount is transferred to the VA for payment. The supplemental assistance, up to $350, is added to the individuals' monthly housing allowance. The amount may be reduced in proportion to the enrollment rate and the type of training. Supplemental assistance for additional years of service may be offered to either an individual in the active component who agrees to remain on active duty for at least five additional continuous years, or to an individual in the Selected Reserve who agrees to serve at least two additional consecutive years on active duty and at least four additional consecutive years in the Selected Reserve. Supplemental assistance for critical skills may be offered either to recruit an enlistee with critical skills into the regular Armed Forces or to gain agreement from an individual with critical skills to serve in the Selected Reserve after separating honorably from the regular Armed Forces. A critical skill is a skill or specialty in which there is a critical shortage or for which it is difficult to recruit or, in the case of critical units, retain personnel. Because the obligatory service of six years is the same for all reservists, the duration of benefits under MGIB-SR is the same for all reservists—36 months (or the equivalent for part-time educational assistance). In general, no educational benefits can be paid for individuals whose entitlement was established from October 1, 1992, to June 29, 2008, the earlier of 14 years after establishing eligibility or separation from the Selected Reserve; or for individuals whose entitlement was established after June 29, 2008, after separation from the Selected Reserve. There are several exceptions to the availability period. Educational assistance may be extended beyond separation if the individual is prevented from pursuing a program of education for involuntary reasons such as being called to qualifying active duty service or being involuntarily separated for a disability that was not the result of the individual's own willful misconduct. If the availability period ends in the middle of an academic term or course, the availability period may be extended to allow completion of the term or course. Each DOD service branch is authorized to allow eligible individuals to transfer their MGIB-SR educational assistance benefits to family members, but no branch currently offers such a program. House hearings examining the possible need for a new GI Bill in the early 1980s focused on the difficulties the military was experiencing in recruiting and retaining a highly qualified all-volunteer force: active duty, Reserves, and National Guard. Although recruiting problems were not uniformly distributed by branch, rank, grade, or military occupational specialty (MOS), some suggested reinstating the draft. DOD was concerned about the high cost of recruiting and training new servicemembers and the loss of experience and expertise when servicemembers leave the service. Some witnesses argued for the elimination of the servicemember's monetary contribution toward educational benefits because retention rates were not appreciably increased by the prior GI Bill, the Post-Vietnam Era Veterans' Educational Assistance Program (VEAP), which required a contribution from servicemembers. Only 20%-25% of new recruits contributed to VEAP, and 40% had disenrolled from the program to recoup their contribution, which equaled 5% to 20% of the after-tax pay for some enlisted members. Despite a strong desire to increase retention by allowing universal transfer of dollars of entitlement and the entitlement period to spouses and children after 10 years of service, such a proposal was deemed too expensive. The Montgomery GI Bill-Active Duty (MGIB-AD)—originally called the All-Volunteer Force Educational Assistance Program—was initially enacted as Title VII of the Department of Defense Authorization Act, 1985 ( P.L. 98-525 ), as a three-year pilot program. The program was finally codified in Title 38, U.S.C., Chapter 30. The original purpose of the permanent program was to provide educational readjustment assistance and to aid in the recruitment and retention of highly qualified personnel for both the active and reserve components of the Armed Forces. It was also expected to promote and assist the All-Volunteer Force program and the Total Force Concept of the Armed Forces based upon service on active duty or a combination of service on active duty and in the Selected Reserve, including the National Guard. To ensure the recruitment of highly capable individuals who were more likely to stay in the military, the program requires that all individuals complete a high school diploma, its equivalent, or 12 credit hours of postsecondary education in order to be eligible for benefits. Educational assistance benefits are available to individuals defined in four categories. Category 1 individuals entered active-duty for the first time after June 30, 1985, as well as commissioned officers of the Public Health Service (PHS) and the National Oceanic Atmospheric Association (NOAA). Category 1 individuals must meet one of three service requirements. The first requires that individuals serve a minimum of three continuous years on active duty, or two continuous years if the initial obligated period of active duty was less than three years. The second requires that individuals serve a minimum of 30 months on active duty, or 20 months if the initial obligated period of active duty was less than three years, before being discharged with a service-connected disability, hardship, pre-existing condition, certain reductions-in-force, a physical or mental condition that did not result from the individual's own willful misconduct, or for the government's convenience. The third requires that Selected Reservists and National Guard members serve two continuous years of honorable active duty service upon first entry into the military after June 30, 1985, and serve a minimum of four continuous years of service in the Reserves beginning within a year of completing the active duty service. For reservists and National Guard members, the active duty service period includes only duty under Title 10 U.S.C. and certain full-time National Guard duty for the purpose of organizing, administering, recruiting, instructing, or training the National Guard under Title 32 U.S.C. However, individuals who receive an officer's commission after December 31, 1976, following graduation from one of the service academies or following graduation as a Reserve Officer Training Corps (ROTC) scholarship recipient are not eligible. Category 2 individuals had a remaining period of entitlement under the Post-Korean Conflict GI Bill (see Appendix C ) as of December 31, 1989, and were on active duty after June 30, 1985. Category 2 individuals exclude individuals who receive an officer's commission after December 31, 1976, following graduation from one of the service academies or following graduation as a Reserve Officer Training Corps (ROTC) scholarship recipient are not eligible. Category 3 individuals elected MGIB-AD before receiving an involuntary separation, voluntary separation incentive, or special separation benefit. Category 4 individuals are VEAP participants who either had a remaining period of entitlement; were on active duty on October 9, 1996; or elected to transfer to the MGIB-AD by October 9, 1997; and made the requisite $1,200 contribution. VEAP participants who served on active duty from October 9, 1996, through April 1, 2000; elected to transfer to the MGIB-AD by October 31, 2001; and made a $2,700 contribution are also in Category 4. A small group of National Guard members who first served on full-time National Guard active duty under Title 32 U.S.C. between June 30, 1985, and November 29, 1989, were eligible to make the requisite $1,200 contribution during an open period from October 9, 1996, to June 8, 1997. The active duty service period requirements exclude time assigned to an education or training program similar to those offered to civilians unless assigned by the military full-time, exclude time spent as a cadet or midshipman at one of the service academies, and exclude the initial 12-week period of active duty for training in the National Guard and the Reserves. The active duty service period requirements include time spent organizing, administering, recruiting, instructing, or training the National Guard while on full-time Army National Guard or Air National Guard duty and include time spent at a service academy or preparing to attend a service academy if the individual fails and returns to active duty. Individuals in all categories must have completed a high school diploma, its equivalent, or 12 semester hours in a program of education leading to a standard college degree. Also, all individuals must continue on active duty or in the Reserves, as appropriate; be discharged under fully honorable conditions; be placed on the retired or temporary disability retired list; or be transferred to certain reserve components. To become eligible for MGIB-AD benefits, Category 1 individuals must not decline the benefit in writing, and must allow the first 12 months of their military pay to be reduced by $100 per month. In certain circumstances, servicemembers who initially declined the benefit were allowed to enroll in the program. The eligible programs of education, educational institutions, and training establishments are the same as under the MGIB-SR. Most MGIB-AD participants receive a monthly allowance. Additional payments are available depending on decisions made while serving in the Armed Forces and for tutorial assistance, licensing or certification tests, national tests, supplemental assistance, former Post-Korean Conflict GI Bill-eligible participants, and the Buy-Up program (see the MGIB-SR section). Covered MGIB-AD participants must be charged no more than in-state tuition and fees. Covered participants are members of the Armed Forces on active duty for a period of more than 30 days in the state in which the public institution of higher education is located, and such members' spouses and dependent children. In addition, covered participants attending public IHLs are MGIB-AD-eligible veterans who were discharged or released from an active duty service period of not fewer than 90 days within three years of the date of enrollment. The public IHL may require the covered participant to demonstrate intent to establish residency, by a means other than physical presence, in order to qualify for in-state tuition. As long as a covered participant remains continuously enrolled at the institution, the participant remains eligible for in-state tuition and fee charges. The MGIB-AD monthly allowance is intended to support subsistence, tuition and fees, supplies, books, and equipment. Effective October 1, 2017, veterans may receive up to $1,928.00 monthly for full-time training. A reduced allowance is provided for less than full-time training and for those who served less than three continuous years on active duty. The monthly allowance is paid directly to recipients. Unless Congress changes the amount, the maximum monthly benefit amount is adjusted annually based on the annual percentage increase in the average cost of undergraduate tuition in the United States, as determined by the National Center for Education Statistics (NCES). Individuals on active duty and those training less than half-time receive actual tuition and fees or the monthly allowance, whichever is less. For an individual in apprenticeship or on-the-job training, the monthly allowance is 75%, 55%, and 35% of the monthly benefit otherwise payable to that individual for the first six months, second six months, and thereafter, respectively. Individuals in cooperative training receive 80% of the monthly allowance. Individuals pursuing education exclusively by correspondence receive 55% of the institution's established charges for completed courses, and individuals pursuing education consisting exclusively of flight training receive 60% of the institution's established charges for completed courses. MGIB-AD participants, like DEA participants, may choose to receive the monthly allowance in the form of an advance payment or accelerated payment. For MGIB-AD, the supplemental assistance may be no more than $950. Category 2 individuals receive an increase to the monthly allowance, depending on the type of training, rate of pursuit, and number of dependents, for as many months as the individual has remaining Post-Korean Conflict GI Bill entitlement. For example, effective October 1, 2017, an individual in full-time institutional training with two dependents may receive a total monthly allowance of $2,183.00. Servicemembers may also contribute up to an additional $600 while on active duty in $20 monthly increments and receive up to an additional $5 monthly for each $20 contributed over the life of their entitlement period under what is known as the $600 Buy Up Program. In other words, each dollar contributed by an individual is matched by the federal government with an additional $9 in benefits. This benefit could equal up to $5,400 over 36 months for a $600 investment. To discourage experienced personnel from leaving the military, servicemembers are eligible to receive educational benefits while serving on active duty, but only after serving two continuous years on active duty. For members of the active component, no educational benefits under the MGIB-AD can be paid after the delimiting date─10 years after discharge or release from active duty. For members of the Selected Reserve, no educational benefits under the MGIB-AD can be paid more than 10 years after completing the required four-year Selected Reserve duty. Most individuals are entitled to 36 months (or the equivalent in part-time attendance) of educational assistance. Category 1 active duty servicemembers discharged or released (other than for the convenience of the government) before serving the minimum two or three years of active duty service are entitled to educational benefits for a period equal to one month for each month of active duty service, but no more than 36 months. Reservists are entitled to one month for each month of active duty service and one month for each four months served in the Selected Reserves, but no more than 36 months. The MGIB-AD death benefit is available to certain beneficiaries of an MGIB-AD-eligible individual and to certain beneficiaries of an individual who served after June 30, 1985, and who died for service-connected reasons while on active duty or who died for service-connected reasons within one year of discharge or release from active duty. The beneficiaries are the beneficiaries of the individual's Servicemembers' Group Life Insurance policy. If the life insurance beneficiaries are no longer living, the death benefit is paid to the surviving spouse. If the spouse is no longer living, the death benefit is split between the individual's surviving children. If the children are no longer living, the death benefit is split between the individual's surviving parents. The benefit, up to $1,200, is equal to the amount the servicemember contributed in order to be eligible for the MGIB-AD less the proportion of entitlement used by the servicemember. Each DOD service branch is authorized to allow eligible individuals to transfer up to 18 months of their MGIB-AD educational assistance benefits to family members. Both the Army and Air Force offered pilot programs to test how effective transferability could be in increasing the retention of highly qualified, specialized, and experienced servicemembers. Both branches have discontinued the pilots. Therefore, transferability is not currently available to new individuals under the MGIB-AD. The Reserve Educational Assistance Program (REAP) was enacted by Section 527 of the Ronald W. Reagan National Defense Authorization Act for FY2005 ( P.L. 108-375 ). The National Defense Authorization Act for Fiscal Year 2016 ( P.L. 114-92 ) effectively ends REAP on November 25, 2019. It is codified in Title 10 U.S.C., Chapter 1607. Passage of the program was a direct reaction to the increased number and length of calls to active duty of reservists that occurred as a result of operations in Afghanistan and Iraq. Reservists must serve at least two continuous years on active duty to receive the MGIB-AD, and the benefits under the MGIB-SR are lower than under the MGIB-AD. REAP sought to provide reservists with benefits proportional to their active duty service and commensurate with the benefits of the regular Armed Forces. The purpose is to provide educational assistance to reserve components called to active duty in response to a declared call to war or national emergency. REAP, like the MGIB-SR, is a DOD program administered by the VA. Each DOD branch is required to establish and maintain a program. The program is permanently authorized. Educational assistance benefits are available to reservists who have served at least 90 consecutive days in qualifying duty authorization after September 10, 2001, and before November 25, 2015. A qualifying duty authorization for reservists is active duty in support of a contingency operation. For Army National Guard or Air National Guard members, a qualifying duty authorization is Section 502(f) of Title 32 U.S.C. when authorized by the President or Secretary of Defense for the purpose of responding to a national emergency declared by the President and supported by federal funds. The 90-day service requirement is waived for individuals released from duty because of an injury, illness, or disease incurred or aggravated in the line of duty. Increased benefits are available to individuals who serve at least one continuous year, two continuous years, or three aggregate years in a qualifying duty authorization. The eligible programs of education, educational institutions, and training establishments are the same as under the MGIB-SR. Most REAP participants receive a monthly allowance. Similar to the MGIB-AD, additional payments are available for certain purposes, and the monthly allowance may be increased under certain circumstances (see Table 2 ). The monthly educational allowance for REAP is a percentage of the allowance provided under the MGIB-AD. Reservists who serve on active duty for at least two continuous years or three aggregate years may receive 80% of the maximum MGIB-AD allowance for that type of education or training, and those serving at least one continuous year may receive 60%. Reservists serving at least 90 consecutive days or released from active duty for an injury, illness, or disease incurred or aggravated as a result of active duty service before serving 90 consecutive days may receive 40% of the maximum MGIB-AD allowance for that type of education or training. REAP participants, like DEA participants, may choose to receive the monthly allowance in the form of an advance payment or accelerated payment. Most individuals are entitled to educational benefits for a period of up to 36 months (or the equivalent in part-time educational assistance), regardless of the active duty eligibility period. In general, no educational benefits can be paid after November 25, 2015. However, individuals who received REAP benefits for the enrollment period immediately preceding November 25, 2015, may receive benefits through November 25, 2019, or until exhausting their entitlement. In addition, individuals who lost REAP eligibility as a result of the November 25, 2015, sunset date may be eligible for the Post-9/11 GI Bill by crediting REAP-qualifying active duty service toward Post-9/11 GI Bill eligibility, in accordance with VA procedures. In addition, no educational benefits can be paid after separation from the reserves. Individuals called or ordered to active service while serving in the Selected Reserve must remain in the Selected Reserve. Individuals called or ordered to active service while a member of the Ready Reserve, excluding the Selected Reserve, must remain in the Ready Reserve. The Ready Reserve is one of the three major reserve components along with the Standby Reserve and Retired Reserve. The Ready Reserve is the primary manpower pool of the Reserves. Ready Reservists will usually be called to active duty before the other components and include Selected Reservists. However, individuals who complete the 90-day service requirement and who complete their service contract under honorable conditions remain eligible for benefits for 10 years after separation from the Selected Reserve (separation from other reserve types does not qualify). Also, individuals separated from the Ready Reserve because of a disability which was not the result of the individual's own willful misconduct have 10 years from becoming eligible for benefits before the benefits expire. Each service branch is authorized to allow eligible individuals to transfer their REAP educational assistance benefits to family members, but no branch currently offers such a program. The Post-Vietnam Era Veterans' Educational Assistance Program (VEAP) was established under Title IV of the Veterans' Education and Employment Assistance Act of 1976 ( P.L. 94-502 ) and codified in Title 38, U.S.C., Chapter 32. The program was established to make education affordable and recruit qualified servicemembers. VEAP was designed as a recruitment incentive for the Armed Forces during peacetime. VEAP was the first GI Bill to make educational benefits available to both active duty and reserve components simultaneously from the outset. Under VEAP, educational assistance benefits are available to individuals who entered active duty on or after January 1, 1977, and before July 1, 1985. To be eligible for benefits, veterans must have been discharged or released other than dishonorably after meeting the active duty service requirement, or they must have been discharged or released for a service-connected disability. The active duty service requirement was a minimum of 24 continuous months or the obligated period of active duty for individuals who enlist in a regular component of the Armed Forces after September 7, 1980, or who enter on active duty after October 16, 1981, or a minimum of 181 days of continuous service for other individuals. Servicemembers remaining in service must have completed their first obligated period of active duty or six years of active duty, whichever is less. The 180-day active duty service period excludes time assigned to a civilian institution for an education or training program similar to those offered to civilians, excludes time spent as a cadet or midshipman at one of the service academies, and excludes periods of receiving an allowance from the College First Program (10 U.S.C. §511(d)) for a delayed enlistment in the Army National Guard or the Air National Guard or while a member of the Reserves. Individuals eligible for the prior GI Bill, the Post Korean Conflict GI Bill (see Appendix C ), are not eligible under VEAP, with one exception. Members of the National Guard or Reserves who participated in the College First Program and who served at least one consecutive year of active duty after completing the period of active duty for training are eligible. The individual must make an irrevocable decision to receive benefits under VEAP. Since the benefit was established for an all-volunteer force serving during peacetime, it was deemed appropriate to require participants to contribute to their educational fund during their period of service in the military. Program participants had to agree to monthly pay deductions of at least $25, but not more than $100, during the initial tour of obligated service or six years of active duty service for a total contribution of up to $2,700. After making at least 12 contributions, individuals could withdraw from the program, receiving their contributions in return and making them ineligible for program benefits. The eligible programs of education are courses which lead to the attainment of a predetermined educational, vocational, or professional objective or objectives if related to the same career (this includes traditional undergraduate and graduate programs); courses which lead to a high school diploma; courses required by the Administrator of the Small Business Administration as a condition to obtaining financial assistance under the provisions of Section 7(i)(1) of the Small Business Act (15 U.S.C. 636(i)(1)); licensing or certification tests for a predetermined vocation or profession, provided such tests and the licensing or credentialing organizations or entities that offer such tests are approved; courses offered by a qualified provider of entrepreneurship courses; national tests for admission to institutions of higher learning or graduate schools (such as the Scholastic Aptitude Test (SAT)); national tests providing an opportunity for course credit at institutions of higher learning (such as the Advanced Placement (AP) exam); full-time programs of apprentice or other on-the-job training; and cooperative programs for individuals not on active duty. Most VEAP participants receive a monthly allowance. Similar to the MGIB-SR, additional payments are available for certain purposes, and the monthly allowance may be increased under certain circumstances (see Table 2 ). The VEAP benefit consists of a monthly allowance for subsistence, tuition and fees, supplies, books, and equipment paid directly to recipients while enrolled in training or a program of education. Individuals are entitled to three times their contribution plus any DOD contributions. The maximum monthly basic educational benefit may not exceed $300. The entitlement period of individuals taking correspondence courses is reduced one month for each month of assistance regardless of the rate of attendance. Individuals incarcerated for a felony conviction in a federal, state, local, or other penal institution or correctional facility may only receive an allowance to cover actual tuition and fees and necessary supplies, books, and equipment. Individuals in a program of education consisting exclusively of flight training receive 60% of the program's established charges. For an individual in apprentice or on-the-job training, the monthly allowance is 75%, 55%, and 35% of the monthly benefit otherwise payable to that individual for the first six months, second six months, and thereafter, respectively. Veterans and servicemembers must use their educational assistance benefits within 10 years of discharge or release from active duty. Under VEAP, individuals are entitled to a maximum of 36 months (or the equivalent for part-time attendance) or the number of months in which contributions were made, whichever is less. In general, veterans and servicemembers, many of whom will be eligible for more than one program, can combine benefit programs administered by the VA to receive no more than 48 months of educational benefits. However, a servicemember who is eligible for two or more of the GI Bill programs: VEAP, MGIB-AD, MGIB-SR, REAP, or the Post-9/11 GI Bill, based on the same period of military service must elect the program to which such service is to be credited. In addition, benefits under more than one program cannot be received concurrently. DEA-eligible individuals can combine benefits with other VA administered educational assistance programs to receive up to 81 months of education benefits, but the eligibility events cannot be duplicative. Table 2 provides a summary of some of the key characteristics of the active programs. Although the Post-9/11 GI Bill is not described in this report, the characteristics have been included in the table for the reader's reference. The Post-9/11 GI Bill is described in CRS Report R42755, The Post-9/11 Veterans' Educational Assistance Act of 2008 (Post-9/11 GI Bill): A Primer . The Harry W. Colmery Veterans Educational Assistance Act of 2017 ( P.L. 115-48 ) requires the VA carry out a five-year High Technology Pilot Program. The program is intended to provide GI Bill-eligible veterans the opportunity to enroll in high technology programs of education that the Secretary determines provide training or skills sought by employers in a relevant field or industry. The VA is authorized to expend up to $15 million annually for the pilot program. Under the program, the VA contracts with qualified providers to provide high technology programs to GI Bill-eligible veterans. High technology programs are nondegree programs of education that provide qualifying instruction and that are offered by qualified providers. Qualifying instruction is computer programming, computer software, media application, data processing, or information sciences. Qualified providers are entities that are not IHLs, have been in operation for at least two years, have successfully provided the high technology program for at least one year, and meet VA-developed approval criteria. Qualified providers that offer tuition reimbursement to students who do not find meaningful employment in suitable fields within 180 days of program completion receive preference in contracting. The VA reimburses the qualified provider for the cost of tuition and other fees for the high technology program. The VA pays 25% of the cost upon enrollment of an eligible veteran, 25% upon program completion by an eligible veteran, and 50% upon employment of an eligible veteran-completer in a suitable field. GI Bill-eligible veterans enrolled full-time in the pilot program receive a monthly housing allowance. The housing allowance is based on the DOD-determined monthly basic allowance for housing (BAH) for a member of the Armed Forces with dependents in pay grade E-5 (hereinafter referred to as the E-5 with dependents BAH ). For individuals not enrolled through distance learning, the monthly housing allowance is the E-5 with dependents BAH for the area in which the qualified provider is located, reduced according to the individual's enrollment rate (rounded to the nearest multiple of 10). For individuals enrolled through distance learning, the monthly housing allowance is 50% of the E-5 with dependents BAH for the area in which the qualified provider is located, reduced according to the individual's enrollment rate (rounded to the nearest multiple of 10). For the most part, individuals eligible for or receiving educational assistance under the VEAP, MGIBs, REAP, DEA, or Post-9/11 GI Bill may request educational and vocational counseling from the VA. The counseling may include, but is not limited to, assistance selecting a program of education, resolving personal problems, and resolving academic difficulties. Counseling was provided to all recipients of educational assistance until 1972. Counseling is still required under DEA for a child who may require specialized vocational training or special restorative training, or a child who is under 18 years of age and has not completed high school. It is also required for a spouse who desires specialized vocational training. Counseling is still required under all of the programs if the individual is rated as incompetent. In an effort to ameliorate the transition from military service to civilian education and ensure GI Bill participants achieve their educational and employment objectives, the VA initiated the VetSuccess on Campus program in June 2009. Services are targeted to servicemembers, veterans, and their family members who use VA education programs. Each college campus participating in the VetSuccess on Campus program is assigned a full-time VA Vocational Rehabilitation and Employment Program (see program description in subsequent section) counselor and a part-time VA outreach coordinator. The coordinator and counselor ensure veterans are aware of the services offered, which include career and academic counseling, adjustment counseling, vocational testing, awareness of and access to VA benefits and services, referral services, and other services. The VA chooses campuses to participate that have high veteran populations. Participating campuses enter into an agreement with the VA to work directly with the on-campus VA representatives to coordinate service delivery. Ninety-four colleges and universities have been participating since 2014. Vocational Rehabilitation and Employment (VR&E) is an entitlement program administered by the VA that provides job training and other employment-related services to veterans with service-connected disabilities. To be entitled to VR&E services, a veteran must be found to have either (1) a 20% service-connected disability and an employment handicap, or (2) a 10% service-connected disability and a serious employment handicap. After veterans are found to be entitled to VR&E benefits, a program counselor helps the veteran identify a suitable employment goal and determines what services (including postsecondary education) will be necessary to achieve that goal. Services and benefits under the VR&E programs may include (but are not limited to) tuition, fees, books, supplies, tutorial assistance, counseling, and other services necessary to meet the veteran's employment objective. VR&E beneficiaries may also receive a subsistence allowance while they are enrolled in the program. As of October 1, 2015, the maximum monthly subsistence allowance for a VR&E beneficiary enrolled full-time at an institution of higher learning with two dependents is $885.00. The subsistence allowance varies by enrollment status and whether or not the veteran has dependents. Veterans who are eligible for the Post-9/11 GI Bill may elect to receive the Post-9/11 GI Bill housing allowance in lieu of the VR&E subsistence allowance. Typically, VR&E benefits are limited to 48 months, though entitled veterans may receive benefits longer under certain circumstances. As discussed earlier, statutory provisions generally prohibit individuals from receiving benefits under more than one program concurrently; however, there is an exception for VR&E. Veterans who are eligible for VR&E as well as MGIB-AD may begin a rehabilitation program under VR&E and may subsequently elect to receive MGIB-AD payments while enrolled in a program that meets the MGIB-AD criteria. VR&E beneficiaries who subsequently elect to receive MGIB-AD payments may not receive tuition, fees, books, supplies, handling charges, licensing fees, equipment, or individualized tutorial assistance through the VR&E program. They are also ineligible for a subsistence allowance or loans under the VR&E program. VR&E participants who elect to receive MGIB-AD payments remain eligible for educational, vocational, psychological, employment, and personal adjustment counseling and other disability-related benefits and services under the VR&E program. A veteran who is also eligible to receive disability compensation as a result of hospital treatment or observation may not receive the total VR&E or MGIB-AD allowance and disability compensation in excess of the greater of 100% disability compensation or the sum of the VR&E or MGIB-AD allowance and the amount of disability compensation that would be paid to the veteran if he or she was not receiving compensation at such a rate as the result of that hospital treatment or observation. The Veterans Work Study Program allows VEAP, MGIB-AD, MGIB-SR, DEA, Post-9/11 GI Bill, and VR&E participants to receive additional financial assistance through the VA in exchange for employment. The program is codified in Title 38 U.S.C. Section 3485. Veterans and reservists in the VEAP, MGIBs, Post-9/11 GI Bill, and VR&E who are enrolled at least three-quarter-time may take advantage of the work-study program. Individuals in the DEA who are enrolled at least three-quarter-time in the United States and are not pursuing a program of special restorative training may also take advantage of the work-study program. Although veterans with at least a 30% disability rating receive priority in the selection of program participants, the VA also considers the individuals' need for additional educational assistance, whether the individuals have the necessary access to transportation to and from the work site, the individuals' motivation, and the individuals' compatibility with the available work assignments. An individual will enter into an agreement with the VA to perform a certain number of hours of work in exchange for compensation. Eligible individuals may work for up to 25 hours times the number of weeks contained in an enrollment period. They receive the greater of the state's minimum wage rate or the national minimum wage rate under Section 6(a) of the Fair Labor Standards Act of 1938 (Title 29 U.S.C. §206(a)). Eligible work-study activities are VA outreach services programs under the supervision of a VA employee; outreach services to servicemembers and veterans furnished by employees of a state approving agency; preparation and processing of necessary papers and other documents at educational institutions or regional offices or facilities of the VA; hospital and domiciliary care and medical treatment for veterans at VA facilities and state homes paid for by the VA; any other activity of the VA as the Secretary determines appropriate; activities related to the administration of MGIB-SR and REAP at DOD, Coast Guard, or National Guard facilities (for reservists only); activities related to the administration of a national cemetery or a state veterans' cemetery; activities of a state veterans agency related to providing assistance to veterans in obtaining state and VA benefits; a position working in a cooperative program carried out jointly by the VA and an IHL; and any other veterans-related position in an IHL. Special provisions of the work-study program allow individuals to receive a lump sum advance payment after signing a contract to complete a certain number of work-study hours. The advance may be 40% of the expected allowance or 50 hours of earnings at the minimum wage rate, whichever is lower. Participation in VEAP, MGIBs, REAP, Post-9/11 GI Bill, and DEA is exhibited in Figure 1 . The following are among the highlights of the figure: Combined participation in VEAP, MGIBs, REAP, Post-9/11 GI Bill, and DEA increased 48% from 541,439 in FY2008 to 800,369 in FY2010, due in large part to the Post-9/11 GI Bill. Participation in the Post-9/11 GI Bill continues to grow, from approximately 370,000 in FY2010, the first full year of implementation, to almost 800,000 in each of FY2014-FY2016. The number of participants in the MGIB-AD was moderately stable from 1994 through 2001 at around 290,000 participants; increased from 2002 through 2008—peaking at 354,284 participants; and began to decline in 2009 following the implementation of the Post-9/11 GI Bill to fewer than 50,000 in FY2016. Participation in VEAP peaked in 1988 at 88,964 and is slowly declining as the eligible individuals become older, disenroll, or transfer to other programs. The VA projects that participation will end in 2025. MGIB-SR participation exceeded 100,000 from 1990 through 1994, fell to less than 90,000 annually from 2001 through 2005, and fell again to under 70,000 from 2006 through 2016. Participation cycles in DEA mirror major conflicts with greater participation around the Vietnam Conflict, 1978-1982, and around the conflicts in Iraq and Afghanistan, 2004-2016. Table 3 compares participation and cost of selected programs administered by the VA. The program with the largest participation and obligations in FY2016 was the Post-9/11 GI Bill, with over 790,000 participants and total obligations of over $11 billion. The program with the smallest participation was VEAP, with eight participants and total obligations of $14,000. The MGIB-AD program provided benefits averaging $7,717 per participant compared to $14,661 for the Post-9/11 GI Bill. Appendix A. Educational Assistance Under the Original GI Bill of Rights The original GI Bill, the Servicemen's Readjustment Act of 1944 (P.L. 78-346), was intended to help veterans returning from World War II (WWII). The original GI Bill provided unprecedented benefits: funds to the VA to build and administer additional hospital facilities; extension of vocational rehabilitation and employment services; educational assistance to non-disabled veterans; loans for the purchase or construction of homes, farms, and business property at advantageous terms to veterans; employment services to returning veterans; and unemployment benefits to veterans. The purpose of the educational assistance program was to avoid high levels of unemployment as had occurred following World War I, to help servicemembers readjust to civilian life, and to afford returning veterans an opportunity to receive the education and training missed while providing compulsory service in the military. From December 1, 1941, through December 31, 1946, 16.1 million personnel served in the U.S. Armed Forces in WWII. The U.S. population in 1946 is estimated at 141,388,566. Eligible Individuals Educational assistance benefits were available to all veterans who served on active duty in the military or naval service after September 16, 1940, and before the termination of WWII hostilities (December 31, 1946). Eligible veterans must have been discharged other than dishonorably and have served a minimum of 90 days or have been discharged or released for a service-incurred injury or disability. The 90-day service period excluded time spent completing the Army specialized training program or Navy college training program and excluded time spent as a cadet or midshipman at one of the service academies. Benefit Availability and Duration of Use Eligible veterans were required to begin an education program within two years of discharge or release or within two years of the end of WWII, whichever was later. The start date was later extended by P.L. 79-268, enacted in 1945, to four years after discharge or release or December 31, 1950, whichever was later. Veterans were entitled to at least one year of education (or the equivalent for continuous part-time study) or the length of the chosen education program if that program was shorter than 12 months. Upon satisfactory completion of the first year (or the period of a shorter education program), veterans whose education had been interrupted upon entering military service were entitled to educational benefits for at least as long as they served after September 16, 1940, and before the end of WWII, but not more than four years. The restriction, which provided no more than one year of educational benefits to certain veterans, was later removed to provide the same benefits to all veterans. By law, no educational benefits under the original GI Bill could be paid seven years after the end of WWII, or July 25, 1956. Eligible Programs of Education, Institutions, and Establishments Initially, the eligible educational institutions were almost any institutions providing education: public or private elementary, secondary, and other schools furnishing education for adults; business schools; scientific and technical institutions; colleges and universities; vocational schools; junior colleges; teachers' colleges; professional schools; and other educational institutions. The eligible training establishments were businesses or other establishments offering apprentice or on-the-job training. Because the quality of some training programs was poor, laws were enacted establishing approval criteria for training institutions and for-profit schools. Stricter criteria were prescribed for on-the-job and on-the-farm training programs and vocational schools. Also, avocational and recreational training programs, such as nonvocational flight training, were eventually prohibited. Benefit Payments Under the GI Bill, the VA paid up to $500 a year directly to an educational institution for tuition, books, fees, and other training costs for each enrolled veteran. Institutions providing apprentice or on-the-job training did not receive this payment. Veterans were required to maintain satisfactory conduct or progress in their chosen program of education. To increase flexibility, the program was revised by P.L. 79-268, enacted in 1945, to allow veterans to receive higher annual tuition and fees payments (accelerated payments) for a corresponding reduction in the period of entitlement. The VA also paid up to $50 monthly as a subsistence allowance to single veterans, and $75 monthly to veterans with one or more dependents. The monthly payment was eventually increased to $75 monthly for single veterans, $105 monthly for veterans with one dependent, and $120 monthly for veterans with more than one dependent by P.L. 80-411, enacted in 1948. Veterans who attended part-time or received compensation for apprentice or on-the-job training received a lower subsistence allowance. In 1945, P.L. 79-268 specifically authorized tuition and fees payments for correspondence courses but disallowed the subsistence allowance. Later, P.L. 79-679, enacted in 1946, limited total earnings for veterans receiving compensation for apprentice or on-the-job training. Veterans were limited to a total monthly employment compensation plus VA subsistence allowance of no more than $175 for single veterans and $200 for veterans with dependents. This was increased to $210 for single veterans, $270 for veterans with one dependent, and $290 for veterans with more than one dependent by P.L. 80-512, enacted in 1948. Lessons Learned Some important lessons were learned in the implementation of the original GI Bill, and as the result of several studies. Paying tuition and fees directly to educational institutions led to overpayments and excessive payments to for-profit vocational training programs in particular. Some institutions were created solely to profit from the program. It was necessary to define and establish standards for the eligible training establishments and educational institutions to ensure adequate quality of the educational programs and to define and remunerate responsibility for evaluating them. There was considerable objection to the use of the GI Bill for avocational and recreational purposes since one of the stated purposes of the program was workforce preparation. The third mechanism for ensuring proper use of the GI Bill educational assistance was the importance placed on veterans' identifying and adhering to an educational objective. Finally, it was necessary to increase the benefits as the cost of living and education increased. Participation and Costs In the end, the nation spent $14.5 billion ($114.7 billion in 2008 inflation adjusted dollars) to provide education and training to 7.8 million WWII veterans ( Table A -1 ). The total expenditure per participant was $1,859 ($14,700 in 2008 inflation adjusted dollars). Appendix B. Korean Conflict GI Bill The Veterans' Readjustment Assistance Act of 1952 (P.L. 82-550, also known as the Korean Conflict GI Bill) was authorized to help veterans returning from the Korean Conflict adjust to civilian life. The program was codified in Title 38 U.S.C., Chapter 33, before its subsequent repeal. The expected number of Korean Conflict veterans─less than 6 million (or 4%) of a national population of 157,552,740 in 1952 ─was lower than the number of WWII veterans, reducing the risk of high national unemployment in comparison to the post-WWI and post-WWII eras. The Korean Conflict GI Bill was intended to provide veterans the education forestalled by compulsory service and provide equitable benefits, as had been afforded the WWII veterans. The bill was also written in an effort to avoid many problems encountered in the implementation of the original GI Bill. Eligible Individuals Veteran eligibility was essentially the same for the Korean GI Bill as the original GI Bill except that only those members of the Armed Forces who served on active duty during the Korean Conflict (on or after June 27, 1950, and before the termination of hostilities on January 31, 1955) were eligible. Veterans still had to be discharged other than dishonorably and serve a minimum of 90 days, or be discharged or released for a service-incurred injury or disability. The 90-day service period excluded time assigned to an education or training program similar to those offered to civilians and excluded time spent as a cadet or midshipman at one of the service academies. Benefit Availability and Duration of Use While WWII veterans were afforded up to four years of education benefits, Korean Conflict veterans were limited to 36 months, which is substantially equivalent for students attending traditional postsecondary schools with summers off. Eligible veterans were required to begin an education program within two years (later extended to three years by P.L. 83-610, enacted in 1954) of discharge or release or before August 21, 1954, whichever was later. Veterans were entitled to educational benefits for a period equal to 1½ times the duration of their active duty service between June 27, 1950, and the termination of hostilities, but no more than 36 months. Veterans enrolled entirely in correspondence courses were entitled to educational benefits for a period equal to six times the duration of their active duty service. Veterans could combine benefits with the VR&E program or the original GI Bill to receive up to 48 months of educational benefits. By law, no educational benefits under the Korean Conflict GI Bill could be paid seven years after discharge or release or upon the termination of hostilities, whichever was earlier. This was later extended to eight years after discharge or release or January 31, 1965, by P.L. 84-7, enacted in 1955. Eligible Programs of Education, Institutions, and Establishments The list of eligible educational institutions and training establishments did not change from the original GI Bill except that institutions listed on the Attorney General's List of Subversive Organizations were not eligible. States were requested to create state approving agencies (SAAs) to approve educational courses and provide lists of eligible institutions. The VA provided some cost reimbursement of salaries and travel for these state agencies. To ensure the benefits were used for workforce preparation and to avoid some of the misuse experienced under the original GI Bill, several provisions were added or changed from the original GI Bill. Veterans were required to declare an educational objective or certificate/degree. They were allowed to change their educational objective only once, only if not making satisfactory progress by no fault of misconduct, neglect, or lack of application, and if the new program fit their aptitude or previous education or the new program was a normal progression from the existing program. The legislation specifically prohibited veterans from receiving benefits for avocational and recreational courses in bartending, dance, photography, music, sports, and personal development. The criteria and standards for approving training establishments and educational institutions were bolstered in comparison to the original GI Bill. As originally enacted, the Korean GI Bill disapproved new enrollments of veterans in non-accredited courses below the college level offered by a private for-profit or nonprofit educational institution if more than 85% of the enrolled students had all or part of their educational charges paid to or for them by the educational institution, VR&E, or the original GI Bill. The act included an additional provision disapproving the enrollment of veterans in any course that was offered by an educational institution that had not been in operation for at least two years unless either the educational institution was public, the educational institution had been in operation for more than two years and the course was similar to instruction previously given, or the institution relocated locally and had offered the course for more than two years. Amendments to the original GI Bill establishing stringent standards for apprentice, on-the-job, and on-the-farm training were expanded under the Korean Conflict GI Bill to include courses already approved by nationally recognized accrediting agencies and certain courses without accreditation. Benefit Payments The Korean Conflict GI Bill made payments only to veterans, as opposed to the payments made to veterans and educational institutions under the original GI Bill. The U.S. House of Representatives' Select Committee to Investigate Educational, Training, and Loan Guaranty Programs under the GI Bill (1950-1952) indicated that direct payments to educational institutions led to abuse. A 1956 house report determined that because the original GI Bill was generous, some veterans used the benefits for income rather than to achieve an employment goal. It was also believed that if veterans were responsible for paying a portion of the cost of their own education that this, in combination with the payment of benefits directly to veterans, would encourage more careful spending. Since maximum benefits were offered to veterans in full-time study, the legislation provided a uniform definition of full-time for below college-level trade, technical, and institutional courses offered on the clock-hour basis and for undergraduate courses offered at colleges and universities. The benefit provided an allowance for subsistence, tuition, fees, supplies, books, and equipment of up to $110 monthly to single veterans, $135 monthly to veterans with one dependent, and $160 monthly to veterans with more than one dependent. Veterans who attended institutional training less than full-time, attended on-the-farm training at least half-time, or attended cooperative training full-time received a lower allowance. As a result of the determination that some veterans were overpaid from the original GI Bill, veterans who attended apprentice or on-the-job training received an allowance, which could not exceed $310 monthly in combination with the veterans' employment compensation. Veterans completing all coursework through correspondence courses or on a less-than-half-time basis were only reimbursed for the cost of completed courses. Veterans in flight training received 75% of the cost of flight training unless the program of education combined flight training with other coursework. An allowance was not paid if veterans were absent from unaccredited courses or apprentice or on-the-job training for more than 30 days. Veterans could not suspend their education for longer than 12 months without a waiver from the VA. Veterans and their institutions were required to certify attendance, lessons completed, and/or satisfactory progress. The law disallowed veterans from receiving duplicate benefits from the Korean Conflict GI Bill and any other educational benefit from the U.S. Treasury. Participation and Cost In the end, the nation spent $4.5 billion ($30.8 billion in 2008 inflation adjusted dollars) to provide education and training to almost 2.4 million Korean Conflict veterans ( Table B -1 ). The total expenditure per participant was $1,882 ($12,867 in 2008 inflation adjusted dollars). Appendix C. Post-Korea Conflict and Vietnam Era GI Bill Once fighting and ground troop deployment escalated in Vietnam, the Veterans Readjustment Benefits Act of 1966 (P.L. 89-358), better known as the Post-Korean Conflict and Vietnam Era GI Bill, was passed. The program is codified in Title 38 U.S.C., Chapter 34. Congress passed the bill unanimously despite reservations by President Lyndon B. Johnson that the cost was too high. The benefits were designed to help recruit new servicemembers, extend benefits to all who fulfilled their compulsory service, and afford returning veterans an opportunity to receive the education and training missed while providing compulsory service in the military. Although the benefits were initially intended to provide "considerably less liberal treatment" to non-war veterans, over time Congress expanded the benefits and liberalized eligibility. Incidentally, these veterans were eligible for other federal education benefits available to the general public and passed through the recently enacted Higher Education Act of 1965. Eligible Individuals The minimum active duty eligibility period was 180 days. Educational assistance benefits were available to all veterans who served on active-duty after January 31, 1955, and entered military service before January 1, 1977, who were discharged other than dishonorably and served a minimum of 180 days, or were discharged or released for a service-connected disability. The 180-day service period excluded time assigned to an education or training program similar to those offered to civilians, time spent as a cadet or midshipman at one of the service academies, time spent in college for a delayed enlistment in the Army National Guard or Air National Guard, and service in the National Guard and the Reserves. The program was later amended by P.L. 93-508, enacted in 1974, so that members of the National Guard and the Reserves were eligible if the active duty period after the initial active duty training period was at least one year. Servicemembers that otherwise met the eligibility requirements were also eligible for benefits while on active duty after serving two continuous years on active duty. This provision responded to concerns by the DOD that benefits available to veterans only would be counter to retention efforts. Benefit Availability and Duration of Use Although the bill was not passed until 1966, the benefits retroactively covered active duty servicemen since 1955 such that there would be no period of ineligibility of educational assistance benefits since September 16, 1940. However, no educational benefits were paid until June 1, 1966. Initially, the Post-Korean Conflict GI Bill provided one month of entitlement for each month of active duty service, up to 36 months. P.L. 90-631, enacted in 1968, increased the period of entitlement to 1½ months of benefits for every month of service, with those serving 18 months or more being entitled to the full 36 months of benefits. Later, the entitlement period was increased to 45 months for those pursuing a standard undergraduate college degree by P.L. 93-508 , enacted in 1974, and finally to 45 months for all eligible persons by P.L. 94-502 , enacted in 1976. By law, no educational benefits under the Post-Korean Conflict GI Bill could be paid eight years (later extended to 10 years by P.L. 93-337, enacted in 1974) after discharge or release or eight years after the Bill's enactment, whichever was later. P.L. 94-502 , enacted in 1976 provided that no educational benefits could be paid after December 31, 1989. As originally enacted, Post-Korean Conflict GI Bill veterans could combine benefits with other educational benefit programs administered by the VA to receive up to 36 months of educational benefits. P.L. 90-631, enacted in 1968, increased this allowance to 48 months. Eligible Programs of Education, Institutions, and Establishments Upon initial enactment, the eligible programs of education were courses pursued at an educational institution─secondary school, vocational school, college or university, scientific or technical institution, or any other institution offering education at the secondary school level or above. For example, flight training courses had to be offered by IHLs and lead to a standard college degree (later revised to the standard college degree the recipient was seeking by P.L. 90-77, enacted in 1967). The list of eligible educational institutions and training establishments was later expanded: Elementary schools, other schools furnishing education for adults, and businesses or other establishments offering apprenticeships or on-the-job training were later added. Farm cooperative training requiring 12 weekly hours of institutional agricultural courses and relevant agricultural employment became eligible under P.L. 90-77. Apprenticeship programs that met Department of Labor published standards were allowed under P.L. 90-77. On-the-job training programs were allowed under P.L. 90-77 if the programs provided progression and appointment to the next highest level based on the skills learned as opposed to length of service; compensation that matched non-veterans; initial compensation of not less than 50% of the final, full wage; a reasonable guarantee that the job would be available upon completion of the training period; at least six months of training but no more than two years; and adequate resources for the training and if the programs qualified the trainee for the job. Flight training at a non-IHL flight school was added by P.L. 90-77 if the flight school was approved by the state approving agency (SAA) and Federal Aviation Administration; if the training was necessary for the attainment of a vocational objective in aviation; if the individual had a valid private pilot's license or sufficient flight training hours for a private pilot's license (the allowance of sufficient hours without a license was later deleted by P.L. 91-219, enacted in 1970). Courses required by the Small Business Administration as a condition for obtaining financial assistance became eligible under P.L. 91-584, enacted in 1970. Educational institutions received an annual reporting fee for each eligible person receiving educational benefits from the VA to facilitate reporting of enrollment, enrollment interruptions, and enrollment terminations to the VA. Lessons Learned Based on the experiences with prior GI Bills and early experience under the Post-Korean Conflict GI Bill, several provisions were included to ensure benefits were used to promote quality workforce preparation. Many of the provisions have been incorporated into all subsequent GI Bills. These provisions include the following: Benefit recipients were only allowed to take courses necessary to fulfill their declared educational, professional, or vocational objective. Individuals were allowed to change the objective if not making or likely to not make satisfactory progress or if the new program better fit their aptitudes. Avocational and recreational courses were disallowed. No allowance was paid if veterans were absent for more than 30 days from courses that did not lead to a standard college degree. Substantially new courses at private for-profit institutions that had been offered for fewer than two years were not eligible. No on-the-job or on-the-farm course (later expanded to any course by P.L. 90-77, enacted in 1967) could be offered through open circuit television or radio, and no program of education leading to a standard college degree could offer the majority of courses through open circuit television or radio. Benefit recipients could not enroll in unaccredited courses below the college level at private institutions at which more than 85% of the students received payments from the institution or the VA. To fight low completion rates, various disclosure and refund requirements for correspondence schools were prescribed by P.L. 92-540, enacted in 1972. Payments could be suspended for courses where there was a substantial pattern of ineligible trainees receiving assistance because course approval requirements had not been met or the institution offering the course had violated recordkeeping requirements, as enacted in 1982 by P.L. 97-306 . Programs of education outside the United States were allowed only if offered at approved IHLs. Based on poor employment outcomes and overuse, Congress limited benefits for flight training. In 1970, Congress limited flight training at a non-IHL flight school to individuals with a valid private pilot's license. Finally, flight training at a non-IHL flight school was terminated for new enrollees by P.L. 97-35, enacted in 1981. Benefit Payments An allowance for subsistence, tuition and fees, supplies, books, and equipment was paid directly to recipients. Veterans and servicemembers received up to $150 monthly (eventually increased to $510 for individuals with two dependents) according to a schedule based on full-time, three-quarter-time, or half-time or cooperative program enrollment and the number of dependents. Active duty servicemembers and students pursuing education on a less-than-half-time basis were only reimbursed for the cost of completed courses, but no more than $100 monthly (eventually increased to $376 by P.L. 98-543 , enacted in 1984). Students completing all coursework through correspondence courses were only reimbursed for the cost (eventually reduced to 55% of cost by P.L. 97-35, enacted in 1981) of completed courses, and their entitlement period was reduced by one quarter of the time in the program (eventually changed to one month of entitlement for each $376 reimbursed by P.L. 98-543, enacted in 1984). Veterans in full-time on-the-farm, apprentice, or on-the-job training received a reduced allowance. In general, veterans and servicemembers and their institutions were required to certify actual attendance, lessons completed, and/or satisfactory progress before payments were made. Veterans and servicemembers were allowed to receive an advance payment for the first month of enrollment (P.L. 91-219 in 1970). Allowance and entitlement period provisions were added for students pursuing a standard college degree through independent study and for students pursuing education while incarcerated or in a half-way house by P.L. 96-466, enacted in 1980. The law disallowed veterans from receiving duplicate educational benefits from the U.S. Treasury. P.L. 95-202 , enacted in 1977, authorized the state or local government to establish a program with the VA that would allow veterans to use accelerated payments to help repay certain VA loans. The veteran had to be enrolled full-time and complete the program satisfactorily with a degree, diploma, or certificate. The tuition and fees had to exceed $700 for a term, and no more than 35% of program students could have received VA benefits. If these requirements were met, the state or local government paid the VA a matching amount of the accelerated payment. Predischarge Education Program The Predischarge Education Program (PREP) allowed servicemembers who completed 180 days of active duty and were still on active duty to receive an allowance for non-correspondence courses leading to a high school diploma or any deficiency, remedial, or refresher course in preparation for enrollment in an approved educational institution or training establishment. The monthly allowance was the lesser of actual tuition, fees, books, and supplies or $175 (eventually increased to $270 by P.L. 93-602 , enacted in 1975). Allowances received while on active duty did not reduce the regular entitlement period upon discharge or release. Training for the Educationally Disadvantaged The Post-Korean Conflict GI Bill was later amended to provide special assistance and training for the educationally disadvantaged. First, P.L. 90-77, enacted in 1967, allowed veterans and servicemembers without a high school diploma or its equivalent or who needed additional secondary school courses to receive the regular allowance for these courses without the payments reducing their regular entitlement period. Second, P.L. 91-219, enacted in 1970, provided tutorial assistance of $50 monthly for nine months (eventually increased to $84 monthly for a maximum of 12 months, or $1,008, by P.L. 98-543, enacted in 1984) to veterans and servicemembers enrolled in postsecondary education at least half-time. The tutorial assistance had to be for a deficiency in a course required for the educational objective, and the educational institution had to certify the need for assistance, the qualifications of the tutor, and the customary nature of the charges. Receipt of tutorial assistance did not reduce their regular entitlement period under the Post-Korean Conflict GI Bill. Work-Study P.L. 92-540, enacted in 1972, created a veteran work-study allowance for full-time students (later liberalized to at least three-quarter-time students by P.L. 101-237 , enacted in 1989). The allowance of $250 or a prorated sum (eventually increased to minimum wage or $625, whichever is higher, by P.L. 95-202 , enacted in 1977) was paid based on the agreement of a veteran to perform 100 hours of work in a term (eventually increased to a number of hours equal to 25 times the number of weeks in the term by P.L. 101-237 , enacted in 1989). Eligible work was VA outreach services, preparation and processing of paperwork at the educational institution or VA, medical care, or other activities approved by the VA. Preference was given to veterans with greater than 30% disability. Participation and Cost In the end, the Post-Korea and Vietnam Era GI Bill provided education and training to almost 1.4 million individuals who were servicemembers during the Post-Korean Conflict era and almost 6.8 million individuals who were servicemembers during the Vietnam era ( Table B -1 ). In total, about 60% of individuals eligible for benefits under the program took advantage of the program. By the end of FY1990, cumulative program expenditures exceeded $41.5 billion ($72.1 billion in 2008 inflation adjusted dollars) or $5,089 per participant ($8,836 per participant in 2008 inflation adjusted dollars). Appendix D. Veterans and Dependents Education Loan Program The Veterans and Dependents Education Loan Program was established by the Vietnam Era Veterans' Readjustment Assistance Act of 1974 (P.L. 93-508) in Chapter 36 of Title 38 U.S.C. to provide additional support to veterans attending high-cost institutions. Veterans who served on active duty after January 31, 1955, and before January 1, 1977 (later modified to active duty after January 31, 1955, by P.L. 94-502 , enacted in 1976), and their spouses, widows, and children were eligible to borrow. Eligible individuals also had to be enrolled at least half-time in a program of education leading to a standard college degree or a six-month non-college degree. Loans were not eligible for correspondence courses or apprentice and on-the-job training. Veterans who were full-time students were allowed loans for another two years of their remaining dollars of entitlement once the VEAP entitlement period ended. Repayment began nine months after enrollment dropped below half-time and was completed within 10 years. The loans were up to $600 (eventually increased to $2,500 by P.L. 95-202, enacted in 1977) annually for education expenses. They were expected to cover the difference between the cost of attendance and the individual's reasonable financial resources. There were several problems with the program's administration. The majority of loans were initially made to individuals at no- or low-cost institutions until P.L. 95-476 specified high-cost institutions. The loans were made without regard to other financial assistance such as Department of Education student financial assistance programs. The financial needs of 99% of recipients could have been covered through Department of Education student financial assistance programs. The default rate increased from 44% as of December 31, 1997, to 65% as of September 30, 1980. It also cost the VA 70 times more to administer the program than the Department of Education. P.L. 97-35 repealed the VA education loan program as of September 30, 1981, with some exceptions. , | The U.S. Department of Veterans Affairs (VA), previously named the Veterans Administration, has been providing veterans educational assistance (GI Bill®) benefits since 1944. The benefits have been intended, at various times, to compensate for compulsory service, encourage voluntary service, avoid unemployment, provide equitable benefits to all who served, and promote military retention. In general, the benefits provide grant aid to eligible individuals enrolled in approved educational and training programs. Since three of the GI Bills have overlapping eligibility requirements and the United States is expected to wind down involvement in active conflicts, Congress may consider phasing out one or more of the overlapping programs. This report describes the GI Bills enacted prior to 2008. Although participation in some programs has ended or is declining, the programs' evolution and provisions inform current policy. The Post-9/11 GI Bill (Title 38 U.S.C., Chapter 33), enacted in 2008, is described in CRS Report R42755, The Post-9/11 Veterans' Educational Assistance Act of 2008 (Post-9/11 GI Bill): A Primer. This report provides a description of the eligibility requirements, eligible programs of education, benefit availability, and benefits. The report also provides some summary statistics, comparisons between the programs (see Table 2), and brief discussions of related programs. Individuals currently participate in five GI Bills enacted prior to 2008: The most popular program prior to the Post-9/11 GI Bill was the Montgomery GI Bill-Active Duty (MGIB-AD), which provides a monthly allowance primarily to veterans and servicemembers who enter active duty after June 30, 1985. The Montgomery GI Bill-Selected Reserve (MGIB-SR) provides a lower monthly allowance than the MGIB-AD to reservists who enlist, re-enlist, or extend an enlistment after June 30, 1985. The Reserves Educational Assistance Program (REAP), which will discontinue paying benefits in 2019, provides a monthly allowance that is higher than the MGIB-SR but lower than the MGIB-AD to reservists with active duty service. The program with the fewest individuals receiving benefits is the Post-Vietnam Era Veterans' Educational Assistance Program (VEAP), which provides a monthly allowance to veterans who first entered active duty service on or after January 1, 1977, and before July 1, 1985. The dependents of individuals with military service may be eligible for the Survivors' and Dependents' Educational Assistance (DEA) program, which provides benefits to the spouse and children of servicemembers who, as a result of service, are seriously disabled, die, or are detained. Other educational support is available to veterans using these benefits. Participants may also request academic and vocational counseling before and while using their GI Bill benefits. Participants on a growing number of pilot campuses have access to the VetSuccess on Campus program, which provides on-campus counseling and referral services. In addition to counseling support, some participants may participate in the Veterans Work Study Program to receive additional financial assistance in exchange for work while attending school. |
Islamic finance is based on shariah , an Arabic term that often is translated to "Islamic law." Shariah provides guidelines for aspects of Muslim life, including religion, politics, economics, banking, business, and law. Shariah -compliant financing (SCF) constitutes financial practices that conform to Islamic law. SCF institutions are similar to conventional financial intermediaries in that they are profit-maximizing institutions and offer traditional banking services, but differ in some of the principles under which they operate. Research from the International Monetary Fund (IMF) indicates that Islamic banking appears to be a complement to conventional banks, rather than a substitute. Major principles of shariah that are applicable to finance and that differ from conventional finance are: Ban on interest ( riba ): In conventional forms of finance, a distinction is made between acceptable interest and usurious interest (i.e., excessive rates of interest). In contrast, under Islamic law, interest is considered to be usurious and is prohibited. Some question how lenders profit from financial transactions under Islamic law. For instance, in a real estate setting, SCF takes the form of leasing, as opposed to loans. Instead of loaning money to a prospective purchaser, the bank obtains the property and leases it to the shariah -compliant investor, who pays rent instead of interest. Ban on uncertainty: Uncertainty in contractual terms and conditions is prohibited, unless all of the terms and conditions of the risk are clearly understood by all parties to a financial transaction. Risk-sharing and profit-sharing: Parties involved in a financial transaction must share both the associated risks and profits. Earnings of profits or returns from assets are permitted so long as the business risks are shared by the lender and borrower. Ethical investments that enhance society: Investment in industries that are prohibited by the Qur ' an , such as alcohol, pornography, gambling, and pork-based products, is discouraged. Asset-backing: Each financial transaction must be tied to a "tangible, identifiable underlying asset," such as real estate or commodities. Under shariah , money is not considered an asset class because it is not tangible and thus, may not earn a return. Financial institutions seeking to offer shariah -compliant products typically have a shariah supervisory board (or at a minimum, a shariah counselor). The shariah board is to review and approve financial practices and activities for compliance with Islamic principles. Such expertise raises the attractiveness of shariah -compliant financial intermediaries to investors considering Islamic banking. International institutions have been established to promote international consistency in Islamic finance. The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), founded in 1991 and located in Bahrain, issues international standards on accounting, auditing, and corporate governance. It has 200 members from 45 countries; its membership includes central banks, Islamic financial institutions, and other bodies in the Islamic banking and finance industry. Another regulatory body is the Islamic Financial Services Boards (IFSB), which began operations in 2003 and is based in Malaysia. IFSB puts forth standards for supervision and regulation. Many leading Islamic financial centers around the world have adopted international SCF regulation standards. U.S. federal banking regulators have provided some formal guidance about Islamic products. The Office of the Comptroller of the Currency (OCC) issued two directives concerning shariah -compliant mortgage products. In 1997, the OCC issued guidance about ijara ("lease"), a financial structure in which the financial intermediary purchases and subsequently leases an asset to a consumer for a fee. In 1999, the OCC recognized murabaha ("cost-plus"), under which the financial intermediary buys an asset for a customer with the understanding that the customer will buy the asset back for a higher fee. Standardization of Islamic finance regulations has been of increasing interest in the industry. Shariah is open to interpretation and Islamic scholars are not in complete agreement regarding what constitutes SCF. Islamic finance laws and regulatory practices vary across countries. The lack of concurrent viewpoints makes it difficult to standardize Islamic financing. Standardization also may be challenging because the maturity of Islamic finance markets varies from country to country, with some markets well-established and others that are more nascent. Without standardization, some industry officials express concern that shariah -compliance risk may grow. The lack of standardization across Islamic finance markets raises legal uncertainty that a contract will not be recognized as valid under Islamic law by all Islamic scholars. This uncertainty has been highlighted by a recent dispute between Lebanon's Blom Bank and Kuwait's Islamic firm Investment Dar over whether or not a contract between the two entities was compliant with Islamic principles and if payment should be made. Many observers view standardization of SCF regulations as important in increasing the marketability and acceptance of Islamic products. Over the years, there have been numerous initiatives to improve regulatory practices. For example, in 2009, the IFSB published guiding principals on issues such as governance and capital adequacy requirements for various financial products. The AAOIFI is in the process of developing new standards in risk management and corporate governance. Estimates vary of the size and growth rates of assets held internationally under Islamic finance, but suggest that Islamic finance is a rapidly growing industry. While it represents a small proportion of the global finance market (estimated at 1%-5% of global share), the Islamic finance industry has experienced double-digit rates of growth annually in recent years (estimated at 10%-20% annual growth). Industry experts estimate that assets held under Islamic finance management doubled between 2007 and 2010 to reach around $1 trillion. A survey of the top 500 Islamic financial institutions shows that shariah -compliant assets in these institutions rose from $822 billion in 2009 to $895 billion in 2010. In 2010, 18 new banks offering SCF entered the market and six conventional banks started providing SCF via "Islamic finance windows." Internationally, Islamic banks appear to have been more resilient to the primary effects of the global economic turndown and international financial crisis than conventional banks. They tend to avoid the speculative investments, such as derivatives, that many analysts believe led to the financial crisis affecting conventional banks. For some observers, Islamic finance serves as a vehicle for recovering from the international financial crisis. The Islamic banking industry may be able to strengthen its position in the international market as investors and companies seek alternate sources of financing. However, as Islamic banks operate within a global financial system, they have not been completely insulated from the recent economic and financial shocks. For instance, on the one hand, the Islamic financial industry is considered by many to be less risky because financial transactions are backed by physical assets. On the other hand, Islamic banks may be more vulnerable to fluctuations in the mortgage market, given their high activity in the real estate sector compared to conventional banks. The recent slowdown in real estate activity in the Gulf economies raises concerns about some Islamic banks' financial positions. Modern Islamic finance has existed since the 1970s. Traditionally concentrated in Muslim-majority countries in the Middle East and Asia, in recent years, Islamic finance has expanded to other countries with smaller Muslim populations. The geographical expansion of Islamic finance can be attributed to a number of factors. Muslims represent about a quarter of the world's population, and there is greater awareness of and demand for Islamic-based financial products by Muslim consumers. Among non-Muslim businesses and investors, there also is growing interest in Islamic finance. Some consider the principles of Islamic finance to be prudent and risk-mitigating, while others are looking to diversify their portfolios or to raise new sources of capital. In the traditional centers of Islamic finance in the Middle East and Asia, Islamic finance activities may be accelerating due to growing oil liquidity and the need for investment in development projects. Countries without large Muslim populations also may be interested in Islamic finance in order to attract new sources of capital or to facilitate trade and investment with Muslim-majority countries. The Middle East continues to be the primary geographic center for shariah -compliant financing. By some estimates, Iran accounts for about 40% of total global assets in Islamic finance. However, according to some analysts, the reach of Iran's Islamic finance market may be limited because of international sanctions. Elsewhere in the Middle East, major Islamic finance markets are Bahrain, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates (UAE). More recently, Asia has emerged as the second-largest hub for Islamic finance. Malaysia, a regional leader in Islamic finance, boasts more than half of the global share of Islamic capital market securities. In recent years, Islamic finance has become an increasingly visible form of banking in other parts of the world. Outside of the Middle East and Asia, the United Kingdom, which has a sizeable Muslim population, often is viewed as the largest Islamic financial center. In August 2004, the United Kingdom's Financial Services Authority (FSA) approved a banking license for the Islamic Bank of Britain (IBB), the country's first Islamic bank to serve the consumer market with shariah -compliant products. In March 2006, the FSA licensed the European Islamic Investment Bank as the United Kingdom's first independent bank for shariah -compliant investments. Other countries that have made inroads into Islamic finance in recent years include sub-Saharan African countries, Indonesia, and Thailand. A number of countries are revising their tax, legal, and regulatory frameworks to attract Islamic finance. For example, several countries that want to foster an Islamic financial market are working to address issues in the taxation of Islamic products. The goal is "to create a level playing field with the tax treatment of equivalent conventional products." European countries working to amend their laws to allow or attract Islamic finance include France and Ireland. Countries in Asia that are doing so include Japan, South Korea, Hong Kong, Singapore, and Thailand. Australia also is engaged in such efforts. From a few Islamic financial institutions and banks in the mid-1970s, there are now hundreds operating in over 40 countries around the world. In some countries, such as Iran and Pakistan, Islamic banks are the only mainstream financial institutions. In others, SCF exists alongside conventional banking. Several international banks that offer conventional financial products, such as HSBC, Deutsche Bank, JPMorgan, and Standard Chartered Bank, have opened "Islamic windows" through which they offer shariah -compliant financial products as well. Islamic finance instruments can be used to manage a range of financial activities, such as credit, savings, investment, and trade. While Islamic banking has gained the most traction in real estate, leasing, and commodities, it has expanded into other areas as well. In the industry's early stages, a limited number of financial products were compliant with Islamic principles. Common Islamic finance instruments tend to be sales contracts, leasing, and asset-pooling partnership agreements. However, the past couple of decades have witnessed innovations in Islamic financial products. In 1999, the Dow Jones presented its first Islamic market index, which follows shariah -compliant stocks internationally. The Dow Jones maintains more than 100 indices in its Islamic series and is advised by an independent shariah supervisory board, which consists of five Islamic scholars from Bahrain, Malaysia, Saudi Arabia, Syria, and the United States. Islamic capital market securities, now a fast-growing segment of the Islamic finance industry, were first introduced in 2001 (discussed in the next section). Some practitioners have encouraged the Islamic finance industry to continue to innovate, especially in the area of risk management. For example, some say that the use of securitization and derivatives, if implemented with care, may help to reduce risk exposures of Islamic finance institutions and improve their credit ratings. However, the application of derivatives in Islamic finance is controversial because of speculation and uncertainty. In recent years, there have been consultations between scholars and industry professionals that have produced derivatives considered to be shariah -compliant. The growth in Islamic finance has fueled the need for professionals who are conversant with Islamic principles and financial products. According to some observers, there is a shortage of trained professionals who understand both Islamic and conventional finance. Some experts believe that this lack of professional expertise may curtail Islamic finance's growth. New courses, degree programs, and educational institutions that specialize in Islamic finance are being launched in the Middle East, Europe, and Asia to meet this demand. A key segment of the Islamic finance market is Islamic capital market securities or bonds, commonly referred to as sukuk . The global market for Islamic bonds is estimated to be upwards of $110 billion. In 2009, corporate issuances represented 64% of total new Islamic bonds issued, sovereign entities represented 21%, and quasi-sovereign entities represented 15%. Malaysia is the world's biggest sukuk market. It is the source of over 40% of global sukuk issuances. The next largest source is the UAE. Other major issuers of sukuk are Saudi Arabia, Bahrain, and Sudan. Most of the sukuk from Malaysia tends to be in the oil and gas sector, while most of the sukuk from Gulf countries is concentrated in real estate. In recent years, the Islamic bond market has expanded to other countries as well. Global issuance of sukuk increased more than five-fold from 2004 to 2007. Peaking in 2007 at around $35 billion (although higher according to some estimates), sales of new Islamic bonds dropped to about $15 billion in 2008 and rose to $20 billion in 2009 (see Figure 1 ). Sukuk issuance began slowing down in late 2008, partly due to the global economic turndown. The international sukuk market faced lower levels of liquidity, resulting from declines in oil prices and reduced confidence from investors. Global issuance of Islamic bonds also may have slowed due to concerns raised by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI, discussed above) about the shariah -compliance of some sukuks . In addition, in recent months, there have been several high-profile defaults of Islamic bonds. In May 2009, the Kuwait-based Islamic firm Investment Dar became the first company in the Gulf region to default on a major sukuk . Other sukuk defaults have included Kuwait's International Investment Group and the U.S. energy firm East Cameron. Despite current challenges, many analysts believe that the long-term viability of the Islamic bond market appears strong, owing to the growing popularity of Islamic financial products, increased government interest in Islamic finance, investment and financing needs of the Gulf countries, and financial institutions seeking greater diversification. In the United States, there is growing interest for Islamic finance and business opportunities for lenders. Some have suggested Islamic finance may be an attractive option for investors as conventional finance faces challenges from the U.S. subprime lending crisis and recession concerns. In the United States, shariah -compliant finance largely exists in personal home mortgages. Since its establishment in 2002, Guidance Residential (Reston, VA), an Islamic home finance company, has provided over $1.5 billion in shariah -compliant home financing in the United States. Other financial intermediaries that provide Islamic-based home mortgages include University Islamic Financial (Ann Arbor, MI), Devon Bank (Chicago, IL), and American Finance House Lariba (Pasadena, CA). HSBC is the only large commercial bank that offers U.S. Islamic finance, and is focused on New York. The Federal National Mortgage Association (Fannie Mae) and the Federal Home Mortgage Corporation (Freddie Mac) purchase shariah -compliant mortgage contracts from financial intermediaries, allowing providers to originate further mortgages. In 2007, Freddie Mac reportedly purchased more than $250 million in Islamic home loans, a small but notable fraction of the enterprise's $1.77 trillion in business activities. Other forms of shariah -compliant services are offered in the United States as well. For instance, Devon Bank and Zayan Finance offer SCF for commercial real estate. Shariah -compliant mutual funds are offered by intermediaries such as the Amana Mutual Funds Trust, Azzad Funds, and the Dow Jones Islamic Fund. International financial intermediaries also provide SCF in the United States. Muslim investors from the countries of the Gulf Cooperation Council (GCC) have sought to diversify their financial portfolios geographically and to invest their wealth in U.S. assets. For instance, the Bahrain-based Arcapita Bank has structured shariah -compliant transactions in private equity and real estate in the United States. U.S.-based companies also have taken advantage of alternative funding sources through Islamic financing abroad. For example, in November 2009, General Electric became the first major U.S. company to sell an Islamic bond. It sold a five-year, $500 million Islamic bond in order to attract international investors who want to invest according to Islamic principles. As Islamic finance activities grow in the United States, critics raise concerns about the related capital adequacy and system risks. Proponents of Islamic finance assert that the ban on risk-taking mitigates many concerns. Some also view the integration of ethics and values into finance as a positive development, especially in light of recent U.S. business corruption scandals. Many investors reportedly consider shariah -compliant finance to be more resilient to global economic and financial crises than conventional finance. However, others point out that Islamic financial markets are still tied to the world economy and are not completely sheltered from the ups and downs of international markets. The growth of Islamic finance in the United States may have implications for congressional oversight. Congress may be interested in evaluating the relationship between the current U.S. banking legal and regulatory framework and Islamic finance. Current U.S. laws and regulation may be broad enough to accommodate some aspects of Islamic finance. Others aspects of Islamic finance may pose some unique challenges to U.S. laws and regulations, such as applying rules created for conventional, interest-based products to Islamic products. There is debate about whether or not, or the extent to which, regulators should apply rules on conventional products to Islamic product counterparts. Some U.S. financial institutions express concerns about the possible ties of some Islamic institutions to terrorist finance networks. According to this viewpoint, there is the possibility that Islamic banking transactions may channel funds to terrorists or enable terrorists to access funds. Others assert that the risks of Islamic finance are not significantly greater or different than those from conventional finance and that the majority of recent terrorist financing cases related to SCF have been thrown out of court. In congressional testimony, one observer stated "there is no reason—in theory—to suspect that Islamic finance would be particularly immune or particularly vulnerable to abuse by money launderers or terrorist financiers." Some proponents also assert that security-related concerns about Islamic finance stem from a lack of understanding of SCF or from stereotyping. There may be a "conflation" of Islamic finance with hawala , an informal trust-based money transfer system prominent in the Middle East and many Muslim countries. Hawala transactions are based on an honor system, with no promissory instruments exchanged between the parties and no records of the transactions. Some analysts consider the hawala system particularly susceptible to terrorist financing. | Islamic finance is based on principles of shariah, or "Islamic law." Major financial principles of shariah are a ban on interest, a ban on contractual uncertainty, adherence to risk-sharing and profit-sharing, promotion of ethical investments that enhance society, and asset-backing. While the Islamic finance industry represents a fraction of the global finance market, it has grown at double-digit rates in recent years. By some estimates, total assets held globally under Islamic finance reached $1 trillion in 2010. Islamic banks have appeared to be more resilient than conventional banks to the immediate effects of the international financial crisis and global economic downturn. Some analysts have attributed this to Islamic banks' avoidance of speculative activities. However, the Islamic finance industry has not been completely immune to the general decline in demand and investor uncertainty. Global issuance of Islamic capital market securities (sukuk), a fast-growing segment of the Islamic finance industry, peaked in 2007 at $35 billion, declined to $15 billion in 2008 and then rose to $20 billion in 2009. Islamic finance historically has been concentrated in Muslim-majority countries of the Middle East and Asia, but has expanded globally to countries with smaller Muslim populations. A number of European and other countries are working to reform their tax, legal, and regulatory frameworks to attract Islamic investments. There is a small but growing market for Islamic finance in the United States. Through international and domestic regulatory bodies, there have been efforts to standardize regulations in Islamic finance across different countries and financial institutions, although challenges remain. Critics of Islamic finance express concerns about possible ties between Islamic finance and political agendas or terrorist financing and the use of Islamic finance to circumvent U.S. economic sanctions. Supporters argue that Islamic finance presents significant new business opportunities and provides alternate methods for capital formation and economic development. |
Vaccines are biologics -- their basic components begin as living material -- that introduce"weakened or killed disease-causing bacteria, viruses, their components" (1) (such as proteins, recombinantproteins, or polysaccharides) or toxoids into a person or animal to stimulate an immune reaction thatthe body will remember if exposed to the same pathogen in the future. Most vaccines are given byinjection. Although many people use the words vaccination , immunization , and inoculation interchangeably, the terms are not technically synonymous. Vaccination is "the physical act ofadministering any vaccine ..." and immunization is a "more inclusive term denoting the process ofinducing or providing immunity artificially by administering an immunobiologic." (2) Inoculation also involvesintroducing a microorganism but not necessarily intentionally; the term vaccination was coined tomean intentional inoculation with the vaccinia virus that causes cowpox to provoke an immuneresponse to protect against the smallpox virus. The U.S. Food and Drug Administration (FDA) licenses 46 vaccines, covering 20 diseases,now available for public use in the United States. (3) Dozens more are in active development; research teams worldwideare working to develop vaccines against tuberculosis, malaria, HIV/AIDS, Alzheimer's disease, somecancers, and other diseases of which most Americans have never heard. The National ImmunizationProgram, part of the U.S. Centers for Disease Control and Prevention (CDC) and its AdvisoryCommittee on Immunization Practices (ACIP), issues recommended immunization schedules forchildren, adolescents, and adults in the United States. (4) FDA procedures to approve a biologic for marketing in the United States follow the samebasic format as the procedures for new drug approvals. (5) Animal testing is extensive, including the safety assessment of theviruses grown in animal or human cells. After satisfactory animal safety testing, clinical trials inhumans begin. Phase I clinical trials, which include a small number of human volunteers, test for safety. The sponsor continues with Phase II and Phase III trials to gather evidence of the biologic'seffectiveness in larger groups of individuals, while continuing to monitor safety data. If the productremains feasible, the sponsor, based on data collected in the clinical trials, submits two licenseapplications to FDA: a product license for the vaccine and an establishment license for themanufacturing plant. FDA scientists review the clinical data, along with the proposed labeling and manufacturingprotocols; inspect the manufacturing facility to assess whether it can produce a consistent product;and performs test on the vaccine and its components. Advisory committees, made up of expertsfrom outside of FDA, also review the data, are available for consultation, and makerecommendations to FDA regarding approval. Because contamination is a greater threat with vaccines than with drugs because they aremade from living organizations, FDA maintains an active presence even after a vaccine is approved. It requires extensive testing of vaccines and all ingredients (e.g., diluents, preservatives, oradjuvants) for characteristics including identity, purity, and potency. FDA continues to assess theproduction process, too, including samples of each lot and data regarding purity and potency. Finally, because even large clinical trials can identify only common potential adverse effects,FDA maintains postmarketing surveillance programs and sometimes works with a manufacturer inPhase IV studies of long term safety and effectiveness. Many groups have a stake in vaccine-related issues, including the government entitiesresponsible for research and development, licensing, post-licensing surveillance of adverse reactions,provision of health care, protection of the population, interstate and international trade, intellectualproperty protections, and homeland security. There is no central authority for vaccine policy within the federal government. In theDepartment of Health and Human Services (HHS), the National Vaccine Program Office (NVPO)coordinates vaccine-related activities and the FDA is responsible for the regulation of humanvaccines and other biologics. (6) The National Institutes of Health (NIH) conducts intramuralvaccine research and development and funds research in universities, for example. CDC, chargedwith protecting the health and safety of the population, houses the National Immunization Program(NIP) and its ACIP, which work to coordinate nationwide activities, including the Vaccines forChildren (VFC) program and the state immunization grants program. (7) CDC also maintains theStrategic National Stockpile (SNS), which includes some vaccines against bioterror agents. TheNational Vaccine Injury Compensation Program (VICP), which is jointly administered by the HealthResources and Services Administration (HRSA), where it is located, and the U.S. Court of FederalClaims and the U.S. Department of Justice, "provides compensation for injuries judged to have beencaused by certain vaccines." (8) Also administered from HRSA is the Smallpox Vaccine InjuryCompensation Program, set up in 2003. (9) Vaccine responsibilities lie outside of HHS as well. The Department of Defense (DOD)maintains research and development programs for vaccines against both naturally occurringinfectious diseases and bioweapons. DOD administers routine and deployment-related vaccines tomilitary personnel and some civilian employees and contractors. As a primary health care provider,DOD also administers vaccines as necessary to its retirees and current personnel and their families. The Department of Veterans Affairs administers vaccines to U.S. veterans who seek care in itsfacilities. The U.S. Agency for International Development (USAID) supports routine immunizationprograms in developing countries and works to reduce the impact of vaccine-preventable diseaseworldwide. State and local governments conduct vaccine activities within their public health role,such as conducting vaccine clinics, maintaining immunization registries, and establishingimmunization requirements for school attendance. Veterinary biologics are regulated by the U.S.Department of Agriculture, Animal and Plant Health Inspection Service, under authority of theVirus, Serum and Toxin Act. These products must meet similar standards of safety, efficacy, purityand potency as do human products. Interested parties outside government include individuals and private entities, both for-profitand not-for-profit, such as current and potential vaccine recipients and their families, employersoffering health care benefits, insurers, traditional vaccine manufacturers, biotechnology firms, tradeassociations such as the Pharmaceutical Research and Manufacturers of America, academicbiomedical researchers, economists, trial lawyers, health care professionals and institutions, andpatient and disease-specific advocacy groups. Concerned about bioterrorist attacks in the United States, the 107th Congress approvedseveral bills that included vaccine-related issues: The USA PATRIOT Act ( P.L. 107-56 ) includes a sense-of-Congress statement expressingthe need to provide funding for bioterrorism preparedness and response (Section 1013); the NationalDefense Authorization Act for Fiscal Year 2002 ( P.L. 107-107 ) directs the Secretary of Defense toaccelerate research, development, and production of items such as vaccines for defense againstbiological agents used as weapons, and includes authorization to build a government-ownedcontractor-operated vaccine production facility (Section 1044). The Public Health Security andBioterrorism Preparedness and Response Act of 2002 ( P.L. 107-188 ) directs the HHS Secretary toundertake specific activities with regard to national stockpiles of drugs and vaccines and theaccelerated approval of high-priority countermeasures (Sections 121-126). The Homeland Security Act (HSA) of 2002 ( P.L. 107-296 ) protects manufacturers and healthcare workers who administer the smallpox vaccine from tort liability and restricts that liabilityassumed by the United States to negligence of those parties (Section 304). Other sections of theHSA of 2002 that related to vaccines have since been repealed. (10) , (11) The 108th Congress passed some vaccine-related legislation. The Smallpox EmergencyPersonnel Protection Act of 2003 ( P.L. 108-20 ) created a mechanism to compensate individuals who,in response to a Secretarial request for smallpox vaccine preparedness, are injured by the vacciniavirus used in smallpox vaccines. Vaccinees and their contacts are eligible for medical care expensereimbursement, lost income benefit, and death benefits, administered through the HHS HealthResources and Services Administration. (12) Other enacted laws that include references to vaccine coverageor funding are the Consolidated Appropriations Resolution, 2003 (108-7); the United StatesLeadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 ( P.L. 108-25 ); the NationalDefense Authorization Act for Fiscal Year 2004 ( P.L. 108-136 ); the Medicare Prescription Drug,Improvement, and Modernization Act ( P.L. 108-173 ); and the Consolidated AppropriationsResolution, 2004 ( P.L. 108-199 ). Dozens of bills relating to vaccine research, purchase, and coverage were introduced in the108th Congress. The Improved Vaccine Affordability and Availability Act ( S. 754 ),introduced by Senate Majority Leader Frist, received the most attention, but scheduled markups ofthe bill were postponed several times in spring 2003. The bill would "amend the Public HealthService Act to improve immunization rates by increasing the distribution of vaccines and improvingand clarifying the vaccine injury compensation program...." In fall 2004, in response to the suddenshortage of influenza vaccine, additional bills were introduced and several hearings were held. (13) In its final three sections, this report organizes the range of legislative issues pertaining tovaccines that Members of Congress may consider into three groups: availability, safety and effectiveness, and access. Cost -- of research, development, production, regulation and oversight, for example -- underlies eachof these concerns. Thirty-seven American companies made vaccines in 1967; in October 2004, there werenine. (14) Why? Reasonsgiven are mostly economic. The road to a shot in the arm can take decades of research anddevelopment and, according to industry estimates, about $800 million per licensed vaccine, (15) requiring great financialreserves to sustain a company through the research and development and clinical trial process. Oncea vaccine is licensed, its continued production remains complex, as the 2004-2005 flu vaccineshortage in the United States illustrates. Production Costs. Because vaccines arebiologics, even routine manufacture involves care, expertise, and expense much beyond that requiredfor pharmaceuticals. To produce a drug, the manufacturer essentially repeats a chemical formula. Vaccines require dedicated production facilities that include physical and chemical barriers to protectworkers from pathogen exposure and finely regulated temperature and ventilation to keep thebiologics viable while stored. Also, because the product is injected, the purity standard has to bemuch higher than for a pill. Although FDA inspects both drug- and vaccine-production facilities,it inspects every lot of vaccine produced and only a sample of drug production lots. (16) For example, manufacturers ceased production of licensed vaccines against plague becauseof manufacturing difficulties, and against adenovirus infection because of contract cost issues. Torestart production, these or other manufacturers must submit new license applications to FDA,conform to current good manufacturing practice standards, and demonstrate the safety andeffectiveness of the new vaccines -- all before they can make the vaccine available to the public. Production Failures. In October 2004, when theU.S. manufacturer Chiron announced that the British drug regulatory authorities had shut itsLiverpool plant, the United States was instantly plunged into a flu vaccine shortage. Chiron wasslated to supply approximately half of the vaccine for U.S. use in the 2004-2005 flu season. TheBritish agency -- and then with FDA concurrence -- found some bacterial contamination andmanufacturing practices that could not assure the safety of the rest of the vaccine production. (17) Liability. Why go to the trouble for a product thatdoes not promise the sales volume common to pharmaceuticals -- particularly when manufacturersmay be liable if vaccines cause injury? The huge claims for compensation that followed the swineflu immunization program in the mid-1970s have made the vaccine industry wary. Manufacturerexecutives recall, for example, discussions of unindemnified liability in their decisions to declineplans to produce anthrax or Lyme disease vaccines. Market. For some diseases, scientists know howto produce protective vaccines but manufacturers have chosen not to pursue the time-consuming andexpensive steps necessary to obtain FDA approval. For some, there is insufficient market size in theUnited States to warrant the effort. An example is the tick-borne encephalitis vaccine that DODadministered to troops in Bosnia during the 1990s. Although licensed in Europe where thedisease-carrying ticks are more widespread, the vaccine is not FDA-licensed. To get FDA approvalrequires U.S. clinical trials for safety. Neither the interested manufacturer nor DOD has been willingto bear the expense of those trials. (18) Malaria, tuberculosis, and HIV/AIDS kill 7 million and sicken 400 million worldwide eachyear. (19) Yet, aside fromHIV, manufacturers have little incentive to develop vaccines because U.S. incidence is low,involving mostly travelers or immigrants and their contacts, and preventive and treatmentmedications are readily available. In countries where vaccines could make a big difference, fewresources are available to support development or purchase. Interestingly, private benefactors havebeen stepping in to support public-good-focused research. The Bill and Melinda Gates Foundation,for example, gave $150 million to the Malaria Vaccine Initiative, which announced in October 2004initial findings that a malaria vaccine it is developing with industry was somewhat effective in youngchildren. (20) Planning. Finally, difficulties with planning canrender even licensed vaccines temporarily unavailable. In 2002, such problems created shortagesof licensed vaccines for eight of the 11 vaccine-preventable childhood diseases. (21) , (22) , (23) Aside from production set-backs, influenza vaccine poses a perennial challenge involvingchoice of vaccine components and amount to manufacture. Each year, public health authorities andmanufacturers analyze worldwide surveillance information to determine which flu virus strains arelikely to put humans at risk in the coming year. Sometimes, the viral strain that most threatens theU.S. public is not among those chosen for that year's vaccine, the situation in 2003 when vaccinedevelopers could not formulate a Fujian component in time for the season's distribution. (24) Because influenza changes slightly each year, healthy adults have partial immunity to newstrains; each year, the virus typically makes healthy people sick, but not too sick. Several times acentury, however, the virus changes enough that there is no partial immunity. This situation can leadto rapid worldwide spread of the virus, called an influenza pandemic, with severe illness and death,even in healthy people, and possible serious disruptions in services and social order. Some haveexpressed concern that the problems evident in the national response to the 2004-2005 flu vaccineshortage serve as a relevant drill -- and warning -- for pandemic preparedness. (25) Also a topic of international surveillance and planning is avian influenza ("bird flu") -- aninfluenza strain affecting poultry in Asia -- in anticipation of its possible joining with a viral strainthat infects humans. Rather than a unique circumstance, this international investigation is part ofthe intensive, ongoing process of animal and human (clinical and laboratory) surveillance, testing,and action that is public health practice. For example, CDC laboratories collaborate with the WorldHealth Organization in testing and describing avian viruses to help in developing a potentialvaccine. (26) Congress may consider at least four kinds of measures to enhance vaccine availability: financial incentives, public-private partnerships, improved coordination, and alternatives to safetyand effectiveness documentation. Financial Incentives. Most people in the UnitedStates now view protections against bioterrorism or biowarfare agents, such as vaccines, as in thepublic interest. Many also so categorize all vaccines, whether intended against naturally occurringor bioterror-related infectious diseases. The bottom line in persuading companies to producevaccines is largely one of opportunity cost: whether they can afford to put aside other potentiallylucrative projects to do so. Over the years, Members of Congress have proposed changes to the Internal Revenue Codeinvolving tax credits for certain vaccine research and distribution activities to effectively lower thecost to manufacturers. Another way to provide a financial incentive is to assure that a primarypurchaser is available to generate demand for the vaccine. When the government is the primarypurchaser, such as for anthrax or smallpox vaccines, it can develop contracts with manufacturers thataddress volume, liability protection, and long-term plans, for example, that make productionpractical. In his 2003 State of the Union speech, President George W. Bush proposed a federalinitiative, Project BioShield, to encourage private industry to develop medical countermeasures tobioterrorism threats. The Project BioShield Act of 2004 was signed into law in July 2004 ( P.L.108-276 ). (27) Liability. Because some manufacturers havenamed liability concerns among reasons to forgo vaccine production, legislative proposals haveaddressed indemnification, liability insurance, and injury compensation plans. Protection ofpotential manufacturers, seen as a necessary incentive to participation, was included in the HomelandSecurity Act of 2002 and the Smallpox Emergency Personnel Protection Act of 2003. The AmericanJobs Creation Act of 2004 (28) added the influenza vaccine to those that the National VaccineInjury Compensation Program covers. Partnerships. Some Members of Congress haveexpressed interest in industry consortia or public-private partnerships to accelerate vaccine researchand development and manufacture. This may involve considering issues of intellectual propertyprotection among collaborators and anti-trust law accommodations to allow private manufacturersto make joint decisions. Such partnerships have been recommended as ways to spread financial risk,thus making vaccines available for diseases that are prevalent among small or impoverished groups. Improved Coordination. Better coordinationamong federal regulators, private manufacturers, government scientists, and purchasers could avoidmany supply shortages, such as occurred with childhood vaccines in 2002. Coordination could alsoshorten the time between initial research and product licensure. Policy analysts look for mechanismsto streamline FDA administrative -- but not human safety and effectiveness assurance -- procedures. Some, including the Institute of Medicine (IOM), have suggested establishing a National VaccineAuthority. (29) Two otherIOM committees, in DOD-sponsored reports addressing naturally occurring infectious diseases (30) and biowarfareagents, (31) recommendedbetter coordination within the DOD vaccine acquisition programs and between DOD and otherentities, particularly HHS. These groups anticipate that a coordinated decision and budget authoritycould present a coherent front to private manufacturers and within government. After the 2002reports, DOD assigned vaccine acquisition responsibilities to a higher administrative level (32) and interagency agreementsand working groups have been formed. Cutting down on frustrations arising from getting differentanswers or timetables from different offices could make vaccine work more appealing to those inresearch and development and manufacture. While almost any change in research and development, production, monitoring, and saleswould involve FDA, some questions focus on FDA itself. These include the extent to which itsbudget limits the scope and timeliness of its activities. Some analysts suggest that FDA standardsare too high to be reasonably feasible. Sometimes all the necessary pieces of potential solutions exist, but without an organizingforce. For years, various representatives of HHS, DOD, and private manufacturers had met overcontracts to develop and produce vaccines to protect, for example, against smallpox and anthrax. The September and October 2001 attacks on the U.S. population quickly dissolved the stickingpoints. Political will -- and its ability to get all the right people and their checkbooks in the roomat the same time -- fueled action to acquire smallpox vaccine, both doses of previously made andlicensed product and contracts to develop new products. In the years since then, HHS has announcedcontracts to develop new vaccines against smallpox, plague, and tularemia; (33) and, with Project BioShieldfunding, a second-generation anthrax vaccine will be stored in the Strategic National Stockpile. (34) Ensuring Safety and Effectiveness May DelayAvailability. It takes a long time from the start of clinical trials to FDAlicensure. (35) Manyobservers consider much of that time as necessary to ensure that vaccines produced and sold are safeand effective. FDA has formal mechanisms to expedite the review process: fast-track drugdevelopment, priority review, and accelerated approval. Its "Animal Rule" and provisions under theProject BioShield Act of 2004 also support shorter time from idea to approved public use. (36) The Congress could assessthe extent to which the laws that direct HHS and DOD to facilitate or accelerate research anddevelopment and approval of bioterrorism countermeasures as well as needed vaccines for seriousconditions (37) aresucceeding and consider legislative ways to help those processes along. Fast-Track Mechanism. The Food and Drug Administration ModernizationAct of 1997 (FDAMA, P.L. 105-115 ) described a "Fast Track" mechanism whereby themanufacturer and FDA discuss development plans and strategies before the formal submission ofa Biologics License Application (BLA, for a vaccine application, for example) or a New DrugApplication (NDA, for a drug). The early interaction can help clarify goals and work throughobstacles that would delay approval decisions if they became evident only at BLA submission. (38) Accelerated Approval. For the treatment of a serious or life-threateningillness, FDA regulations allow "accelerated approval" of a biologic product that provides a"meaningful therapeutic benefit ... over existing treatments." The approval is based on clinical trialsthat, rather than using standard outcome measures such as survival or illness, use "a surrogateendpoint that is reasonably likely ... to predict clinical benefit." FDA usually requires postmarketingstudies of biologics approved this way. (39) Animal Rule. Scientists use clinical trials and field trials to test a vaccine'seffectiveness. Clinical trials designed to test vaccines for most infectious diseases usually involverandom assignment of individuals to groups -- members of one group are given the new vaccine andmembers of the other (the control group) are given a placebo or an existing licensed vaccine -- toassess whether the investigational vaccine would effectively prevent disease. When the diseaseunder study has no known treatment and has severe outcomes (including death), it is unethical tochallenge human research subjects, because if the vaccine is not effective, the subjects are irreparablyharmed. Field trials, in which scientists observe naturally occurring disease among vaccinated andunvaccinated groups, are not feasible for diseases that occur sporadically or would occur only in thecontext of bioterror or biowarfare action. For these reasons, researchers and regulators maysometimes need alternative models for demonstrating vaccine effectiveness. In 2002, FDA published its long-debated final Animal Efficacy Rule. The regulations applyonly "when adequate and well-controlled clinical studies in humans cannot be ethically conductedand field efficacy studies are not feasible." They allow submission of data from animal studies ofeffectiveness as evidence to support licensure applications of new drug and biological products thattarget "serious or life-threatening conditions" in humans. (40) It could apply, for example, to inhalational anthrax, for whichthere is no surrogate of immunity and no natural endemic disease. Although no vaccine has yet beenapproved under this rule, FDA used the rule for the first time in February 2003 to approve adrug. (41) Congress mayfollow the implementation of this rule and discuss alternative actions in its oversight of safety,effectiveness, and availability goals. Priority Review. Unlike Fast Track, Accelerated Approval, or Animal Ruleactivities, the Priority Review process begins only when a manufacturer officially submits a BLA(or an NDA). Priority Review, therefore, does not alter the steps taken in a drug's development ortesting for safety and effectiveness. It does, however, for products believed to address unmet needs,shorten the anticipated amount of time until approval decision from 10 months to 6 months. (42) Medical Countermeasures to Bioterrorism Attack. Although FDA, NIH,and DOD had been working on vaccines against potential bioterrorism or biowarfare agents, theevents of September and October 2001 infused the efforts with resources and political capital. Product development was supported with increased interaction among and within governmentagencies and with manufacturers, and consideration of fast track, accelerated approval, and animalefficacy mechanisms to bring products to review. The Project BioShield Act of 2004 allows theHHS Secretary (with directions regarding potential risk and benefit and required recordkeeping) toauthorize the emergency-use of products that do not have FDA approval in the event of potentialserious or life-threatening effects of a biological agent for which there is no approved product. Otherprovisions of the act address spending authority for medical countermeasure (such as vaccines)development and purchase. A pillar of U.S. policy on drugs and vaccines is the protection of the individuals who usethem. Vaccines cannot be marketed within the United States without a license from FDA; and FDAdoes not license a product until it is satisfied that the vaccine is safe and effective and that themanufacturing process can produce it. Congress may be called upon again to discuss issues of bothsafety and effectiveness. This could mean assessing how safe is safe . It will also mean definingeffectiveness: absolute or simply better than nothing or better than the available alternative? It canalso mean assessing effectiveness in terms of value-for-cost. Safety is assessed by the nature and frequency of adverse reactions attributable to vaccineuse. A vaccine need not be side-effect free for FDA licensure; the licensed smallpox vaccine carriesan estimate, based on data from its routine use 30 years ago, of one or two deaths per millionrecipients. Similarly, effectiveness does not mean that a vaccine must protect permanently orcompletely. Researchers attempt to assess efficacy , generally, with expensive and lengthy clinicaltrials that compare infection or illness rates in two groups, both exposed to the disease-causing agent,but with only one provided with the hypothesized vaccine protection. Effectiveness describes howthe product works in a real-world situation. For drugs, effectiveness is often lower than efficacybecause of interactions with other medications or health conditions of the patient, sufficient dose orduration of use not prescribed by the physician or followed by the patient, or use for a off-labelcondition that had not been tested. Because vaccines are administered by the clinician, some of theseconditions are not relevant. Effectiveness may, however, still be diminished by the health of thevaccinee and whether circumstances permit all shots in a required series to be given according toschedule. FDA and CDC monitor safety, in part, with their Vaccine Adverse Event Report System(VAERS), which assembles reports from parents, clinicians, and manufacturers of problems that maybe related to vaccination. Another FDA program, MedWatch, informs the public with clinicalinformation about safety issues involving vaccines and other medical products. These so-called passive surveillance systems rely on consumers and physicians to both recognize adverse events aspossibly vaccine-related and to follow through with reporting their concern to FDA. Such reportsare valuable aids to researchers looking for potential risks. The picture painted by the data, however,is incomplete. (43) Side-Effects. Some scientists, parents, andconsumer advocates raise concerns that U.S. vaccine policy, with its recommended 20 shots toinfants by age two, (44) endangers the children it aims to protect. They cite hypotheses that the vaccines or preservatives orpackaging might cause autism and other neurodevelopmental disorders. One focus has been onthimerosal, a mercury-containing preservative used in some vaccines. In this case, even though thescience is not definitive, (45) manufacturers have chosen to reformulate many vaccines sothimerosal is not used. An example of the government's interagency system to protect vaccine recipients involvesthe rotavirus vaccine that the CDC Advisory Committee on Immunization Practices had added tothe list of recommended infant vaccinations in 1998. During the year of mass use, VAERS flaggedreports of bowel obstruction soon after rotavirus vaccination; CDC recommended suspending thosevaccinations until it could study the apparent association. In October 1999, after scientific reviewof the data, the ACIP withdrew its earlier recommendation that the rotavirus vaccine be given toinfants. (46) Insufficient Knowledge and Inadequate RiskCommunication. Often, decisions of vaccine safety revolve around perceptions ofrisk, methodologic limits of risk assessment, and communication of what is known about risks. Scientists, clinicians, Members of Congress, and public policy analysts continue to face choices onrisk -- hypothetical and real -- that do not offer clear alternatives. These involve uncertainties, bothscientific and political, and, therefore, will reflect personal and communal values. Smallpoxvaccination policy, for example, must weigh risks and benefits whose balance may differ whenconsidered from the perspective of the nation or the perspective of the individual. Knowledge, therefore, is not an issue only for public policy. Some parents refuse pertussis(whooping cough) and measles vaccines for their children out of concern about vaccine safety. Insome of these cases, and in polio vaccine refusals (reportedly based on misinformation about sideeffects) in developing countries seeking to eliminate disease, (47) avoidable and potentiallyhorrible diseases still occur. How can anyone decide whether getting immunized is worth the risk? Implementation ofgovernment decisions concerning anthrax vaccination was hindered by concern about similarquestions of uncertainty. Some members of the U.S. armed forces balked at mandatory anthraxvaccination, raising questions of safety. In October 2004, DOD stopped its anthrax vaccinationprogram following a U.S. District Court for the District of Columbia injunction. The Court basedits action on its finding that FDA had not solicited public comment on its finding that the vaccinewas safe and effective for protection against inhalational anthrax. (48) Assessment of Competing Products. Comparisons of effectiveness among all available products and between a new product and othersalready on the market are possible. One could compare multiple single vaccines with variouscombined (polyvalent) products, or currently licensed smallpox vaccine with both the diluted formbeing tested and products now in the development pipeline. Industry and university researchers haveworked on some analyses of safety, effectiveness, and cost. Is there enough detail and rigor in thesecomparative studies? How can legislators assess the merits of the debate over side effects -- and aproper remedy for injury? Or ensure sound research about competing products? Or that the publicis better informed? Production of Generic Biologics. Vaccines havenot been prime candidates for generic production in part because of the technologic difficulties inmeasuring whether two products are equivalent. In fact, the Hatch-Waxman Act (The Drug PriceCompetition and Patent Term Restoration Act of 1984, P.L. 98-417 ) amendments to the FFDCA thatdeal with Abbreviated New Drug Applications were not matched with a provision for abbreviatedapplications for biologics licenses under the Public Health Service Act. Now, manufacturers andthe public are looking to newer biotechnology procedures as a possible route to lower medicalcosts. (49) Improving Post-Licensure Adverse-EventSurveillance. Congressional approval of the National Childhood Vaccine InjuryAct of 1986 ( P.L. 99-660 ) set into motion the VAERS activities in FDA and CDC for monitoringvaccine adverse events. Congress may choose to strengthen surveillance programs such as VAERS,address data coordination, and communicate surveillance analyses in ways that build trust amongconcerned parents and patient advocacy groups. When it comes to smallpox, Congress has acknowledged the need for the consistentdocumentation of vaccine administration and side effects along with coordination of the manyrelated federal, state, and local activities. (50) As the smallpox immunization program proceeds, Congress maywant to review the completeness of the surveillance program and the usefulness of its output. Education and Risk Communication. Websitesfor HHS offices, including CDC, the National Immunization Program, the Advisory Committee onImmunization Practices, and the National Vaccine Program Office, and others have hundreds of linksto consumer-oriented health information, addressing reasons to immunize, common misconceptions,safety, and even "evaluating immunization information on the Internet." (51) CDC and state healthdepartments also try to ensure that all health care providers are handing out the federally requestedVaccine Information Statements each time a vaccine is administered. (52) Despite such Internet efforts and others, government education programs are not reaching allwho should be immunized or who have reservations. Congress might consider additional approachesto public communication of risk and medical choices. Studies in Pharmacoepidemiology andPharmacoeconomics. Some legislators, in considering cost, would broaden theanalysis to include value-for-cost, arguing that if the government is going to consider paying fordrugs, it may as well pay for the most effective ones. Researchers are adapting the study design andstatistical methods of epidemiology and economics, along with those fields' traditional way offraming research questions, to questions regarding drugs and vaccines. Because declarations of comparative effectiveness could affect manufacturers' market shareand individuals' access to drugs and vaccines, the success of that activity could depend, in part, onall stakeholders' trusting in the unbiased and expert credentials of the entity analyzing and presentingthe comparisons. Some have suggested that the government, a public-private group, or a"quasi-governmental" institution perform this function. (53) Others may feel such analysis is too fraught with uncertainty forgovernment decisions and is best left to individual physicians. In its Medicare legislation, the 108th Congress directed the HHS Agency for HealthcareResearch and Quality (AHRQ) to "conduct and support research" dealing with "the outcomes,comparative clinical effectiveness, and appropriateness of health care items and services (includingprescription drugs)...." (54) How to fund these activities -- and to what extent -- remains atopic of debate. Compensation. For those times when safetyefforts have been unsuccessful, earlier Congresses have addressed compensation. Since its creationby Congress in 1986, the National Vaccine Injury Compensation Program (VICP) (55) has made many awards,primarily to families of children, following injuries deemed to have been associated withACIP-recommended vaccinations. For several years, sentiment has been growing in Congress thatmodifications to the program are needed to make it more fair and efficient. Senator Bill Fristproposed changes to VICP in his Improved Vaccine Affordability and Availability Act( S. 754 , introduced April 1, 2003); committee mark-up of the bill has been postponedindefinitely. (56) As the nation began to vaccinate certain military personnel and civilian health care workersagainst smallpox, some Members of Congress discussed proposals that would create non-tortmechanisms for smallpox vaccine injury compensation. On April 30, 2003, President Bush signedthe Smallpox Emergency Personnel Protection Act of 2003 ( P.L. 108-20 ), which the House andSenate had adapted from the Administration's proposal. It includes provisions to pay for smallpoxvaccine injury-related medical care, lost employment income under specified circumstances, anddeath benefits. HRSA published the required injury table in August 2003 (57) and the administrativeguidelines for the Smallpox Vaccine Injury Program in December 2003. (58) Because the perceivedurgency for smallpox vaccination diminished coincidentally with the compensation program'spassage, it remains theoretical to what extent the program would have succeeded in recruitingvolunteers. Successful development and production of a safe and effective vaccine does not ensure thateveryone who needs a vaccine gets it. People have to (1) know about it and believe it will benefitthem; (2) live near a health care provider willing to administer it; and (3) be able to afford the costof vaccination and follow-up care, if necessary. Vaccines fare better than prescription drugs in health benefits coverage in the United States. In 2002, 75% of U.S. children between 19 and 35 months old had completed the recommended seriesof vaccinations, not yet reaching the HHS Healthy People 2000 and 2010 objectives of 80%. Recommended adult immunization rates are even farther from HHS goals: 66% ofnon-institutionalized adults at least 65 years of age reported receiving a flu vaccine within the pastyear, far less than the HHS goal of 90% by 2010. (59) Also, there are regional and economic disparities in access toimmunization services. Reasons given for these problems include insufficient coordination ofvarying eligibility rules among private insurers and government vaccine programs; incompletedocumentation of immunizations achieved; and inadequate financing. (60) As federal and state agencies coordinated options and plans for smallpox vaccination,weaknesses in the U.S. public health infrastructure became apparent. These include the need forimprovements in technology, training, hospital and laboratory capacity, and communication amongparticipants. (61) In manydeveloping countries, inadequate public health infrastructure overshadows any question of access. Congress has gone beyond a domestic focus and showed legislative interest in the lack of access tovaccines in less developed areas around the world. Congress has the opportunity to touch on access to safe and effective vaccines in itsconsideration of prescription drug benefit bills and broader issues involving global health. Coordination of Government Financing Programs. Individual states and assorted federal programs work toward increasing childhood immunizationrates. To improve immunization rates among U.S. children as well as the financial efficiency of theefforts, legislative discussions could address difficulties of coordination among the publicly fundedvaccine programs, such as Medicaid, the State Children's Health Insurance Program, and Vaccinesfor Children. Adult immunization insurance coverage and government financing is less complete. Although Medicare covers the major, recommended vaccines for adults, such as influenza andpneumococcal infections, many younger adults have no coverage for these routinely recommendedvaccines. Congress may consider funding levels and financing strategies for vaccine-related care inthe United States. Payment for Vaccination and Follow-Up Care. In the context of medical countermeasures to bioterrorism attacks, such as the smallpox vaccine,Congress may consider questions about the payment for the vaccine administration and, then, forfollow-up and treatment, if necessary, of vaccine-related illness. As other vaccine countermeasuresare developed, Congress may need to consider who would have access to that continuum of medicalcare. (62) Global Health. Concerns about access to vaccinesare not limited to biodefense and domestic use. Many government agencies and private groups worktoward international health objectives, such as eradicating polio. Some Members noted concern forpublic health needs of developing countries worldwide and the need to assist those countries in fightsagainst infectious diseases. Their concern stemmed from both humanitarian impulses and a growingawareness of the links between poor health and economic and political instability. Their workresulted in P.L. 108-25 , the United States Leadership Against HIV/AIDS, Tuberculosis, and MalariaAct of 2003. Legislators may want to increase access to existing vaccines, spur the development ofaffordable new vaccines for which the technology already exists -- an issue of both availability andaccess, and consider increased long-term investment in vaccine development for these diseases. | This report's focus is on vaccination, one of the most cost-effective methods available toprevent infectious diseases. Whether a vaccine's target is naturally occurring or present because ofhostile intent, the issues policy makers must deal with include vaccine development, production,availability, safety, effectiveness, and access. Vaccines are biologics: their basic components beginas living material. They introduce bacteria or dead or weakened viruses into a person or animal tostimulate an immune reaction that the body will remember if assaulted by the same pathogen in thefuture. There is no central federal authority for vaccine policy. In the Department of Health andHuman Services (HHS), the National Vaccine Program Office (NVPO) coordinates vaccine-relatedactivities, and the Food and Drug Administration (FDA) is responsible for the regulation of vaccinesand other biologics. Also involved in vaccine activities are other components of HHS (e.g., theNational Institutes of Health, the Centers for Disease Control and Prevention, and the HealthResources and Services Administration), the Departments of Defense, Veterans Affairs, andHomeland Security, and the U.S. Agency for International Development. Concerned about bioterrorist attacks in the United States, the 107th Congress passed severalvaccine-related measures and the 108th Congress continued with legislative and oversight activitiesregarding the development and purchase of vaccines against possible bioterrorist attacks and dealingwith the sudden shortage of influenza vaccine at the outset of the 2004-2005 flu season. Obstacles to vaccine availability -- such as production costs, concern for liability expenses,weak markets, and difficulties in predicting need -- often have economic roots. As mechanisms toenhance availability, Congress may consider financial incentives, public-private partnerships,improved coordination, and alternatives to safety and effectiveness documentation. A pillar of U.S. policy on drugs and vaccines is the protection of the individuals who usethem. FDA does not license a product for sale in the United States until it is satisfied that thevaccine is safe and effective. Scientists, clinicians, Members of Congress, and the public must makedecisions of vaccine safety despite uncertainties and varying perceptions of risk. To ameliorate thedifficulties, Congress could address post-licensure adverse-event surveillance, education and riskcommunication, studies in pharmacoepidemiology and pharmacoeconomics, and improving availablemechanisms to compensate individuals injured by vaccinations. Successful development and production of safe and effective vaccines does not ensure thateveryone who needs a vaccine gets it. Congress may take up the coordination of governmentchildhood immunization programs and financing levels and strategies for vaccine-related care. Noting concern for health needs of developing countries, some Members seek to increase access toexisting vaccines and to spur development of affordable vaccines for global health threats. Thisreport will be updated as warranted. |
Through various acts of Congress, the public safety community is poised to develop a national, wireless, emergency communications capacity with unencumbered spectrum, a mechanism for planning, and funding. With the passage of the Deficit Reduction Act, Congress established an important milestone toward improving emergency communications by providing a date certain for the release of spectrum for new radio channels. Previously used for analog television broadcasting, 24 MHz of wireless capacity at 700 MHZ will become available to public safety in 2009. By requiring the Department of Homeland Security (DHS) to establish an Office of Emergency Communications, Congress has legislated the creation of a forum to reach agreement on an interoperable communications plan. Congress has not passed legislation, however, regarding how the soon-to-be-released spectrum should be used. There are currently three major initiatives to develop plans that could incorporate spectrum at 700 MHz in solutions for public safety communications to improve interoperability and resiliency. One initiative is Congress's mandate to DHS to bring together a diverse body of experts and develop a National Emergency Communications Plan that would rely, at least in part, on shared networks. Second, an initiative by the Administration to improve spectrum efficiency gives responsibility to the National Telecommunications and Information Administration (NTIA) to provide policy recommendations that include spectrum uses for homeland security and public safety. An Advisory Committee created by the NTIA is studying public safety tests of networks at 700 MHz. The Federal Communications Commission (FCC), which has jurisdiction over spectrum used by state and local public safety agencies, is pursuing its own initiative. It is seeking comment on a plan to use spectrum at 700 MHz assigned to public safety for a shared network that would operate under its regulatory supervision. The FCC's proposal includes many elements favored by a majority of public safety participants, but—by taking over the management of public safety radio channels at 700 MHz—it would apparently minimize the role of the Department of Homeland Security (DHS) in planning for interoperable communications. Some of the unresolved policy choices brought into focus by the FCC proposal are: Direction of national planning for emergency communications. Control of network operations. Joint management by agencies. Regulatory vs. legislative authority. Spectrum management. Congressional jurisdiction. Funding sources and distribution. The schedule set for rulemaking means that the FCC could move forward in the creation of an interoperable network as early as spring 2007. Congress may change the terms of the debate by setting its own timetable, objectives, and parameters for creating a national authority to manage a public safety network at 700 MHz. Options for Congress that have been suggested by public safety experts include requiring the Department of Homeland Security to expedite its own plans, requiring greater participation of the FCC in the DHS planning process, curtailing the right of the FCC to regulate network development for public safety, and turning over management of spectrum used for public safety to the NTIA. There are also other efforts and proposals, some of which are summarized in this report, that Congress may consider. Radio frequency spectrum is used for all forms of wireless communications. Spectrum licenses are allocated within bands of designated frequencies, divided into bandwidths, or channels. Licenses are assigned, as is the case for state and local public safety agencies, or auctioned to commercial entities. As new wireless tools are developed to help emergency responders, the demand for spectrum increases. Finding appropriate spectrum to carry these vital transmissions as well as finding ways to use spectrum more efficiently are among the policy decisions to be addressed as part of the national effort to develop a robust, interoperable, emergency communications capability. Pricing spectrum access for all users, or auctioning all spectrum and creating property rights, are market-driven methods for allocating spectrum that could maximize economically efficient use. In the case of public safety, however, demand may be inelastic and substitution difficult with the result that the cost to the public is increased without any compensating gains. The need for spectrum capacity among first responders and other emergency workers is variable. When radio communications are routine, public safety's demand for spectrum is modest. In times of crisis, demand for spectrum exceeds availability. Identifying spectrum that public safety can share—with commercial users for example—is also considered a possible means to use valuable spectrum more efficiently. Although, cumulatively, radio frequencies designated for non-federal public safety total over 90 MHz, the characteristics of these frequencies are dissimilar, requiring different technological solutions. Although the fragmentation of spectrum assignments for public safety has some advantages for voice communications, it is a significant barrier to achieving needed broadband capacity for the future. It is one of the technical problems that plague public safety communications, such as out-of-date equipment, proprietary solutions, network congestion, and interference among systems. Providing new spectrum at 700 MHz for broadband communications capabilities, including interoperable connectivity, is viewed by many as the optimal solution for overcoming problems caused by incompatible radio frequencies and technologies, as well as for enhancing communications capacity for public safety. Because 700 MHz is viewed as highly desirable for consumer-oriented applications, some believe that a means should be found for public safety and commercial users to share radio frequencies in this band. As noted above, the FCC has proposed the building of a network, accessible nationwide, that would require standardized interfaces. This model, which mirrors the organization of commercial wireless service in the United States, represents a significant departure from existing public safety radio operations. Like most public safety support services, radio communications have historically been built primarily for local operations, often with proprietary solutions that limit interoperability. With post-9/11 emphasis on improving interoperability, three technology-based solutions for nationwide interoperability have dominated policy making. These are: radios—pursued primarily through standard setting; gateways—supported through guidance from DHS and federal grants; and networks—recognized as a potential solution but not developed. One solution for achieving interoperability is to build it into the radios carried by first responders and other emergency workers, requiring standardized models that work on multiple systems. Radio standardization is part of a suite of standards being developed through an effort known as Project 25 (or P25). Project 25 is the accepted standard for radio interoperability. The radio-based solution to interoperability conforms to recommendations made in 1996 by the Public Safety Wireless Advisory Committee (PSWAC) regarding the improvement of public safety communications over wireless networks. P25 radios can be costly, from $600 to $1,000 for general purpose radios, and $3,000 for radios that meet standards for federal use. A second technology choice, also developed partly in response to recommendations made by PSWAC, are gateways—also known as bridges, or as cross-talk or cross-patch systems, among other terms. The gateway is a "black box" that can accept wireless transmissions on one frequency standard and resend them on other frequency standards. As a result, they are inefficient users of spectrum, since a single message is using two or more frequency assignments. Gateways can provide interfaces for modern systems but not for older, obsolete radios. Although gateways typically use Internet Protocol (IP) to connect to information technology systems, some components are proprietary and have limited interoperability with rival gateway solutions. Early gateway solutions were tested through the AGILE Program, created by the National Institute of Justice (NIJ). Project 25 members are working to complete a standard for public safety gateways, the Inter-Sub-System Interface (ISSI), that would enable full interoperability for future gateway solutions. Gateways have become the centerpiece of current efforts by DHS to achieve situational interoperability. Over the long term, DHS expects gateway solutions to evolve into a "standards-based shared system." Gateways range in price from $500,000 for basic capability into millions of dollars for a large, customized system. A third technology choice, considered but not adopted at the federal level, is a network solution. A network solution requires agreement from multiple jurisdictions to deploy compatible equipment and interfaces that can provide links anywhere in the network. A national network might be comprised of regional agreements grouping states that are working to develop networks that are available to local and tribal emergency workers. The technology exists to achieve interoperability through a network, what are lacking are a mechanism to achieve agreement and the leadership to set the mechanism in motion and guide it to resolution. The 9/11 Commission broached the subject of creating a network in its recommendation that high-risk urban areas "should establish signal corps units to ensure communications connectivity." Congress embraced the 9/11 Commission recommendation and instructed DHS to explore solutions modeled on the Army Signal Corps, using a national architecture, and compatible with commercial technologies. The DHS has been focused on the installation of gateways and developing interoperability "from the bottom up," and has not announced plans to use spectrum at 700 MHz to develop an interoperable network capability that could, over time, be extended through interfaces to existing systems. Reportedly, Jay Cohen, DHS Undersecretary for Science and Technology, has advocated the concept of a digital backbone to achieve interoperability. DHS Secretary Michael Chertoff has voiced support for an interoperable network at 700MHz if Congress decides to free up additional spectrum for that purpose; these are recent statements, however, and not part of a formal policy. Absent federal action for a network solution that would encompass state, local, and tribal public safety users, the private sector has responded, through comments filed with the FCC, with proposals to use 700 MHz spectrum to create the needed network for public safety. Some of the proposals would share network capacity with commercial users, offsetting the cost of building the network by charging fees for access. Although the cost for such a network is undetermined, the estimated cost for the federal Integrated Wireless Network was originally reported to be $10 billion. Some industry estimates have given a $1 billion to $2 billion range for the build-out of a commercial broadband network reaching the top 150 markets. A national network would cost more, but how much more would depend on many variables that should be resolved in the planning process. Building interoperability into a network reduces the cost for new radios, bringing the prices to public safety within the range of devices used by consumers on commercial networks. In part because of recent actions by the FCC, new attention is being paid by policy-makers to the potential of a network solution to provide interoperability for public safety. But this approach has not been pursued by DHS since its creation. Therefore, a new debate is underway on how to build a network for public safety interoperability without a comprehensive discussion among federal policymakers about the need for such a network. The following discussion provides an overview of key actions that might frame a national debate. This overview does not cover all the organizational and technological solutions that are being used or tested, or have been proposed. However, the following reflects the major considerations and breadth of the debate. The Homeland Security Appropriations Act, 2007 created an Office of Emergency Communications within DHS to lead a cooperative planning effort to create a "national response capability" for communications. A section of this law— P.L. 109-295 , Title VI , Subtitle D—the 21 st Century Emergency Communications Act of 2006—established an Office of Emergency Communications and the position of Director, reporting to the Assistant Secretary for Cybersecurity and Communications. The Director is required to take numerous steps to coordinate emergency communications planning, preparedness, and response, particularly at the state and regional level. These efforts are to include coordination with Regional Administrators appointed by the FEMA Administrator to head ten Regional Offices. Among the responsibilities of the Regional Administrators is "coordinating the establishment of effective regional operable and interoperable emergency communications capabilities." Among the key responsibilities assigned to the Director of Emergency Communications is to assist the Secretary for Homeland Security in carrying out the program responsibilities required by the Intelligence Reform and Terrorism Prevention Act in Sec. 7303 (a) (1) [6 U.S.C. 194 (a) (1)], in response to recommendations made by the 9/11 Commission. Other responsibilities of the Director include conducting outreach programs, providing technical assistance, coordinating regional working groups, promoting the development of standard operating procedures and best practices, establishing non-proprietary standards for interoperability, developing a National Emergency Communications Plan, working to assure operability and interoperability of communications systems for emergency response, and reviewing grants. Required elements of the National Emergency Communications Plan include an evaluation of the feasibility of developing a mobile communications capability modeled on the Army Signal Corps. General procedures are provided for coordination of emergency communication grants, and for a Regional Emergency Communications Coordination (RECC) Working Group. In requiring broad-based representation in the composition of the RECCs, Congress responded to requests from the public safety community to include the second tier of emergency workers in interoperable communications planning. Non-federal members of the RECC include first responders, state and local officials and emergency managers, and public safety answering points (911 call centers). Additionally, RECC working groups are to coordinate with a variety of communications providers (such as wireless carriers and cable operators), hospitals, utilities, emergency evacuation transit services, ambulance services, amateur radio operators, and others as appropriate. Beginning in 2003, President George W. Bush has issued several memoranda to establish and guide a national Spectrum Policy Initiative, led by the Secretary of the Department of Commerce. As required by the President, the Secretary submitted a plan to implement recommendations previously provided by the Federal Government Spectrum Task Force. The planning process is being guided by the NTIA, which has established seven projects dealing with aspects of spectrum policy, including to "satisfy public safety communications needs and ensure interoperability." One component of the response is to examine the feasibility of sharing spectrum among commercial, federal and local public safety, and critical infrastructure applications. In conjunction with the FCC, the NTIA is seeking to establish a test-bed of radio frequencies for shared use between federal and non-federal users. Another component of the public safety project is the evaluation of wireless technologies by a Spectrum Advisory Committee that the NTIA has created to assist in the development of the policy initiative. Reportedly, the committee will be studying existing public safety communications programs that might provide a model for a national system. One of these programs is the Wireless Accelerated Responder Network (WARN) currently being tested in Washington, D.C. WARN uses 700 MHz for a network that supports broadband communications in the Washington metropolitan area. The proponents of WARN advocate a "network of networks" to resolve the nation's need to assure emergency communications capacity and interoperability. In December 2005, the FCC submitted a report to Congress on spectrum needs for emergency response providers, as required by provisions in the Intelligence Reform and Terrorism Prevention Act ( P.L. 108-458 ). For the study, the FCC sought comment on whether additional spectrum should be made available for public safety, possibly from the 700 MHz band. Comments received from the public safety community overwhelmingly supported the need for additional spectrum, although other bands besides 700 MHz were also mentioned. The FCC did not make a specific recommendation for additional spectrum allocations in the short-term although it stated that it agreed that public safety "could make use of such an allocation in the long-term to provide broadband services." It qualified this statement by observing that spectrum is only one factor in assuring access to mobile broadband services for emergency response. It further announced that it would move expeditiously to determine whether the current band plan for the 24 MHz at 700 MHz currently designated for public safety could be modified to accommodate broadband applications. Subsequently, in March 2006, the FCC issued a request for proposals for a new band plan that would allocate spectrum for broadband use by first responders within the 24 MHz currently assigned for public safety. The same proposed rulemaking also asked for additional comment on the possible adaptation of a wireless broadband standard for interoperability. The FCC received over 1,000 responses by December 2006, with many comments from the public safety community and commercial wireless interests. One petition, from a company called Cyren Call Communications Corporation, received widespread publicity in the press and through lobbying to Congress. The petition requested the reallocation of 30 MHz (half of the 60MHz currently designated for auction for commercial use by the Deficit Reduction Act) to a "Public Safety Broadband Trust." According to the proposal, the trust would lease capacity not used by public safety to commercial operators that would provide the network infrastructure. The FCC denied Cyren Call's petition, citing, among other reasons, the Congressional mandate to auction the spectrum Cyren Call proposed to use. Other proposals for joint operations were also submitted. One proposal, developed by Access Spectrum and Pegasus Communications Corporation, suggested accommodating broadband wireless by rebanding the 24 MHz allocated to public safety and adding 3 MHz from existing guardband allocations, with some of the spectrum shared with commercial operators. Verizon Wireless reportedly proposed to build a broadband network for public safety use on half of the 24 MHz of spectrum assigned to public safety, using the other 12 MHz for mixed use, with the cost of building the infrastructure recovered through leasing arrangements and fees. In December 2006, the FCC issued a new Notice of Proposed Rulemaking (NPRM) that proposed to turn over management of the 24MHz of spectrum designated for public safety to a not-for-profit group. This group would, among other responsibilities, hold a national license that would support public safety with a broadband wireless backbone. In the NPRM, the FCC states that it is responding to "an opportunity to put in place a regulatory framework that would ensure the availability of effective spectrum in the 700 MHz band for interoperable, public safety use." To help develop these regulations, the FCC is presenting for comment a "plan that we believe may best promote the rapid deployment of a nationwide, interoperable broadband public safety network . . .[with] a centralized and national approach to maximize public safety access. . . ." The NPRM outlines seven points: (1) allocate 12 MHz from the 700 MHz band assigned to public safety for broadband use by state and local public safety members; (2) assign this 12 MHz of spectrum to a single licensee, nationwide; (3) permit this licensee to operate commercially on the remaining 12 MHz allotted to public safety with public safety having priority access when needed; (4) permit the licensee to provide public safety broadband access on a fee for service basis; (5) permit the licensee to provide unconditionally preemptible access to commercial operators; (6) facilitate the shared use of commercial mobile infrastructure; and (7) "establish performance requirements for interoperability, build out, preemptibility of commercial access, and system robustness." In the NPRM, the FCC states its case for how the proposal meets objectives for "public safety communications in the twenty-first century" and provides some information about the selection of a national licensee and the license-holder's obligations. The FCC proposes that the licensee should meet criteria such as not-for-profit status, experience with public safety frequency coordination, and the ability to directly represent all public safety interests. The licensee's responsibilities would include the design and implementation, build-out, and maintenance of a national network, the coordination of eligibility for access for public safety, and the leasing of capacity to commercial users. The licensee would be able to charge fees for the use of its services, such as access to the network, to both public safety and commercial users. In the NPRM, the FCC requests comments be filed no later than 45 days after publication in the Federal Register with reply comments due within 60 days after. Topics on which comment is requested regarding the National Public Safety Network are: Broadband Communications . How to "best implement a broadband network." System Architecture . "Should the national public safety licensee have the discretion to choose the best system architecture, or should the Commission establish system architecture requirements . . . ?" Nationwide Interoperability . The proposal requires that the licensee be required to construct a network that would provide interoperability for all devices operating on a national broadband public safety network. The FCC seeks comment on whether it should require IP-based standards for network access or whether it should require interoperable solutions that accommodate legacy systems. It seeks comment on other solutions and on the cost-benefit trade-offs of various interoperability requirements. Federal Access . Comment is sought on opening the network to federal users, including the Department of Defense. Network Build-Out . The FCC seeks comment on "appropriate" timing and scope and on several of its suggestions on how to move the build-out quickly and efficiently. Network Resiliency and Disaster Restoration . Comment is sought on what requirements the FCC might impose on the network for resiliency and disaster restoration and whether "robustness requirements be imposed on all public safety systems, not just the national public safety system." Local Needs . The FCC seeks comment on whether the national public safety licensee should permit local entities operational discretion—and how much—within the norms of the network. Definition of Public Safety . The FCC proposes to use the definition of public safety services provided in the Communications Act [47 U.S.C. § 337 (f)(1)] which states that providers are state or local government entities or authorized non-governmental organizations that do not make their services commercially available. This statutory requirement could influence the manner in which the FCC structures and awards the proposed national license. The NPRM also seeks comments on secondary operations by commercial users on the remaining 12 MHz of spectrum assigned by Congress for public safety use. Currently the FCC permits public safety licensees to lease spectrum assigned to them only for use by other public safety entities. The FCC uses the NPRM to propose exempting the new, national public safety licensee from limitations it imposes on existing public safety entities. The FCC plan is expected to be modified in response to public comment. Whatever the merits of the final plan, its approval by the majority of Commissioners would shift responsibility and jurisdiction away from federal departments to a not-for-profit entity regulated by the FCC. Under law, spectrum is considered a natural resource, owned by the federal government, and is assigned for use by others, but not sold. The building of a network on spectrum assigned to public safety is a significant policy decision affecting not only the daily safety of the public but also the security of the nation. Some of the administrative, regulatory, and legislative considerations that have been brought to the forefront by the FCC proposal are: Composition of and network operations control by the proposed not-for-profit entity . If the cost of building a network is offset by allowing commercial use, will the network operator show a preference for solutions that mesh with commercial interests or will it give priority to developing interfaces that support other federal and state programs for emergency communications? Non-commercial interoperable communications needs might, for example, extend to 911 call centers, emergency alert systems, border security, and to other emergency workers, often referred to as the "second tier." Joint management by agencies . The FCC and NTIA have a history of working together to develop and implement spectrum policy. What role, if any, would the NTIA, the Presidential Spectrum Initiative, and the Spectrum Advisory Council play in advising, directing or regulating the development and operation of any network? How would management of the 700 MHz network interface with FEMA, the Department of Homeland Security, the National Response Plan and other federal authorities with responsibilities for establishing and maintaining emergency communications? Regulatory and legislative actions . The FCC is using its regulatory authority over spectrum use to take action in an area (improvement to public safety communications) where Congress has assigned responsibility to DHS. Should Congress seek means to coordinate the FCC plan with planning efforts at DHS? Or take some other action to assign responsibility for planning and implementation? Spectrum management . What are the best policies to encourage efficient use of spectrum by public safety? Market-driven pricing has been proposed by the FCC, among others. If this is applied only to usage at 700 MHz, would it be effective policy to have a two-speed regulatory framework for public safety spectrum licenses, with one set of rules for 700 MHz and different rules for other spectrum holdings? Congressional jurisdiction . In the law that created the Office of Emergency Communications, Congress specified that, in reviewing interoperable emergency communications plans, the emergency communications director would exclude the review of spectrum allocation and management. Congress has yet to make decisions about jurisdiction for programs planned and funded by DHS that operate on spectrum managed by the FCC and the NTIA. Funding . Funding of $1 billion expressly for interoperable communications is mandated for 2007. This would be in the form of a distribution from the Digital Television Transition and Public Safety Fund created by the Deficit Reduction Act. According to language directing distributions from the fund, grants are to be spent for "the acquisition of, deployment of or training for the use of interoperable communications systems that utilize, or enable interoperability with communications systems that can utilize" spectrum at 700 MHz. New federal funding for interoperable communications is under consideration. Many propose that the cost of a new network built on public safety spectrum be funded with access fees from users. How will existing and planned federal funding programs be applied to include a private operator for the key interoperable network? In the light of these and other questions, Congress may decide to revisit emergency communications policy and management at the federal level through hearings and oversight, as well as to clarify Congressional priorities and goals regarding interoperability. This report has described three separate policy initiatives from different sectors of the federal government that appear to be moving in different directions. This situation can be attributed, in part to the division of jurisdictional and institutional responsibilities in both the Executive and legislative branches of government, and in part to the absence of any recent crisis that would raise the profile of emergency communications needs. Without guidance from Congress or the Administration, it is possible that these three initiatives will continue to develop along dissimilar paths with little or no apparent coordination. If so, what would be the likely impact on emergency communications policy? Of the three initiatives, the proposal by the FCC—which is sponsored by the Public Safety and Homeland Security Bureau it created in 2006 —seems to be the most far reaching. Although it is possible that the FCC will extend the time for public comments and also deliberate extensively, it could move to allocate the spectrum to a quasi-commercial entity in 2007 for development by 2010-2011. This could possibly preempt any decisions or recommendations from the NTIA and DHS, which are operating within unspecified but apparently longer time frames. In a different scenario, the FCC might provide a bridge connecting the Regional Emergency Communications Coordination (RECC) Working Group that DHS is to create to Regional Planning Committees like those the FCC originally formed to develop the 700 MHz band plan and agreements on interoperability. The FCC could then bring to the RECC table the benefits of regional representation, technical expertise, and a broad sample of public opinion from its rulemaking efforts. A network not unlike the one now proposed by the FCC might be the result, but with potentially wider participation and acceptance. Such a network might be administered by the Office of Emergency Communications, not through FCC regulations. Another possibility is that DHS might cede responsibilities and requirements stated in P.L. 109-295 for developing public safety networks to the FCC. This could diminish the scope of the new Office of Emergency Communications. In that scenario, DHS might focus on continuing its policy of assisting cities and other areas in setting up gateways, adding access to the 700MHz systems. The advantage of spectrum efficiency through sharing frequencies at 700 MHz would likely be lost to public safety users (but not to commercial users). In the absence of clear authority and direction, many routes are possible. It remains to be seen whether these routes will be coordinated or whether they will collide at the crossroads. | Wireless communications capacity and capability provide essential support to emergency workers. First responders, state, local, tribal and federal emergency officials, utility workers, ambulance drivers, hospital personnel, forest fire fighters, federal law enforcement agents, the National Guard, and members of all branches of the military are among those who might respond to an emergency and need to be equipped to communicate among themselves and with each other. The management of spectrum that carries wireless communications for public safety and homeland security has emerged as a time-critical policy issue for the 110th Congress due largely to several recent actions by Congress and the Administration, some with near-term deadlines. Congress has mandated that an important band of spectrum be released for public safety use not later than February 18, 2009 (Deficit Reduction Act, P.L. 109-171, Sec. 3002). Congress has also mandated that a billion-dollar fund for public safety communications, created by the Deficit Reduction Act, be fully distributed by the end of FY2007 (S. 2653). As part of the Homeland Security Appropriations Act, 2007, Congress put in place a number of requirements for an Office of Emergency Communications that, among other objectives, is to work with community, state and regional representatives to develop a national emergency communications capability (P.L. 109-295, Title VI, Subtitle D). Funding for part of this effort would be authorized as part of H.R. 1 (Representative Thompson). The National Telecommunications and Information Administration (NTIA) is moving forward with the Presidential Spectrum Policy Initiative planning process which includes evaluating spectrum use for public safety and homeland security. The Spectrum Advisory Committee created for this effort has announced that it will study several advanced systems operated by public safety agencies that might serve as a model for designing a national system. The Federal Communications Commission (FCC), in December 2006, announced a proposed rulemaking for a plan to provide a national emergency communications network using the spectrum band assigned by Congress to public safety, noted above. At the core of the FCC proposal is the appointment of a not-for-profit entity to administer access to the designated spectrum and to design a network that would be shared by public safety and commercial users. These various initiatives appear to be moving in different directions. Congress may opt to establish policies for spectrum management that could require other approaches or objectives by the various agencies and departments involved. This report will be updated. |
Jacques Rogge, President of the International Olympic Committee (IOC), announced on October 2, 2009, that Rio de Janeiro, Brazil, had been selected to host the Games of the XXXI Olympiad in 2016. The selection of Rio de Janeiro to host the 2016 games marks the first time a South American city has been selected to host an Olympics. Rio de Janeiro was an applicant city for the 2012 Summer Olympics. Rio de Janeiro does have experience hosting major international sporting events, however. The city hosted the 2007 Pan-American Games and the 2014 Fédération Internationale de Football Association (FIFA) World Cup. The Olympic Games will be held August 5-21, 2016. It is expected that 10,500 athletes from 206 countries will participate in 42 sports, including 555 athletes on the U.S. Olympic team. Most events will be held at 32 competition venues in 4 main regions, or neighborhoods, in Rio de Janeiro: Barra de Tijuca (Barra), Copacabana, Deodoro, and Maracanã. Figure 1 below shows the four neighborhoods and the specific venues located in each. In addition to Rio de Janeiro (which has two soccer stadiums), soccer matches will be held in the cities of Belo Horizonte, Brasília, Manaus, São Paulo, and Salvador. Figure 2 below shows all six cities. For the first time, the 2016 Rio Games will feature a team consisting of athletes who are refugees. Created by the IOC's Executive Board, the Refugee Olympic Team (ROT) for the 2016 Summer Games has 10 members who were selected from a pool of 43 athletes. The origin countries of the ROT athletes are the Democratic Republic of the Congo (2), Ethiopia (1), South Sudan (5), and Syria (2). The IOC will ensure that the ROT receives uniforms, housing, and technical assistance (e.g., coaches and support staff). The Olympic flag and the Olympic anthem will be used for any official representations, such as possible medal ceremonies, involving ROT. Over the years, host countries and cities have had to deal with a variety of concerns, problems, or criticisms, and Rio de Janeiro is no exception. Separately or collectively, a variety of issues might pose risks to the health, safety, and general well-being of athletes and their families, team personnel, and spectators participating in or attending the 2016 Games. Chief among these are the Zika virus, public safety threats, security concerns, and environmental conditions. This report also discusses the possible implications of hosting the Olympics for Brazil and the issue of doping. Each candidate city for the 2016 Games was required to address 14 themes in its bid—such as environment and meteorology, finance, security, medical services, and doping control. However, in 2009 no one could have foreseen the outbreak of the mosquito-borne Zika virus in 2016. The U.S. Olympic Committee (USOC) has stated publicly that the decision to participate in the 2016 Games is up to each member of the U.S. Olympic team, which will include approximately 550 athletes. In March 2016, the USOC announced that it had recently established an Infectious Disease Advisory Group consisting of three physicians who are infectious disease experts and who have experience managing "infectious disease in patient populations that frequently travel internationally." The advisory group is to assist the USOC by establishing best practices for "the mitigation, assessment and management of infectious disease.... " Other steps taken, or planned, by the USOC include making information available to athletes and the public via the Internet and providing Team USA athletes with mosquito netting, bug repellent, and informational materials. The Rio 2016 Organising Committee for the Olympic Games described, in the candidature file it submitted to the IOC, the exiting health care resources that could be used in support of the Games and committed to providing a series of Games-specific health services. However, shortages of health care workers and supplies might compromise the medical services available. Public safety is also a key concern, given the prevalence of criminal activity in and around Rio de Janeiro. More recently, as reported by the Wall Street Journal , criminals stole a truck loaded with broadcasting equipment for the Games, and athletes training in Rio de Janeiro have been robbed on the street. Although it does not mention the Olympics specifically, the State Department's information page for travelers to Brazil cautions that the city of Rio de Janeiro continues to "experience high incidences of crime, including armed robberies.... Tourists are particularly vulnerable to street thefts and robberies in the evening and at night especially in areas adjacent to major tourist attractions." However, U.S. Olympic Committee (USOC) officials reportedly have stated that "the athletes' and competition venues would be 'the safest place in the world'" and U.S. "'athletes will be among the safest people in Rio, just because of all the security there's going to be.'" The September 11, 2001, terrorist attacks in the United States and recent attacks in Belgium, France, and the United States have heightened concerns that the Olympics could be targeted by terrorists. As reported by the Washington Post , Brazil is revising its security plans for the Games in the wake of the incident in Nice, France, in July 2016. On the other hand, the Wall Street Journal reported that a contract for providing screeners who will staff security checkpoints was not awarded until July 1, 2016, and the company awarded the contract is "a small employment outsourcing firm." Hosting the Olympic Games and Paralympic Games may have implications for Brazil that extend beyond the actual events. Although the Brazilian government viewed hosting the Olympics as an opportunity to showcase the country's progress, its international stature has generally declined in recent years and Olympics-related problems that have emerged, or may emerge, could adversely affect the country's standing. For example, as countries' Olympic teams began moving into the Olympic Village in July, they discovered a variety of infrastructure problems. At least one country's delegation chose to stay in a hotel while the plumbing, electricity, and gas problems were fixed. Additionally, the backdrop to the Olympics is a country beset by political and economic issues. Although a host country may anticipate that being selected to stage the Games will enhance its standing in the world, serve as a catalyst for ameliorating (for example) environmental issues, or prompt economic development, hosting the Games may fall short of the Rio 2016 Organising Committee for the Olympic Games' (Rio Organising Committee or Rio2016™) goals or exacerbate existing problems or issues. If Brazil's efforts are successful, the country may regain some of the prestige it may have lost in recent years, and, turning to politics, a successful Games might improve the standing of the interim president. While the city of Rio de Janeiro may benefit from infrastructure improvements, it is unclear how hosting the Games might affect the country (including the city and state of Rio de Janeiro) financially. Of particular to concern to athletes who compete in open water events, such as sailing and rowing, is the quality of the water where those events will take place. Although the Rio 2016 Organising Committee for the Olympic Games (Rio Organising Committee or Rio2016™) had committed, for example, to ensuring to improve the quality of the water at the venue for canoeing, kayaking, and rowing events, the efforts apparently have fallen short. As reported by ESPN .com in early 2016, a USOC memorandum on water quality read, in part, that "The IOC and Rio Organizing Committee recognize that the water quality in and around Rio is for the most part not at an acceptable level and there [are] significant fluctuations in the bacterial and viral contaminants at the competition venues." Precautions taken by the U.S. rowing team include wearing a training suit that has anti-microbial properties. Doping, which is a perennial concern, has taken on added importance in the year leading up to the Rio Games because of revelations regarding Russia's national governing body (NGB) for track and field. Publication of a World Anti-Doping Agency-commissioned report in November 2015 revealed that individuals and sports organizations in Russia had engaged in an orchestrated doping scheme involving track and field athletes. A second WADA report, released in July 2016, documents Russian doping practices during the 2014 Sochi Winter Olympics and a multi-year doping methodology that involved the Russian Ministry of Sport. While the relevant international organizations, such as the World Anti-Doping Agency (WADA), denounced the doping schemes and practices and used their respective authorities to sanction individuals and organizations involved, lingering questions remain regarding, in particular, other Russian Olympic athletes and teams. In late 2015, health officials in Brazil saw a spike in the number of infants born with microcephaly, a birth defect that may accompany significant, permanent brain damage. The increase in microcephaly was later linked to prenatal infection with the Zika virus, which appears to have arrived in Brazil early in 2015. Between October 2015 and July 2016, more than 1,600 cases of Zika-related microcephaly and other congenital malformations of the central nervous system have been reported among newborns in Brazil. Zika virus is transmitted through the bite of an infected mosquito, or through sexual transmission or blood transfusion from an infected person. No vaccine or specific treatment is available. Most Zika infections are mild. However, rare but serious neurologic disorders may occur in anyone who is infected, and the risk of fetal abnormalities among infected pregnant women may be as high as 13%. Some have voiced concerns that the travel of thousands of tourists and athletes to the Olympic and Paralympic Games and back to their homes could enhance the regional and global spread of the Zika virus. For some time, Brazilian officials have sought to assuage these concerns by noting that the Games will take place during the dry winter season in Brazil, when fewer mosquitoes are present, and that the venues and hotel areas will be regularly fumigated. However, in May 2016, 150 health experts and bioethicists wrote an open letter to WHO Director-General Dr. Margaret Chan urging her to recommend postponing or relocating the Games. The letter cites uncertainties surrounding the emergence of the Zika virus in the Americas, and the severity of the neurologic injuries Zika infection can cause. The letter also states that a long-standing partnership between WHO and the International Olympic Committee (IOC) presents a conflict of interest that compromises WHO's ability to render a neutral opinion on public health in this situation. The World Health Organization (WHO) reaffirmed its support of the Games in June 2016, following the third meeting of a WHO Emergency Committee convened to study the Zika outbreak and the means to contain it. As it had before, the WHO committee determined that " ... there is a very low risk of further international spread of Zika virus as a result of the Olympic and Paralympic Games ... ," and it did not recommend postponing, cancelling, or relocating the Games. In July 2016, researchers at the U.S. Centers for Disease Control and Prevention (CDC) and their collaborators published a model of the contribution of the Olympics to the international spread of the Zika virus. The model found this contribution to be negligible except for four countries—Chad, Djibouti, Eritrea, and Yemen—that do not otherwise have substantial travel to any country with local Zika virus transmission. The CDC publishes health recommendations for U.S. travelers to other countries. For the Zika outbreak, the CDC has not advised against all travel to Brazil (or other areas with active Zika transmission). It has advised against travel by pregnant women (discussed further below), and advises other travelers to use special precautions while in Brazil and upon return. These precautions include avoiding being bitten by mosquitoes, and practicing "safe sex" while on travel and for specified periods of time upon return. The USOC refers members of the U.S. Olympic and Paralympic delegations to CDC guidelines on travel to Brazil. In addition, the USOC says that delegation members who plan to attend the games will be provided with air-conditioned rooms, repellant spray, protective clothing, and a six-month supply of condoms to help them adhere to CDC guidelines. The USOC formed a voluntary advisory group of three infectious disease physicians to advise the committee and individual members of the U.S. delegation on preventing Zika infection. As of early July 2016, several athletes, mostly men, have announced their decisions to forgo the 2016 Games due to concerns about Zika infection. Their concerns have included the safety of a pregnant wife, possible risks for future childbearing, and possible risks to their own health. As the Zika outbreak spreads across South and Central America and the Caribbean, public health officials have focused on protecting pregnant women from infection. Ongoing research shows persistence of the virus in semen of men who have recovered from infection, even when the infection was mild enough to go unnoticed. Based on this, the CDC has made specific recommendations involving travel to Zika-affected areas in order to protect women—and their current or future pregnancies—from sexual transmission of Zika infection. Recommendations involving the Olympic and Paralympic Games are shown in the text box. In light of these complicated recommendations, Olympic and Paralympic athletes, delegation members, athletes' families, and spectators are advised to consider—in addition to their own health status and the risk of Zika infection—the risk of transmitting an infection to a woman who is currently pregnant or who plans to conceive in the future. Brazil offers free health care for its citizens and visitors. Health care services are expected to be provided through "a comprehensive network of Games hospitals and related health care facilities, including an upgraded World Anti-Doping Agency-accredited laboratory in Rio." In addition to the pre-existing health infrastructure, Brazil committed to establishing "a number of Games-specific services, including designated Games Family hospitals, a comprehensive Polyclinic within the Olympic and Paralympic Village, on-site medical response teams at all Games venues, and a network of medical stations supported by roving first aid teams." Brazil has 27 hospitals within 15 miles of the Olympic Village that hold nearly 5,000 beds, and, each of the four cities that will host soccer matches, in addition to Rio de Janeiro, has its own hospital. Nine of the hospitals may be designated as Olympic and Paralympic Reference Hospitals. Rio de Janeiro also maintains a network of emergency services, which is resourced by the Emergency Rescue Group (GSE; a component of the Rio Fire Corps), the Urgent Mobile Attention Service (SAMU), and 1,500 health care professionals. Long waiting times, health worker shortages (particularly specialists), and deficits of key health commodities are a growing concern in some public sector health facilities. A growing proportion of Brazilians are opting to purchase private health insurance to supplement the free public health care. Visitors can purchase travel insurance or purchase a temporary form of private health insurance for health coverage in the local private sector. Despite concerns about health worker shortages, Brazil has committed to ensure that an on-site medical response team will be in place at all Olympic and Paralympic venues to provide first response and medical transfer; at least two ambulance units will be stationed at each competition venue, as well as in many non-competition venues including the Olympic and Paralympic Village, training sites, and the Games Family hotels; well-equipped disaster response teams are trained to respond to a range of possible emergencies, including dangerous weather conditions, multiple casualty situations, and incidents involving biological, chemical, or radiological hazards; and each Games venue will have its own mass casualty response plan with a pre-deployed, fully equipped mass casualty response team remaining on standby. The Brazilian Minister of Health has indicated that "Rio de Janeiro is prepared to host the Olympic and Paralympic Games. Everything that was promised to host the Games will be fulfilled and on time." The International Olympic Committee also indicated that "Rio 2016 is ready to welcome the world." Despite these assurances, in January 2016, some state hospitals reportedly ran out of money to pay for medicines, equipment, and salaries. Another press report indicated that on July 7, 2016, two medical associations reported insufficient space at a state hospital and inadequate training for healthcare personnel responsible for visitors of the Games. Securing the venues, the athletes' village, and tourist locations against an act of terrorism in a city hosting the Olympic Games is a significant undertaking. The host country, with the assistance of international security partners, plans for a long time to ensure that all participants or visitors to the Games can have a safe and enjoyable experience. One type of activity that has caused significant disruption to prior Games is an act of terrorism. Planning for such a terrorist incident during the Olympic Games, while occurring infrequently, requires a great deal of host nation and international support. Safety is also a concern as criminal activity directed at the athletes and visitors could have negative implications for the Games and the Brazilian economy and tourism. According to the State Department, "crime is the principal threat to visitors in Brazil." When the country hosted the 2014 World Cup, thieves engaged in opportunistic street crime, targeting tourists near stadiums, on public transportation, and in other gathering locations. Commonly stolen items included wallets, purses, phones, and other valuables. While thefts were usually non-violent, more serious crimes were also reported, including sexual assault, armed robbery, and express kidnapping. Rio de Janeiro has experienced significant improvements in security conditions over the past decade. The city's homicide rate, for example, fell from 32.4 per 100,000 residents in 2003 to 18.5 per 100,000 in 2015 (a rate similar to that of Miami). Conditions appear to have deteriorated somewhat in 2016, however, with Rio de Janeiro state reporting a 13.6% increase in homicides and a 27.3% increase in street robbery during the first five months of the year. The U.S. State Department asserts that while crime can happen at any place or time within Rio de Janeiro, "tourists are particularly vulnerable to street thefts and robberies in the evening and at night especially in areas adjacent to major tourist attractions." Several Olympic and Paralympic athletes training or participating in test events in Rio de Janeiro reportedly have been robbed at gunpoint. Some analysts have linked the recent increase in crime and violence to the Rio de Janeiro state government's decision to reduce the police budget by a third as a result of financial shortfalls. The state government declared a state of "public calamity" on June 17, warning that the state's deteriorating financial situation could lead to a total collapse of public security and other services. Brazil's national government responded to the declaration by transferring $885 million (R$2.9 billion) to the state government, largely to fund security efforts. Although public security is primarily the responsibility of Brazil's states, the national government will be in charge of ensuring security around the Olympic Games. The security presence is expected to comprise 85,000 personnel, including 41,000 military troops; this is roughly twice as many personnel as were deployed for the London Games in 2012. Some 67,000 security personnel will be based in Rio de Janeiro while 18,000 will be deployed to the other five cities hosting Olympic soccer games. In addition to providing security at Olympic venues, Brazilian security forces reportedly will patrol airports, major roadways, public transportation lines, and tourist zones. An act of terrorism occurring at the Olympic Games has long been a concern to international security officials and the nation hosting the event. An act of terrorism can be perpetrated by an international group attempting to call attention to its cause and using the act to leverage a specific action, or a domestic group demonstrating its unhappiness with a nation's policies. Concerns relating to acts of terrorism significantly increased after the 1972 Olympics in Munich, Germany, when members of the Palestinian Black September Organization attacked the Olympic village and in the process of a hostage standoff and attempted getaway, killed 11 members of the Israeli Olympic team. The group desired to bring attention to Palestinian and Israeli issues and also demanded the release of more than 200 Palestinian prisoners from Israeli jails. Another confirmed terrorist attack occurred during the 1996 Olympics in Atlanta, Georgia, whereby an individual detonated a backpack full of material killing two and wounding more than 100. This individual undertook this act of domestic terrorism to protest the nation's abortion laws. Other acts of violence or threats of violence have occurred prior to, leading up to, and during other Olympic Games. Some of these acts or threats have been categorized as possibly having terrorism-related motivations. Due to previous terrorist attacks at Olympic Games and post-9/11 concerns associated with possible vulnerabilities associated with large gatherings of individuals, security officials are closely monitoring potential threats to the 2016 Games. In April 2016, Brazil's Director of Counterterrorism, Brazilian Intelligence Agency, Luiz Alberto Sallaberry, was reported as noting that the threat of terrorism had increased in recent months due to attacks in other countries and a rise in what he described as the number of Brazilian nationals suspected of sympathizing with Islamic State militants. The statement from Director Sallaberry was apparently in response to information relating to a Tweet from November 2015 by a suspected ISIS executioner, French nationalist Maxime Hauchard, that stated, "Brazil, you are our next target." This warning comes approximately a year after a Brazilian newspaper reported that, "Brazilian intelligence agencies are gearing up to monitor young people, especially men, who may be enticed by online ISIS propaganda to stage 'lone wolf' attacks." More recently, on July 21, 2016, Brazilian police arrested 10 Brazilian nationals suspected of planning a terrorist attack on the Games. Given the history of threats directed at the Olympic Games and the specific threats directed at Rio in the past year, many security observers anticipate activities to safeguard these games will be significant. Securing Olympic venues, athletes, and visitors to the Games and the surrounding area takes a great deal of effort and planning. Brazil planned to devote "approximately 85,000 professionals ... to guarantee security in the biggest sporting event ever held in South America." In August 2015, the Brazilian government noted that, "[C]urrent investments totaling R$750 million ($220.98 million), to which about R$220.98 million ($88.39 million) in equipment and infrastructure improvements for troops should still be added by 2016." These resources were expected to be devoted to investing in security-related items, including mobile police stations, mobile command and control centers, Elevated Observation Platforms, aerial imagers for helicopter monitoring, and an Integrated Command Center. In the event a security incident does arise that is the cause of significant concerns and the host government is perceived as incapable of safeguarding visitors to the Games, the United States may be of assistance to its citizens located in Rio de Janeiro. Whether the result of criminal- or terrorism-related concerns, U.S. citizens who find themselves in harm's way have a number of options to seek support from the federal government. The Department of State (DOS) is required by law to provide a range of threat-related services to Americans abroad. In all but the most extreme situations, the department will serve primarily in an information-distribution role. However, if the departure of U.S. citizens is advised, additional assistance may be provided. The Department of State is required by law to serve as a clearinghouse of information on any major disaster or incident abroad which affects the health and safety of U.S. citizens abroad. The department carries out this function through the Consular Information Program, which provides a range of products, including Country Spe cific Information, Travel Alerts, Travel Warnings, Worldwide Cautions, Messages for U.S. Citizens, Security Messages for U.S. Citizens, Emergency Messages for U.S. Citizens, and Fact Sheets. These messages are posted online at https://travel.state.gov . The Secretary of State is also required to provide for the safe and efficient evacuation of private U.S. citizens when their lives may be endangered, per 22 U.S.C. §4802. In practice, even when the department advises U.S. citizens to leave a country, DOS will advise citizens to evacuate using existing commercial transportation options whenever possible. In more rare circumstances, when the local transportation infrastructure is compromised, DOS may arrange chartered or non-commercial transportation for U.S. citizens to evacuate to a nearby safe location determined by the department. Given the challenges associated with in-country transportation during crises, the department typically requires citizens to make their own way to the departure point. On arrival at a safe location, evacuees are then typically required to make their own onward travel arrangements. Involvement of the U.S. military in any evacuation of U.S. citizens is a last resort, as most evacuations are able to rely on commercial means and local infrastructure. When those elements are not available, DOS and Defense Department coordination is addressed through a standing Memorandum of Agreement that addresses the roles and responsibilities of each agency. In 1999, the IOC adopted a two-phase procedure for awarding an Olympic Games to a city. The first phase is the "Candidature Acceptance Procedure," during which applicant cities are required to address several potential concerns of hosting the games, including "environmental conditions and impact." They must provide the following: an assessment of current environmental conditions in the city; details of ongoing environmental projects and their organization; an assessment of the environmental impact of staging the Games in that city or region; and information regarding any environmental impact studies carried out on proposed venues and if legislation requires such studies. Responses are assessed by the IOC Candidature Acceptance Working Group in its report to the IOC Executive Board. Thus, environmental conditions, actions, and impact are a consideration in the decision as to which cities become "candidate cities." During the second phase of consideration, a candidate city must prepare a "Candidature File" that provides details on environmental and other issues. More details are requested, including air quality, protected areas, public authorities' roles and responsibilities, environmental impact assessments, construction work, work with non-governmental organizations (NGOs), integration of environmental approaches into contracts with suppliers and sponsors, and estimates of Games-time rainfall, wind, temperatures, and humidity levels. This information is considered by the IOC to be a central element in developing a "Green Games," as all commitments regarding actions, programs, and policies are binding and should be carried out and implemented by the Organising Committee. After an Olympic Games is awarded to a city, the host city Organising Committee integrates environmental issues into its planning, logistics, and operations in accordance with commitments made in the Candidature File. It also must work with government authorities and other stakeholders to implement the city-wide and nationwide policy and program developments and actions in the bid in order for a city to fulfill its Host City contract obligations. In addition to external scrutiny by NGOs and the media, the IOC and the Organising Committee monitor progress and implementation of the proposed environmental and sustainability actions and policies to ensure fulfillment of commitments. In preparing its Candidature File, the Rio de Janeiro bid committee developed an agenda for the 2016 Olympic and Paralympic Games structured around nine environmental issues. 1. Water treatment and conservation 2. Environmental awareness 3. Use and management of renewable energy 4. Games neutral in carbon, air quality, and transport 5. Protection of soils and ecosystems 6. Sustainable design and construction 7. Reforestation, biodiversity, and culture 8. Shopping and ecological certification 9. Solid waste management. Thus, by 2009, when the Rio Olympics Organising Committee was awarded the 2016 Summer Games, it had made a number of pledges about ensuring that the Games would be environmentally safe and sustainable. The Organising Committee also pledged to prepare a subsequent Sustainability Management Plan expanding on the nine thematic issues identified in the Candidature File and identifying responsible entities. The Sustainability Management Plan identified three overarching strategic objectives, one of which—"Planet"—was intended to reduce the environmental impact of projects related to the 2016 Games, leaving a smaller environmental footprint from the preparations and operations of the event. This portion of the plan identified specific objectives for transportation (including expanding the subway system to provide public transport for spectators and workers, using cleaner fuels for buses, and implementing actions to reduce greenhouse gas emissions in public transportation systems). It also addressed construction (pledging to minimize environmental impacts in the design and construction of facilities, and making large-scale urban redevelopment and improvements around stadium and other sport venue sites). The plan also identified objectives for waste management based on a hierarchy of approaches: avoidance, reducing, reuse, recycling, composting, energy recovery techniques, waste treatment, and conventional incineration. In 2007, among the 92 municipalities in the state of Rio de Janeiro, 76 discarded their waste in uncontrolled dumpsites. According to a state report, a total of 13,738 tons of garbage was produced daily by more than 15 million inhabitants of those municipalities. Less than 1% of the waste was recycled, while 41% was disposed in dumpsites, and 45% went to controlled sanitary landfills. The waste management objectives in the 2013 Sustainability Plan and existing Brazilian policy called "Dumpsite Zero" mandated shutting down by 2014 all large untreated dumpsites in Brazil, which were then receiving more than one-third of the country's waste, and replacing them with sanitary landfills. Finally, the Sustainability Management Plan addressed a fourth set of objectives related to environmental conservation and cleanup. These objectives included projects to minimize impacts on existing ecosystems at Games venues and to accelerate forest reforestation activities. Available information on the extent to which these objectives have been met is summarized below. One focus of the environmental conservation and cleanup objectives was improving the quality of waters that would be sites for sailing, rowing, triathlon, and marathon swimming during the 2016 Games. The plan for the Games calls for sailing, rowing, and other outdoor water events to take place at three locations located in the southeast portion of Rio de Janeiro—Marina da Gloria and Guanabara Bay, Rodrigo de Freitas lagoon, and Fort Copacabana beach, collectively referred to as the Copacabana Zone (see Figure 3 ). Even before the Games were awarded to Rio de Janeiro, concern had been widely expressed about these locations, which are highly polluted with untreated sewage and household and industrial wastes. This concern led to fear that high levels of water pollution could harm the health of tourists and athletes, in addition to impacting the competitions themselves. In 2007, the city of Rio de Janeiro treated only 21% of its wastewater to secondary treatment levels, 44% received primary treatment, and nearly 35% was discharged into open waters with no treatment. Untreated sewage is typically discharged directly into Guanabara Bay and other waters where sailing, windsurfing, rowing, and similar events will occur. Exposure to pollutants in untreated sewage can lead to acute illness such as diarrhea, gastroenteritis ("stomach flu"), fever, Hepatitis A, and typhoid fever. Facilities that could provide better treatment exist in some parts of the city, but are effectively unavailable due to lack of collector sewers to transport waste to treatment plants. Monitoring of waters in the Copacabana Zone that was done by Rio2016™ during the 2007-2012 period identified levels of pollutants—enterococci and fecal coliform bacteria, as well as nutrients—that exceeded Brazilian public health standards. Concern was raised about pollution at all of the water venue sites but especially about Guanabara Bay, where sailing events will take place, as described in a 2014 report prepared for the Rio Organising Committee. Despite the cyclic renewal of its waters to the sea, which makes it waters saline, the bay is the receptor of a significant watershed, which receives a wide range of liquid and solid discharges. Among the potential pollution sources included are: sewage, various types of industries, marine terminals for oil products, two commercial ports, several shipyards, and two oil refineries, among other economic activities. Population growth and industrial development brought, in addition to pollution, environmental physical issues, such as the destruction of peripheral ecosystems of the Bay, and the embankment of its water surface. It also brought uncontrolled land use and its adverse effects in terms of siltation, bottom sedimentation, flooding, and landslides. Simultaneously, public health problems have characterized the basin region of Guanabara Bay, reflecting the inadequate management of wastewater and solid waste in the region during the expansion of the Metropolitan Region. Throughout this time, the implementation of infrastructure services, such as sanitation and drainage did not follow population growth. The report concluded, "If this situation is not reversed in time for the Olympics, it will represent a potential health hazard to the athletes and tourists." The 2013 Sustainability Management Plan called for accelerating planned improvements to sanitary facilities in the Rio metropolitan area, including a pledge that by the start of the 2016 Games, through projects to be undertaken by the municipal and state governments, collector sewer infrastructure would be constructed throughout the city and 80% of sewage would be treated to at least secondary treatment levels. Although the 2013 Sustainability Management Plan stated that updates would be provided during the seven-year life of the Rio Olympics project (from winning the bid in 2009 to dissolution after the Games in late 2016), only one update has been issued. Called "Embracing Change," it was released in September 2014. It describes activities and progress made in the 2012-2013 period, especially refinement of sustainability strategies contained in the 2013 Plan on topics such as carbon management—Rio2016 TM had a target of reducing Rio de Janeiro's total carbon emissions by 18.2% below 2011 levels by 2016; minimizing ecosystem impacts—through design and avoidance; and waste management. On the latter issue, this report noted that all open dumpsites in Rio de Janeiro were closed in 2012, and that the process for their environmental restoration had begun. By late 2013, 3.7% of potentially recyclable waste was being diverted to recycling centers, while the city's target was to recycle 25% of wastes by 2016. Regarding water quality, the 2014 report said that the percentage of sewage receiving at least some level of treatment had increased to 50% in 2013. Progress toward water quality cleanup plans—or lack of progress—has continued to receive widespread public attention. Watchdog groups say, for example, that official statistics on the percentage of city sewage that is treated assume that all sewage treatment facilities are functioning, an assumption that they believe is not correct. Since 2014, official estimates of the percentage of the city's sewage that will be receiving treatment by the start of the 2016 Games have dropped—from 80% receiving secondary treatment in the 2009 bid for the Games, to 50% receiving some treatment early in 2014, to 30% in early 2016. Some officials now estimate that it could take five to six more years to attain the 80% target, although Rio de Janeiro's Governor Luiz Fernando Pezao said in October 2015 that Guanabara Bay will not be cleaned up until 2035. Approximately 1,700 athletes are expected to participate in events at the Copacabana Zone sites. Throughout 2015, many U.S. and other countries' athletes visited Rio de Janeiro to train and familiarize themselves with conditions and facilities. Athletes reported seeing massive amounts of large debris in Guanabara Bay and other waters—including mattresses, cars, washing machines, trees, tables, televisions, couches, and chairs, as well as dead animals. The Rio de Janeiro state government pledged to install eco-barriers, to catch refuse flowing down rivers, and to employ "eco-boats" that sweep the bay picking up garbage to avoid disrupting competitions during the Games. In addition to waste that athletes could see in the water came reports of pollutant contamination. Some athletes reportedly got sick at training and test events in 2015, but none of the cases was definitively connected to the water, as opposed to food or another source. In July 2015, the Associated Press (AP) released findings of a five-month investigation and analysis of water quality at sites where Olympics and Paralympics competitions will be held. The AP investigation tested for rotavirus, which is the most common cause of gastroenteritis, as well as three different strains of adenoviruses, each of which acts as a signpost for human waste in waterbodies. AP said that its tests, which were the first independent comprehensive testing at the Olympic sites, revealed "dangerously high levels of viruses and bacteria" above Brazilian or World Health Organization standards. The AP's focus on viruses complicated controversies and publicity that followed release of the report, because neither Brazil nor the WHO (nor the United States) has adopted water quality standards that establish safe levels for viruses in recreational or other waters. Brazilian, WHO, and U.S. standards and water quality criteria are based on bacterial indicators of fecal contamination (enterococci and E. coli ). Although enteric viruses are currently tested in some places as water quality indicators, and some water experts believe that governments should adopt viral as well as bacterial testing to determine whether recreational waters are safe, most scientists believe that testing for viruses has yet to be successfully implemented in routine monitoring of water quality. In response to the AP report, Rio2016™ and IOC officials said that the health and welfare of athletes is always a top priority and that bacterial testing has shown that water quality meets relevant international standards. As noted, there are no international standards for the viral indicators that were included in the AP's analyses. The IOC said that it had no plans to conduct its own water quality tests. The WHO, which acts in an advisory role to the IOC, took several different positions on whether or not viral testing should be carried out, ultimately stating in October 2015 that it did not feel that Olympic officials needed to conduct routine viral testing. The WHO statement added that it was not "unconcerned with viral pathogens in water" and that water quality and monitoring would continue to be discussed in relation to the 2016 Games. Swimming's governing body, Fédération Internationale de Natation (FINA), called for virus testing in September 2015, and sailing's world governing body, the International Sailing Federation (ISAF), also said that it could support viral testing. Athletes who might be exposed to contaminated water during the Games have offered mixed responses. Some said that they are concerned about even brief exposure to waters of Guanabara Bay; some sailors said that they will adopt protocols such as getting multiple vaccinations and washing themselves with bleach after competing. Others have said that they believe the issue has been overblown and that athletes typically face potential health risks in many places where they compete. USOC officials and organizations that represent athletes have said that individual athletes can choose whether or not to participate in the Games if they are concerned about these issues. Finally, press reports in April 2016 said that Brazilian federal police are investigating Rio de Janeiro's state utility, Companhia Estadual de Águas e Esgotos (CEDAE), for allegations of fraud at its sewage treatment plants around Guanabara Bay. The police investigations were said to be part of a year-long probe that is targeting the water and sewage utility for pollution from treatment plants and possibly charging for services that it is not adequately providing, which, if proven, would constitute fraud. The benefits of hosting an Olympics Games often include acceleration of a wide range of existing plans, projects, investments, and activities. Rio de Janeiro's expectations in this regard are evident in the 2013 Sustainability Management Plan and other documents that discuss using the opportunity of the Games to benefit the city by improving environmental conditions and practices and incorporating sustainability policies and ethic into the city's future. Most analysts see the biggest gains from hosting an Olympics to be urban upgrades that otherwise would occur over a longer term, if at all. Some believe that it is an obligation of an Olympics hosting city to improve its environmental conditions. It is also believed that countries' hosting bids are greatly bolstered when they include major "green" or sustainability pledges. However, once the event is awarded, there are few, if any, consequences for countries if they do not follow through—despite the IOC's statements that commitments are binding. Some observers expect that the environmental legacy of Rio2016™ may be viewed as having positive and negative implications for Brazil, such as public transportation and at least partially improved sewage treatment on the positive side, but other outcomes that are less clear. When the 2016 Summer Games were awarded in 2009, some feared that development pressures associated with the construction would harm nearby natural environments such as the biologically rich Atlantic Forest and Coastal regions and increase the city's population, especially by expanding favelas , urban slums where nearly one-quarter of its inhabitants live. Reportedly, well-financed efforts to clean up Rio de Janeiro's waters have proved disappointing for decades, undercut by mismanagement and allegations of corruption. All Olympic Games have glitches and receive skeptical press ahead of time, and the 2016 Games are no exception. In the weeks immediately ahead of the start of the Games, activist organizations that have been tracking developments say that some promised objectives are succeeding—for example, urban renewal and public transport—but that environmental and sanitation goals will be missed. They report that the promise to plant 24 million trees has been abandoned, and projects needed to mitigate untreated sewage discharges—one of the highest pre-Games priorities—are incomplete; overall, none of the major environmental projects linked to the Olympics will be completed before the Games. Once the deadline of the start of the 2016 Games has passed, international pressure to finish those projects is likely to disappear. For now, the environmental legacy of the 2016 Games for Rio de Janeiro remains to be determined. In 2009, when the International Olympic Committee (IOC) announced that Brazil would host the 2016 Summer Games, then-President of Brazil Luiz Inácio Lula da Silva hailed the decision as recognition of Brazil's arrival as a "first-class country," stating, "Today we received the respect that people are already starting to show to Brazil." As the fifth-largest and fifth most populous country in the world, Brazil has long sought recognition as a global power, and at the time it was awarded the Olympics, it appeared to be on the verge of finally realizing its ambitions. During the previous decade, a boom in global commodity prices fueled a period of rapid economic growth that—combined with the Lula Administration's social policies—significantly reduced poverty and inequality and lifted 36 million Brazilians into the middle class. Brazil's international stature grew along with its economy as the Brazilian government used increased revenues to expand its diplomatic presence and leveraged its economic clout to assert Brazilian influence on global matters ranging from trade to climate change. Like President Lula, many international observers viewed Brazil's successful bids for the 2016 Olympics and the 2014 World Cup as a confirmation of the country's rise. Brazil's international image has been battered in recent years, however, as the country has struggled to address deepening economic and political crises. Economic growth began to slow as commodity prices declined. President Dilma Rousseff's economic policies exacerbated the situation, contributing to rising inflation and fiscal deficits and declining consumer and investor confidence. Brazil's economy contracted by 3.8% in 2015 and is projected to contract by 3.3% this year. Some of the Brazilians who joined the middle class during the boom years have fallen back into poverty as unemployment has risen to 11.2%. At the same time, a sprawling corruption investigation involving the diversion of public sector funds to political campaigns and politicians has implicated prominent business leaders and much of the political class. The Brazilian Congress has sought to channel the resulting citizen discontent into an effort to impeach President Rousseff, ostensibly for violations of the country's fiscal responsibility law; Rousseff is currently suspended from office in order to stand trial. While some Brazilians and international observers view Rousseff's impeachment as a necessary first step to address the economic and political crises, others view it as an illegitimate attempt to remove a left-leaning president and install a more conservative administration that will protect Brazilian legislators from the ongoing corruption probe. These economic and political setbacks have damaged the country's reputation as a successful and socially inclusive democracy and weakened its international influence. The 2016 Olympics will place a spotlight on Brazil, drawing renewed international attention to the country's potential as well as its challenges. The new Brazilian administration led by Interim President Michel Temer views the Summer Games as an opportunity to demonstrate the country's credibility on the international stage. If Brazil is able to host a successful Olympics despite the country's recent setbacks, it may be able to regain some of the prestige it may have lost in recent years. Alternatively, failures to complete construction on facilities and infrastructure, properly plan for logistics, or take appropriate precautions to protect the security and health of the athletes and fans attending the Games would likely further erode the country's international image. The Olympics also could have political implications for Interim President Temer and the politicians governing the city of Rio de Janeiro and Rio de Janeiro state. Temer is expected to carry out official host duties during the Games as the acting head of state, and while domestic support for his administration likely will depend on its ability to resolve the country's economic and political crises, the Olympics could improve domestic and international perceptions of Temer's legitimacy and strengthen his hold on the presidency. On the other hand, any problems that emerge would likely be blamed on Temer and his political party, which controls the city and state governments of Rio de Janeiro. Investments related to the 2016 Olympics are expected to total at least $11.9 billion (R$39.1 billion), using current exchange rates. This includes nearly $2.2 billion (R$7.1 billion) for Olympic venues, $2.3 billion (R$7.4 billion) for the Rio 2016 Organising Committee for the Olympic Games, and $7.5 billion (R$24.6 billion) for infrastructure improvements, environmental cleanup efforts, and other so-called legacy projects. Other costs related to the Summer Games, such as additional security personnel, have yet to be determined. About 57% of the total has been financed with private resources while 22% has been financed by the state government, 12% by the local government, and 9% by the national government. Many Brazilians view public expenditures on the Olympics as wasteful given the country's difficult financial situation and considerable social disparities. The Temer Administration is currently considering cuts to Brazil's pension system and other social services as part of its efforts to reduce the national government's ballooning budget deficit. Likewise, Rio de Janeiro state, which has already cut expenditures steeply, declared a state of "public calamity" on June 17, warning that the government's lack of finances could "lead to the total collapse of public security, health, education, mobility and environmental management." Reports that some Olympic funds were siphoned off by corruption have further bolstered critics of the Games. Economic analysts assert that the Summer Games may deliver a temporary boost in tax revenues for Rio de Janeiro's local government but are unlikely to have much of an impact on the broader Brazilian economy. According to Moody's Investors Service, "the key benefit of the 2016 Olympics for the city of Rio will be lasting transport infrastructure improvements" that will reduce traffic congestion and potentially lower business costs. The impact and sustainability of those infrastructure projects remains to be seen, however, as efforts to improve Rio de Janeiro's sewage system appear to have done little to clean up the city's polluted waterways and a bike path that was constructed as a legacy project of the Games recently collapsed. Some observers have also called into question the value of the infrastructure improvements, asserting that the funds could have been better invested in upgrading the overburdened infrastructure that Rio de Janeiro residents use on a daily basis. Moreover, human rights advocates maintain that more than 4,100 families have been displaced in Rio de Janeiro as a result of projects associated with hosting the Olympics and World Cup. According to a July 2016 poll, 63% of Brazilians think the Olympics will bring more costs than benefits for the nation's citizens. In the run-up to the 2016 Rio Games, American athletes, as well as athletes from other nations, expressed concerns about doping and whether the organizations charged with protecting clean athletes were up to the task. Prompting this surge of concern were revelations that the Russian track and field team engaged in a doping scheme orchestrated by the Russian Athletic Federation (RusAF; Russia's national governing body [NGB] for track and field) and the perception, if not reality, that the World Anti-Doping Agency (WADA) was slow to respond when first made aware of the allegations in 2010, as reported by both the New York Times and the television show 60 Minutes . The New York Times reported there had been "[m]ultiple warnings about Russia" and doping over the years and suggested that possible conflicts of interest might have played a role in WADA's initially tepid response. Concerns that other Russian sports might be similarly tainted by state-orchestrated doping were validated in July 2016 with the publication of another WADA-initiated report that described, among other things, how Russian sports organizations and authorities tampered with Russian athletes' samples during the 2014 Winter Olympics in Sochi, Russia. Although the U.S. government is not directly involved in WADA or its anti-doping efforts, it does provide support to the agency. As a signatory to the Copenhagen Declaration on Anti-Doping in Sport, the United States is committed to supporting WADA and the World Anti-Doping Code ( Code ), which includes providing financial support through membership dues. Beginning with a payment in 2003 and through 2016, the United States has paid approximately $25 million to WADA. The allegations involving Russia and WADA's anti-doping role have drawn the attention of the Senate Committee on Commerce, Science, and Transportation and the House Committee on Energy and Commerce. In a June 20, 2016, letter addressed to the president of WADA, the chairman of the Senate committee noted that WADA had been made aware, in 2010, that Russian athletes were involved in a government-sanctioned doping scheme; that WADA's independence had been called into question; and that representatives of Olympic athletes had called upon WADA to expand its investigation to other sports in Russia and other countries. The House Committee on Energy and Commerce raised similar concerns in a July 12, 2016, letter to the President of the IOC while acknowledging the work that the IOC and WADA have done to enhance their efforts to ensure athletes compete in doping-free sports. One of the challenges identified by the committee is that "neither [WADA nor the IOC] is functionally organized to achieve [the goal of eradicating doping in sport]." On December 3, 2014, a documentary aired on German television alleging "the existence of a sophisticated and well established system of state-sponsored doping with the All-Russia Athletics Federation (ARAF)." In the aftermath of the documentary, WADA formed an Independent Commission (IC) to investigate. The investigation, which began in January 2015, concluded with the publication of two reports, the first of which focused on the allegations presented in the German television documentary. The November 2015 report's findings are summarized as follows: 1. A "deeply rooted culture of cheating" exists, meaning "the acceptance of cheating at all levels is widespread and longstanding." 2. The exploitation of athletes is acceptable, which has resulted in "unethical behaviours and practices ... becom[ing] the norm." 3. Many Russian athletes have participated in the "consistent and systematic use of performance enhancing drugs." 4. Doctors, coaches, and laboratory personnel have been involved in systematic cheating. The report included two notable caveats. Although there were "reliable indications" that other sports in Russia had doping problems, the IC stated these sports were outside the scope of what it had been directed to investigate. The commission also stated that, "in its considered view, Russia is not the only country, nor track and field the only sport, facing the problem of orchestrated doping in sport." Publication of the report in November 2015 was immediately followed by responses from the Council of the International Association of Athletics Federations (IAAF), which is the international federation (IF) for track and field, and WADA. The IAAF "provisionally suspended the All-Russia Athletic Federation (ARAF) [RusAF] as an IAAF Member with immediate effect." A significant consequence of this suspension is the prohibition on RusAF athletes and support personnel from competing in international competitions, including the Olympic Games. WADA's response was to suspend provisionally the Moscow Antidoping Center; recommend that the head of the center, Dr. Grigory Rodchenkov, be permanently removed (he immediately resigned); and assess the compliance of the Russian Anti-Doping Agency (RUSADA) with the World Anti-Doping Code . In a separate, subsequent press release, WADA announced that RUSADA was not in compliance with the Code . In June 2016, the IAAF Council met to consider whether RusAF had satisfied the reinstatement conditions. The IAAF Taskforce's report to the council stated that several verification criteria had not been met and included several recommendations, all of which were accepted by the IAAF Council. Concurring with the taskforce's recommendations, the IAAF decided that RusAF should not be reinstated, a decision that was supported by both the IOC and WADA, and that no other RusAF personnel (such as officials and athlete support personnel) be allowed to take part in international competitions or the IAAF while RusAF is suspended. In July 2016, the Russian Olympic Committee and individual Russian track and field athletes filed requests for arbitration with the Court of Arbitration for Sport (CAS) regarding the IAAF's decisions. The CAS arbitration panel ruled in favor of the IAAF, thus upholding the ban on Russia's track and field athletes. Several months after WADA released the IC's report, allegations surfaced in the media regarding a doping scheme to benefit Russian athletes during the Sochi Games. On May 19, 2016, the President of WADA announced that Professor Richard H. McLaren would lead the investigation. The key findings of Professor McLaren's report, known as the Independent Person (IP) Report and dated July 18, 2016, implicate the Moscow Anti-Doping Laboratory, the Sochi Laboratory, and Russia's Ministry of Sport in doping activities. In addition to documenting the "urine sample swapping scheme" that was implemented during the Sochi Games, the IP Report uncovered what it called the "Disappearing Positive Methodology," which it characterized as "a State directed method [implemented] following the very abysmal medal count" by Russian athletes at the 2010 Vancouver Winter Olympics. As documented in the IP Report, the Russian Deputy Minister of Sport would review positive test results provided by the Moscow Anti-Doping Laboratory and issue an order, SAVE or QUARANTINE, to the laboratory for each result. A SAVE order meant that the laboratory was to stop the analytical process and report to WADA's Anti-Doping Administration and Management System (ADAMS) that the sample was negative. A QUARANTINE order directed the laboratory to continue processing the sample. The IP Report states that, generally, the SAVE order was used for athletes who "tended to be medal winners or athletes of promise," while the QUARANTINE order was used for "[f]oreign athletes, or Russian athletes deemed unpromising." The Disappearing Positive Methodology was used "from at least late 2011 to August 2015 ... and affected athletes from all sport disciplines whose urine samples were being analyzed by the Moscow Laboratory." In the aftermath of the release of the IC Report and the IP Report, on July 24, 2016, the IOC issued conditions Russian athletes must meet to be eligible to compete in Rio de Janeiro. Chief among these is an athlete's anti-doping record, which may include "only reliable adequate international tests." Additionally, the international federations, which are responsible for deciding which athletes are eligible to participate in the Olympic Games, have been advised by the IOC that an absence of positive doping test results will not be considered sufficient in establishing that an athlete has not doped. The IOC will accept a Russian athlete for participation in the Rio Games only if the relevant IF "is satisfied that the evidence provided" meets the IOC's conditions and the IF's determination is "upheld by an expert from the CAS list of arbitrators.... " Russian athletes who have been sanctioned previously for doping, or who are unable to meet the IOC's criteria, will not be allowed to compete in the 2016 Games. The consequences for the Russian Olympic Committee include an estimated 30% decrease in the size of the Russian team competing in the 2016 Games. As announced by the IOC on August 4, 2016, the Russian Olympic team numbers 271 athletes; the original entry list for the ROC included 389 athletes. The number of Russian athletes competing in Rio de Janeiro may change, however. On August 8, 2016, CBS News reported that seven Russian swimmers who had been banned initially from participating in the Rio Games are now permitted to compete although "FINA has not fully explained why." Reportedly, one of the Russian swimmers participated in a 100-meter breaststroke semifinal on August 7, 2016. Russia's paralympic team has also been affected by the doping revelations. The International Paralympic Committee (IPC) opened suspension proceedings against the Russian Paralympic Committee (RPC) in late July. On August 7, 2016, the IPC announced it had suspended the RPC, effective immediately. The suspension means the Russian Paralympic Committee is not permitted to enter its athletes in the Rio 2016 Paralympic Games, which will be held September 7-18, 2016. However, the RPC may appeal the IPC's decision and has 21 days (August 28, 2016) to do so. On June 21, 2016, the IOC convened an Olympic Summit for the purpose of ensuring "a level playing field for all athletes participating" in the 2016 Games. Among other things, the IOC advised IFs and national Olympic committees (NOCs; e.g., U.S. Olympic Committee) to take all necessary actions to prevent "doped athletes" from participating in the 2016 Games, to broaden their efforts to include sanctioning any athlete support personnel who are implicated in doping, and to refrain from requesting accreditation for the Games for "any person currently implicated in an anti-doping rule violation." The Olympic Summit also stated that athletes from Russia and Kenya are not entitled to the "presumption of innocence" because neither is in compliance with the Code and "substantial allegations" exist regarding these countries' sports organizations. Though it does not appear that the scope of Kenya's doping problems approaches that of Russia's, Kenya has been beset by a series of issues. In November 2015, the IAAF Ethics Commission provisionally suspended three Kenyan track and field officials; the commission extended the suspension on May 20, 2016. WADA declared, on May 12, 2016, that the Anti-Doping Agency of Kenya is not compliant with the Code . Also in 2016, a news article reported that the chief executive of Kenya's track and field association, Athletics Kenya, solicited bribes from two Kenyan athletes in return for reducing their suspensions for doping. A journalist for the New York Times summarized Kenya's problems as follows: Kenya cannot assure the world that any of its athletes is drug-free, at least based on evidence collected by its national antidoping program. World Anti-Doping Agency officials say the Kenyan antidoping agency exists in name only. The government established the agency in the past year [2015] but has yet to finance it, WADA officials recently told [the journalist]. "There's just no political will for it, even though they've been encouraged, persuaded, cajoled by us," David Howman, WADA's director general, said of WADA's effort to help Kenya put antidoping measures into effect over the past two-plus years. "It's reached a crisis point, really." In spring 2016, the IOC decided to re-test samples from the 2008 Beijing Games and the 2012 London Games. To date, two of the four rounds, or waves, of re-testing have taken place. Focusing on athletes who might participate in the 2016 Rio Games, 454 samples obtained during the 2008 Beijing Games were re-tested in the first round. The results indicated that 30 athletes from 6 sports and 12 countries had tested positive. The second round involved re-testing 386 samples and yielded 30 positive results, 23 of which were from athletes who were awarded a medal during the Beijing Olympics. These positive results were from four sports and eight nations. On May 27, 2016, the IOC announced that, in the first round of re-testing, analysis of 265 samples from the 2012 London Games resulted in positive tests for 23 athletes from 5 sports and 6 countries. The second round yielded 15 positive tests from a pool of 138 samples involving 2 sports and 9 countries. To summarize, the re-analysis of 1,243 samples from the Beijing and London Games in rounds one and two resulted in 98 positive tests. The implications of this situation, including the IC Report and the IP Report, extend beyond the consequences for Russian sports organizations, athletes, and officials. Other athletes (in particular, non-Russian athletes) have a vested interest in the outcomes of the investigation and related matters. Following the release of the IC report in November 2015 and prior to the IAAF's June 2016 decision to uphold the suspension of RusAF, several organizations that represent the interests of Olympic athletes shared their concerns with the heads of the IOC and WADA. Generally, the representatives of the athletes organizations, in separate communications, expressed dissatisfaction with WADA's or the IOC's actions, and advocated for both organizations to do more to protect clean athletes and to protect sports in all countries. A common theme was the call for an expanded investigation into other countries and other Russian sports. As the chair of the WADA's Athlete Committee stated in a speech, the IC's report noted the "complete and utter implausibility" of the orchestrated doping system in Russia serving only track and field athletes. One month prior to the IAAF's decision on RusAF, the chairs of the IOC's Athletes' Commission and WADA's Athlete Committee expressed, in a letter to the presidents of the IOC and WADA, their shared constituency's perspective: "... [A]t this time athlete confidence in the Anti-Doping system, in WADA, and in the IOC has been shattered." While the IAAF's decision to suspend RusAF—thus prohibiting Russian track and field athletes from competing in the 2016 Games—was welcomed by the IOC Athletes Commission and the WADA Athlete Committee, it remains to be seen how athletes respond to the IOC's decision not to impose an outright ban on Russian athletes. As reported by the New York Times and Wall Street Journal , other stakeholders have been critical of the IOC's decision. The IC and IP Reports emphasize the need for strengthening efforts to protect clean athletes, which was begun by the IOC in late December 2014. Following the 127 th IOC Session, which was held on December 7, 2014, the IOC changed its philosophy with regard to doping and called for greater independence for WADA. Effective August 2, 2015, the Olympic Charter states that the IOC's role is, in part, "to protect clean athletes and the integrity of sport, by leading the fight against doping.... " Previously, the Charter stated that the role of the IOC with regard to doping was "to lead the fight against doping in sport." Explaining its change in philosophy, the IOC wrote, in part, The Olympic Mo vement is all about the clean athletes. They are our best ambassadors, they are our role-models, they are our treasure. Therefore we have first and foremost to protect the clean athletes. We have to protect them from doping, match-fixing, manipulation and corruption. We have to change our way of thinking. We have to consider every single cent in the fight against these evils not as an expense but as an investment in the future of Olympic Sport. We have to realize that catching the cheats is extremely important but only a means to an end—the protection of the clean athletes. Since changing the Olympic charter, the IOC has taken, or proposed, several steps to enhance the protection of clean athletes. At its October 2015 Olympic Summit, the IOC proposed that the testing of athletes should be independent from sports organizations and requested that WADA lead a working group to study the proposal that it (WADA) take responsibility for testing. In December 2015, the IOC's Executive Board unanimously adopted a declaration that included proposals for WADA and CAS. The executive board proposed that WADA establish an independent entity for testing and results management, that the new entity include a unit dedicated to intelligence collection, and that "sports oganisations should transfer their doping control operations to this new organisation." The IOC Executive Board's proposal involving CAS stated that the court should be the body that pronounces doping sanctions. This change, according to the board, would centralize the system of sanctions and be cost efficient while creating a more "harmonised anti-doping system among all sports and all countries." Finally, the IOC has called on WADA to convene an "Extraordinary World Conference on Doping" in 2017. | The 2016 Olympic Games will be held in Rio de Janeiro, Brazil, August 5-21, 2016, and will be followed by the Paralympic Games, September 7-18, 2016. Notably, these are the first games to be hosted by a South American city. Reportedly, 10,500 athletes from 206 countries will participate in the Olympics, including 555 athletes from the United States. Most Olympic events will take place in and around Rio de Janeiro. In addition to Rio de Janeiro, soccer matches will be held in the cities of Belo Horizonte, Brasília, Manaus, São Paulo, and Salvador. Host countries and cities often have to deal with a variety of questions or issues, which is also true for Brazil and Rio de Janeiro. The list of issues or potential problems that might have implications for athletes, team personnel, and spectators participating in or attending the 2016 Rio Games includes the Zika virus, public safety threats, security concerns, and environmental conditions. It also bears noting that the act of hosting the Olympics may have implications for Brazil. Finally, doping is of particular concern this year because of revelations regarding a state-orchestrated doping scheme perpetrated by Russian authorities and sports organizations. Each candidate city for the 2016 Games was required to address 14 themes in its bid, such as environment and meteorology, finance, security, medical services, and doping control. However, no one in 2009 could have foreseen the outbreak of the mosquito-borne Zika virus in late 2015, when Brazilian health officials noticed an increase in the number of infants born with microcephaly. Although some have called for the Games to be postponed or cancelled, the U.S. Centers for Disease Control and Prevention (CDC) and the World Health Organization (WHO) have indicated the risk of international transmission due to the Olympic and Paralympic Games is low. The CDC has published specific recommendations for pregnant women, and the U.S. Olympic Committee (USOC) has taken steps to safeguard the U.S. Olympic team. In the candidature file it submitted to the International Olympic Committee (IOC), the Rio 2016 Organising Committee for the Olympic Games stated that visitors to the country would be provided free health care. Additionally, Brazil committed to providing medical response teams and units at Olympic facilities. However, shortages of health care workers and supplies might compromise the medical services available. Public safety and security are key concerns for visitors to Brazil, including Olympic competitors and spectators. The Department of State has noted that crime is a significant threat, and, during the 2014 World Cup, thieves targeted visitors near sports venues and other locales frequented by tourists. Although Rio de Janeiro has experienced significant improvement in public safety in recent years, some criminal activity has increased in the first half of 2016. With respect to security concerns and, specifically, terrorist threats, Brazil's Director of Counterterrorism reportedly has noted that the threat of terrorism has increased in recent months. In July 2016, the Brazilian police arrested 10 Brazilian nationals suspected of planning an attack during the Games. The national government, which is in charge of security for the Olympic Games, plans to muster a force of 85,000 personnel to provide security. U.S. citizens requiring assistance may reach out to the State Department. Organizers of the Rio 2016 Summer Olympics and Paralympics have made many commitments to host Games in which environmental sustainability is integral to design and planning through implementation, review, and post-event activities. These commitments address issues such as impacts of public transportation, construction, and waste management, and needed water quality improvements. For some time, concern has focused on pollution of waters at venues that will host sailing, rowing, triathlon, and similar events, leading to fear that high levels of water pollution could harm the health of tourists and athletes, in addition to impacting the competitions themselves. Organizers of the Games acknowledge that commitments related to sanitation and water quality will not be met before the Games begin. The Brazilian government campaigned hard to win the right to host the 2016 Olympics, viewing the Games as an opportunity to showcase Brazil's economic and social progress and reinforce the country's image as a rising power. Brazil's international stature has generally declined in recent years, however, as the country has struggled to address deepening economic and political crises. While the Olympics could allow Brazil to highlight its potential and regain some of the prestige it may have lost in recent years, any problems that emerge are likely to reinforce negative perceptions some have of the country. The Games are unlikely to have much of an effect on Brazil's domestic political situation or economy. Nevertheless, a successful Olympics could strengthen the current government's hold on power and provide a temporary boost to Rio de Janeiro's economy. Most Brazilians are relatively pessimistic about the Olympics and believe they have brought more costs than benefits to the country. While doping is a perennial concern, it has been, and is, of particular concern in the months leading up to the 2016 Rio Games. The release of two World Anti-Doping Agency (WADA) reports, in November 2015 and July 2016, has shown that Russian authorities and sports organizations engaged in doping schemes involving the Russian track and field team and Russian athletes competing in 2014 at the Winter Games in Sochi, Russia. The latter report also revealed a multi-year operation implicating, among other organizations, the Russian Ministry of Sport. The consequences of these reports include, among other actions and decisions taken by the appropriate international sports organizations, a ban on Russia's track and field team, which means the team will not be allowed to participate in the 2016 Games. Additionally, the International Olympic Committee (IOC) stated that the presumption of innocence does not apply to Russian athletes and established conditions other Russian athletes must meet to demonstrate they have clean doping records and thus be eligible to compete in Rio de Janeiro. |
Since the United Nations (U.N.) was established in 1945, Congress has demonstrated a continued interest in U.N. system development assistance. Thirty-two U.N. funds, programs, agencies, departments, and offices play a role in international development. These entities, which are referred to by many as the U.N. Development System (UNDS), conduct development-related activities in 180 countries with expenditures estimated at $14.7 billion per year. The United States generally supports these activities; it is often among the top donors to UNDS entities and serves on various U.N. executive boards and other governance mechanisms. The United Nations estimates that in 2009, the United States contributed $1.306 billion to U.N. development-related activities, more than any other country. Congress appropriates funds to several U.N. entities involved in development, and as such has demonstrated an ongoing interest in UNDS efforts, including: the role and efficiency of the U.N. system, and multilateral assistance as a whole, in international development; the U.N. system's effectiveness in providing development assistance at the country level; and the level of U.S. funding of such activities, most recently in light of the global financial crisis, economic recession, and calls to reduce the U.S. budget deficit. These issues have been discussed individually, as well as in the broader context of U.N. system reform, U.S. and international efforts to achieve the Millennium Development Goals (MDGs), and U.S. foreign aid reform. This report discusses the origins and evolving role of the UNDS and its perceived strengths and weaknesses. It examines the current UNDS structure, including country, regional, and global activities, as well as funding levels and trends. It also discusses congressional perspectives, Obama Administration policy, and current UNDS reform efforts. In addition, it analyzes possible challenges and policy issues related to U.N. development assistance efforts, including: Lack of system-wide data collection and sharing mechanisms— The UNDS lacks a central mechanism for collecting and disseminating information about its activities. Consequently, donors, host governments, and in some cases U.N. entities themselves, do not have a full picture of the range of activities occurring in the countries where they operate. Many contend that this leads to a lack of coordination and duplication within the UNDS. Moreover, it makes it more difficult for donors, recipient governments, and the U.N. system to identify gaps and areas for improvement. Competition among and within U.N. system entities— Many in the development community debate the impact of competition among U.N. entities on overall UNDS efforts. Generally, experts agree that competition can benefit U.N. development activities by encouraging organizations to improve the quality of their services. At the same time, some have questioned whether the decentralized nature of the U.N. system creates an environment where U.N. entities act in their own best interest rather than that of the host government or of the UNDS as a whole. The impact of different funding flows on UNDS activities —Non-core (or earmarked) funding has become the largest source of development-related expenditures in the UNDS. Some experts are concerned that such funding may limit the degree to which host countries are involved in the design of programs in their countries. Some also worry that an increase in non-core funding, which is often unpredictable, may impact the ability of organizations to fund their mandates and missions and could affect long-term planning. Others, however, argue that non-core funding allows donors to contribute to activities in sectors and countries that align with their development priorities and therefore encourages donor participation. The 32 U.N. entities that comprise the UNDS include seven Secretariat offices or departments, nine specialized agencies, nine funds and programs, five regional commissions, and two additional U.N. bodies. (See Appendix A for a list of these U.N. entities by type and primary funding source.) The UNDS aims to help countries achieve social and economic progress by undertaking or supporting a range of operational and normative development activities—including technical assistance, setting and facilitating technical standards and norms, providing forums for intergovernmental cooperation and policy-sharing, advocacy and awareness raising, and research and data collection. These activities are guided by the priorities of the national governments as well as by various international laws, norms, and standards such as treaties, U.N. resolutions and decisions, and the MDGs. For the past several decades, the international community has repeatedly acknowledged the need to improve U.N. development efforts through enhanced coordination and substantive reform. Various expert panels, commissions, and U.N. Secretaries-General have made recommendations on how to enhance the efficiency and effectiveness of the UNDS. Many of their proposed reforms have been markedly similar, calling for more integrated planning and budgeting systems, strengthening coordination at the country level, and harmonizing the activities of U.N. specialized agencies. In 1966, for example, the U.N. Development Program (UNDP) commissioned A Study of the Capacity of the United Nations Development System ( Capacity Study ), which found that "at the country level capacity suffers because the U.N. development system is not presented in an integrated fashion." It recommended that governments and the United Nations take steps to address lack of governance, coordination, interagency competition, and administrative barriers within the UNDS. In 2006, nearly 40 years later, then-U.N. Secretary-General Kofi Annan appointed a high-level expert panel on system-wide coherence to evaluate U.N. system development activities. The panel found that U.N. development assistance was "fragmented and weak," contributing to inefficiencies and duplication across the U.N. development system, particularly at the country level. The similarities between the high-level panel's observations and those made decades earlier in the Capacity Study illustrate the continued challenges to institutional reform faced by the U.N. system and governments, including the United States, as they try to improve UNDS efficiency and effectiveness. Despite what many view as the slow pace of development reform, U.N. member states and the U.N. Secretary-General have made incremental efforts to improve the UNDS. In 1997, for example, Secretary-General Annan established the U.N. Development Group (UNDG) to help coordinate the activities of U.N. entities that play a role in development. In 2006, at the recommendation of the high-level panel on system-wide coherence, U.N. member states established the Delivering as One (DAO) initiative, which aims to enhance coordination and coherence among U.N. agencies at the country level by consolidating all U.N. entities into one building with one budget and management structure. DAO, which is generally supported by the Obama Administration, has been implemented as a pilot program in several countries with varied degrees of progress. When the United Nations was first established in 1945, many people did not foresee the role that it would eventually play in global, long-term development efforts. During the United Nations' first few years, there were no mechanisms for addressing overall development activities. The founders of the U.N. specialized agencies viewed development operations as secondary to the primary goals of encouraging international cooperation in focus areas such as agriculture, education, health, and aviation, and dealing with more acute crises in the aftermath of World War II. In 1948, the General Assembly began to recognize the role the United Nations could play in development and decided that in addition to the programs already undertaken by the specialized agencies, U.N. activities should be expanded to include technical assistance carried out under the U.N. Secretary-General. It established the Expanded Program of Technical Assistance (EPTA) in 1949 to provide technical assistance to developing nations. In 1958, it created the Special U.N. Fund for Economic Development, which was charged with conducting surveys and analysis for major development projects. In 1965, in response to increased U.N. membership and to consolidate financial resources and reduce duplication, U.N. member states decided to merge the two bodies into one entity—UNDP. This merger laid the foundation for the current UNDS. Initially, UNDP's role was to coordinate the provision of technical assistance, making funds available to other bodies in the U.N. system depending on the expertise required. The particular agency or program would execute the project using UNDP funds and financial support provided by the host government. In 1971, the General Assembly updated the organizational structure and functions of UNDP. At that time, the concepts of country programs and country resident representatives were introduced as additional coordinating tools. These concepts were strengthened and broadened by more reforms in the 1990s. Presently, UNDP carries out development activities, particularly technical assistance, in specific regions and countries. It also works to coordinate, focus, and in some cases finance the work of U.N. specialized agencies, funds, programs, and offices that play a role in development. The UNDS is one of many players in a complex global development landscape. It conducts its activities parallel to and sometimes in collaboration with governments, intergovernmental organizations, non-governmental organizations (NGOs), other multilateral organizations, and the private sector. Over the years, the nature of global development has shifted with the emergence of new types of donors and evolving development challenges. Many experts have increasingly recognized that the UNDS needs to adapt to these changes. Levels of Official Development Assistance (ODA) to developing countries have increased, as have the number of governmental and intergovernmental aid donors. The emergence of new bilateral donors (that are also aid recipients) such as Brazil, China, India, and Russia, have challenged the more traditional structure of foreign assistance in which aid flows from developed to developing countries. Contributions from the private sector, foundations, NGOs, and others have continued to grow, and many experts have increasingly recognized the significant role of private foreign investment in fostering development. Donors have also changed the way they fund development activities, often earmarking their contributions for specific projects rather than providing contributions that directly relate to the mandate and mission of development organizations. Increased competition among global development organizations has demonstrated the need for U.N. entities, and the UNDS as a whole, to provide more effective, streamlined, and accountable development services. Since its inception, the UNDS has been criticized by many development experts and governments who contend that the system is not living up to its potential. Most U.N. entities are independent international intergovernmental organizations with distinct rules, membership, and financial resources. They report to their governing bodies, which are comprised of member states, and do not fall under the direct authority of the U.N. Secretary-General or U.N. system coordinating mechanisms. Consequently, U.N. development activities, particularly those at the country level, have continued to be criticized for inefficiency, duplication, and fragmentation. The expansion of UNDS activities and the creation of new U.N. development organizations during the last several decades has magnified many of these concerns. Some criticism of the UNDS as a whole has been compounded by apprehension about UNDP's management and oversight mechanisms. Since the mid-2000s, reports of UNDP misusing funds in North Korea have raised questions about U.N. system management in-country, as well as overall transparency and accountability within UNDP and the UNDS—especially related to internal auditing and investigation procedures. This had led some policymakers in the United States, including Members of Congress, to question whether providing financial contributions to UNDP and, more broadly, other parts of the UNDS, is the most effective use of U.S. foreign assistance dollars. Although the UNDS has faced criticism from some corners, it is also recognized for its unique role in global development efforts. Many experts and policymakers have argued that while the decentralized nature of the U.N. system can hinder its development activities, it can also be a strength. They assert that the array of U.N. agencies specializing in various sectors and populations allows for U.N. entities to develop long-term, issue-specific expertise and more efficiently respond to specialized development concerns as they arise. Supporters also point to the United Nations' neutrality as a distinct advantage in development cooperation. The United Nations comprises 193 member states with equal voting rights. This universal membership provides it with a neutrality and legitimacy not enjoyed by other development organizations. Developing states, for instance, may hold seats on executive boards and cast votes in U.N. forums that directly impact the nature and financing of UNDS efforts. These opportunities are not always available in other organizations; in the World Bank Group, for example, nations with the largest financial contributions tend to have the most influence. The legitimacy provided by the United Nations' universal membership also allows the UNDS to operate in politically sensitive areas where other organizations and governments may not be permitted. Moreover, unlike bilateral aid, UNDS assistance is not tied to the priorities of a specific donor nation; many contend that this makes recipient countries more open to receiving development assistance and the policy advice that often accompanies it. Some experts also assert that because of what some view as its universality, broad mandate, and global expertise, the U.N. system has a comparative advantage over other organizations in key areas of development—particularly in providing capacity building and technical assistance, offering policy advice to governments, and setting and maintaining international norms and standards. In 2009, the last year for which data are available, development-related activities represented almost half (41%) of total U.N. system-wide contributions. As illustrated in Figure 1 , while a large number of U.N. entities are engaged in such activities, only a handful account for the bulk of these efforts. In 2008, four entities—UNDP, the U.N. Children's Fund (UNICEF), World Health Organization (WHO), and Food and Agriculture Organization (FAO)—accounted for more than two-thirds of all development-related activities. UNDP alone accounted for 37% of all U.N. development expenditures. UNDS activities focus on a number of sectors including health, gender, science and technology, and social development. As demonstrated in Figure 2 , UNDS's areas of focus have gradually shifted during the last two decades. Since 1993, activities focused on health have declined from 31% to 25%, while those focusing on agriculture have decreased from 14% to 6%. At the same time, activities related to gender and social development have each increased by 6%. At the country level, the UNDS has 136 U.N. Country Teams (UNCTs) covering 180 countries that aim to ensure the effectiveness of U.N. system interagency coordination and decision making. The Teams, which are comprised of representatives from all U.N. system entities operating in-country, work with host governments to ensure that that the U.N. system delivers tangible results in line with the host government's priorities. UNCTs engage in a range of activities, including developing and implementing a country-specific strategic program framework referred to as U.N. Development Assistance Framework (UNDAF); endorsing annual work plans; and overseeing internal U.N. theme groups that carry out program design, implementation, and monitoring under UNDAF priorities. The UNCTs also review their overall performance and make decisions about country-level fundraising and joint financing. UNCTs are led by U.N. Resident Coordinators (RCs), who are funded and managed by UNDP and report to the Secretary-General through the Chair of UNDG. The purpose of the RC is to have one person in each country coordinate all U.N. entities addressing operational activities. Many RCs hold multiple positions, also serving as the Humanitarian Coordinator (HC), the Designated Official for Safety and Security, or the UNDP Resident Representative. There are currently 127 RCs globally, plus two RC-type posts in the occupied Palestinian territories and Kosovo. At the regional level, UNDS activities are conducted through five regional economic commissions, and some 30 regional or sub-regional offices of various funds, programs, and specialized agencies. The regional commissions work to promote multilateral dialogue, enhance cooperation, and share knowledge at the regional level. Regional offices established by UNDS entities such as the International Labor Organization (ILO), UNICEF, and UNFPA, work to promote regional knowledge and cooperation at the agency level and among partners. Many regional offices are outfitted to provide technical capacity and resources to help UNCTs develop and implement projects. UNDP, for instance, has sent some policy specialists to its regional posts, while UNICEF regional offices are fully responsible for providing oversight of and support to UNCTs. At the headquarters level, UNDS entities engage in a range of activities that address global, regional, and country-specific efforts. The exact nature of a U.N. entity's work depends on the mandate, structure, and governance of the organization. Examples of work that may be undertaken at headquarters include formulating regional and country-specific policies and programs; coordinating and overseeing regional and field offices; and supporting governance mechanisms such as executive boards, committees, and member state assemblies. Many U.N. entity headquarters also conduct human resources and budget-related activities and liaise with other U.N. entities, governments, and NGOs. U.N. entity headquarters also participate in internal U.N. system coordination mechanisms related to development, particularly the U.N. Development Group (UNDG), which was established by Secretary-General Kofi Annan in 1997 as part of broader U.N. system-wide reform efforts. The UNDG is comprised of the 32 U.N. entities that play a role in development; it aims to coordinate approaches to operational activities at the country level in support of national governments' development priorities. The group is based at U.N. Headquarters in New York and is chaired by the Administrator of UNDP. Its main activities include developing measures to improve strategic and operational coherence at the country level, and developing policies and procedures for the management of the Resident Coordinators (RCs). Through the UNDG Advisory Group, it also provides guidance to the Chair of UNDG (the UNDP Administrator) on the management of the RC system on behalf of the U.N. system. UNDG is one of three pillars of the U.N. Chief Executives Board for Coordination (CEB), which is the primary U.N. system mechanism for supporting and reinforcing the coordinating role of U.N. intergovernmental bodies on social, economic, and related issues. The U.N. Development Operations Coordination Office (UNDOCO) provides technical support for UNDG and works to link UNDG headquarters activities and U.N. system operations at the country level. The UNDS is funded by donor contributions to individual U.N. entities. Donors include governments, intergovernmental organizations, NGOs, private organizations, and individuals, among others. Total government contributions to U.N. system development-related activities in 2009 was $14.2 billion. Approximately one-third of these contributions were in the form of core resources. The top five government donors were the United States ($1.3 billion); Japan ($804.6 million); the Netherlands ($796.9 million); the United Kingdom ($743.9); and Norway ($695.2 million). Funding mechanisms for UNDS entities vary depending on their governance and structure. For instance, U.N. funds and programs such as UNDP, UNFPA, UNICEF, and UN Women rely primarily on voluntary contributions from donors. Payment of contributions are up to each individual country; no country is legally obligated to contribute to these programs. U.N. specialized agencies, such as ILO, WHO, WFP, and FAO, however, rely on assessed contributions to their regular budgets. Payment of such contributions is one of the legal obligations accepted by a country when it joins an organization. Assessed contributions provide entities with a regular source of income for staffing and implementation of authorized programs. As demonstrated in Figure 3 , since 2003 overall UNDS expenditures have generally increased in both current and constant dollars. In 2009, the UNDS spent approximately $14.7 billion on development-related activities, compared with $8.7 billion in 2004. This represents a 69% increase in current dollars and a 46% increase in constant dollars. Of the $14.7 billion in expenditures for 2009, approximately 53% were designated for country programmable resources; 18% for global and regional programs; 16% for program support and management; 7% for local resources provided by recipient countries; and 6% were not attributed to any specific activities. ( Figure 4 .) Africa received the largest proportion of expenditures from both U.N. funds and programs as well as the specialized agencies, with 25% of development-related expenditures occurring in the region in 2009. It is followed by the Asia/Pacific (19%); the Americas (10%); Western Asia (4%); Europe (2%); regional and global programs (14%); and program support and management (15%). Development-related expenditures to the Americas were funded primarily from local resources (payments or financial support provided by the host governments). Afghanistan, Sudan, the Democratic Republic of the Congo, and India received the most funding from the UNDS for country programmable resources in 2009. Non-core or earmarked funding has become the largest source of development-related expenditures in the UNDS. As illustrated in Figure 5 , between 1994 and 2009, core contributions for long-term UNDS development activities rose from $3.4 billion to $4.8 billion in current dollars. During the same period, non-core contributions increased from $1.5 billion to $9.4 billion. In constant dollars, this represents a 2% increase in core contributions and a notable 355% increase in non-core contributions. As non-core resources have become a more prevalent source of UNDS contributions, some development experts have expressed concern that such funding may limit the degree to which host countries are involved in the selection and design of programs in their countries. More broadly, some worry that a rise in non-core funding may affect the ability of organizations to fund their core mandates and missions. Core resources, some argue, allow organizations to be more efficient and effective in ensuring that infrastructure and resources are in place for long-term development planning. Non-core funding, on the other hand, is less predictable and may lead to higher transaction costs for organizations due to additional monitoring and reporting requirements that may be instituted. Others, particularly donor governments and organizations, contend that non-core funding allows donors to fund activities in sectors, countries, and regions that align with their domestic and foreign policy priorities. They argue that as a whole, non-core contributions are important mechanisms for increasing multilateral organizations' total resources available for development. (Without non-core funding options, some suggest, governments may be more inclined to engage in bilateral development activities instead of contributing to multilateral organizations.) Some also emphasize that non-core funds allow development organizations to participate in more activities than they would otherwise be able to under their existing institutional mandates. The United Nations accounts for the largest share of multilateral funding by OECD Development Assistance Committee (DAC) countries when core and non-core contributions are combined. In 2009, total OECD-DAC aid to multilateral organizations such as the UNDS, World Bank, regional banks, and European Commission (EC) was $57.3 billion. UNDS core and non-core funding accounted for about $18.7 billion, or 33%, of the total share—a slight increase from the 2006 share of 30%. (See Figure 6 .) Despite these recent increases in the overall UNDS share of multilateral aid, some experts have expressed concern regarding what appears to be an ongoing drop in the share of core multilateral funding. As illustrated in Figure 7 , the United Nations' share of core multilateral aid has steadily decreased in relative terms during the past decade, falling from 25% during the 1995-1997 time period to 18% during the 2007-2009 period. The United Nations attributes the decrease to strong growth in the funding of the EC's multilateral activities. The OECD agrees and suggests that increased contributions to the Global Fund and World Bank Group have also contributed to the relative decline. More broadly, some speculate that the apparent drop may indicate not only the growth of other multilateral organizations, but also a lack of donor confidence in the effectiveness and benefits of U.N. development efforts. Nevertheless, the broader implications of this data for the U.N. system remain to be seen. Statistics for the 2010-2012 time period will likely shed further light on whether this is part of a longer-term, ongoing trend or a temporary change. The Obama Administration has expressed ongoing support for UNDS activities and multilateral cooperation as a whole. In the State Department's 2010 Quadrennial Diplomacy and Development Review, the Administration stated that U.N. agencies and programs are "particularly critical [development] partners" with the United States, and emphasized that given the magnitude of U.S. assistance to multilateral organizations, the U.S. government must work to "improve operational cooperation with U.N. agencies" in New York and in the field, particularly in situations that involve complex emergencies that are U.S. priorities such as in Afghanistan, Haiti, Pakistan, and Sudan. When discussing U.N. system development activities in U.N. forums, Administration officials have consistently raised the importance of: achieving overall coherence at the country level , which includes enhancing and recognizing the important role of the U.N. Resident Coordinator, strengthening the individual capacities and coordination of U.N. entities, and supporting the concept of country ownership in the development process; improving transparency and accountability through enhanced oversight, such as results-based budgeting and greater access to audit information to ensure that expenditures are accounted for and that programs demonstrate effective results; and improving evaluation mechanisms to better demonstrate the effectiveness of UNDS activities to donors and host countries, and to provide mechanisms for organizations to measure their effectiveness. The Administration has also emphasized that U.N. entities need to continually update management practices to keep up with emerging development institutions that are "more nimble, transparent, and accountable." It generally supports U.N. system-wide coherence efforts, including the Delivering as One (DAO) pilot program, a country-specific pilot program that is part of broader U.N. member state efforts to improve U.N. system-wide coherence. Notably, the Administration has emphasized many of these same issues in efforts to improve U.S. bilateral development agencies such as the U.S. Agency for International Development (USAID) and the Millennium Challenge Corporation (MCC). Each year, Congress authorizes or appropriates U.S. contributions to UNDS entities and often seeks to influence U.S. policy within the United Nations to further U.S. development and foreign policy objectives. Examples of legislative tools that Members may use to seek influence or direct U.S. participation in the U.N. system include: passing "sense of the Congress" resolutions; confirming U.S. nominees for U.N. posts; conducting oversight of U.N. programs or U.S. Administration policies through hearings and investigations; and funding, withholding, or placing limits on U.S. contributions to U.N. entities. During the 111 th and 112 th Congresses, Members have introduced legislation linking U.N. system reforms to U.S. contributions, held hearings on issues related to U.N. system efficiency and effectiveness, and issued committee reports addressing aspects of U.N. system transparency, particularly related to UNDP. U.S. contributions to UNDS entities are generally made in two ways: (1) assessed contributions, which are required dues at percentage levels established by the membership of each organization; and (2) voluntary contributions, which finance special programs and offices created by the U.N. system and represent more than half of the total aggregated funds received by the U.N. system. U.S. assessed contributions are funded through the Department of State budget. Congress authorizes these funds in foreign relations authorization acts and appropriates the money in Department of State, Foreign Operations, and Related Programs appropriations legislation. The regular assessed budgets of U.N. system organizations, including many in the UNDS, are included in the Contributions to International Organizations (CIO) account. U.S. voluntary contributions to UNDS entities are financed through the foreign assistance authorization and foreign operations appropriations legislation, primarily through the International Organizations and Programs (IO&P) account. IO&P does not include voluntary contributions to the U.N. High Commissioner for Refugees (UNHCR), which has a different authorization and is funded through the Migration and Refugee Assistance account. The United Nations estimates that in 2009, the United States made $1.306 billion in development-related contributions to the U.N. system, more than any other country. As shown in Table 1 , in FY2010 the United States contributed over $450 million in resources to the four UNDS entities that account for over two-thirds of UNDS activities in 2008—UNDP, UNICEF, FAO, and WHO. The following sections highlight two issues that might be of particular significance to the 112 th Congress as it considers U.S. participation in and funding of the UNDS: (1) the impact of limiting U.S. contributions to U.N. system entities, and (2) the benefits and drawbacks of multilateral versus bilateral assistance. In the past, Congress has placed financial contributions or limits on U.S. funding to U.N. entities or programs of which it did not approve, including those that are part of the UNDS. Since 1980, for example, it has withheld funds from regular budget programs, including the U.N. Special Unit on Palestinian Rights and the Preparatory Commission on the Law of the Sea. Within the UNDS, Congress has withheld or restricted funds to the U.N. Population Fund (UNFPA) due to concerns regarding the organization's role in coercive abortion activities in China. It has also withheld funding and withdrew membership from the U.N. Educational, Scientific, and Cultural Organization (UNESCO) due to concerns about politicization of the organization and unrestrained budgetary expansion. Policymakers disagree on the political and practical implications of withholding or restricting U.S. contributions to the U.N. system. Opponents of withholding funds are concerned that doing so may weaken U.S. influence at the United Nations and on UNDS activities, thereby undercutting the United States' ability to conduct diplomacy and pursue its development objectives in the multilateral system. Supporters of withholding funds argue that the United States should use its position as one of the largest financial contributors to the UNDS to push for the implementation of policies that lead to comprehensive reform. They emphasize that limiting or withholding U.S. contributions to the UNDS may encourage countries to find common ground on divisive issues. Some also assert that legislation threatening to cut off U.S. funding of the United Nations has led to substantive changes. The impact of withholding U.S. funds from a UNDS entity or program depends on the origin of the organization or program's funding. For example: If a program is funded, in whole or in part, through the U.N. regular budget and the United States withholds its proportionate share of its assessed budget contributions, regular budget funding of the program or entity will continue, as regular budget contributions are used to finance the budget as a whole and are not targeted for specific programmatic purposes. (Some programs or entities may be financed in part through the regular budget; their funding may come from a variety of extrabudgetary resources, such as trust funds.) Thus, targeted withholding of regular budget contributions, by the United States or other U.N. member states, may not achieve the desired effect. If the United States withholds or limits contributions to a U.N. entity funded primarily by member state voluntary contributions, the impact could be significant because these organizations depend on such contributions for the bulk of their activities. Withholding contributions to a specialized agency where the United States is assessed at a certain amount could also have a substantial effect on the entity's operations, particularly in the first several budget cycles after the money is withheld. For example, the United States is assessed at 22% of the FAO budget. If the United States were to withhold this contribution, nearly one-quarter of the organization's budget would be reduced by that amount. Nonpayment might also lead to the United States losing its membership in the specialized agency. When considering UNDS activities, U.S. policymakers may wish to consider the benefits and drawbacks of providing bilateral versus multilateral foreign assistance. Many donors contend that through bilateral aid they have more control over how and where their money is spent. (Bilateral assistance, for example, allows countries to channel resources to countries or organizations of strategic importance regardless of the development needs.) In contrast, multilateral donors have little direct control over how their contributions are spent. Some donors and experts further contend that multilateral institutions, including U.N. entities, lack accountability and do not provide enough evidence of their effectiveness or overall impact on development. In their view, such organizations are more concerned with short-term results like conferences, reports, and studies, rather than achieving sustainable results through long-term monitoring and evaluations processes. Some experts also hold that it is politically easier for governments to justify bilateral rather than multilateral aid to their citizens due to the perceived institutional complexities and bureaucratic nature of multilateral organizations. Despite potential drawbacks, many donors, including the United States, have recognized the advantages of multilateral aid. Experts maintain that it benefits the United States because it allows the government to share development costs and resources with other governments and organizations (often referred to as burden sharing). Moreover, some argue that U.S. support of multilateral organizations provides development assistance at lower costs and with relatively little political risk. It also allows the United States to contribute to development activities in areas or sectors where it might not otherwise engage. From a political perspective, many assert that by funding and supporting positions in multilateral organizations, the United States can potentially influence the policy direction of such organizations and demonstrate its leadership in global development. More broadly, some have suggested that U.S. financial contributions to and participation in the multilateral development activities, including the UNDS, can impact the United States' influence and credibility in other multilateral forums such as the U.N. Security Council, Group of 20 (G-20), and international financial institutions. Although the United States has generally supported and funded U.N. system development activities, its overall contributions to U.N. entities are less than other U.S. foreign assistance activities, particularly bilateral efforts. Indeed, U.S. multilateral assistance as a whole—which includes contributions to the U.N. system as well as to multilateral development banks and other multilateral organizations—is a relatively small portion of overall U.S. foreign assistance, representing 7% ($2.6 billion) of total aid in FY2010. (In contrast, countries such as the United Kingdom and Germany disbursed about one-third of their foreign aid to multilateral organizations.) The OECD-DAC reports that during the past decade, U.S. contributions to multilateral organizations, including the U.N. system, have remained relatively steady while U.S. bilateral ODA has significantly increased. (See Figure 8 . ) Experts suggest this trend has been precipitated by several factors, including increased U.S. investment in bilateral programs such as the Millennium Challenge Corporation and the President's Emergency Plan for AIDS Relief (PEPFAR) and other global health efforts, as well as ongoing concerns about the effectiveness and efficiency of multilateral organizations, including the U.N. system, in fulfilling U.S. foreign policy objectives. Over the years, U.N. member states, including the United States, have repeatedly recognized the need to improve the UNDS. Accordingly, they have implemented reforms that have generally been undertaken every 10 to 15 years, usually with mixed results. During the last decade, some of these reform efforts, such as the establishment of the UNDG to coordinate UNDS activities, have demonstrated progress. Generally, however, experts agree that additional changes, some of which are discussed below, are needed for the current system to operate as efficiently and effectively as possible. This section provides examples of two recent reform-related frameworks and activities that Members of the 112 th Congress may wish to take into account when considering U.S. funding of and participation in the UNDS: the General Assembly's comprehensive policy reviews, which provide a foundation for UNDS reform efforts; and the Delivering as One (DAO) initiative, a country-specific pilot program that is part of broader member state efforts to improve U.N. system-wide coherence. The primary U.N. mandates for current UNDS reform efforts reside in a series of comprehensive policy review (CPR) resolutions adopted about every three years by the General Assembly, most recently in 1998, 2001, 2004, and 2007. These resolutions, which have been implemented with varying degrees of success, work to address concerns that include poor operational coherence at the country level; insufficient UNDS data coverage, availability, and reliability; and lack of coordination and communication among all levels of the UNDS (country, regional, headquarters). The 2001 CPR, for example, asked U.N. entities to emphasize simplification and harmonization in their rules and procedures, calling for concrete steps to decrease duplication and transaction costs. The 2004 CPR resolution called for further operational harmonization, especially at the country level. It also undertook an evaluation of UNDS capacity to assist national efforts of developing countries. Most recently, in 2007, the General Assembly adopted CPR resolution 62/208 that underscored the importance of national ownership and leadership in the UNDS as well as the need for flexibility in responding to national development requirements. It provided specific guidance on funding and contributions to UNDS, cooperation among developing countries, development of national capacity, and enhanced evaluation mechanisms. It also acknowledged the need to improve UNDS information-sharing and reporting. In 2008, U.N. member states agreed that the CPR resolutions should be reviewed every four years instead of every three years. Thus, a new quadrennial comprehensive policy review resolution will be addressed by the General Assembly in the fall of 2011. In September 2005, heads of state and government met at U.N. Headquarters in New York for the U.N. World Summit to review the progress made in fulfilling the 2000 Millennium Summit goals and commitments made in earlier major U.N. conferences. In the Summit Outcome Document, governments called on the Secretary-General to improve U.N. system-wide coherence and coordination by "strengthening linkages between the normative work of the United Nations system and its operational activities." Accordingly, in February 2006, the Secretary-General announced the creation of a high-level panel to examine how the U.N. system can work more effectively, especially in the areas of development, humanitarian assistance, and the environment. The panel's final report emphasized the overall value and progress of the United Nations, but also noted that without substantial reforms the United Nations would be "unable to deliver on its promises and maintain its legitimate position at the heart of the multilateral system." The high-level panel recommended the concept of Delivering as One (DAO) to promote greater coherence and consolidation of U.N. offices and agencies at the country, regional, and headquarters levels. The panel also recommended an overhaul of U.N. business and management practices at the country level to bring greater focus on achieving the MDGs. Under DAO, U.N. agencies operating in-country share one budget, one leader, one office, and one program with harmonized business practices. Participants hope that such changes create greater country ownership, reduce transaction costs for governments, and increase the impact and effectiveness of the U.N. system through more coherent and coordinated programs. In December 2006, the United Nations announced that it would test a voluntary DAO pilot program in Vietnam. (In Vietnam, 16 U.N. agencies operated in 10 separate locations in Hanoi, leading to a lack of harmonization among U.N. entities operating in-country.) It subsequently announced the establishment of voluntary DAO initiatives in seven other countries: Albania, Cape Verde, Mozambique, Pakistan, Rwanda, Tanzania, and Uruguay. A "One U.N." multi-donor trust fund was established to provide donors with a direct means to support DAO. Since the DAO initiative was launched, participants have sought to evaluate the initiative's progress and challenges through various stocktaking reports, meetings, and working groups. In June 2010, donors, countries, and U.N. agencies convened in Hanoi for a High-Level Tripartite Conference to discuss lessons learned and a possible way forward. Overall, participants found that the implementation of DAO in the pilot countries has provided renewed host government leadership to U.N. programs, better alignment of national priorities and U.N. efforts, and enhanced coherence and effectiveness of U.N. support. At the same time, many agree that much more could be done to improve DAO. Several pilot evaluations, for example, found that the RCs do not have full authority over all U.N. entities operating in-country, leading to a lack of coordination and accountability in UNCTs. Moreover, U.N. agency headquarters and governing bodies are viewed by many as being "behind the curve" on DAO, particularly because the pace of reform at the headquarters level appears to lag behind reform and innovation at the country level. Finally, the evaluations found that a lack of multi-year and predictable core funding has reduced the United Nations' capacity to improve long-term planning and limited its ability to provide accurate and timely inputs in country planning. The future of DAO remains uncertain. It is unclear whether U.N. member states will decide to expand the initiative beyond the eight pilot countries. An independent evaluation of DAO is currently being conducted by an ad hoc Evaluation Management Group comprising representatives from selected U.N. member states. Secretary-General Ban hopes that the evaluation will be completed by mid-to-late 2011 so that it can inform the upcoming quadrennial comprehensive policy review. As the 112 th Congress considers U.S. participation in and contributions to the UNDS, it may take the following challenges and policy issues into account. U.N. member state perspectives and relationships are constantly evolving; however, fundamental disagreements between developing countries (represented primarily by the G-77 and China) and developed countries (often represented by the United States, Japan, and the United Kingdom) regarding the role of the United Nations in development have remained relatively consistent. In general, developed countries, which account for the majority of assessed contributions to the U.N. regular budget and donor contributions to the UNDS, would like the Secretary-General to have greater flexibility and authority to implement UNDS reforms, specifically those related to oversight, transparency, and human resources. While they recognize the importance of maintaining the autonomy of the specialized agencies, some developed countries would also like to see a more centralized and coordinated U.N. presence at the country level. Developing countries, on the other hand, generally object to policies that may enhance the power of the Secretary-General or developed countries and decrease the power of the General Assembly and its budget and administrative committees. Some experts contend that developing countries have resisted the idea of creating a more consolidated and centralized UNDS because a decentralized system suits their interests. In such a system, some experts hold, developing countries have "better possibilities" to control the system and use it to their advantage. One of the foremost challenges facing the UNDS, including its administration, funding, and operations, is the dynamic between and among U.N. member states. The majority of UNDS entities are controlled by various governance structures, including executive boards and committees. These bodies include representatives of governments that have their own political agendas, foreign policy and national security goals, and definitions of development and U.N. reform. For instance, some governments hold differing opinions on how to most effectively implement reform and how to measure the success or failure of a given reform initiative. Others present their policy priorities as reform to further their own policy goals, causing distrust among governments that question whether certain reform proposals are based on a national self-interest or a desire to enhance U.N. development efforts. Moreover, some governments appear to support contradictory reform proposals and recommendations in different executive boards, making it difficult to implement consistent and coordinated reforms across the development system. Many in the development community have raised questions about the impact of competition among U.N. entities on overall U.N. development efforts. On the one hand, experts agree that competition can benefit U.N. development activities by spurring organizations to improve the quality of their services. On the other hand, many are concerned that the decentralized nature of the U.N. system may lead U.N. entities to consider their own institutional interests above the interests of host governments or the UNDS as a whole. For example, the recent shift from core to non-core contributions, both within the UNDS and the broader development community, has increased competition for funding among some U.N. entities. As a result, U.N. organizations often work separately, rather than together, to raise funds. In addition to vying for scarce funds, U.N. entities may also compete for access to government officials and ministries, office space, or control over various projects and programs. Such competition, experts argue, could lead to duplication of activities and excess expenses. In addition, some have suggested that UNDP's increasingly centralized role in U.N. country operations has led to resentment and increased competition among some UNDS entities that feel that they are losing control of development activities for which they were previously responsible. The UNDS lacks a central mechanism for collecting and disseminating comparable and comprehensive information on its activities at the country, regional, and headquarters levels. As a result, donors, host governments, and in many cases U.N. entities themselves, may not have a clear picture of the range of activities occurring in the country where they operate. A U.N. Country Team (UNCT) is not required to track or maintain a database of all UNDS activities undertaken in its country, and if such a mechanism exists, it is usually at the discretion of a Resident Coordinator (RC). There are also no formal mechanisms in place for RCs or UNCTs to share best practices or lessons learned. Many argue that this dearth of information and knowledge-sharing leads to a lack of coordination and duplication within the UNDS. Moreover, it makes it more difficult for donors, governments, and the U.N. system itself to identify gaps and areas of possible improvement in UNDS activities. Efforts to streamline U.N. system data collection and information-sharing are in various stages of development and implementation. The U.N. System Chief Executives Board for Coordination (CEB) and the General Assembly acknowledged the need for system-wide data coverage, availability, and reliability. In 2007, for instance, the General Assembly requested the Secretary-General to continue to "broaden and improve the coverage, timeliness, reliability, quality and comparability of system-wide financial data, definitions and classifications for the financial reporting" of UNDS operational activities for development in a coherent way. It also called on him to "build a comprehensive, sustainable and consistent financial data and reporting system" for UNDS activities. A key challenge facing the UNDS is monitoring and evaluating the development impact of its activities, which is often difficult to measure or quantify. Sufficient baseline data are needed for organizations to monitor and assess the impact of their programs, yet in many cases such data are not available due to a lack of national statistical capacity in developing countries. There are also questions as to how development results (or a lack of results) can be attributed to the work of one particular organization or, more narrowly, one program or project. Changes in the political atmosphere, external shocks such as natural disasters, and shifts in national priorities can severely impact the success, or failure, of development efforts. The obstacles associated with monitoring and evaluation (M&E) in the UNDS are further magnified by a lack of harmonized evaluation mechanisms within the UNDS and across the U.N. system. During the 1990s and early 2000s, many U.N. entities adopted evaluation mechanisms based on results (referred to as results-based frameworks). These frameworks have been implemented to varying degrees and often include disparate definitions and criteria for evaluation. Recognizing the importance of harmonizing evaluation practices, some U.N. entities have taken steps to coordinate evaluation activities. Many development experts agree, however, that efforts to improve M&E within the U.N. system need to be expanded. In 2007, for example, governments called on the UNDS to "pursue and intensify efforts to strengthen evaluation capacities in program countries." Some development experts contend that the quality of UNDS staff varies among countries, and that in many cases the success of a U.N. Country Team (UNCT) often hinges on the leadership qualities and effectiveness of the Resident Coordinator (RC). Experts and governments, including the United States, have acknowledged the challenges associated with the RC position, recognizing that its "complexities and demands have not always made it an attractive career option." RCs are charged with a broad mandate of leading all UNCT activities, yet they have little management authority over other U.N. entities to carry out their responsibilities. One reason for this is lack of incentives; U.N. system staff are evaluated based on their contributions to their individual agencies rather than the U.N. organization as a whole. RCs, on the other hand, are evaluated primarily based on their performance of U.N. system-wide objectives. Consequently, RCs and other UNCT members may be working towards different objectives. The UNDG has acknowledged this inconsistency and notes that in recent years some entities, such as UNFPA, have taken steps to add recognition of U.N. system-wide work to its appraisals. In 2008, the UNDG approved a Management and Accountability System to hold UNCT members accountable in areas where they have agreed to lead the Country Team. At the same time, many point out that the RC's apparent lack of authority is in line with the decentralized nature of the U.N. system and the longstanding autonomy of U.N. specialized agencies. Moreover, some assert that RCs with strong leadership and management skills can and have overcome the inherent challenges of the position to successfully lead UNCT efforts. Accordingly, there is general agreement that RC recruiting should be widened and improved to attract the most qualified people. In 2009, UNDG implemented a "talent-management" initiative that works to align more closely candidate qualifications with post requirements and improve competency assessment and development. It also instituted marketing and communications tools to attract eligible candidates. The extent to which these recruiting efforts have improved the quality of RCs remains unclear. Navigating the transition between humanitarian relief and development has been an issue of longstanding concern within the U.N. system and among the wider development and humanitarian assistance communities. During natural disasters, conflicts, or other humanitarian situations, U.N. operational entities such as the U.N. Office for the Coordination of Humanitarian Affairs (UNOCHA), UNICEF, UNHRC, and WFP, work to alleviate the crisis at hand. While responses to natural disasters or conflicts may differ, typically a U.N. Humanitarian Coordinator (HC) works with U.N. entities, NGOs, the host government, and other partners to coordinate and oversee the U.N. humanitarian response at the country level. In the immediate aftermath, the U.N. system transitions its work from the humanitarian phase (lifesaving and early recovery) to the development phase (restoring livelihoods); in some cases such phases often continue on parallel tracks. Many contend that these relationships could be more effectively coordinated. Moreover, some experts maintain that once the transition to the development phase occurs, humanitarian issues are at risk of falling by the wayside in UNCTs and the UNDS as whole because the majority of RCs and UNCT members are not trained or experienced in humanitarian issues. One of the key areas of discussion is the role of the HC in UNCTs. In 29 UNCTs, RCs wear two hats as both the HC and RC. Humanitarian experts argue that many RCs, including some that hold the dual RC/HC position, are primarily from development backgrounds and do not have sufficient knowledge of humanitarian issues or the humanitarian system. (The United Nations reports that as of June 2011, 64% of the RCs were affiliated with UNDP and 36% were affiliated with other entities.) Critics also contend that some RC/HCs might be reluctant to confront host countries on humanitarian issues because they are afraid of damaging the relationship necessary to carry out the RC role, possibly harming the U.N. system's effectiveness in addressing humanitarian-related issues in specific countries. Effective coordination with other development organizations is an ongoing challenge for the UNDS. Many development experts argue that in light of how the international development community has and will likely continue to evolve, the U.N. system must be increasingly willing and able to work with and leverage the expertise of a range of development organizations. They suggest that improved communication and collaboration among these organizations, particularly at the country level, might minimize duplication of activities and promote information sharing, which in turn could lead to more effective development programs that align with host country priorities. Despite incremental progress in improving coordination in recent years, several obstacles remain. For example, a more crowded development field has led to increased competition for scarce resources. As previously discussed, U.N. entities are often competing with each other, as well as other development organizations, for funding. They may be reluctant to coordinate their funds or activities due to concerns that they might lose influence in a country or sector, or because they have different strategic interests than other donors. In addition, donors are more likely to earmark funds for specific projects, leaving the UNDS and other development organizations with less flexibility in program implementation or coordination. Finally, development experts view the lack of coordination among U.N. entities as a significant obstacle to collaboration with other donors. UNDS entities and international financial institutions (IFIs) such as the World Bank Group, International Monetary Fund (IMF), and regional development banks, share similar development priorities and have been known to undertake nearly identical development projects with little collaboration or communication. (UNDP, for instance, supports a project to decrease green house gas emissions from deforestation and forest degradation, while the World Bank supports a parallel Forest Carbon Partnership Facility and other similar facilities in the Amazon and Congo river basins.) As a result, some observers emphasize that they should strive for greater consistency in their strategic frameworks and priorities at the country level. At the same time, while many experts and governments, including the United States, support enhanced coordination, they also emphasize that because U.N. entities and the IFIs are distinct organizations with different mandates and governance structures there needs to be a clear division of labor between their work. In recent years, the UNDS has taken some steps to include the IFIs in U.N. system activities. In 2007, for instance, the U.N. General Assembly called for the "harmonization of strategic frameworks, instruments, modalities, and partnership arrangements" between the U.N. system and Bretton Woods Institutions. In addition, because they are part of the U.N. system, the World Bank serves as a UNDG observer and both the World Bank Group and the IMF are members of the CEB. During the past decade, many NGOs that work on development issues have become more organized and better funded due to increased contributions from foundations, the private sector, and the general public. As a result, experts contend that their influence on development has grown stronger. Accordingly, many argue that the UNDS should work not only to coordinate its efforts with these institutions, but also to leverage their innovation and expertise. International NGOs in developing countries, for example, are often staffed by experienced local citizens rather than those from outside the country. Some suggest that such individuals could provide unique perspectives on the needs and resources of a particular country. As with the IFIs, many argue that enhancing UNDS communication with NGOs on best practices and ongoing development activities could lead to more efficient and effective development services as a whole. In recent years, governments, experts, and the U.N. system itself have increasingly recognized the contributions of the private sector to development. Despite this recognition, many agree that the UNDS and other development organizations remain ill-equipped to leverage the benefits of private sector development activities, many of which are not immediately obvious because they are not undertaken by traditional development participants or labeled as development. Consequently, some development experts maintain that the UNDS should consider modifying its approach to aid so that it more effectively leverages links between the private and public sectors. Many view private investment, in particular, as an untapped opportunity. Unlike several decades ago, the majority of resources that flow to developing countries now come through private capital rather than Official Development Assistance. The U.S. government, for example, reports that more than 80% of its contributions to the developing world are in the form of private capital rather than foreign aid. The 112 th Congress may debate aspects of U.S. participation in and funding of the UNDS. As highlighted in this report, issues range from the effectiveness of ongoing UNDS reform efforts, to the role of the U.N. system in the global development landscape, and to improving UNDS coordination and accountability at the country, regional, and global level. As Congress considers these challenges, other overarching issues may arise. In recent years, many foreign aid experts have expressed concern regarding ongoing inefficiencies related to the overall organization, effectiveness, and management of U.S. foreign aid. In particular, some have suggested that the United States should more effectively leverage U.S. funding for multilateral programs and institutions to influence country or program directions. Congress may wish to view U.S. participation in the UNDS in this broader context. Experts suggest that any debates regarding UNDS enhancement or reform should be viewed in the broader global development context. As previously discussed, the rise of middle-income economies like Brazil, India, and China as development donors and the increased role of multilateral donors such as the European Union and World Bank in development activities has altered the development landscape. Members of Congress may also wish to consider the UNDS in the context of the G-20's rise as the premier forum for international economic cooperation. Although its effectiveness moving forward is still being debated, the G-20's increasing influence raises questions about the U.N. system's future role in development and, more broadly, global governance. Some experts have emphasized that U.N. development efforts may be undermined by a lack of focus. For example, there are over 9,000 mandates in the U.N. system; many argue that this makes it difficult for member states, and the U.N. system itself, to prioritize its development activities. Some have proposed that the UNDS tighten its focus by concentrating its activities on fragile states or countries emerging from conflict. Others, however, argue that focusing only on specific countries or situations undermines the United Nations' universality. To improve U.N. system development activities, some experts have recommended merging, eliminating, or creating new U.N. entities to streamline and unify U.N. system development activities. Others have suggested consolidating U.N. development activities under one central entity. Most agree, however, that in the near future U.N. member states are unlikely to implement the structural and organizational changes necessary for comprehensive and far-reaching reform. This is due primarily to the decentralized nature of the U.N. system; the autonomy of U.N. agencies, funds, and programs; and disagreements among the United Nations' 193 member states on the mandate and role of the U.N. development system. With this in mind, Congress may consider monitoring ongoing and incremental UNDS reform activities, including the comprehensive policy review (CPR) resolutions adopted by the General Assembly and the implementation of the Delivering as One (DAO) initiative. The future of DAO, in particular, is uncertain. Although many U.N. member states, including the United States, appear to support the initiative, it is unclear whether it will continue beyond the current pilot phase. More broadly, Congress may wish to stay apprised of growing policy debates on the future of the U.N. development system in international development efforts, particularly in light of the global economic crisis, concerns about U.N. system effectiveness, and the emergence of new bilateral and multilateral donors. In the United States, the role of the United Nations in U.S. foreign assistance will likely remain a point of continuous debate for policymakers as they aim to balance domestic concerns and the recession on the one hand, with key foreign policy and development priorities on the other. Appendix A. U.N. Development Group Membership Appendix B. Abbreviations Appendix C. Top Recipients of UNDS Funding, 2009 | Members of Congress continue to demonstrate an ongoing interest in the efficiency and effectiveness of United Nations (U.N.) development activities, both in the context of U.N. reform and broader U.S. development and foreign assistance efforts. Thirty-two U.N. agencies, funds, programs, and offices play a role in development. These entities, collectively referred to as the U.N. development system (UNDS), are independent intergovernmental organizations with distinct mandates, rules, membership, and financial resources. They work to help countries achieve social and economic progress through a range of development activities—including program implementation, technical assistance, providing forums for intergovernmental cooperation, setting and facilitating international standards and norms, advocacy and awareness raising, and research and data collection. In 2009, U.N. system development-related expenditures were estimated at $14.7 billion and accounted for 41% of all U.N. system-wide contributions. Many experts and policymakers recognize the unique role that the United Nations plays in development. In their view, the United Nations' universal membership provides it with a neutrality, legitimacy, and convening power not enjoyed by countries and other development organizations. At the same time, however, the United Nations has been criticized for lacking effectiveness and cohesion in its development activities, particularly at the country level. Some experts suggest that the decentralized nature of the U.N. system has had an unfavorable impact on development coordination, accountability, and information-sharing efforts. To address these issues, U.N. member states have implemented incremental reforms every 10 to 15 years. While some of these reforms have shown progress, experts generally agree that additional changes are needed for the UNDS to operate as effectively as possible. The United States is the largest contributor to the U.N. system as a whole and is often one of the top financial contributors to UNDS entities. It holds leadership roles in U.N. governance mechanisms and annually appropriates funding to UNDS organizations. Given the extent of U.S. participation in and funding of the UNDS, the 112th Congress may raise questions regarding: The overall effectiveness of the UNDS, particularly at the country level—A 2006 report on U.N. system-wide coherence found that U.N. development assistance was "fragmented and weak," contributing to inefficiencies and duplication across the UNDS. Members of Congress may wish to consider ways to improve UNDS activities by examining current challenges and reform efforts. The level and extent of U.S. contributions to the UNDS—During the past decade, some U.S. policymakers have raised concerns about perceived lack of transparency and accountability within the U.N. Development Program (UNDP) and the UNDS. Consequently, some Members of Congress have debated whether providing financial contributions to UNDP and, more broadly, other parts of the UNDS, is an effective use of U.S. foreign assistance. The benefits and drawbacks of multilateral versus bilateral assistance—The role of the United States in the UNDS plays into broader discussions about U.S. foreign assistance and the role of multilateral and bilateral aid in achieving U.S. foreign policy and national security goals. Some contend that bilateral aid provides the government with control over how money is spent. On the other hand, many argue that multilateral aid, including contributions to the UNDS, allows the government to share development costs with other donors. |
In 2008—and again in 2012—the Canadian company TransCanada submitted to the U.S. Department of State an application for a Presidential Permit authorizing construction and operation of pipeline facilities to import crude oil across the U.S.-Canada border. The proposed Keystone XL Pipeline would transport crude oil derived from Canadian oil sands deposits in Alberta as well as crude oil produced from the Bakken region in North Dakota and Montana to a market hub in Nebraska for further delivery to U.S. Gulf Coast refineries. A decision to issue or deny the Presidential Permit on the project is based on the U.S. Department of State's determination of whether the proposed pipeline serves the national interest. A national interest determination rests on a number of factors, including energy security; foreign policy; environmental, social, and economic impacts; and compliance with relevant federal regulations. On June 25, 2013, President Obama announced a national "Climate Action Plan" to reduce emissions of carbon dioxide (CO 2 ) and other greenhouse gases (GHG), as well as to encourage adaptation to expected climate change. During his speech, the President made reference to the proposed Keystone XL Pipeline and stated that an evaluation of the pipeline's impact on climate change would factor into the State Department's national interest determination: Allowing the Keystone pipeline to be built requires a finding that doing so would be in our nation's interest. And our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution. The net effects of the pipeline's impact on our climate will be absolutely critical to determining whether this project is allowed to go forward. Both supporters and opponents of the proposed Keystone XL Pipeline reacted positively to the President's comments, signaling that an assessment of the net effects of the pipeline's impact on the climate—as well as the significance of those effects—is still under intense debate. The effects of the proposed Keystone XL Pipeline on climate change could be analyzed, in part, by an assessment of the GHG emissions attributable to the project. Such an analysis could encompass a variety of activities and implications relative to the pipeline, including the GHG emissions associated with the proposed pipeline's construction and operation, as well as the GHG emissions attributable to the crude oils that would be transported through the pipeline. An assessment would be dependent upon many factors, most notably, the availability and quality of GHG emissions data for the industry, the scope of industry activities included within the assessment, and the assumptions made about how to model these activities. Many secondary considerations may also impact an assessment. These include assumptions regarding global crude oil markets, refinery inputs and outputs, transport options, economics, policy considerations, and the end-use consumption of petroleum products. Different values attached to these varying factors return different estimates for the GHG emissions attributable to the construction and operation of the proposed pipeline as well as the crude oils transported through it. A number of publicly available studies have attempted to assess the GHG emissions of crude oils derived from Canadian oil sands deposits ("oil sands crudes"). Some of these studies have also made estimates for the GHG emissions attributable to the crude oils that would be transported through the proposed pipeline. The State Department, in its March 2013 Draft Environmental Impact Statement ( DEIS ) for the Keystone XL Pipeline, has produced one such assessment. As the DEIS will be a primary component for the national interest determination, this report focuses on the State Department's analysis and comments on its methodology and conclusions. Where applicable, the report supplements the DEIS analysis with relevant additional information. As the State Department's assessment is based on the findings of several published studies of oil sands crudes, this report also comments on their respective methodologies and conclusions. For a more extensive investigation of the GHG emissions assessments of oil sands crudes and their comparison to other global crude oils ("reference crudes"), see CRS Report R42537, Canadian Oil Sands: Life-Cycle Assessments of Greenhouse Gas Emissions , by [author name scrubbed]. The DEIS includes an analysis of the GHG emissions that would be attributable to the proposed Keystone XL Pipeline. It reports both "direct" GHG emissions from the construction and operation of the proposed pipeline as well as "indirect" emissions attributed to the production and use of the oil sands crudes that would be transported through the proposed pipeline. The State Department defines the indirect GHG emissions as "incremental GHG emissions." This value is generated by examining the full GHG emissions profile of oil sands crudes (i.e., the aggregate GHG emissions released by all activities from the extraction of the resource to the end-use combustion of refined fuels), comparing this profile to those of other reference crudes it may displace in U.S. refineries, and then estimating the difference between a scenario where the proposed Keystone XL Pipeline is constructed and a scenario where it is not. Thus, for the purposes of its analysis, the State Department incorporates the direct emissions attributed to the operation of the pipeline into the reported incremental indirect emissions. Based on its review of the available GHG emissions assessments, as well as an analysis of North American crude oil transport infrastructure and global crude oil markets , the State Department finds the following: Approval or denial of the proposed Project is unlikely to have a substantial impact on the rate of development in the oil sands, or on the amount of heavy crude oil refined in the Gulf Coast area. If the proposed Keystone XL Pipeline were not built, but other proposed pipelines were (e.g., the Northern Gateway, the Trans Mountain expansion, and the TransCanada proposal to ship crude oil east to Ontario), there would be a 0.4%-0.6% reduction in Canadian oil sands production by 2030, and a decrease in the incremental indirect life-cycle GHG emissions of oil sands production in the range of 0.07-0.83 million metric tons of carbon dioxide equivalents (MMTCO 2 e) annually. If all proposed pipelines were denied, there would be a 2%-4% reduction in Canadian oil sands production by 2030, and a decrease in the incremental indirect life-cycle GHG emissions of oil sands production in the range of 0.35-5.30 MMTCO 2 e annually. In summary, the DEIS reports that the proposed Keystone XL Pipeline "would be responsible for incremental GHG emissions in the range of 0.07 ... 5.30 MMTCO 2 e annually," and places these numbers in context by noting U.S. GHG emissions totaled 6,822 MMTCO 2 e in 2010 (excluding emissions/removals from land use, land-use change, and forestry), and global CO 2 emissions from fuel combustion totaled 30,326 MMCO 2 e. The incremental pipeline emissions would represent an increase of 0.001%-0.08% over the total domestic GHG inventory for the United States in 2010 and would be equivalent, at most, to the annual GHG emissions from the energy used in a little over 1 million passenger vehicles or the annual CO 2 emissions from the energy used in a little over a quarter million homes in the United States. See Table A-1 for a summary of this estimate as well as other selected pipeline scenarios and their GHG equivalencies. The proposed Project would be responsible for incremental GHG emissions in the range of 0.07 ... 5.30 MMTCO 2 e annually. How does the State Department calculate this estimate, and what does it say about the cumulative effects of the pipeline? The State Department's first step in calculating the GHG emissions attributable to the proposed pipeline is to develop a "life-cycle assessment" of the Canadian oil sands resource. Life-cycle assessment (LCA) is an analytic method used for evaluating and comparing the environmental impacts of various products (in this case, the climate change implications of a petroleum resource). LCAs can be used in this way to identify, quantify, and track emissions of carbon dioxide and other GHG emissions arising from the development of the resource, and to express them in a single, universal metric of carbon dioxide equivalent (CO 2 e) GHG emissions per unit of fuel or fuel use. This figure is commonly referred to as the "emissions intensity" of the fuel. The results of an LCA can be used to evaluate the GHG emissions intensity of various stages of the fuel's life-cycle, as well as to compare the emissions intensity of one type of fuel or method of production to another. Emissions intensities modeled by LCAs are delimited by the scope of activities chosen to be in the assessment. Many LCAs are based on a set of boundaries commonly referred to as "cradle-to-grave," or, in the case of transportation fuels such as petroleum, "Well-to-Wheels" (WTW). WTW assessments focus on the emissions associated with the entire life-cycle of the fuel, from extraction, transport, and refining of crude oil; to the distribution of refined product to retail markets (e.g., gasoline, diesel, jet fuel); to the combustion of the fuel in end-use vehicles. The State Department has chosen a WTW assessment for the DEIS. Other analyses have used different sets of boundaries to compare the relative impact of oil sands crudes against reference crudes. Other choices include Well-to-Tank (WTT) or Well-to-Refinery Gate (WTR), and each establish different (i.e., more specific) life-cycle boundaries to evaluate emissions. Inclusion of the final combustion phase allows for the most complete picture of petroleum's impact on GHG emissions, as this phase can contribute up to 70%-80% of WTW emissions. However, other boundaries can be used to highlight the differences in emissions associated with particular stages as well as experiment with certain boundary assumptions. A number of publicly available studies have attempted to assess the life-cycle GHG emissions intensity of oil sands crudes. The State Department—in conjunction with the consultancy firm ICF International LLC—in the Keystone XL Project's August 2011 Final Environmental Impact Statement employs the results of four published LCAs in its analysis. The use of these studies is reproduced in the March 2013 DEIS conducted by the State Department and the contractor Environmental Resources Management. The four LCAs used by the State Department—Jacobs 2009, TIAX 2009, NETL 2008, and NETL 2009 —employ slightly different design parameters, input assumptions, and industry data to model the GHG emissions intensities of oil sands crudes. Thus, each returns slightly different findings. As one example, the U.S. Department of Energy's assessment (NETL 2009) looks at both oil sands mining and in situ production techniques, and examines the GHG emissions profiles for the extraction, transportation, and refining of these crudes into gasoline, diesel, and jet fuel products. NETL reports the average GHG emissions intensity of oil sands crudes to be 106.3 grams of carbon dioxide equivalent for each megajoule of energy released by its combustion as gasoline (gCO 2 e/MJ LHV gasoline). NETL compares this result to a baseline value of 91 gCO 2 e/MJ LHV gasoline, which it reports as "the weighted average of transportation fuels sold or distributed in the United States in 2005." Overall, the four LCAs return emissions estimates for several different types of oil sands production techniques in the range of 101-120 gCO 2 e/MJ LHV gasoline. The State Department uses these results to report the following key finding in the DEIS : Combustion of fossil fuels, including petroleum-based products such as crude oil, is a major source of global GHG emissions, which contribute to human-induced climate change. [Western Canadian Sedimentary Basin] crudes are more GHG-intensive than the other heavy crudes they would replace or displace in U.S. refineries, and emit an estimated 17 percent more GHGs on a life-cycle [WTW] basis than the average barrel of crude oil refined in the United States in 2005. The State Department references several third-party sources for the raw data on the GHG emissions intensities of oil sands crudes. Thus, the DEIS is less an independent and original assessment, than a comparative analysis of multiple other studies, each presenting significant variations in both reported findings and input assumptions. Life-cycle assessment has emerged as an influential methodology for collecting, analyzing, and comparing the GHG emissions and climate change implications of various hydrocarbon resources. However, because of the complex life-cycle of fuels and the large number of analytical design features that are needed to model their emissions, LCAs retain many uncertainties. As noted previously, the NETL 2009 LCA—from which the State Department sources many of the estimates for oil sands crudes—has many specified design parameters and input assumptions. The LCA is also four years old and utilizes data that are over eight years old (e.g., GHG emissions intensities of the oil sands crudes are compared against a 2005 U.S. baseline). Opponents to the Keystone XL Pipeline are critical of many of the exclusions in the NETL 2009 LCA, including the tightly delimited boundaries and the omission of co-product emissions (e.g., petroleum coke). The DEIS states that "adjusting the NETL results to include other product emissions could increase the differential in incremental emissions from WCSB oil sands compared to the 2005 U.S. average crude oils by roughly 30 percent." Conversely, proponents of the Keystone XL Pipeline point to the many recent advances in energy efficiency and GHG mitigation technologies that Canadian oil sands producers have made. They highlight the 2012 formation of the Canada's Oil Sands Innovation Alliance (COSIA), an industry group focused on accelerating the pace of improvement in environmental performance through collaborative action and innovation. They note also that the government of Alberta has implemented policies to help mitigate and reduce the GHG emissions associated with oil sands production. These include (1) a mandatory GHG intensity reduction program for large industrial emitters, (2) a fund for clean energy investment that is capitalized by the reduction program, and (3) dedicated funding for the construction of large-scale carbon capture and sequestration (CCS) facilities. Proponents suggest that these and other advances may make the GHG emissions intensity estimates for oil sands crudes more in line with other reference crudes. The second step in the State Department's analysis is to determine the total, or "gross," GHG emissions that would be attributable to the crude oils transported through the proposed pipeline. Because the throughput of a pipeline is commonly expressed in barrels per day (bpd), the GHG emissions intensities for the various oil sands crudes must be converted into a value that can be assigned to a barrel. This calculation requires an understanding of the mix of oil sands inputs that goes into a barrel at the start of the pipeline as well as the yield of refined products that are produced from a barrel at the end of the pipeline. Further, an estimate must be made for how many barrels of crude oil would be transported annually through the proposed pipeline. While implicit in its analysis, the State Department does not report a value for the total, or "gross," annual GHG emissions attributable to the crude oil transported through the proposed pipeline. Without access to the State Department's input assumptions and conversion factors, CRS cannot calculate a value for these emissions that would be consistent with the findings in the DEIS . Third-party analyses have produced estimates which could be used to determine the total, or "gross," GHG emissions that would be attributable to the crude oils transported through the proposed pipeline. For example, IHS CERA's 2012 study, Oil Sands, Greenhouse Gases, and U.S. Oil Supply: Getting the Numbers Right-2012 Update, compares the data from various published LCAs to determine the WTW GHG emissions for oil sands and other reference crudes on a "per barrel of refined product basis." IHS CERA estimates emissions for an "average of oil sands crudes refined in the United States in 2011" to be in the range of 517-547 kg CO 2 e/barrel of refined products (or, 9%-12% higher than an average barrel refined in the United States). Based on these results, and assuming that the full 830,000 bpd pipeline capacity is used to transport only oil sands crudes to Gulf Coast refineries, the total life-cycle GHG emissions attributable to the oil sands crudes transported through the proposed pipeline would range from 157 to 166 MMTCO 2 e a year. These emissions would represent an increase of 2.3%-2.4% over the total domestic GHG inventory for the United States in 2010, and would be equivalent to the annual GHG emissions from the energy used in 32.7 million to 34.6 million passenger vehicles or the annual CO 2 emissions from the energy used in 8.1 million to 8.5 million homes in the United States. (See Table A-1 for a summary of selected pipeline scenarios and their GHG equivalencies.) In order to determine a value for the "incremental" life-cycle GHG emissions attributable to the proposed pipeline, the State Department considers a scenario wherein the crude oils transported through the proposed pipeline would displace an equivalent volume of other crude oils currently processed at the Gulf Coast refineries. Hence, the difference in their respective GHG emissions profiles would return a value for the "increment." If oil sands crudes were determined to be slightly more emissions-intensive than the current mix of crude oils in Gulf Coast refineries, they would be responsible for those additional GHG emissions above the current level. The DEIS uses the findings from the NETL 2009, Jacobs 2009, and TIAX 2009 LCAs to compare GHG emissions profiles for Canadian oil sands crudes against three reference crudes: Venezuelan Bachaquero, Mexican Maya, and Middle Eastern Sour. Bachaquero and Maya are chosen with the assumption that as the heavy crudes currently in the input mix at U.S. refineries, they are likely to be the first displaced by an increased use of oil sands crudes. Middle Eastern Sour is chosen with the assumption that as the world's balancing crude, it may ultimately be the one that is backed out of the world market by increased production of the oil sands. In each case, the GHG emissions profile for oil sands crudes is higher than that of the reference crude. Based on the results, and with the assumption that Gulf Coast refinery capacity is held constant, the DEIS then calculates the difference in GHG emissions that would be attributable to oil sands crudes if the full 830,000 bpd capacity of the proposed pipeline displaced an equal volume of the reference crudes in Gulf Coast refineries. For example, using the findings from Jacobs 2009, oil sands crudes transported by the pipeline would add an additional 3.7 MMTCO 2 e GHG emissions a year if they displaced Venezuelan crudes; whereas using the findings from NETL 2009, oil sands crudes transported by the pipeline would add an additional 20.7 MMTCO 2 e GHG emissions a year if they displaced Middle Eastern crudes. Because uncertainty remains as to which reference crudes would be displaced, the DEIS reports "the full range of incremental GHG emissions associated with the displacement of the reference crudes by the WCSB oil sands crude as 3.3 to 20.8 MMTCO 2 e a year across the three studies. " These emissions would represent an increase of 0.05%-0.30% over total domestic GHG inventory for the United States in 2010. The DEIS states this overall range "is equivalent to annual GHG emissions from combusting fuels in approximately 770,800 to 4,312,500 passenger vehicles or the CO 2 emissions from combusting fuels used to provide the energy consumed by approximately 190,400 to 1,065,400 homes for one year." (See Table A-1 .) For some, an evaluation of the total, or "gross," life-cycle GHG emissions of the oil sands crudes transported through the proposed pipeline would serve as an adequate assessment of the pipeline's impact on the climate. For others, this value must be adjusted by the GHG emissions profiles of the crude oils they are projected to displace in U.S. Gulf Coast refineries. This adjustment is based on two determining factors: (1) the assumption that the refinery capacity and the input mix at Gulf Coast facilities is held constant, and (2) the choice of reference crudes to be displaced. First, the assumption that refinery capacity and crude oil inputs are held constant is backed by the State Department's market analysis, which finds that the "approval or denial of the proposed Project is unlikely to have a substantial impact ... on the amount of heavy crude oil refined in the Gulf Coast area." The DEIS notes that U.S. refinery throughput has remained constant over recent years, and that "U.S. refineries have not materially changed ... indeed, the major projects that have gone ahead both in [the Midwest] PADD 2 and on the Gulf Coast (PADD 3) have been geared to increasing heavy crudes processing. Having made significant investments in equipment to process heavy sour crude, refiners have strong [economic] incentive to obtain such crudes." Thus, the DEIS determines that (1) no new capacity would be added or installed on the Gulf Coast to refine the additional crude oils made available from the proposed pipeline, (2) oil refineries optimized for heavy crudes would only process heavy crudes, (3) oil sands imports would only displace other heavy imports, and (4) any growing domestic light oil production from shale or tight oil plays—in the Bakken, the Eagle Ford, or others—would only displace light crude imports. Further, the DEIS assumes that the projected drop-off in domestic tight oil production by the late 2020s would dissuade Gulf Coast refiners optimized for processing heavier crudes from switching. But critics of the State Department's analysis argue that increased transport of oil sands crudes out of Canada could serve to optimize operating capacity at Gulf Coast refineries or even encourage an expansion in investments. They maintain that any additional production capacity (of oil sands crudes or others) would not simply substitute for current levels, but add to them, increasing the incremental, or "net," GHG emissions attributable to the proposed pipeline. Similarly, these commentators have pointed to recent evidence showing that domestic light oil production is not only backing out imported light crudes but also displacing the market for heavier crudes. They contend that this switch, even in the short to medium term, could have significant impacts on the use of oil sands crudes in U.S. refineries and the GHG emissions attributable to the sector. Second, a determination of which reference crudes would be displaced at Gulf Coast refineries is left open by the State Department's analysis, as the DEIS reports a range of values for several different scenarios. Nevertheless, determining the emissions intensities of reference crudes requires calculations similar to those performed on the oil sands, and thus harbors many of the same uncertainties. In addition, the quality of the data and the transparency in presentation for many of the reference crudes are not as robust as data on the oil sands. Some, even, have yet to be modeled (e.g., Bakken tight oil). This is primarily a function of changing conditions as well as the difficulty in accessing necessary data from the field. A lack of equivalence can impede the ability to make meaningful comparisons. Comparisons are also complicated by the fact that emissions factors for Canadian oil sands crudes and reference crudes will change over time, and it is not clear how these changes will impact their respective GHG emissions. On one hand, secondary and tertiary recovery techniques will become more common in conventional oil, increasing the GHG emissions of reference crudes. In contrast, oil sands surface mining is expected to have a relatively constant energy intensity for a long period of time, and in situ techniques may be expected to become more efficient. Exploration for new oil reservoirs will also continue (with the possibility of commercializing both greater and lesser emissions-intensive resources), while the location and extent of Canadian oil sands is well understood. The State Department's final step in calculating the GHG emissions attributable to the proposed pipeline is to consider the effects that projected changes in market factors might have on the production of oil sands crudes. In the end, the State Department aims to calculate a value for the difference in overall GHG emissions between two primary scenarios: one in which the proposed Keystone XL Pipeline is built, and one in which it is not. This difference returns a value for the "incremental GHG emissions" for which "the proposed Project would be responsible." These scenarios are based on various market projections and modeling assumptions. The steps in the State Department's calculations are as follows: Determining a "business-as-usual" scenario. The State Department begins by referencing several third-party market projections/forecasts for both current and future crude oil prices and production volumes. These include analyses from the U.S. Department of Energy, Energy Information Administration (EIA), the Canadian Association of Petroleum Producers (CAPP), and Canada's National Energy Board (NEB). Each projection reaches out to the period 2030-2035. The business-as-usual scenario for Canadian oil sands producers is one in which "the industry and market react based on normal commercial incentives." Thus, it is assumed that projects currently proposed, approved, and under construction will go forward, and that adequate takeaway capacity will be available to Canadian oil sands producers to allow for announced production targets. Estimating the effects of not constructing adequate takeaway capacity becomes the "counterfactual" scenario the DEIS must calculate . Determining a "no expansion" scenario. The State Department reports that no new pipeline capacity has been added to the oil sands region since 2011 and that existing pipeline capacity could be fully utilized by 2016. The DEIS further notes that other proposed pipeline projects (e.g., the Enbridge Northern Gateway project to Kitimat, British Columbia, and the Kinder Morgan Trans Mountain pipeline expansions to the Canadian West Coast) "face significant opposition from various groups, and ... may continue to be delayed." Thus, for the purposes of the DEIS analysis, the State Department chooses to assess a "no expansion" scenario which assumes that pipeline capacity would be frozen at 2010 levels for at least 20 years along three routes: (1) from the WCSB to the United States; (2) from the WCSB to the Canadian West Coast; and (3) from PADD 2 (Midwest) to PADD 3 (Gulf Coast) in the United States. Assess ing the potential for rail capacity . In the event that no new pipelines are constructed, rail and other non-pipeline transport options would be tasked with accommodating any production growth. Based on the CAPP 2012 outlook for Canadian production (a projected 3.6 million bpd increase by 2030), rail would need to expand by approximately 175,000 bpd each year to 2030 in order to keep up with (and prevent shut-in of) the increases in Western Canadian crude supplies. To assess if this expansion is credible, the State Department reviews the recent example of rail takeaway for crude oil in the Bakken (an expansion of 700,000 bpd over four years between 2009 and 2012, or an increase of 175,000 bpd annually) and the past example of rail takeaway for coal in the Powder River basin (a total expansion of 6.7 million bpd equivalents over 28 years between 1980 and 2008, or an increase of 240,000 bpd equivalents annually). Based on this evidence, the DEIS concludes that "there is no indication that the rail logistics system would not be able to continue to scale up at this rate, or more, over many years." Assess ing the incremental cost of rail versus pipeline transport. The DEIS estimates the cost for rail transport to the Gulf Coast to be approximately $15.50 per barrel. This is compared to CAPP's estimate for pipeline tariff for the same transport of approximately $8-$9.50 per barrel. Based on future cost saving assumptions which the State Department projects for rail transport, the DEIS concludes "that the incremental increase in cost of rail compared to pipeline transport is $5 per barrel." Determining the effects that the incremental cost of rail transport may have on oil sands production. To assess the potential impacts that a $5 change in the cost of transportation would have on the rate of production, the DEIS turns to the market projections in EIA's 2011 International Energy Outlook (IEO). The IEO projects crude oil production for three price cases (i.e., high, low, and reference price projections), and "oil sands/bitumen (Canada)" production figures are reported for each price case. Comparing the reported production volume for each price, the State Department calculates the change in volume for every $5 increment in price. Assuming that "a change in oil price can be considered equivalent to a change in costs," the DEIS determines that a $5 increment in cost would cause a decrease in oil sands production of approximately 90,000 bpd in 2030 (or 2.1% of the projected volume for that year). The DEIS performs a similar calculation using the NEB/CAPP projections to report a decrease of approximately 210,000 bpd in 2030 (or 4% of the projected volume for that year). Thus, the DEIS reports that "if all proposed pipelines were denied, there would be a 2%-4% reduction in Canadian oil sands production by 2030." The State Department then focuses on a scenario wherein only the Keystone XL Pipeline is not built, such that only the 830,000 bpd capacity would be subject to the $5 cost increase and the 2%-4% reduction in volume. In this instance, the DEIS reports a "20,000 to 30,000 bpd" change, or "0.4% - 0.6% reduction in Canadian oil sands production by 2030" "if the proposed Keystone XL Pipeline project were not built, but other proposed pipelines were." Calculating the incremental GHG emissions for which the proposed Project would be responsible. Having calculated the decreases in oil sands production attributable to the lack of pipeline infrastructure, the DEIS uses these values to estimate the GHG emissions attributable to the proposed Keystone XL pipeline, and reports the following: ... should the proposed Project be denied, a 0.4 to 0.6 percent reduction in WCSB production could occur by 2030, and in the scenario of all pipeline projects not being built, a 2 to 4 percent decrease in WCSB oil sands production could occur. This infers that of the 3.3 to 20.8 MMTCO2e annual incremental GHG emissions, the proposed Project would be responsible for incremental GHG emissions in the range of 0.07 to 0.83 MMTCO2e annually, and in the scenario where all pipelines were not constructed, the incremental GHG emissions would be 0.35 to 5.3 MMTCO2e annually. These emissions would represent an increase of 0.001%-0.078% over the total domestic GHG inventory for the United States in 2010 and would be equivalent to the annual GHG emissions from the energy used in 14,500 to 1,104,100 passenger vehicles or the annual CO 2 emissions from the energy used in 3,600 to 272,700 homes in the United States. (See Table A-1 for a summary of selected pipeline scenarios and their GHG equivalencies.) The State Department bases its market analysis on 2011 projections for the 2030 production profile of the oil sands and other benchmark crudes. The "reference case"—or "business as usual"—scenario for these projections is made under the assumption that industry and market forces react based on normal commercial incentives. The construction of adequate takeaway capacity to accommodate projected production growth is commonly understood to be a normal commercial operation. Thus, instead of modeling how the construction of the proposed pipeline might affect the short- to medium-term growth of the industry, the State Department chooses instead to model how industry and market forces may react to the denial of the proposed project in the medium to long term. This is posited as the counterfactual scenario against which the reference case is compared. The D EIS concludes that if the proposed pipeline is denied, the rate of development in the oil sands and the amount of heavy crude oil refined in the Gulf Coast area is unlikely to be substantially impacted because the market would likely respond by adding broadly comparable transport capacity over time. This claim is supported by two assumptions: (1) that rail and other non-pipeline transport options can fully accommodate all future projected growth of the oil sands in the medium to long term, and (2) that at no point would the global price of oil fall—or the marginal cost of production increase—such that investment in new oil sands projects will be deemed uneconomical (i.e., below the breakeven cost of production). The Capacity Argument . The State Department notes that while no new additional pipeline capacity has been added from Canada into the United States or to the Canadian West Coast since 2011, a number of projects are proposed, including those entailing modifications and/or use of existing rights of way. While the DEIS appropriately recognizes that some proposed projects (e.g., the Enbridge Northern Gateway project, and the Kinder Morgan Trans Mountain expansion) may experience delays, it also recognizes that many interstate pipelines that do not cross international borders face less regulatory review (e.g., the Enbridge Flanagan South and Trunkline conversion, among others). For these reasons, the DEIS considers an assessment which assumes that pipeline capacity would be frozen at 2010 levels as "unlikely." Nevertheless, for the purposes of its analysis, the State Department examines options for transporting all new production of oil sands crudes by rail and other non-pipeline transport options. It surmises that scaling up transport is logistically and economically feasible based on past and present evidence in the Powder River Basin and the Bakken. Given the identified commercial demand for oil sands crudes in Gulf Coast refineries, the DEIS concludes that the market would respond by adding sufficient transport capacity over time. Critics, however, disagree, as expansion would require significant infrastructure development, including loading and unloading facilities, tract capacity, and rail tank car availability. The State Department grants that "if the rate of production is substantially higher than indicated in the CAPP 2012 forecast, and if there are delays in the delivery of new rail cars and terminals ... it is possible that some short-term shut-in [until third quarter of 2017] of WCSB heavy crude could occur." (An emissions estimate for this scenario is included in Table A-1 .) This short- to medium-term reduction is supported by other market analyses of the oil sands (e.g., CIBC, TD Economics, Goldman Sachs, and IEA). IEA reports that the failure to build needed oil sands pipelines—particularly Keystone XL—could result in persistent price discounts and slow expansion of the sector; and Goldman Sachs estimates that rail capacity would peak at 500,000 bpd over the next three to four years, further noting that most of the current and future shipments would be light crude oil, not oil sands crudes. Most of the third-party market analyses do not report conditions for the medium to long term, as some assume that transport logistics would be worked out by the market in the long term and others do not speculate. The Cost Argument . To assess the potential impact of increased production costs on the oil sands (whether transportation costs or others), the State Department reviews information regarding "breakeven costs" for different types of oil sands projects. The "breakeven cost" is often expressed as the lowest price of a benchmark crude that is necessary to enable a potential production project to cover all its costs and earn a commercial rate of return on capital employed—typically 10%-15%. A long-term increase in production costs acts as an increase in the breakeven costs for producers. The State Department posits the argument that if the cost of production for new oil sands projects were to raise above the breakeven cost for an extended period of time, conditions would lend themselves to a potential decrease in oil sands production and a dampening of future investment. To assess if this scenario may occur, the State Department references the Canadian NEB's breakeven costs for new oil sands projects. NEB reports breakeven costs at $51-$61 per barrel for new in situ crude; $66-$76 per barrel for mining (without upgrader); and $86-$96 per barrel for mining (with upgrading). Comparing these breakeven costs to price projections of benchmark crudes, the State Department reports that based on AEO 2013 projections, both Brent and WTI prices are above the band of breakeven costs for in situ and for mining without upgrading for all years through 2040, and that based on WEO projections, oil prices are above the breakeven costs for all projects from 2015 through 2035. With this, the DEIS concludes that most oil sands projects have breakeven costs low enough that incremental increases in production costs (including transportation costs) would not curtail future development. Critics of the State Department's analysis note that the DEIS accurately characterizes the current market conditions encountered by oil sands producers but fails to adequately assess the full range of potential market scenarios. Critics highlight the DEIS analysis which states that ... discounts for the marker heavy grade WCS have been growing in recent months. Prior to the advent of current logistics constraints, WCS discounts versus Brent were generally of the order of $15–$20/barrel, (primarily reflecting differences in refining values of the two crudes. These discounts deepened to the $30–$40 per barrel range in 2011 and through much of 2012. Recently, the discount widened further to the $50–$60 per barrel range.... [T]he severe pricing discounts indicate these crudes are not able to move further and access coastal markets, notably in the Gulf Coast where their value would match that of heavy Venezuelan crudes and Mexican crudes such as Mayan. They argue that the State Department's market analysis fails to properly account for the short- to medium-term effects of these discounts on future production estimates and fails to consider the uncertainties that are inherent in all cost and price projections. They note that recent estimates of oil sands production costs have increased over those reported in the DEIS , current rail transport costs are higher than those reported in the DEIS (an emissions estimate for this scenario is included in Table A-1 ), and benchmark crude oil price projections are lower than those reported in the DEIS — all conditions that would place downward pressure on oil sands development and investment. In regard to these competing projections, it is the time horizon that is the most significant difference between the State Department's market analysis and those critical of the analysis. The State Department focuses on the year 2030, at which point market forces may have the opportunity to resolve many of the short-term obstacles to oil sands development currently encountered by producers (e.g., lack of transport infrastructure, price discounts, and competition from U.S. tight oil). Others, however, have focused on shorter-term analyses which, in some cases, have returned projections of higher costs and lower prices. They stress that these obstacles suggest continued challenges for investment and development in the sector. Whether short-term obstacles translate into longer-term challenges is dependent upon the outcome of many of the projections and variables outlined in this analysis. The construction of pipeline infrastructure is one such variable. President Obama has stated that an evaluation of the "net effects of the pipeline's impact on our climate" in order to determine if the project would "significantly exacerbate the problem of carbon pollution" would factor into the State Department's national interest determination for the proposed Keystone XL Pipeline. For many, the net effects of the pipeline's impact on climate are tied explicitly to its impact on the rate of development in the oil sands. Proponents of the proposed pipeline support a market analysis which concludes that the approval or denial of the proposed pipeline is unlikely to have a substantial impact on the rate of development in the oil sands, or on the amount of heavy crude oil refined in the Gulf Coast area. They argue that as long as there is strong global demand for petroleum products (whether from the United States, China, India, or the developing world), resources such as the Canadian oil sands will be produced and shipped to markets using whatever route is available. They see future investment affected only in scenarios where the global price of oil falls below the breakeven cost of production for an extended period of time. They see current production affected only in scenarios that assume all pipeline transport capacity is frozen and no other transport capacity (such as rail or tanker) is available. There are 5.4 million bpd of oil sands projects currently under construction or regulatory review (i.e., three times 2012 production levels), and these projects are being developed under current conditions. They contend that incentives are too great for oil sands producers and the Canadian and Albertan governments to leave the oil in the ground; and that once the oil is extracted, the market would likely respond by adding adequate transport capacity over time. They maintain that a single pipeline (in and of itself) would not affect the long-term development of the oil sands, and thus a single pipeline (in and of itself) would not affect long-term GHG emissions from the sector. Furthermore, they estimate that GHG emissions intensities for the Canadian oil sands are currently within range of many other heavy crude oils, and that in the future Canadian oil sands emissions intensities will only decrease (due to efficiencies and technological advances), while those of other crudes around the world will likely increase (due to a heavier resource base). Others maintain that Canadian oil sands are currently the most GHG emissions intensive crudes in production (due to the energy intensity required to extract and refine the resource), and that future oil sands deposits will only become more difficult and costly to access. Further, they argue that there is nothing presumed or inevitable about the rate of expansion for the Canadian oil sands. Current oil sands projects face a challenging financial environment, and production costs and price differentials are comparatively higher for oil sands crudes, making new investment sensitive to changes in production costs and global prices. Critics highlight the many reported instances where current price discounts for oil sands crudes have dampened investment and project development. They stress that oil market projections and transportation options are rife with uncertainty, and that the proposed Keystone XL Pipeline could have a much more significant impact on expansion if a number of key variables differ from the State Department's assumptions. These variables include lower global oil prices than projected; higher rail costs than projected; higher new project costs than expected; greater competition from shale oil and tight oil plays; and future carbon pricing or procurement policies. They argue that the State Department has failed to adequately assess these other possible scenarios, and claim that many of these could upset the breakeven costs for project development and dampen investment in the industry. A decrease or delay in investment would affect the timing and capacity of new oil sands projects. Any decrease or delay in production could have significant impacts on the rate of growth in global GHG emissions by allowing more time for the promulgation of climate policies, the development of adaptation strategies, and the migration to renewable technologies. For still others, the net effect of the proposed pipeline does not rest solely on the fate of oil sands production in Canada, but on the direction of U.S. energy policy. They argue that while many of the decisions that may affect the development of the oil sands will be made by the market and the national and provincial governments of Canada, the choice of whether or not to approve the permit for the proposed Keystone XL Pipeline is an opportunity for the U.S. government to signal its future direction. These stakeholders have pushed for a national policy that moves the United States away from a reliance on fossil fuels. They see the decision to build the proposed pipeline as a 50-year-long commitment to a carbon-based economy and its resulting GHG emissions. As EPA notes in its comments to the DEIS, given the 50-year lifetime of new infrastructure projects such as the proposed pipeline, "the additional CO 2 e from oil sands crude transported by the pipeline could be as much as 935 million metric tons." Opponents of the proposed pipeline contend that with meaningful action on climate policy slowed or stalled in Congress, the courts, and, to some extent, the regulatory agencies (i.e., local, state, and federal environmental and land-use agencies), the sole remaining outlet to leverage a low-carbon energy policy is single action initiatives on such items as infrastructure permits. They have actively opposed the permit for the proposed Keystone XL Pipeline knowing that it may set a precedent; for if the project is allowed to go forward, it may be the case that no future infrastructure project would be held accountable for its indirect and cumulative GHG emissions. On January 31, 2014, the State Department released the Final Environmental Impact Statement (FEIS) for the Keystone XL Pipeline, which contained revised analysis and estimates. For a detailed review of these findings see CRS Report R43415, Keystone XL: Greenhouse Gas Emissions Assessments in the Final Environmental Impact Statement , by [author name scrubbed] . | On June 25, 2013, President Obama announced a national "Climate Action Plan" to reduce emissions of carbon dioxide (CO2) and other greenhouse gases (GHG), as well as to encourage adaptation to expected climate change. During his speech, the President made reference to the proposed Keystone XL Pipeline and stated that an evaluation of the project's impacts on climate change would factor into the U.S. State Department's national interest determination. The State Department, in the March 2013 Draft Environmental Impact Statement (DEIS) for the Keystone XL Pipeline, reports estimates for both the direct (i.e., operational) and indirect (i.e., associated with crude oil production and use) GHG emissions that would be attributable to the proposed project. The DEIS finds that "the proposed Project would be responsible for incremental GHG emissions in the range of 0.07 ... 5.3 [million metric tons of CO2 equivalent] annually." These emissions would represent an increase of 0.001%-0.08% over the domestic GHG emissions totals of 6,822 MMTCO2e in 2010. The State Department bases its findings on the following conclusions: (1) approval or denial of the proposed pipeline is unlikely to have a substantial impact on the rate of development in the oil sands, or on the amount of heavy crude oil refined in the Gulf Coast area in the long term, (2) denial of the proposed pipeline is offset entirely by the expansion of new rail and pipeline infrastructure in North America in the long term, and (3) the cumulative impact of the proposed pipeline would be the additional oil sands production that would become economical given the marginal cost savings afforded by the project over non-pipeline transport. Many industry stakeholders, the Canadian and Albertan governments, and proponents of the proposed pipeline have generally supported the State Department's findings. They contend that the demand for the oil sands resource, as well as the economic incentives for producers and the Canadian governments, is too significant to dampen production. However, the U.S. Environmental Protection Agency (EPA), among other stakeholders, has questioned several of the conclusions put forth by the DEIS and recommended that the State Department revisit the analysis. Opponents of the project argue that the Keystone XL Pipeline may have greater impacts than projected in the DEIS if certain State Department assumptions were to differ, including projections for global crude oil markets, rail transport costs, new project costs, refinery inputs, and carbon pricing policies. Members of Congress remain divided on the merits of the proposed project, as many have expressed support for the potential energy security and economic benefits, while others have expressed reservations about its potential environmental impacts. Though Congress, to date, has had no direct role in permitting the pipeline's construction, it may have oversight stemming from federal environmental statutes that govern the review. Further, Congress may seek to influence the State Department's permitting process or to assert direct congressional authority over approval through new legislation. On January 31, 2014, the State Department released the Final Environmental Impact Statement (FEIS) for the Keystone XL Pipeline, which contained revised analysis and estimates. For a detailed review of these findings, see CRS Report R43415, Keystone XL: Greenhouse Gas Emissions Assessments in the Final Environmental Impact Statement, by [author name scrubbed]. |
S ince 2014, the Islamic State (IS) has become the focal point for the bulk of homegrown violent jihadist terrorist plots. This includes instances in which people in the United States wanted to travel to Syria to fight with extremist groups in the nation's civil war as well as plots to strike domestic targets. Regarding the former, in early 2016, U.S. government officials estimated that about 250 Americans had traveled (or tried to travel) to Syria to fight in the civil war—about 25 had been killed. Regarding the latter, in recent congressional testimony, the Director of National Intelligence, James R. Clapper noted that homegrown actors "will probably continue to pose the most significant Sunni terrorist threat to the U.S. homeland in 2016." Most homegrown IS acolytes have attempted to travel to Syria to join the terrorist group. The ideological goals undergirding the Islamic State's efforts to violently impose a caliphate in Iraq and Syria have attracted many of them. Some have sought adventure. Others have appeared to crave escape, camaraderie, even marriage. The Islamic State entices supporters via the Internet and social media. According to CRS analysis of publicly available information, IS supporters have accounted for 67 homegrown violent jihadist plots between 2014 and early June 2016. In the same time period, IS-linked plots have dominated the homegrown violent jihadist landscape, accounting for 67 of 76 total plots. In November 2015, the Federal Bureau of Investigation (FBI) reportedly had more than 900 investigations of IS suspects in the United States. Coping with the comparative size of this threat is one of the challenges domestic law enforcement agencies face. This is complicated by the varied courses of action chosen by IS supporters as they engage with the terrorist group. The 67 homegrown IS-plots can be broken into three rough categories based on the courses of action that plotters pursued as they attempted to support the terrorist group. (See Figure 1 .) The first two categories focus on foreign fighters, the last on people willing to do harm in the United States: The Departed — American foreign fighters who plan to leave or have left the United States to fight for the Islamic State. This group includes suspects scheming to travel but who are caught before they arrive in IS territory. The Returned — American foreign fighters who trained with or fought in the ranks of the Islamic State and return to the United States, where they can potentially plan and execute attacks at home. The Inspired — Americans lured—in part—by IS propaganda to participate in terrorist plots within the United States. The desire to become a foreign fighter (captured in either the departed or the returned category) played a role in 41 of the 67 IS-related plots. Almost all of the 41 had people either departing the United States for Syria or considering such a trip. Two of the 41 cases involved investigations of people who had returned from the conflict zone. Together, the 41 plots accounted for more than two-thirds of homegrown IS acolytes. In other words, it seems more often than not, the allure of the Islamic State has encouraged would-be violent jihadists to journey to Syria rather than strike a domestic target. However, this is not to suggest that the Islamic State discourages Americans from staying put and committing acts of terrorism. To the contrary, the Islamic State has incited would-be followers to stay in their home countries to commit terrorist acts. For example, in May 2016, the group issued an audio recording, particularly encouraging American and European sympathizers to commit attacks in their home countries during the holy month of Ramadan (early June to early July). The January 2016 issue of Dābiq , the Islamic State's English language magazine, praises the married couple reportedly involved in the San Bernardino shooting in December 2015. In 28 cases since the start of 2014, people inspired by the terrorist group's propaganda considered striking targets in the United States. Five of these succeeded. According to CRS estimates, 5 of the 13 homegrown violent jihadist attacks that have occurred since 9/11 involved people inspired by the Islamic State. It does not appear that any of the suspects in either the five IS-inspired attacks or the eight others had sustained, substantive, in-person contact with foreign terrorist organizations. In essence, these attacks involved do-it-yourself—DIY—terrorists. Largely isolated from the operational support of terrorist organizations, they acquired violent skills (however rudimentary) by themselves or relied on abilities that they had developed prior to becoming violent jihadists. Such DIY-ers often scraped together ideological justification for their deeds from online or social media sources aligned with terrorist organizations. Some drew inspiration from charismatic figures like now-dead radical U.S.-born imam Anwar al-Awlaki, who was affiliated with the terrorist group Al Qaeda in the Arabian Peninsula. Awlaki died in a widely reported U.S. strike in Yemen in 2011. As mentioned above, five attacks involved people who reportedly supported the Islamic State. On June 12, 2016, Omar Mateen reportedly shot and killed at least 49 people in a gay nightclub in Orlando, FL. He allegedly wounded more than 50 others. Mateen was killed by police. He claimed allegiance with the Islamic State during a 911 phone call he purportedly made during the attack. His immediate motives remain unclear. On January 7, 2016, Edward Archer allegedly shot an on-duty Philadelphia, PA police officer three times in the arm. The wounded man survived. Archer reportedly assaulted the officer while the latter was in his patrol vehicle. The FBI is investigating the incident as an act of terrorism. After the attack, the reputed assailant confessed to the crime and mentioned the Islamic State. On December 2, 2015, husband and wife Syed Rizwan Farook and Tashfeen Malik reportedly killed 14 people and injured 22 others in a shooting incident at the Inland Regional Center, a social services facility in San Bernardino, CA. The couple appeared to have targeted employees attending a holiday lunch and training session for San Bernardino County's health department, where Farook worked. Both died in a shootout with police after the attack on the Inland Regional Center. The FBI has noted that the day of the shooting, "a post on a Facebook page associated with Malik" pledged allegiance to Abu Bakr al Baghdadi, the leader of the Islamic State. In 2011, Farook allegedly began to plot a terrorist attack with a neighbor, Enrique Marquez, Jr., a U.S. citizen. They purportedly targeted a stretch of State Route 91 and the Riverside Community College in California, and "planned to use firearms and explosives to carry out the terrorist attacks." Two rifles Farook and Marquez obtained for their planned attack were used in the San Bernardino shooting. The neighbors did not carry out their highway and college plot, in part, because arrests in an unrelated FBI counterterrorism investigation in Southern California made them wary. Their scheme was never detected by law enforcement. Additionally, it appears that Farook helped to radicalize Marquez by introducing him to extremist ideology and the work of Anwar al-Awlaki. In November 2015, Faisal Mohammad, an 18-year-old, stabbed a fellow student and attacked three others at the University of California, Merced campus. In March 2016, the FBI announced that its investigation of the incident uncovered evidence that Mohammad may have been inspired by Islamic State propaganda. In May 2015, Elton Simpson and Nadir Soofi were shot and killed by local law enforcement in Garland, TX, as they tried to attack an exhibition of cartoons depicting the prophet Muhammad. A security guard was wounded in the altercation. Simpson purportedly had a pro-Islamic State social media account and claimed Awlaki as an inspiration. A third individual, U.S. citizen Abdul Malik Abdul Kareem, conspired with Simpson and Soofi but was not directly involved in the shootout in Garland. In March 2016, Kareem was found guilty of attempting to provide material support to the Islamic State as well as other charges. Aside from the three categories based on the courses of action that IS supporters follow, at least two other sorts of IS foreign fighters pose some threat to U.S. interests. The Lost: unidentified Americans who fight in the ranks of the Islamic State. Such individuals may come home after fighting abroad and remain unknown to U.S. law enforcement. Some American IS fighters will never book a trip back to the United States. (The post 9/11 record of U.S. counterterrorism investigations suggests this prospect. None of the Americans who have fought for al-Shabaab, a terrorist group based in Somalia, are known to have come home to plot attacks.) Finally, some American IS supporters will perish abroad. The Others: foreign IS adherents who radicalize in and originate from places outside of the United States or non-American foreign fighters active in the ranks of the Islamic State. These persons could try to enter the United States from abroad. In the broadest of senses, confronting the threats posed by IS acolytes categorized as the departed, returned, inspired, lost, and others requires U.S. law enforcement to identify individuals who present a danger as terrorists and preempt their efforts to do harm. All of this draws on resources, strategies, and programs developed largely in response to 9/11. Beyond these established programs, additional law enforcement efforts specifically targeting the Islamic State have been made. The following discussion is not intended as an exhaustive analysis of federal law enforcement counterterrorism efforts in the homeland. It is meant to broadly inform policy makers on such activity. For the United States, systematically identifying potential terrorists involves the country's watchlisting regimen. The datasets in the regimen include identities linked to the Islamic State. Maintaining and enhancing the datasets can Help identify and stop known or suspected terrorists who plan to or depart the United States for IS territory. Assist U.S. authorities in spotting IS foreign fighters trying to return to the homeland. Help authorities track the travel and activities of homegrown IS acolytes inspired to do harm domestically. Shrink "the lost" and "the others" categories described above. The National Counterterrorism Center (NCTC) keeps a classified database known as the Terrorist Identities Datamart Environment (TIDE). TIDE is the U.S. government's "central repository of information on international terrorist identities." TIDE includes: to the extent permitted by law, all information the [U.S. government] possesses related to the identities of individuals known or appropriately suspected to be or to have been involved in activities constituting, in preparation for, in aid of, or related to terrorism (with the exception of purely domestic terrorism information). In late 2013, TIDE held the identities of approximately 1.1 million people. Of this number, about 25,000 were U.S. citizens and lawful permanent residents. Since 2014, NCTC particularly has worked with European partners to identify, track, and disrupt the violent activities of foreign fighters engaged in the Syrian conflict. Within TIDE, NCTC "aggregates information" on known or suspected terrorists who travel to Syria. TIDE is not just a list but serves as an "analytic tool" and "valuable forum" for "identifying, tracking, and sharing information" about terrorists. NCTC also has a Pursuit Group that partly relies on such information to develop leads for "partner agencies to pursue." The group is specifically "working to identify foreign fighters entering Syria who have potential access or connections to the Homeland, so they can be watchlisted." On March 10, 2016, several news outlets received a cache of documents from a reputedly disgruntled IS member. The cache purportedly included what amounts to personnel files containing information about more than 22,000 alleged IS members. If authenticated, this may assist the efforts of U.S. and foreign intelligence and law enforcement agencies to identify heretofore unknown IS fighters. The Terrorist Screening Database (TSDB, commonly referred to as the Terrorist Watchlist) lies at the heart of federal efforts to identify and share information about identified people who may pose terrorism-related threats to the United States. It includes biographic identifiers for those either known to have or suspected of having ties to terrorism. In some instances it also includes biometric information on such people. It stores hundreds of thousands of unique identities. Some of the entries in TIDE get into the TSDB, which held approximately 800,000 people in November 2014. The Terrorist Screening Center (TSC), a multi-agency organization administered by the FBI, maintains the TSDB. Information from the Terrorist Watchlist populates a number of other lists that play important roles in screening individuals such as travelers entering the United States. Preemption of terrorist activity by U.S. law enforcement can be broadly described in terms of screening and interdiction (stopping a suspected terrorist from entering the United States, for example), law enforcement investigation, and government activities aimed at keeping radicalized individuals from morphing into terrorists . Of course, much of this work is predicated on identifying dangerous actors. Portions of the TSDB are exported to data systems in federal agencies that perform screening activities such as background checks, reviewing the records of passport and visa applicants, and official encounters with travelers at U.S. border crossings. As suggested above, screening processes are crucial to stopping terrorists—interdicting them—before they can harm the homeland. Interdiction conceivably involves at least two wide categories of IS acolytes who may intend to travel to the United States—" the returned " and " the others ." Within the Department of Homeland Security (DHS), components such as Customs and Border Protection (CBP) and the Transportation Security Administration (TSA) draw on the TSDB for information regarding known or suspected terrorists, including any Americans entered into the TSDB for joining the Islamic State. For example, battle-hardened American IS members who choose to return to the United States run the risk of being spotted at U.S. borders by CBP officials who routinely test the identities of travelers against information drawn from the TSDB. CBP, charged with the mission of preventing terrorists and their weapons from entering the United States, has described its efforts as intelligence-driven and layered, geared toward mitigating the risk posed by travelers destined for the United States. As this suggests, the agency is at the forefront in identifying Americans who fought with the Islamic State attempting to come home—" the returned ." CBP "detect[s], assess[es] and, if necessary, mitigate[s] the risk posed by travelers throughout the international travel continuum. CBP and its partners work to address risk at each stage in the process: (1) the time of application to travel; (2) ticket purchase or reservation; (3) check in at a foreign airport; and (4) arrival in the United States." Additionally, DHS Secretary Jeh Johnson and other DHS officials have broadly alluded to U.S. efforts to coordinate with allies on foreign fighters. DHS has expanded its liaison with international officials regarding foreign fighters involved in conflict in Syria and Iraq. The State Department and DHS play important roles in visa security. These feature prominently in the effort to identify IS fighters not from the United States who try to get U.S. visas—" the others ." For example, the State Department Bureau of Consular Affairs is responsible for issuing visas and uses a number of tools to conduct national security and public safety reviews of visa applicants. One tool, implemented in partnership with NCTC, is dubbed "Kingfisher Expansion" (KFE) and began operations in June 2013. 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 [of NCTC].... 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. Additionally, Immigration and Customs Enforcement (ICE), an agency within DHS, operates the department's Visa Security Program. The program is responsible for stopping terrorists and criminals who may try to use the legal visa process to enter the United States. ICE agents are stationed at 20 Visa Security Units located in U.S. embassies and consulates abroad. ICE notes that such visa security efforts include examining visa applications for fraud, initiating investigations, coordinating with law enforcement partners, and providing law enforcement training and advice to State Department officials. What about IS fighters from countries where their citizens do not need visas to travel to the United States, that is, countries participating in the U.S. Visa Waiver Program (VWP)? In 2014, DHS responded to concerns regarding IS foreign fighters from VWP countries by expanding the information collected from VWP travelers through the Electronic System for Travel Authorization (ESTA). Customs and Border Protection (CBP) uses ESTA to review prospective travelers from visa waiver countries "to determine if they pose a law enforcement or security risk before they board aircraft destined for the United States." DHS has stated that ESTA has been a "highly effective security and vetting tool" enabling "DHS to deny travel under the [VWP] to thousands of prospective travelers who may pose a risk to the United States [presumably endangering national security or public safety], prior to those individuals boarding a U.S. bound aircraft." However, since ESTA is a biographic and not a biometric security check, and there is no interview by a consular officer, some contend that ESTA does not provide the same level of screening as applying for a visa. In addition to the enhancements of ESTA data elements discussed above, in 2015, DHS boosted the security criteria that countries "must meet to participate in the VWP." Also, in December 2015, Congress passed legislation requiring changes to the U.S. visa waiver program. Among other changes, the legislation established new eligibility requirements for the VWP which, as implemented, modified what data were to be collected from travelers via ESTA. Furthermore, as of April 2016, all foreign travelers participating in the Visa Waiver Program will have to use e-Passports. The FBI is the lead agency for investigating the federal crime of terrorism, and its IS-related cases largely have targeted suspects that this report describes as "the departed," "the returned," and "the inspired." Aside from its own investigative work, the Bureau relies on other U.S. federal agencies (such as DHS, the State Department, the Central Intelligence Agency, and NCTC) as well as state, local, and foreign governments for assistance and investigative leads. Specifically, in 2015 media reporting suggested that local police were enlisted in some locations to help with surveillance of possible terrorism suspects tied to the Islamic State. Joint Terrorism Task Forces (JTTFs) led by the FBI play the chief role in coordinating federal counterterrorism investigations across the United States, bringing together federal, state, and local participants in the process. There are more than 100 JTTFs across the country in the FBI's field offices and resident agencies. JTTFs are locally based, multiagency teams of investigators, analysts, linguists, special weapons and tactics (SWAT) experts, and other specialists who investigate terrorism and terrorism-related crimes. Among their many roles, the agents, task force officers, and analysts working on JTTFs gather leads, evidence, and information related to these cases. They analyze this information and help develop cases for prosecution, most often pursued in federal court. JTTF members share leads and information from counterterrorism cases with federal, state, and local partners to coordinate counterterrorism investigations and broaden U.S. counterterrorism efforts. Over 4,100 federal, state, and local law enforcement officers and agents work on them (including more than 1,500 people from more than 600 partner agencies), more than four times the total prior to 9/11. During the past decade, law enforcement cooperation has increased in the area of information sharing, particularly the exchange of material tied to terrorist threats. A hallmark of this has been the development of state and major urban area fusion centers, designed not to investigate people or crimes but to share threat information. The more than 70 federally recognized fusion centers in operation are not federally led. Rather they are controlled by state and local entities and supported by the federal government. They play a notable role in information and intelligence sharing, bringing together federal, state, and local law enforcement and security professionals working on counterterrorism and crime issues. Sharing can involve the reporting of suspicious activity to generate investigative leads for JTTFs to pursue. It can also include the exchange of more finished intelligence analysis discussing the evolution and nature of existing threats. Thwarting terrorist plotters also involves understanding the intricacies of radicalization—especially determining when individuals move from radical activity involving First Amendment-protected behavior to violent extremism (i.e., terrorism). Thus, the U.S. government faces the difficult task of finding ways to keep people who are radicalizing or radicalized from morphing into terrorists. Regarding the Islamic State, the FBI, DHS, and NCTC are working to understand the motivations driving people to radicalize and join terrorist groups in Syria. Ideally, this work prevents people from ever falling into the "departed," "returned," "inspired," "others," or "lost" categories described above. More generally, American counter-radicalization approaches favor government engagement with communities affected by terrorism. The U.S. government has a strategy aimed at countering violent extremism (CVE), much of which is focused on the domestic arena. The Administration's CVE strategy revolves around countering the radicalization of all types of potential terrorists. As such, the radicalization of violent jihadists falls under its purview and is the key focus. The Administration held a CVE summit in February 2015, and in January 2016, announced the creation of a Countering Violent Extremism Task Force to coordinate "federal efforts and partnerships" in the CVE arena. The task force, a permanent interagency body, emerged after "representatives from 11 departments and agencies" reviewed federal CVE efforts. The task force is to "organize federal efforts" at Research and Analysis. The Task Force will coordinate federal support for ongoing and future CVE research and establish feedback mechanisms for CVE findings, thus cultivating CVE programming that incorporates sound results. Engagements and Technical Assistance. The Task Force will synchronize Federal Government outreach to and engagement with CVE stakeholders and will coordinate technical assistance to CVE practitioners. Communications. The Task Force will manage CVE communications, including media inquiries, and leverage digital technologies to engage, empower, and connect CVE stakeholders. Interventions. The Task Force will work with CVE stakeholders to develop multidisciplinary intervention programs. Examples of interagency efforts at CVE afoot prior to the Task Force's creation include the following: The National Security Council has coordinated an interagency "effort to work with Boston, Los Angeles, and Minneapolis/St. Paul to facilitate and support the development of locally based, and driven, violent extremism prevention and intervention pilot frameworks." The Community Resilience Exercise, developed and presented by DHS and NCTC, brings together local law enforcement and community leaders in a specific locale to work through "a hypothetical violent extremist or foreign fighter-related scenario, including a hypothetical attack. The goal of the exercise is to build capacity within municipalities to mitigate the terrorist threat." The Community Awareness Briefing, developed by DHS and NCTC, is "a key tool [the agencies] use to convey information to local communities and authorities on the terrorist recruitment threat. The CAB now also includes information on the recruitment efforts of violent extremist groups based in Syria and Iraq." As of June 2015, the CAB had been presented in 15 U.S. cities. Community engagement efforts pursued by the office of Civil Rights and Civil Liberties in DHS, including June 2014 meetings in Los Angeles that covered topics concerning Syria and World Refugee Day. | Analysis of publicly available information on homegrown violent jihadist activity in the United States since September 11, 2001, suggests that the Islamic State (IS) and its acolytes may pose broad challenges to domestic law enforcement and homeland security efforts. Homegrown IS-inspired plots can be broken into three rough categories based on the goals of the individuals involved. The first two focus on foreign fighters, the last on people willing to do harm in the United States: The Departed—Americans, often described as foreign fighters, who plan to leave or have left the United States to fight for the Islamic State. The Returned—American foreign fighters who trained with or fought in the ranks of the Islamic State and come back to the United States, where they can potentially plan and execute attacks at home. The Inspired—Americans lured—in part—by IS propaganda to participate in terrorist plots within the United States. At least two other categories of IS foreign fighters pose some threat to U.S. interests: The Lost—Unknown Americans who fight in the ranks of the Islamic State but do not plot terrorist attacks against the United States. Such individuals may come home after fighting abroad and remain unknown to U.S. law enforcement. Additionally, some American IS fighters will never book a trip back to the United States. Finally, some American IS supporters will perish abroad. The Others—Foreign IS adherents who radicalize in and originate from places outside of the United States or non-American foreign fighters active in the ranks of the Islamic State. These persons could try to enter the United States when done fighting abroad. Federal law enforcement has numerous approaches to go after each of these categories of terrorist actors. These include the following: Watchlisting—the federal counterterrorism watchlisting regimen effectively attempts to shrink "the lost" category described above. Preemption—efforts geared toward preemption of terrorist activity can be broadly described in terms of interdiction (stopping a suspected terrorist from entering the United States, for example), law enforcement investigation, and government activities aimed at keeping radicalized individuals from morphing into terrorists, also known as countering violent extremism. |
Since 1945, seven nations—China, France, India, Pakistan, Russia, the United Kingdom, and the United States—have developed and currently deploy nuclear weapons. North Korea tested a low-yield nuclear explosive device in October 2006, announced that it had conducted a second nuclear test in May 2009, and announced a third test on February 12, 2013. Israel is generally thought to possess nuclear weapons, although it maintains a policy of ambiguity on this matter. This report describes the organizations controlling research and development (R&D) on nuclear weapons (i.e., nuclear explosive devices, as distinct from the bombers and missiles that carry them) in these nations, and presents a brief history of the organizations controlling nuclear weapons R&D in the United States. It discusses whether these organizations are civilian or military, though in many nations the lines between civilian and military are blurred. This information may be of use to Members of Congress and their staff interested in nuclear weapons, nuclear proliferation, and arms control matters. The U.S. program for research, development, and production of nuclear weapons began during World War II. It was initially under the control of the Office of Scientific Research and Development, a civilian agency within the Executive Office of the President. In 1942, control shifted to the Army, in substantial part because the Army had the capability to manage projects to design and build the massive plants to produce uranium and plutonium for atomic bombs. In 1945 and 1946, debate raged in Congress, the White House, the War Department, and among scientists and the public about whether to place atomic energy under civilian or military control. Congress resolved the issue in favor of civilian control of atomic energy in the Atomic Energy Act of 1946 (P.L. 79-585). That act created the Atomic Energy Commission (AEC) to develop nuclear weapons and, more generally, to foster and control research into atomic energy. The AEC was an independent organization, separate from the War Department and, later, from the Department of Defense (DOD). Ever since, nuclear weapons R&D has been conducted by the AEC and its successor organizations, all of which have been under civilian control and separate from DOD. The Atomic Energy Act of 1954 (P.L. 83-703), as amended, replaces the Atomic Energy Act of 1946. The Nuclear Regulatory Commission states that the 1954 act "is the fundamental U.S. law on both the civilian and the military uses of nuclear materials." The Energy Research Reorganization Act of 1974 ( P.L. 93-438 ) abolished the AEC. It established the Nuclear Regulatory Commission, which regulated civilian uses of nuclear energy; the Energy Research and Development Administration (ERDA), which was in charge of nuclear weapons, among other things; and the Energy Resources Council. In 1977, the Department of Energy Organization Act ( P.L. 95-91 ) abolished ERDA and the Federal Energy Administration and established the Department of Energy (DOE). In 1999, Title XXXII of P.L. 106-65 , National Defense Authorization Act for FY2000, established the National Nuclear Security Administration (NNSA) as a semiautonomous agency within DOE. Regarding the semiautonomous status, that act, as amended, stated: SEC. 3220. STATUS OF ADMINISTRATION AND CONTRACTOR PERSONNEL WITHIN DEPARTMENT OF ENERGY. (a) Status of Administration Personnel.—Each officer or employee of the Administration, in carrying out any function of the Administration— (1) shall be responsible to and subject to the authority, direction, and control of— (A) the Secretary acting through the Administrator and consistent with section 202(c)(3) of the Department of Energy Organization Act; (B) the Administrator; or (C) the Administrator's designee within the Administration; and (2) shall not be responsible to, or subject to the authority, direction, or control of, any other officer, employee, or agent of the Department of Energy. Section 3203 states that the Secretary of Energy "shall be responsible for establishing policy" for NNSA, while Section 3251 requires that NNSA's budget shall be treated separately in the DOE budget. NNSA's Office of Defense Programs is responsible for such nuclear weapons work as R&D, production, transportation between DOE sites and between DOE and DOD sites, maintenance of weapons (except for minor maintenance at DOD sites), and dismantlement. NNSA's other primary program areas are Defense Nuclear Nonproliferation (DNN) and Naval Reactors. DNN's Office of Fissile Materials Disposition is responsible for the disposition of surplus plutonium and highly enriched uranium. The Nuclear Weapons Council coordinates NNSA and DOD work on nuclear weapons. The council was established pursuant to P.L. 99-661 , FY1987 National Defense Authorization Act, Section 3137. As per 10 U.S.C. 179, the members of the council are the Under Secretary of Defense for Acquisition, Technology, and Logistics, the Vice Chairman of the Joint Chiefs of Staff, the Under Secretary for Nuclear Security of the Department of Energy (who is also the Administrator of NNSA), the Under Secretary of Defense for Policy, and the Commander of the United States Strategic Command. At present, NNSA's nuclear weapons activities are conducted at eight sites: Los Alamos National Laboratory (NM), Lawrence Livermore National Laboratory (CA), and Sandia National Laboratories (NM and CA), all of which conduct weapons R&D; Pantex Plant (TX), Kansas City Plant (MO), and Y-12 National Security Complex (TN), all of which are involved in the production, maintenance, and dismantlement of nuclear weapons; the Savannah River Site (SC), which processes tritium, a key ingredient of nuclear weapons; and the Nevada National Security Site (NV, formerly Nevada Test Site). While the last U.S. nuclear test was conducted in September 1992, the Nevada National Security Site conducts weapons-related experiments not involving nuclear explosions and remains available to conduct nuclear tests if needed. A DOE website contains summary and detailed DOE budget requests for FY2002-FY2013. In the FY2013 budget cycle, both Armed Services Committees expressed concerns about NNSA, questioning its relationship with DOE and raising the prospect that it should have more, if not total, autonomy from DOE. The FY2013 National Defense Authorization Act, P.L. 112-239 , Section 3166, established the Congressional Advisory Panel on the Governance of the Nuclear Security Enterprise, with an interim report due by July 2013 and a final report due by February 2014. According to Section 3166, the panel was to "examine options and make recommendations for revising the governance structure, mission, and management of the nuclear security enterprise." While the legislation addressed the "nuclear security enterprise," the conference report made clear that the panel was "to address the immediate and long-term issues associated with the NNSA." (Written by Jonathan Medalia, Specialist in Nuclear Weapons Policy.) The research, development, and production of nuclear weapons in the People's Republic of China (PRC) appear to be under the control of the military, which is collectively called the People's Liberation Army (PLA). The PLA's Second Artillery (missile force) deploys nuclear-armed and conventionally armed missiles for strategic deterrence and manages the storage and security of nuclear weapons. The nuclear weapons work is conducted by the China Academy of Engineering Physics (CAEP), which refers to a large organization that encompasses at least 17 major research institutes located near the cities of Mianyang (Sichuan province), Shanghai, Beijing, and Chengdu. Founded in 1958, the CAEP has used names of entities that include the Ninth Academy, High Power Laser Laboratory, and Institute of Applied Physics and Computational Mathematics (IAPCM). CAEP seems to report to the Science and Technology Commission of the PLA's General Armaments Department (GAD). The PLA, through the GAD, also controls the nuclear weapon testing base at Lop Nur in the northwestern Xinjiang region. The PRC's last announced nuclear weapons test took place in July 1996. At the same time, the PRC has a policy of military-civilian integration in national defense, including work at military and civilian institutes and universities. Under the Central Military Commission (CMC) and the State Council, the Central Special Commission is believed to be responsible for top-level coordination of strategic weapons programs. Other PRC organizations reportedly involved with nuclear warheads reportedly include the following: Northwest Institute of Nuclear Technology, Fudan University, Shanghai Institute of Nuclear Research, China Institute of Atomic Energy, China Institute of Radiation Protection, China Aerospace Science and Technology Corporation (CASC), China Academy of Sciences (CAS), and China Academy of Engineering (CAE). The China National Nuclear Corporation (CNNC) is a defense industrial state-owned conglomerate that works with nuclear fuel, nuclear power plants, enrichment, and other related nuclear activities. In 2008, CNNC was re-organized as one of 10 defense industrial conglomerates under the Ministry of Industry and Information Technology (MIIT). The PRC is believed to possess a nuclear force that totals approximately 240 nuclear warheads, according to some experts. They also say that satellite images and other data suggest that China's nuclear production facilities are not producing more plutonium and do not have enough fissile material for thousands of warheads. Still, uncertainty remains about China's nuclear weapons. The PLA's Second Artillery reportedly uses an extensive network of underground tunnels, totaling over 3,100 miles, to hide and move strategic missiles, as the Secretary of Defense reported to Congress in 2011. In 2011, Professor Phillip Karber of Georgetown University focused on the tunnels and argued in a study that China's nuclear weapons could total as many as 3,000. A retired general who commanded Russia's strategic forces, Viktor Yesin, argued that China has 1,600-1,800 nuclear warheads. However, in August 2012, the Commander of the U.S. Strategic Command (STRATCOM), Air Force General Robert Kehler, said that he disagreed with arguments that China has hundreds or thousands more nuclear weapons than the size estimated by intelligence assessments. (Written by Shirley Kan, Specialist in Asian Security Affairs.) France's nuclear weapons R&D is supervised by the French Ministry of Defense, which delegates the direction of these programs to the French Atomic and Alternative Energy Commission ( Commissariat à l'énergie atomique et aux energies alternatives , or CEA). CEA was established in 1945 and is a public entity. It "is active in four main areas: low-carbon energies; defense and security; information technologies; and health technologies." According to the Embassy of France, CEA's general programs are determined by a committee, Comité à l'Energie Atomique , which is chaired by the French Prime Minister. The CEA Chairman serves as "a sort of Chief Executive Director" of the organization. He or she is appointed by the government, chairs the CEA Board, and is a permanent member of the aforementioned Comité . A High Commissioner, also appointed by the government, is tasked with advising the CEA Chairman on scientific and technical issues. The High Commissioner chairs the CEA Scientific Committee and is usually a member of the Comité . CEA activities in the military field are carried out in the CEA's Direction des Applications Militaires (DAM). DAM's activities are supervised by the Ministry of Defense, but program management is in large part delegated to CEA. A commission, the Comité Mixte Armées-CEA , oversees program execution, particularly the financial aspects. As is the case for other CEA directorates, DAM is not a part of the Ministry of Defense or any other government ministry. CEA receives its funding from several government ministries and directorates: the Ministry of Ecology and Sustainable Development; the General Directorate for Energy and Climate; the Ministry for Higher Education and Research; and the Ministry of Defense. Funding decisions are based on a common CEA strategy, but each ministry submits to parliament a separate budget proposal for programs in its area. (Written by [author name scrubbed], Analyst in European Affairs.) The organizations concerned with research and development for India's nuclear weapons all appear to be controlled by the Department of Atomic Energy (DAE), which was set up in 1954 under the direct charge of the Prime Minister. The department continues to function under the direct control of the Prime Minister and includes facilities widely believed by experts to be part of (or potentially part of) India's nuclear weapons program, including nuclear reactors, reprocessing facilities, and enrichment facilities. All of these facilities appear to be under the control of the Bhabha Atomic Research Centre and the Indira Gandhi Centre for Atomic Research, both of which are part of the DAE. (Written by Paul Kerr, Analyst in Nonproliferation.) Israel follows a policy of strategic ambiguity or "nuclear opacity" regarding its nuclear weapons status, neither confirming nor denying the existence of a nuclear weapons program. Its officials simply state that Israel would not be the first to introduce nuclear weapons into the region, without explaining what that means. Israel has followed this policy for more than four decades in the apparent hopes of deterring adversaries without triggering widespread regional proliferation. Therefore, the Office of the Military Censor disallows any reporting on the country's nuclear infrastructure, facilities, and organizations that implies the existence of a nuclear weapons program. Nonetheless, there have been many international reports alleging and concerning Israel's nuclear weapons program. Indeed, as far back as 1974, a U.S. Special National Intelligence Estimate stated, "We believe that Israel already has produced and stockpiled a small number of fission weapons." Israel's nuclear program is under civilian control. In 1952, the Israel Atomic Energy Commission (IAEC) was created to advise the government on nuclear policy and on nuclear research and development priorities, as well as to implement policies and conduct research. Between 1957 and 1966, during the development of the nuclear site near Dimona in the Negev, Shimon Peres, then director general of the defense ministry (and now Israel's president), diminished the IAEC's role by giving authority over the nuclear project to two new organizations within the defense ministry that reported directly to him. A restructured IAEC resurfaced in 1966, shortly after Peres's departure from the defense ministry. At that point, the IAEC reportedly assumed overall responsibility for Israel's nuclear weapons program. The director general of the IAEC officially reports directly to the prime minister, who is the ex-officio chairman of the organization. Like the Mossad (Institute for Intelligence and Special Operations)—another secretive Israeli organization under the prime minister's responsibility—the IAEC and its activities are not codified in Israeli law. In 2007, the IAEC established a website that includes some basic unclassified information on Israel's nuclear program, without referring to any military aspects of the program. Such aspects remain classified. In August 2007, then Prime Minister Ehud Olmert named Dr. Shaul Horev (alternate transliteration: Chorev), formerly deputy chief of the Israeli navy and then head of a secret "special means" division within the defense ministry, to be the IAEC director general. According to a 2010 book by a U.S.-based Israeli academic specializing in Israel's nuclear history, the defense ministry reportedly plays a substantial but publicly undisclosed role in steering the program, largely due to its control over "key aspects of the IAEC's operations, such as budget and security." The 2010 book characterizes the IAEC as, in some respects, Israel's most secretive security organization. The IAEC directs research at the Center for Nuclear Research at Nahal Sorek (alternative transliteration: Soreq), approximately 10 miles south of Tel Aviv, and at the larger Center for Nuclear Research in the Negev south of Dimona. The Sorek center has a small civilian research reactor under International Atomic Energy Agency (IAEA) safeguards. According to some reports, Sorek also conducts nuclear weapons research and design activities. Dimona is the site of a reactor and fissile material processing plant that is off-limits to international inspectors, and reportedly both highly enriched uranium (HEU) and plutonium are produced there. In March 2012, Israeli officials announced plans to phase out the civilian reactor at Sorek by 2018, largely because the reactor's stock of HEU fuel—provided by the United States in 1960—is running out and the reactor is aging. Nuclear Suppliers Group guidelines prohibit suppliers from exporting additional reactor fuel to Israel because the country is not a signatory to the Nuclear Non-Proliferation Treaty (NPT). Israel will reportedly replace the reactor with a particle accelerator that will fulfill many of the same research and medical functions. (Written by [author name scrubbed], Specialist in Middle Eastern Affairs.) Policy-making toward North Korea's nuclear program has been vested in the National Defense Council since 1991. North Korean leader Kim Jong-un heads this body. The other members represent the North Korean Workers (Communist) Party and the North Korean military. Kim Jong-un was appointed "Supreme Commander" of the Korean People's Army after his father (Kim Jong-il)'s death in December 2011. Kim Jong-un has had the supreme decision-making authority on nuclear policy, as did his father and grandfather before him. At the top of the operational organization is North Korea's Ministry of Atomic Energy Industry, a full-fledged cabinet ministry. Under this ministry, there are a number of nuclear-related organizations and research centers. There are two committees: an Isotope Application Committee and a Nuclear Energy Committee. The ministry also directs a nuclear research center at Yongbyon, the site of North Korea's known plutonium facilities. There also is a nuclear energy institute in Pyongyang, the capital. The Yongbyon nuclear research center consists of 10 branches: (1) Uranium Resources Development Institute; (2) Nuclear Physics Institute; (3) Radiochemical Laboratory (plutonium reprocessing); (4) Nuclear Material Institute; (5) Nuclear Energy Research Institute; (6) Isotope Utilization Institute; (7) Neutron Physics Institute; (8) Reactor Design Institute; (9) Nuclear Electromagnetics Institute; and (10) Radiation Protection Institute. Under this organizational framework, the South Korean government estimates that there are about 20 nuclear facilities. The main ones at Yongbyon are a 5-megawatt nuclear reactor, a plutonium reprocessing plant, a newly built gas centrifuge uranium enrichment plant, and initial construction on a 100 megawatt-thermal (approximately 25-30 megawatt electric) light-water reactor. There also are at least five uranium mining and milling facilities. It also is believed that North Korea has facilities for storing its stockpile of plutonium, which it has produced at Yongbyon, and for storing a few nuclear weapons that it may have produced. U.S. officials have also stated that they believe North Korea operates clandestine uranium enrichment facilities as well. The South Korean government estimates that there are about 3,000 people working throughout North Korea's nuclear facilities. (Written by Mary Beth Nikitin, Specialist in Nonproliferation.) The National Command Authority (NCA) supervises the functions and administration of all of Pakistan's organizations involved in nuclear weapons research, development, and employment, as well as the military services that operate the strategic forces. The Prime Minister is Chairperson of the NCA. Other members of the NCA include senior military and civilian officials. The NCA, as Pakistan's main decision-making body for nuclear weapons issues, is made up of two committees. One, the Development Control Committee (DCC), includes several military officials; its Deputy Chairperson is also the Chair of the Joint Chiefs of Staff. The DCC "exercises technical, financial and administrative control over all strategic organisations, including national laboratories and research and development organisations associated with the development and modernisation of nuclear weapons." The second is the Employment Control Committee. The Strategic Plans Division (SPD) acts as the secretariat for the NCA. The SPD is tasked with the daily management of Pakistan's strategic assets and has oversight over the "Strategic Organizations," which include the Pakistan Atomic Energy Commission and Dr. A.Q. Khan Research Laboratories. The SPD also oversees "the systematic progress of weapon systems." (Written by Paul Kerr, Analyst in Nonproliferation.) The Russian Federation has continued the Soviet pattern of civilian government control of the nuclear infrastructure, including military and civilian programs. The Soviet Union's nuclear weapons program began in the late phases of World War II and developed into 10 closed "nuclear cities." The Soviet nuclear complex was under the Soviet Ministry of Atomic Power and Industry, which in 1992 became the Ministry for Atomic Energy (MinAtom). The Russian Federation inherited the vast majority of the Soviet Union's nuclear assets. After government restructuring in 2004, MinAtom became the Federal Agency for Atomic Energy (FAAE, known as Rosatom). After being appointed head of the agency, former Prime Minister Sergei Kiriyenko led a restructuring of the nuclear complex to facilitate an expansion of nuclear power exports and international collaboration. A 2007 law, the "Tunnel Law," consolidated all civilian nuclear assets under a new joint stock company, Atomenergoprom, under Rosatom. A further restructuring converted Rosatom itself from a federal agency to a government-owned corporation, the Rosatom State Atomic Energy Corporation (which retained nearly all of its functions as a government agency). Kiriyenko, who stayed in his post as head of the organization, is accountable to the Prime Minister of the Russian Federation. Rosatom manages Atomenergoprom and is directly responsible for defense-related nuclear work, nuclear science, the back end of the fuel cycle, and nuclear safety and security matters. Rosatom's Nuclear Weapons Complex branch is responsible for developing, testing, producing, and dismantling all nuclear weapons. The Nuclear Weapons Complex branch consists of two divisions: the Nuclear Weapons Production Division and the Development and Testing Division. The latter oversees the two major Russian nuclear weapon design research institutes—the All-Russian Scientific Research Institute for Experimental Physics in Sarov (VNIIEF) and the All-Russian Scientific Research Institute for Technical Physics in Snezhinsk (VNIITF), founded in 1946 and 1955, respectively. A number of research centers also participate in nuclear weapons work. Russia also maintains a test site at Novaya Zemlya. The Ministry of Defense oversees the storage and deployment of nuclear weapons. (Written by Mary Beth Nikitin, Specialist in Nonproliferation.) The Atomic Weapons Establishment (AWE) is responsible for the design, production, assembly, and maintenance of the UK's nuclear weapons, as well as decommissioning and disassembly. The British government owns all AWE sites and assets, which are based at two facilities in Berkshire: Aldermaston and Burghfield. Government control of AWE is exercised by the civilian-led Ministry of Defence (MoD) and vested in its top official, the Secretary of State for Defence. Since creation of this post in 1964, this official has always been a civilian, a Member of Parliament, and a member of the Prime Minister's cabinet. Within the MoD structure, the Minister for Defence Equipment, Support and Technology, also a civilian and a Member of Parliament, has lead responsibility for government policy regarding AWE. In 1993, AWE was made a government-owned, contractor-operated entity, and its management was contracted to the private consortium Hunting-BRAE. In 2000, the MoD awarded a new 10-year contract to AWE Management Limited (AWE ML), which was then a partnership of Lockheed Martin, Serco, and British Nuclear Fuels Limited. In 2003, this contract was extended through 2025. With the management contract, AWE ML took over the operating company AWE plc, which handles day-to-day operations and employs the workforce of around 4,500 staff and 2,000 contractors. The MoD retains a "golden share"—a nominal share allowing it to veto corporate action—in AWE plc. In December 2008, Jacobs Engineering Group Inc. acquired British Nuclear Fuels Limited's share of AWE ML. AWE ML is contractually obligated to consult with the government regarding all such changes in the composition of its ownership. The great majority of funding for AWE comes from the UK defense budget, primarily under allocations for the Defence Equipment and Support (DE&S) section of the MoD. The Directorate Strategic Weapons of DE&S manages the AWE contract, leading MoD monitoring and liaison with AWE ML to ensure the execution of government decisions regarding Britain's strategic requirements. AWE facilities are subject to the same regime of licensing and safety regulations as civil nuclear plants, and are regularly inspected for compliance by the Office for Nuclear Regulation, a division of the UK Health and Safety Executive. An agreement signed by the United Kingdom and France in November 2010 commits the two countries to a program of cooperation with regard to nuclear weapons R&D. Under the treaty, the UK and France are expected to jointly develop, operate, and staff a new hydrodynamics research facility at Valduc, France, and a Technology Development Center at AWE Aldermaston. The new joint facilities are expected to be operational starting in 2015. (Written by Derek Mix, Analyst in European Affairs.) | Seven nations—China, France, India, Pakistan, Russia, the United Kingdom, and the United States—possess nuclear weapons. North Korea tested a nuclear explosive device in 2006, and announced that it had conducted a test in 2009 and another in 2013. Israel is widely thought to have nuclear weapons. As an aid to Congress in understanding nuclear weapons, nuclear proliferation, and arms control matters, this report describes which agency is responsible for research and development (R&D) of nuclear weapons (i.e., nuclear explosive devices, as distinct from the bombers and missiles that deliver them) in these nations and whether these agencies are civilian or military. It also traces the history of such agencies in the United States from 1942 to the present. This report will be updated annually, or more often as developments warrant. In the United States, the Army managed the nuclear weapons program during World War II. Since 1946, weapons R&D has been managed by civilian agencies, at present by the National Nuclear Security Administration (NNSA), a semiautonomous agency in the Department of Energy. Concerns about "the immediate and long-term issues associated with the NNSA," however, led Congress to establish the Congressional Advisory Panel on the Governance of the Nuclear Security Enterprise in the FY2013 National Defense Authorization Act, P.L. 112-239. China's nuclear weapons R&D is apparently under the direction of the military, collectively called the People's Liberation Army. France's nuclear weapons R&D is supervised by the Ministry of Defense, which delegates the direction of these programs to the French Atomic and Alternative Energy Commission (CEA). However, as with NNSA in the United States, CEA is not a part of the Ministry of Defense. CEA also conducts nuclear programs in science and industry under the supervision of other ministries. India's nuclear weapons R&D appears to be controlled by the Department of Atomic Energy, which is under the direct control of the Prime Minister. Israel's nuclear program is under civilian control, but since Israel neither confirms nor denies that it possesses nuclear weapons, it classifies information on such weapons, including organizations responsible for R&D. The Israel Atomic Energy Commission reportedly has overall responsibility for Israel's nuclear weapons program, and the Director General of that commission reports directly to the Prime Minister. North Korea's Ministry of Atomic Energy Industry is in charge of the day-to-day operation of the nuclear weapons program. Under it are nuclear-related organizations. Policy is decided by leader Kim Jong-un and other Communist Party and military leaders who advise him. Pakistan's National Command Authority (NCA) supervises the functions and administration of all of Pakistan's organizations involved in nuclear weapons R&D and employment, as well as the military services that operate the strategic forces. The Prime Minister is the chair of the NCA, and membership includes senior civilian and military leaders. Russia's State Atomic Energy Corporation (Rosatom) is responsible for nuclear weapons R&D and production. It is a civilian agency, though it has many links to the military. In the United Kingdom, a private company, AWE Management Limited, manages and operates the Atomic Weapons Establishment (AWE), a government-owned, contractor-operated entity. The Ministry of Defence (MoD), which is headed by a civilian, controls the operations, policy, and direction of AWE and can veto actions of the company. The MoD provides most of the funding for AWE. This update revises the section on Israel. The balance of the report is updated to February 2013. |
The length of time a congressional staff member spends employed in Congress, or job tenure, is a source of recurring interest among Members of Congress, congressional staff, those who study staffing in the House and Senate, and the public. There may be interest in congressional tenure information from multiple perspectives, including assessment of how a congressional office might oversee human resources issues, how staff might approach a congressional career, and guidance for how frequently staffing changes may occur in various positions. Others might be interested in how staff are deployed, and could see staff tenure as an indication of the effectiveness or well-being of Congress as an institution. This report provides tenure data for 15 staff position titles that are typically used in Senate committees, and information for using those data for different purposes. The positions include the following: Chief Clerk Chief Counsel Communications Director Counsel Deputy Staff Director Legislative Assistant Minority Staff Director Press Secretary Professional Staff Member Senior Counsel Senior Professional Staff Member Staff Assistant Staff Director Subcommittee Staff Director Systems Administrator Publicly available information sources do not provide aggregated congressional staff tenure data in a readily retrievable or analyzable form. Data in this report are based on official Senate pay reports, from which tenure information arguably may be most reliably derived, and which afford the opportunity to use complete, consistently collected data. Tenure information provided in this report is based on the Senate's Report of the Secretary of the Senate , published semiannually, as collated by LegiStorm, a private entity that provides some congressional data by subscription. Senate committee staff tenure data were calculated for each year between 2006 and 2016. Annual data allow for observations about the nature of staff tenure in Senate committees over time. For each year, all staff with at least one week's service on March 31 were included. All employment pay dates from October 2, 2000 to March 24 of each reported year are included in the data. Utilizing official salary expenditure data from the Senate may provide more complete, robust findings than other methods of determining staff tenure, such as surveys; the data presented here, however, are subject to some challenges that could affect the interpretation of the information presented. Tenure information provided in this report may understate the actual time staff spend in particular positons, due in part to several features of the data. Figure 1 provides potential examples of congressional staff, identified as Jobholders A-D, in a given position. Some individuals, represented as Jobholder A, may have an unknown length of prior service before October 2, 2000, when the data begin. In the data captured for this report, no jobholders fall into this category. The earliest date at which Senate committee staff included in this report received pay was October 4, 2000. Thus, the tenure periods of all staff for which data are provided completely begin within the observed period of time; some tenure periods, as represented by Jobholders B and C, also end within the observed period. The data last capture those who were employed in Senate committees as of March 31, 2016, represented as Jobholder D, and some of those individuals likely continued to work in the same roles after that date. Data provided in this report represent an individual's consecutive time spent working in a particular position in a Senate committee. They do not necessarily capture the overall time worked in a Senate office or across a congressional career. If a person's job title changes, for example, from staff assistant to professional staff member, the time that individual spent as a staff assistant is recorded separately from the time that individual spent as a professional staff member. If a person stops working for the Senate for some time, that individual's tenure in his or her preceding position ends, although he or she may return to work in Congress at some point. No aggregate measure of individual congressional career length is provided in this report. Other data concerns arise from the variation across commirrees and lack of other demographic information about staff. Potential differences might exist in the job duties of positions with the same or similar title, and there is wide variation among the job titles used for various positions in congressional offices. The Appendix provides the number of related titles included for each job title for which tenure data are provided. Aggregation of tenure by job title rests on the assumption that staff with the same or similar title carry out the same or similar tasks. Given the wide discretion congressional employing authorities have in setting the terms and conditions of employment, there may be differences in the duties of similarly titled staff that could have effects on the interpretation of their time in a particular position. As presented here, tenure data provide no insight into the education, age, work experience, pay, full- or part-time status of staff, or other potential data that might inform explanations of why a congressional staff member might stay in a particular position. Tables in this section provide tenure data for selected positions in Senate committees and detailed data and visualizations for each position. Table 1 provides a summary of staff tenure for selected positions since 2006. The data include job titles, average and median years of service, and grouped years of service for each positon. The "Trend" column provides information on whether the time staff stayed in a position increased, was unchanged, or decreased between 2006 and 2016. Table 2 - Table 16 provide information on individual job titles over the same period. In all of the data tables, the average and the median length of tenure columns provide two different measures of central tendency, and each may be useful for some purposes and less suitable for others. The average represents the sum of the observed years of tenure, divided by the number of staff in that position. It is a common measure that can be understood as a representation of how long an individual remains, on average, in a job position. The average can be affected disproportionately by unusually low or high observations. A few individuals who remain for many years in a position, for example, may draw the average tenure length up for that position. A number of staff who stay in a position for only a brief period may depress the average length of tenure. Another common measure of central tendency, the median, represents the middle value when all the observations are arranged by order of magnitude. The median can be understood as a representation of a center point at which half of the observations fall below, and half above. Extremely high or low observations may have less of an impact on the median. Generalizations about staff tenure are limited in at least three potentially significant ways, including the following: the relatively brief period of time for which reliable, largely inclusive data are available in a readily analyzable form; how the unique nature of congressional work settings might affect staff tenure; and the lack of demographic information about staff for which tenure data are available. Considering tenure in isolation from demographic characteristics of the congressional workforce might limit the extent to which tenure information can be assessed. Additional data on congressional staff regarding age, education, and other elements would be needed for this type of analysis, and are not readily available at the position level. Finally, since each Senate committee serves as its own hiring authority, variations from committee to committee, which for each position may include differences in job duties, work schedules, office emphases, and other factors, may limit the extent to which data provided here might match tenure in a particular office. Despite these caveats, a few broad observations can be made about staff in Senate committees. Between 2006 and 2016, staff tenure, based on the trend of the median number of years in the position, appears to have increased by six months or more for staff in four position titles in Senate committees. The median tenure was unchanged for seven positions, and decreased for four positions. This may be consistent with overall workforce trends in the United States. Although pay is not the only factor that might affect an individual's decision to remain in or leave a particular job, staff in positions that generally pay less typically remained in those roles for shorter periods of time than those in higher-paying positions. Some of these lower-paying positions may also be considered entry-level positions in some Senate committees; if so, Senate committee employees in those roles appear to follow national trends for others in entry-level types of jobs, remaining in the role for a relatively short period of time. Similarly, those in more senior positions, which often require a particular level of congressional or other professional experience, typically remained in those roles comparatively longer, similar to those in more senior positions in the general workforce. There is wide variation among the job titles used for various positions in congressional offices. Between October 2000 and March 2016, House and Senate pay data provided 13,271 unique titles under which staff received pay. Of those, 1,884 were extracted and categorized into one of 33 job titles used in CRS Reports about Member or committee offices. Office type was sometimes related to the job titles used. Some titles were specific to Member (e.g., District Director, State Director, and Field Representative) or committee (positions that are identified by majority, minority, or party standing, and Chief Clerk) offices, while others were identified in each setting (Counsel, Scheduler, Staff Assistant, and Legislative Assistant). Other job title variations reflect factors specific to particular offices, since each office functions as its own hiring authority. Some of the titles may distinguish between roles and duties carried out in the office (e.g., chief of staff, legislative assistant, etc.). Some offices may use job titles to indicate degrees of seniority. Others might represent arguably inconsequential variations in title between two staff members who might be carrying out essentially similar activities. Examples include the following: Seemingly related job titles, such as Administrative Director and Administrative Manager, or Caseworker and Constituent Advocate Job titles modified by location, such as Washington, DC, State, or District Chief of Staff Job titles modified by policy or subject area, such as Domestic Policy Counsel, Energy Counsel, or Counsel for Constituent Services Committee job titles modified by party or committee subdivision. This could include a party-related distinction, such as a Majority, Minority, Democratic, or Republican Professional Staff Member. It could also denote Full Committee Staff Member, Subcommittee Staff Member, or work on behalf of an individual committee leader, like the Chair or Ranking Member. The titles used in this report were used by most Senate committees, but a number of apparently related variations are included to ensure inclusion of additional offices and staff. Table A-1 provides the number of related titles included for each position used in this report or related CRS Reports on staff tenure. A list of all titles included by category is available to congressional offices upon request. | The length of time a congressional staff member spends employed in a particular position in Congress—or congressional staff tenure—is a source of recurring interest to Members, staff, and the public. A congressional office, for example, may seek this information to assess its human resources capabilities, or for guidance in how frequently staffing changes might be expected for various positions. Congressional staff may seek this type of information to evaluate and approach their own individual career trajectories. This report presents a number of statistical measures regarding the length of time Senate committee staff stay in particular job positions. It is designed to facilitate the consideration of tenure from a number of perspectives. This report provides tenure data for a selection of 15 staff position titles that are typically used in Senate committee offices, and information on how to use those data for different purposes. The positions include Chief Clerk, Chief Counsel, Communications Director, Counsel, Deputy Staff Director, Legislative Assistant, Minority Staff Director, Press Secretary, Professional Staff Member, Senior Counsel, Senior Professional Staff Member, Staff Assistant, Staff Director, Subcommittee Staff Director, and Systems Administrator. Senate committee staff tenure data were calculated as of March 31, for each year between 2006 and 2016, for all staff in each position. An overview table provides staff tenure for selected positions for 2016, including summary statistics and information on whether the time staff stayed in a position increased, was unchanged, or decreased between 2006 and 2016. Other tables provide detailed tenure data and visualizations for each position title. Between 2006 and 2016, staff tenure, based on the trend of the median number of years in the position, appears to have increased by six months or more for staff in four position titles in Senate committees. The median tenure was unchanged for seven positions, and decreased for four positions. These findings may be consistent with overall workforce trends in the United States. Pay may be one of many factors that affect an individual's decision to remain in or leave a particular job. Senate committee staff holding positions that are generally lower-paid typically remained in those roles for shorter periods of time than those in generally higher-paying positions. Lower-paying positions may also be considered entry-level roles; if so, tenure for Senate committee employees in these roles appears to follow national trends for other entry-level jobs, which individuals hold for a relatively short period of time. Those in more senior positions, where a particular level of congressional or other professional experience is often required, typically remained in those roles comparatively longer, similar to those in more senior positions in the general workforce. Generalizations about staff tenure are limited in some ways, because each Senate committee serves as its own hiring authority. Variations from office to office, which might include differences in job duties, work schedules, office emphases, and other factors, may limit the extent to which data provided here might match tenure in another office. Direct comparisons of congressional employment to the general labor market may have similar limitations. Change in committee leadership, for example, may cause staff tenure periods to end abruptly and unexpectedly. This report is one of a number of CRS products on congressional staff. Others include CRS Report R43946, Senate Staff Levels in Member, Committee, Leadership, and Other Offices, 1977-2016, by [author name scrubbed], [author name scrubbed], and [author name scrubbed], and CRS Report R44325, Staff Pay Levels for Selected Positions in Senate Committees, FY2001-FY2014, coordinated by [author name scrubbed]. |
The United States and the European Union (EU) have engaged in a long-standing and acrimonious trade dispute over the EU's decision to ban hormone-treated meat, dating back to the early 1980s. Despite an ongoing series of dispute settlement proceedings and decisions by the World Trade Organization (WTO), there is continued disagreement between the United States and the EU on a range of legal and procedural issues, as well as the scientific evidence and consensus concerning the safety of hormone-treated beef. Many in the United States perceive the EU's ban as an example of how sanitary and phytosanitary (SPS) measures and non-tariff barriers are used as disguised protectionism, primarily intended to restrict imports from other countries. In January 2009, the U.S. Trade Representative (USTR) for the outgoing Bush Administration announced changes to the list of EU products subject to increased tariffs under the dispute. These changes were scheduled to go into effect on March 23, 2009. The EU claimed this action constituted an "escalation" of the dispute and was "more punitive" than current trade sanctions. The EU decided to hold off further action until the Obama Administration reviewed the decision. The Administration delayed implementing the changes, pending further negotiations with the EU. In May 2009, following a series of negotiations, the United States and the EU signed a memorandum of understanding (MOU), which phased in certain changes over the next several years. As part of this MOU, the EU granted market access to U.S. exports of beef raised without the use of growth promotants, and the United States suspended its retaliatory tariffs for imported EU products under the dispute. However, in December 2016, USTR took steps to reinstate retaliatory tariffs on the list of EU products under the dispute given continued concerns about U.S. beef access to the EU market. Specifically, under the MOU, the EU agreed to create a 45,000 metric ton duty-free quota for imports of non-hormone-fed beef that, according to the U.S. beef industry, has been filled by countries other than the United States, including Australia, Uruguay and Argentina. A public hearing is scheduled for 2017. This issue has also been raised in ongoing trade negotiations between the United States and the EU to establish a free trade area as part of the Transatlantic Trade and Investment Partnership (T-TIP). Some Members of Congress continue to push for the EU's hormone ban to be lifted and expect the T-TIP negotiations to resolve long-standing trade disputes regarding SPS rules between the two trading blocs and enhance disciplines to address SPS issues and other non-tariff barriers. The provisional agreement allows the EU to maintain its restrictions on U.S. beef imports in a manner that many U.S. farm organizations believe to be inconsistent with WTO rules, not to mention a scientific consensus supporting the safety to consumers of eating hormone-treated meat. To date, the EU continues to ban imports of hormone-treated meat and restricts most meat exports to the EU to a limited quantity of beef imports that are certified as produced without the use of hormones, beta agonists, and other growth promotants. Growth-promoting hormones are used widely in beef production in the United States and in other meat-exporting countries. In the United States, hormones have been approved for use since the 1950s and are now believed to be used on approximately two-thirds of all cattle and about 90% of the cattle on feedlots. In large U.S. commercial feedlots, their use approaches 100%. Cattle producers use hormones because they allow animals to grow larger and more quickly on less feed and fewer other inputs, thus reducing production costs, but also because they produce a leaner carcass more in line with consumer preferences for diets with reduced fat and cholesterol. Growth-promoting hormones include compounds that either naturally occur in an animal's body or mimic naturally occurring compounds. Estradiol, progesterone, and testosterone (three natural hormones), and zeranol and trenbolone acetate (two synthetic hormones), may be used as an implant on the animal's ear. Melengestrol acetate, which can be used to improve weight gain and feed efficiency, is approved for use as a feed additive. Not all combinations of hormones are approved for use in all classes of cattle. The U.S. Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA) cooperate in regulating growth promotants for livestock. Both of these agencies maintain that hormones in beef from an implanted animal have no physiological significance for humans. All animal drug products are approved for safety and effectiveness under the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.). About 30 animal growth-promoting products are marketed in the United States. In addition to the United States, other countries that have approved the use of growth-promoting hormones in beef production are Canada, Australia, New Zealand, South Africa, Mexico, Chile, and Japan, among other countries. The use of hormones in beef production, however, is not allowed in the European Union, or in other European countries that assume many of the rights and obligations of the EU single market. To date, the EU continues to ban imports of hormone-treated meat and restricts most meat exports to the European Union to a limited quantity of beef imports that are certified as produced without the use of hormones. The European Commission (EC) enacted its ban on both the production and importation of meat derived from animals treated with growth-promoting hormones in the early 1980s. This ban restricts the use of natural hormones to therapeutic purposes, bans the use of synthetic hormones, and prohibits imports of animals and meat from animals that have been administered the hormones. The ban, however, did not go into effect until January 1, 1989. Initially the ban covered meat and meat products from animals treated with six growth promotants that are approved for use and administered in the United States, including estradiol, testosterone, progesterone, zeranol, trenbolone acetate and melengestrol acetate. In 2003, the commission amended its policy to permanently ban one hormone—estradiol-17β—while provisionally banning the use of the five other hormones, as it continued to seek more complete scientific information. The ban reflects the EU's approach to food safety policy, known as the precautionary principle, which supports taking protective action before there is complete scientific proof of a risk. The ban also effectively restricts trade of meat and meat products from countries that regularly treat farm animals with these growth promotants. The commission has justified its ban as necessary to protect consumer health and safety. This position initially evolved, in part, as a reaction to reports in the 1970s over the illegal use of dethylstilboestrol (DES) in veal production in France, and consumer concerns that this was linked to reports of hormonal irregularities in Italian adolescents. This created concerns over the possible negative health effects of using hormones in livestock production, and contributed to a general climate in Europe that was suspicious of the use of hormones in livestock production and the potentially harmful health effects to consumers. During the 1990s, EU consumer meat demand was again adversely affected by outbreaks in British cattle herds of bovine spongiform encephalopathy (BSE), a fatal brain disease, commonly known as "mad cow disease." Scientifically established links between BSE and Creutzfeldt-Jakob disease (CJD), the human variant of BSE, added to consumer distrust about the safety of the meat supply. Continued discovery of BSE-infected cattle in some European countries contributed further to an unfavorable political, economic, and social environment for resolving the meat hormone dispute. Although BSE has nothing to do with hormones, many EU beef producers are fearful of doing anything, like using hormones, that might give consumers another disincentive to buy meat. Many of these same types of concerns have surfaced in consumer reactions to the introduction of transgenic plants and other forms of biotechnology into the food chain. Political and economic considerations also have likely contributed to the commission's decision to continue its policy to ban hormone-treated beef. Opposition to hormone-treated meat continues unabated, and both producer and consumer interest groups in the EU continue to exert pressure on EU trade policy officials to hold to their position banning hormone-treated beef. The EU's beef sector benefits from both domestic producer support and trade policies under the EU's Common Agricultural Policy (CAP), which is reported to have resulted in the accumulation of large, costly-to-store beef surpluses. Many European cattle producers support the EU's import ban in part because they are concerned about competition from possibly cheaper imported beef from the United States and other beef exporting countries. Along with responding to consumer concerns, EU agricultural policymakers have been resistant to policies that might accelerate the contraction of the agricultural sector and contribute to increased unemployment. The United States has continued to challenge the EU's beef hormone ban in the World Trade Organization (WTO) and to question whether the ban is consistent with the EU's WTO obligations under the Sanitary and Phytosanitary (SPS) Agreement (see box). After a series of WTO consultations, panel decisions, and appeals in the case, both the United States and the European Union claim these formal proceedings have vindicated their respective positions in the dispute. This case has proven so intractable in part because it involves internal national regulation and domestic policy issues, and rules for dispute settlement and the use of SPS measures to restrict trade, rather than routine commercial disputes over trade or customs regulations. Although the WTO has issued decisions that have questioned the validity of the ban, the EU has repeatedly voted to maintain it, citing consumer worries, questions of animal welfare, meat quality, and effects of hormones on the EU's beef and milk sectors. The laws governing the EU's ban have been reissued and/or updated numerous times (in 1988, in 1996, and again in 2003). The EU claims that its position to maintain the ban is supported by studies on the potential human health risks associated with the consumption of hormone-treated beef. The United States continues to question whether the EU has conducted an adequate risk assessment to support its position, and maintains there is a clear worldwide scientific consensus supporting the safety to consumers of eating hormone-treated meat. In retaliation, starting in the late 1980s, the United States imposed trade sanctions—as authorized by the WTO—in the form of high import tariffs on selected EU agricultural products. To further complicate matters, in October 2008, the WTO issued a mixed ruling that allows the United States to continue its trade sanctions, but also allows the EU to maintain its ban. As a result, the United States has continued to impose its trade sanctions, while the EU has continued to maintain its ban. A detailed timeline showing a chronology of major events is provided at the end of this report ( Appendix D ). For a more detailed discussion of the dispute settlement process in the WTO, see CRS Report RS20088, Dispute Settlement in the World Trade Organization (WTO): An Overview . In response to the EU's initial ban on hormone-treated meat in the 1980s, the United States first invoked GATT dispute settlement in 1986-1987 under the Tokyo Round's Technical Barriers to Trade Agreement, and also threatened to implement retaliatory tariffs on selected EU imports. This action delayed full implementation of the EU ban until January 1, 1989. Once the ban was implemented, the United States instituted retaliatory tariffs (100% ad valorem ) on EU imports valued at $93 million, which stayed in effect until May 1996. Earlier in 1996, both the United States and the EU had requested WTO consultations in an attempt to resolve the dispute. In April 1996, the United States requested a WTO dispute settlement panel case against the EU, claiming that the ban is inconsistent with the EU's WTO obligations under the SPS Agreement. Australia, Canada, and New Zealand joined the United States in the complaint. The EU maintained the ban, and issued updates to its law confirming and extending the prohibitions. In August 1997, the WTO dispute settlement panel released its report agreeing with the United States that the ban violated several provisions of the SPS Agreement. Specifically, the EU ban was found to violate SPS requirements that such measures: be based on international standards, guidelines or recommendations (Article 3.1); be based on a risk assessment and take into account risk assessment techniques developed by the relevant international organizations (Article 5.1); and avoid arbitrary or unjustifiable distinctions that result in discrimination or a disguised restriction on international trade (Article 5.5). The EU appealed the ruling, and in February 1998, the WTO Appellate Body found that the EU ban did contravene the EU's obligations under the SPS Agreement, but left open the option for the EU to conduct a risk assessment of hormone-treated meat. A WTO arbitration panel ruled subsequently that 15 months from the date of the decision (i.e., May 13, 1999) would be a reasonable period of time for the EU to conduct its assessment. By the deadline, the EU did not complete its scientific review and decided it would not consider removing the ban before conducting additional review. This led the way for the United States to retaliate by imposing its current trade sanctions against U.S. imports of EU products starting in July 1999. Following the 1997 WTO decision, the EU commissioned various research studies and conducted scientific reviews of the issue. In 1999, as justification for continuing the ban, the EU offered the first in its series of scientific reviews and opinions that estradiol-17β may be carcinogenic. (Further opinions and studies followed in 2000, 2002, and 2007, as discussed in the section of this report titled " EU Reviews .") In 2003, the EU announced that its scientific review had concluded that estradiol-17β was carcinogenic and that for the five other hormones the current state of knowledge did not make it possible to provide a quantitative assessment of their risks to consumers. An October 2003 EU press release claimed that EU's scientific reviews constitute "a thorough risk assessment based on current scientific knowledge" and thus fulfill the EU's WTO obligations. The United States continues to question whether the EU Commission's studies constitute risk assessments. Accordingly, in 2003, the EU issued a new directive and revised its ban to permanently ban estradiol-17β and provisionally ban the five other hormones. The EU claims the decision to provisionally ban the five other hormones is necessary, while the commission seeks more complete scientific information. The EU claims that its actions replacing its original ban with a provisional ban comply with its WTO obligations under Article 5.7 of the SPS Agreement. U.S. trade and veterinary officials have repeatedly rejected the EU studies, claiming that the scientific evidence is not new information nor does it establish a risk to consumers from eating hormone-treated meat. The United States also claims that these findings ignore and contradict numerous scientific studies, including some by European scientists (as discussed in the section titled " U.S. Response to EU Reviews "). Claiming that its ban is justified and in compliance with its WTO obligations, the EU has continued to initiate counteractions against the United States (and Canada), stating that there is no longer a legal basis for the United States to impose trade sanctions against the European Union. In November 2004, the EU requested WTO consultations, claiming that the United States should remove its retaliatory measures since the EU has removed the measures found to be WTO-inconsistent in the original case. In 2005, the EU initiated new WTO dispute settlement proceedings against the United States and Canada. A final panel report was delayed until 2008, owing, the panel said, to the complexity of the dispute and other administrative and procedural matters. The March 2008 panel report cited fault with all three parties (EU, United States, and Canada) on various substantive and procedural aspects of the dispute. The panel found that the EU had not presented sufficient scientific evidence to justify the import ban, including the EU's 2003 risk assessment report. The panel faulted the United States and Canada for maintaining their imposed trade sanctions. The panels found that both parties had made procedural violations under the WTO Dispute Settlement Understanding (DSU) because of unilateral actions they had taken. Both parties filed appeals citing procedural errors and disagreements with the panel findings. In October 2008, the WTO Appellate Body issued a mixed ruling that allows for continued imposition of trade sanctions on the EU by the United States and Canada, but also allows the EU to continue its ban on imports of hormone-treated beef. The Appellate Body report reversed the dispute panel decision by stating that the EU's ban is not incompatible with WTO law, thus granting more deference to the EU in deciding the basis for food safety regulations. The WTO Appellate Body also recommended that the parties initiate a compliance panel proceeding under Article 21.5 of the DSU to determine whether the EU is in compliance with its WTO obligations in the underlying beef hormone dispute. In late December, the EU requested consultations under Article 21.5, and may request a panel at a later date. The WTO Appellate Body's reversal of the panel on this issue of scientific evidence has led some to argue that this is a potentially precedent-setting decision that might be perceived to instruct dispute settlement panels to be more deferential to national governments when the relevant scientific evidence is not available to make an objective risk assessment. Some claim that this could allow for more flexibility to countries in imposing SPS requirements in future WTO compliance panels, and might also change how panels operate on matters related to the burden of proof and in post-retaliation situations. Typically complainants initiating the compliance panel proceedings bear the burden of proof, because it is in their interest to prove that the respondent has not brought itself into compliance with WTO rules. In November 2008, following the announcement by USTR that it was seeking comment on possible modification of the list of EU products subject to increased tariffs under the dispute, the EU filed a new WTO challenge against U.S. and Canadian sanctions imposed on imports of EU products in retaliation to the EU's ban on hormone-treated beef. In January 2009, USTR announced changes to the list of EU products subject to increased tariffs under the dispute, adding countries and raising the tariff on select products. The EU claimed that USTR's action constitutes an "escalation" of the dispute and is "more punitive" than the current trade sanctions. The EU was prepared to challenge the United States in the WTO. In May 2009, following a series of negotiations, the United States and the EU signed a memorandum of understanding (MOU), which phases in certain changes over several years, as discussed later in section " 2009 Memorandum of Understanding ." One critical issue in this seemingly intractable debate is an underlying disagreement about the scientific consensus regarding the safety of hormone-treated beef for human consumption. The EU continues to maintain that "there is a lack of data on the type and amount of [growth-promoting hormone] residues in meat on which to make a quantitative exposure assessment" that would change the EU's understanding of the "possible risks to human health" associated with hormone-treated meat and meat products. It claims that this position is supported by a series of commissioned research studies and scientific reviews conducted by the EU, although there has been no conclusive testing on the issue. A 1997 WTO decision found that the EU's ban on imports of hormone-treated meat was inconsistent with the EU's WTO obligations under the Sanitary and Phytosanitary (SPS) Agreement since the EU had not conducted a risk assessment. In response, the EU commissioned 17 studies to address the scientific basis of the import ban on meat and meat products and animals treated with hormones for growth promotion purposes. The studies addressed toxicological and carcinogenicity aspects, residue analysis, potential abuse and control problems, and environmental aspects of six growth promotants (estradiol-17β, progesterone, testosterone, zeranol, trenbolone acetate, and melengestrol acetate) and their metabolites. Between 1999 and 2002, the EC's Scientific Committee on Veterinary Measures relating to Public Health (SCVPH) issued a series of opinions on the potential risks to human health from hormone residues in bovine meat and meat products. The first review's opinion, issued in April 1999, stated that there is evidence showing that the growth hormone estradiol-17β, used in U.S. cattle production, is carcinogenic, among other potential health risks to consumers. The second review, finalized in May 2000, concluded that new information questioning the findings of the SCVPH's first review did "not provide convincing data and arguments demanding revision of the conclusions drawn in the 1999 SCVPH opinion on the potential risks to human health from hormone residues in bovine meat and meat products." The third opinion, issued in May 2002, concluded that the committee's review of the 17 studies initiated in 1998 again reconfirmed the previous findings of the 1999 and 2000 reviews. The most recent review was conducted in 2007 by the European Food Safety Authority (EFSA). The review covered new scientific evidence that emerged after the previous risk assessments (1999, 2000, and 2002) relating to the use of certain natural and synthetic growth-promoting hormones in cattle. EFSA's Scientific Panel on Contaminants in the Food Chain (CONTAM) concluded: At present, epidemiological data provide convincing evidence for an association between the amount of red meat consumed and certain forms of hormone-dependent cancers. Whether hormone residues in meat contribute to this risk is currently unknown. The CONTAM Panel concluded that the new data that are publicly available do not provide quantitative information that would be informative for risk characterisation and therefore do not call for a revision of the previous assessments of the Scientific Committee on Veterinary Measures relating to Public Health (SCVPH) (EC, 1999, 2000, 2002). Among the stated concerns is that excess intake of hormone residues from all six hormones and their metabolites could pose a risk to the consumer. The review cites evidence supporting that estradiol-17β be considered as a carcinogen, and states that all six hormones may pose endocrine, developmental, immunological, neurobiological, immunotoxic, genotoxic, and carcinogenic effects, particularly for susceptible risk groups (such as prepubertal children). The toxicological and epidemiological data reviewed by the commission panels do not allow a quantitative estimate of the risk, leading to the panel's conclusions that no threshold levels can be defined for any of the six hormones. Based on this series of reviews, the commission maintains that these reviews "reaffirmed public health concerns about the large scale use of hormones administered to cattle for growth promoting purposes," and therefore "provided the scientific basis for community legislation not allowing the use of hormones for growth promoting purposes in the EU." Accordingly, the EU claims that the retaliatory tariffs imposed on EU export to the United States are not in compliance with its WTO obligations and should be discontinued. The United States continues to maintain that U.S. beef from cattle treated with certain approved growth hormones poses no public health risk. Overall, the official U.S. position is that "there is a clear world-wide scientific consensus supporting the safety of these approved and licensed hormones when used according to good veterinary practice." The United States claims that this position is supported by "scientific reviews of the six hormones, international standards pertaining to their use, and a long-standing history of administering the six hormones to cattle for growth promotion purposes." Accordingly, the United States claims that the use of these hormones as growth promoters in beef production is safe, when applied in accordance with good veterinary practices. The United States claims that numerous U.S. and international scientific studies of the six hormones support its position, including safety assessments by the U.S. FDA and comparable food safety institutions in other countries; the reports of the EC-commissioned 1984 and 1987 Scientific Group on Anabolic Agents in Animal Production (the so-called "Lamming Committee"); the 1983 World Organization for Animal Health Symposium; the Joint Expert Committee on Food Additives (JECFA) reports; the Codex Alimentarius Commission reports; the EC-commissioned 1995 Scientific Conference on Growth Promotion in Meat Production; the EC-commissioned Committee for Veterinary Medicinal Products on the Safety Evaluation of Steroidal Sex Hormones reports; the United Kingdom's 1999 and 2006 Veterinary Products Committee reports; and the 2003 Australian review. In general, these studies report that the three natural hormones—estradiol, progesterone, and testosterone—and their derivatives, when used as growth-promoting agents and according to good veterinary practice, are "safe," are "not hazardous," or "do not pose a risk to consumers." Some reports determined that it was unnecessary to specify maximum residue levels (MRLs) for natural hormones administered according to good veterinary practices, and recommended MRLs or acceptable daily intake levels for two of the three synthetic hormones in dispute. The United States also points out that the EU's own 1995 Scientific Conference on Growth Promoting Substances in Meat Production concluded that "at present there is no evidence for possible health risks to the consumer due to the use of natural sex hormones for growth promotion." The United States also cites as support the findings of the 1996-1997 WTO panel in the dispute. The panel report states that "[n]one of the scientific evidence referred to by the European Communities which specifically addresses the safety of some or all of the hormones in dispute when used for growth promotion, indicates that an identifiable risk arises for human health from use of these hormones if good practice is followed." The panel noted "that this conclusion has also been confirmed by the scientific experts advising the Panel." The United States has criticized the EU's scientific opinions for focusing on only one growth promotant—estradiol-17β—and on its potential genotoxicity, while directing relatively little attention toward the other natural and synthetic hormones. The United States also claims that the "EU failed to use solid evaluative methods in their studies and completely disregarded the large body of evidence from epidemiological studies that indicate that estradiol does not contribute to any increased cancer risk and that meat from animals tested with estradiol is safe for consumers." Regarding the EU's more recent reviews, the United States claims they fail to provide any new evidence that would call into question the findings and conclusions of other authoritative reviews. More broadly, the United States also disputes whether the EU's scientific reviews serve as a risk assessment. The United States claims: "There has been no new risk assessment based on scientific information and reasoning presented by the EU," further claiming that the "17 studies" funded by the commission beginning in 1998 were "not intended as to serve as a risk assessment, but instead were to fill in the gaps." Accordingly, the United States claims the EU's 2003 update to its hormone ban is not in compliance with its WTO obligations and should be discontinued. Industry groups in the United States voice these same criticisms. The National Cattlemen's Beef Association (NCBA), the largest national group of cattle producers, has long opposed the EU's ban on imports of U.S. hormone-treated beef, claiming that the ban is scientifically unjustified and fails to satisfy the EU's WTO requirements under the SPS. Similar concerns have been expressed by other U.S. farm groups, including American Farm Bureau Federation (AFBF), the Animal Health Institute (AHI), and the American Meat Institute (AMI). Many trade analysts believe that the United States has a strong case against the hormone ban under WTO rules that require SPS restrictions to be based on risk assessment and to have a scientific justification. These various interest groups have continued to exert pressure on U.S. trade policy officials to hold to their position regarding the EU's meat hormone ban. Insisting that the scientific evidence demonstrates that hormone-treated beef is safe to consumers, the United States began to consider retaliatory tariffs on EU imports starting in the 1980s. In 1987, the United States announced but then suspended retaliatory tariffs (100% ad valorem ) on about $100 million worth of EU imports. On January 1, 1989, the United States instituted 100% tariffs on EU imports valued at about $93 million per year. These higher tariffs remained in effect until May 1996, when the EU sought a WTO panel against the U.S action. Again, in 1999, following the EU's failure to implement the WTO's recommendations related to its obligations under the SPS Agreement, the United States and Canada formally sought and obtained WTO authorization to suspend tariff concessions and retaliate against trade from the European Union. Initially, the United States requested authorization to impose import duties in excess of bound rates on a list of products equivalent, on an annual basis, to $202 million. The WTO arbitrators set the level at $116.8 million for the United States. On July 27, 1999, USTR announced its decision to impose a 100% ad valorem rate of duty on a specified list of products from certain EU member states. The list of products includes beef and pork products, goose pâté, Roquefort cheese, truffles, onions, carrots, preserved tomatoes, soups, yarn, Dijon mustard, juices, chicory, toasted breads, French chocolate, and jams, as well as agricultural-based byproducts, such as glue and wool grease. The list targeted France, Germany, Italy, and Denmark, as well as Austria, Belgium, Finland, Greece, Ireland, Luxembourg, the Netherlands, Portugal, Spain, and Sweden. The list did not include products of the United Kingdom because it has indicated support for lifting the ban. Appendix A provides a listing of the product imports initially affected by the U.S. trade sanctions imposed in 1999. According to USTR, the imposition of these higher duties is "intended to restore the balance of trade concessions under the WTO and to induce compliance by the EU with the WTO's rulings and recommendations in the original EC-Hormones dispute." However, some point out that these retaliatory duties have been mostly ineffective since they do not provide any direct benefit to the U.S. beef industry, and claim that it is U.S. and EU consumers who lose by paying higher prices for a wide variety of imported foods. The U.S. beef industry has long maintained that the EU ban is merely a disguised trade barrier, intended to protect EU domestic beef producers. Some in Congress have questioned whether the EU's ban is motivated more by politics than by sound science. Yet the EU continues to claim that the United States is not justified in maintaining its trade sanctions, given its belief that there is a scientific basis for banning hormone-treated beef and given updates to their laws governing the ban in 2003. In October 2008, USTR initiated action to modify the retaliation list of EU products subject to 100% tariffs in connection with the U.S.-EU beef hormones dispute. Such an action is consistent with legislation enacted by Congress in 2000, under the Trade and Development Act ( P.L. 106-200 ), which amended the 1974 Trade Act. The law included a so-called "carousel retaliation" provision requiring the Administration periodically to rotate, or change, the types of products targeted for trade retaliation. Prior to this, the provision had not been implemented per the legislation. USTR did consider modifying the retaliation list in 2006, but ultimately decided not to do so, as was recommended by the U.S. beef industry. Public comments sent to USTR in late 2008 reflected support by agricultural industry groups for maintaining higher tariffs on a range of current and expanded products, while some importers recommend removing some products. In January 2009, the USTR under the outgoing Bush Administration announced changes to the list of EU products subject to increased tariffs under the dispute ( Appendix B ). The modified list added products from many of the newly acceded countries under EU expansion (such as Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, and Malta). The modified list added additional products (such as pork products, cut flowers and plants, processed fruits, nuts, fruit juices, drinking waters, confectionary and chewing gum, and oats), but deleted some products currently on the list (such as onions, carrots, processed tomatoes, toasted breads, coffee, mustard, fish products, soups, yarns, and glue). The modified list did not include some of the initially proposed products, such as yarns, hair clippers, and motorcycles. The modified list also raised the tariff on Roquefort cheese to 300% from 100% under the current retaliation. These changes were scheduled to go into effect on March 23, 2009. The EU claimed that this action constituted an "escalation" of the dispute, and was "more punitive" than the current trade sanctions. In February 2009, further consultations between the United States and the EU on the dispute were not successful, and the EU was expected to seek a dispute settlement panel on whether its ban was consistent with the SPS Agreement. In March, USTR announced that it would delay the imposition of additional duties on a modified list of EU products by one month; in April, USTR announced it would further extend this delay until May 2009 in order to provide "more time to negotiate a settlement with the EU." Press reports indicated that among the issues to be resolved were the U.S. demand for increased market access of U.S. non-hormone-treated beef for export to the EU, and the U.S. demand that the EU refrain from seeking a new WTO ruling that its revised ban in 2003 now complies with the SPS Agreement. In March 2009, the United States drafted a "reduced list" of EU import products subject to 100% ad valorem duties ( Appendix C ). On May 13, 2009, following a series of negotiations, the United States and the EU signed a memorandum of understanding (MOU) implementing an agreement that could resolve this long-standing dispute. The MOU sets up three phases, as follows. 1. Phase 1: (a) Expanded market access for beef to the EU under an annual tariff-rate quota (TRQ) of 20,000 metric tons (MT) at zero duty for beef produced without growth-promoting hormones ("High Quality Beef"); and (b) agreement by the United States that it will delay implementation of the January 2009 modifications ("increased duties," Appendix B ) for certain EU imports. The new quota is in addition to the existing 11,500 MT of hormone-free beef. The United States will continue to impose U.S. import duties on the "reduced list" of products ( Appendix C ). Phase 1 of the MOU was scheduled to conclude August 3, 2012. 2. Phase 2: (a) Further expansion of EU market access for High Quality Beef to 45,000 MT; and (b) agreement by the United States to reduce "increased duties" to zero ( Appendix B ). A decision on whether to move to Phase 2 would depend on conditions at the end of Phase 1 and the U.S. beef industry's ability to make full use of the additional quota. Phase 2 would last one year. 3. Phase 3: (a) EU maintains the TRQ for High Quality Beef at 45,000 MT; and (b) the United States removes import duties on selected EU products under the dispute, leading to the possible longer-term resolution of the dispute. Before the end of the fourth year, a decision on whether to move to Phase 3 would be made following negotiations between the United States and the EU on selected issues (such as duration, withdrawal, and status of WTO litigation, etc.). Some U.S. farm organizations were unhappy with the MOU because it did not lift the EU's ban on beef from hormone-treated cattle and because the EU did not concede to the terms of the science regarding the safety of hormone-treated beef. As part of Phase 1, the EC adopted regulations opening a tariff quota for 20,000 MT imports of high-quality beef (HQB), effective August 2009. U.S. beef products under this quota must originate from animals that have never been treated with growth hormones; eligibility requirements may be met by participating in USDA's Non-Hormone Treated Cattle (NHTC) Program. In 2010, the United States was reported to have shipped about 16,500 MT to the EU under the quota, which was about three times that shipped in 2008 under previous quota levels. (For more information, see the section of this report titled " USDA's Non-Hormone Treated Cattle (NHTC) Program .") The United States, in Phase 1, agreed not to implement its January 2009 revised ("carousel") sanctions, which would have resulted in higher retaliatory duties on selected EU exports to the United States (see Appendix B ). In September 2009, USTR announced it was officially terminating its plan to rotate the list of products. Trade sanctions were to remain in effect on certain EU exports (listed in Appendix C ) until the final phase of the agreement. During the first 18 months of the agreement, the United States or the EU would refrain from further WTO litigation regarding the dispute. In May 2011, USTR announced it was terminating higher duties for imported products listed under the dispute. The removal of retaliatory tariffs under the dispute was ahead of the scheduled date under the MOU, and was reported to have been intended to encourage a successful transition to Phase 2 of the MOU. As part of Phase 2, in June 2012, the EU issued regulations increasing the HQB quota and changing the quota management system to a "first come, first served" basis. The HQB quota was raised to 48,200 MT and is consistent with Phase 2 in the MOU on the beef hormone dispute, fully effective by August 2012. Changes to the HQB quota management are intended to "provide easier quota access to new and smaller importers of U.S. beef, as well as to terminate the trade in quota import licenses that occurred as demand for import licenses exceeded the quota volume." In October 2013, the EU approved a two-year extension of the deal, allowing for access of U.S. beef raised without the use of growth promotants in exchange for continued U.S. suspension of retaliatory import duties on some EU food products. By extending Phase 2, the EU and United States were opting not to proceed to Phase 3, which would require the EU to maintain its annual TRQ of 45,000 MT and require the United States to end its retaliatory import duties and give up its ability to reimpose higher duties. As of year-end 2016, the U.S. and EU have not entered into the Phase 3 of the MOU. Nevertheless, over the years, USTR and the U.S. beef industry have continued to monitor EU implementation of the MOU and other policies affecting market access for U.S. beef products. In December 2016, USTR took steps to reinstate retaliatory tariffs on the list of EU products under the dispute. Some attribute these actions to the perceived failure of T-TIP negotiations between the United States and the EU and to continued concerns about U.S. beef access to the EU market. Starting in August 2012, the EU increased the TRQ for high-quality (non-hormone treated) beef to 45,000 MT. However, according to USTR and the U.S. beef industry, most of this duty-free quota has been filled by countries other than the United States, including Australia, Uruguay, and Argentina. According to U.S. officials, the "EU has been unwilling to consider an allocation that would reserve a significant part of the TRQ for the United States." A public hearing is scheduled for 2017. Regarding the EU's quota, some meat-exporting countries—including Argentina, Brazil, India, New Zealand, Nicaragua, Paraguay, and Uruguay—have argued that the TRQ should be available to all most-favored-nation (MFN) countries. Some of these countries claim that the U.S.-EU agreement is "discriminatory" and inconsistent with WTO rules, since it allows for an increase in the U.S. quota but does not make similar concessions to other countries. Brazil, for example, is reported to have considered asking the WTO to investigate whether the EU sets different rules for beef from Brazil than those from the United States and Canada. By invoking MFN status, these countries argue that equal treatment and trade advantages should be accorded to all MFN trading partners and that all should have access to export products under the quota. Press reports claim that an EC Commission official has claimed that the "EU has fully complied, both in the letter and in spirit, with the Memorandum of Understanding signed with the United States in 2009, establishing a hormone-free beef quota of more than 60,000 tons." The U.S-EU beef hormone dispute has been raised as an issue as part of the current negotiations between the United States and the EU seeking to establish a free trade area as part of T-TIP. Some Members of Congress continue to push for the EU's hormone ban to be lifted and expect the T-TIP negotiations to resolve long-standing trade disputes regarding SPS rules between the two trading blocs, as well as enhance disciplines to address SPS issues and other non-tariff barriers. Major concerns revolve around meat and poultry production and processing methods, specifically involving the U.S. use of beef hormones and ractopamine, pathogen reduction and other treatment technologies, BSE-related regulations, and other plant processing regulations. In February 2014, European Commissioner Karl De Gucht indicated that the EU would not change its regulations prohibiting imports of meat raised with growth promotants. More generally, the provisional agreement allows the EU to maintain its restrictions on U.S. beef imports in a manner that many U.S. farm organizations believe to be inconsistent with WTO rules—not to mention with a scientific consensus supporting the safety to consumers of eating hormone-treated meat. To date, the EU continues to ban imports of hormone-treated meat and restricts most meat exports to the EU to a limited quantity of beef imports that are certified as produced without the use of hormones, beta agonists, and other growth promotants. Other issues also need to be resolved. According to press reports, the U.S. government is seeking to resolve other issues regarding the EU's disapproval of the common U.S. practice in the beef industry of using antimicrobial treatments to ensure that meat is not contaminated with pathogens. The EU has claimed that the use of such washes is cover for unsanitary production methods. EU representatives have stated that they would be unwilling to accept U.S. beef products treated with antimicrobial washes. In 2013, EU lifted its previous ban to allow the use of lactic acid as a pathogen reduction treatment (PRT) on beef carcasses, half-carcasses, and beef quarters in the slaughterhouse. Many in the United States considered this action to be a "major victory for science-based food processing." However, the EU still prohibits the use of other types of PRTs and antimicrobial washes when shipping beef and poultry to the EU. Some U.S. importers have actively contested higher tariffs on U.S. imports on the retaliation list. For example, Gilda Industries, an importer of Spanish toasted breads, filed a series of protests with U.S. Customs against higher tariffs on toasted breads. Gilda Industries later brought a lawsuit against the United States in the U.S. Court of International Trade (CIT), seeking to force USTR to remove toasted breads from its retaliation list. For years, the United States and Canada have refused to remove their trade sanctions on grounds that the scientific evidence claimed by the EU does not provide new information and does not establish a risk to consumers from eating hormone-treated meat. In the original case, the CIT ordered a refund of all punitive duties paid on affected goods imported after July 29, 2007. The United States appealed the decision. Toasted breads were subsequently removed from the "revised" retaliation list ( Appendix C ). Following proposed changes in January 2009 adding imported waters to the list of EU products subject to higher U.S. tariffs, Nestle Waters of North America, Inc., also filed a preliminary injunction order in the CIT against the action. The suit claimed that retaliation is not authorized because there was no request for changes in the product mix within the most recent deadline for such a request. In addition, Gilda Industries, along with several other importing companies, sought a partial refund of retaliatory duties that the United States has imposed under the dispute. In October 2010, the U.S. Court of Appeals for the Federal Circuit issued a decision in the Gilda Industries case, which could make importers of certain foods from the EU eligible for refunds for retaliatory duties paid since July 29, 2007. The current status of this case is not known. Initially, lost U.S. beef exports because of the EU's ban were estimated at about $100 million annually, and valued approximately equal to retaliatory trade sanctions against selected EU food product exports. Currently, U.S. exports do not account for a sizable share of the EU beef import market. Under the ban, eligible U.S. beef exports to the EU must be certified as not having been treated with hormones and are further subject to quotas that limit the total amount of beef imported under preferential tariffs. The U.S. beef industry claims that, absent the ban, U.S. beef exports to the European Union would be much greater. Evaluating actual trade trends is complicated by large discrepancies between the U.S.-reported export data and the EU-reported import data for beef. Because of concerns that the U.S. beef export data may not reflect actual trade conditions, in part due to possible transshipments via certain EU port destinations and/or trade data inaccuracies, this report examines available EU import data. These data are available only back to 1999 and do not allow for a full evaluation of how the ban has affected U.S. beef exports over the time period. These data indicate that EU beef imports from the United States were lower during the 2000-2006 period, compared to 1999, and averaged between $5 million and $6 million per year ( Figure 1 ). During this period, U.S. beef accounted for less than 1% of the EU beef import market. The majority (more than 90%) of EU beef imports were supplied by Brazil, Argentina, and Uruguay, among other countries. Available U.S. export data for the 10-year period from 1989 to 1998 indicate that U.S. exports to the EU of fresh/chilled and frozen beef averaged between $11 million and $13 million annually. The U.S. Meat Export Federation (USMEF) reports that in 2010, U.S. beef exports to EU were valued at an estimated $165 million. The EU import data also indicate that in the past couple of years, U.S. beef exports have risen, particularly for fresh and chilled beef products, which reached nearly $260 million in 2015 ( Figure 1 ). According to EU import data, as a share of the EU import market, U.S. beef accounted for nearly 17% of EU fresh/chilled beef imports, up from about 4% in 2008. U.S. exports still accounted for less than 1% of EU imports of frozen beef and offal products. Despite potential questions surrounding the available trade data, the USMEF acknowledges that U.S. beef exports to the EU turned upward in 2007-2008, and that trend continues through 2015 ( Figure 1 ). The rise may be attributable to the approval of additional, larger U.S. beef plants to export to the EU under USDA's Non-Hormone Treated Cattle (NHTC) Program (see discussion in next section). Volume shipments for most beef products are limited by the EU's so-called "Hilton quota" for high-quality beef (HQB), a tariff rate quota that has been in effect since 1997 and allows only a fixed amount of fresh/chilled beef to be imported from selected countries before being subject to higher tariffs. This quota allows for North American beef exports (and also Canadian beef exports) to the EU of 11,500 MT at a 20% tariff. The quota covers exports of fresh/chilled beef (HTS 0201); however, the EU also imports accredited frozen meat (HTS 0202) and offal products (HTS 0206), which are outside the quota. Currently the EU has extended an annual TRQ for 45,000 MT of hormone-free beef from certain countries, including the United States. U.S. beef shipments to the European Union have increased sharply in recent years. In 2008, a reported 4,900 MT of U.S. beef was shipped to the EU under the previous quota, a roughly twofold increase compared to 2007. In 2009, the United States shipped a reported 12,000 MT under the revised quota—another doubling compared to shipments in 2008. According to EU import data, U.S. beef shipments to the EU-27 countries were between 17,000-18,000 MT during 2013-2015 under its existing quota, or about 8% of beef imports over the period. Only U.S. beef from cattle raised under control measures specified in USDA's NHTC Program is eligible for export to the EU. (See box, below, for information on this program.) The program was initiated in 1989 when the United States and the EU agreed to control measures to facilitate the trade of non-hormone treated bovine meat, including veal. As of December 2016, more than a dozen farms, ranches, feedlots, and cattle management groups have been audited and approved as sources of non-hormone treated cattle and are eligible for further evaluation by USDA's Food Safety and Inspection Service (FSIS). All export shipments must also be accompanied by a health certificate issued by FSIS under the non-hormone treated cattle program, certifying that all meat must originate from animals that have never been treated with growth hormones. Import licenses are issued by authorities in the EU member states, and the quantity available is published every month by the European Union. Initially, few U.S. plants were approved for export to the EU, and U.S. volume exports were low and often well below the allowable quota limit. Because, historically, the U.S. quota had not been filled, this caused some to conclude that increasing the quota would not likely offer any benefit to U.S. beef exporters, particularly given additional costs of raising and shipping untreated beef. In the past, negotiations between the United States and the EU to increase the quota have not been successful. However, recently some larger facilities have been approved and volume exports have been higher, approaching or possibly exceeding the quota limit, and there is renewed interest in increasing U.S. market access under the quota. Prior to 2009, EU offers of compensation or trade concessions for lost U.S. meat exports were rejected by the United States. In lieu of lifting the ban, the EU has considered offering the United States compensation in the form of an expanded quota for hormone-free beef and reducing the 20% in-quota tariff. In January 2009, the EU offered to expand access for U.S. beef by 58,000 metric tons—well below what the United States initially requested. However, there were unresolved issues in these negotiations, including the timing of the United States' lifting of its current trade sanctions against the European Union. The United States also asked for changes to the program, including simplifying the current system and requirements for plants, and reducing the number of chemical residues U.S. inspectors must test for before clearing shipments. In addition, the United States wanted its beef exports to be allowed to be treated with antimicrobial washes to ensure cleanliness. The EU objects to such washes unless accompanied by adequate labeling, which the United States has resisted. The U.S. beef industry claims its beef exporters do not use antimicrobial washes on beef destined to the EU, but that it is often difficult to set-aside or segment production within individual plants. Previously, negotiations had been slowed by related disputes over detection of the presence of EU-listed hormones in U.S. shipments of presumably non-hormone treated beef. Other previous attempts by the United States and the EU to resolve the dispute have not been successful. In the late 1990s, the EU and the United States also discussed other options to resolve the dispute, including compensation for not lifting the ban, removal of the ban coupled with a labeling system, and conversion of the ban to a temporary measure. These options were ultimately rejected by the United States—backed by most of the U.S. beef industry—preferring instead full removal of the ban and arguing that other forms of compensation would not be large enough to compensate for losses of hormone-treated exports. The 1999 imposition of retaliatory (100%) tariffs on selected U.S. agricultural imports from EU member countries has significantly reduced imports of these products since these tariffs went into effect ( Figure 2 , Table 1 ). This graph only looks at the period from 1996-2008, since the United States has agreed to suspend retaliatory import tariffs on selected EU products under the terms of the MOU signed in May 2009 (see section titled " 2009 Memorandum of Understanding "). Overall, U.S. imports of these products dropped from about $130 million in 1997-1998 to under $15 million in 2008. Products with the most significant decline in imports include meat and fish products, fruit juices, other fruit and vegetable products, processed foods, chocolate products, yarns, and other agriculture-based byproducts. Imports of some products, such as Roquefort cheese, mustard, and coffee products, also are lower, but less so. During this period, these EU products were still being imported to the United States and presumably sold at a higher price, given the need to cover higher importing costs due to higher tariffs. Many in Congress have long maintained an interest in the U.S.-EU hormone dispute in support of the U.S. beef industry and its concern that the EU ban may be a disguised trade barrier, intended to protect EU domestic beef producers by restricting imports. As discussed, Congress enacted the carousel retaliation provision as part of the Trade and Development Act of 2000 ( P.L. 106-200 ), largely in response to the dispute. In addition, over the years, the dispute has been invoked at various congressional hearings and has been a subject of introduced legislation, mostly to illustrate how SPS measures and other non-tariff barriers are often used to unjustifiably restrict trade. In addition, in 2000, former Senator Max Baucus introduced the Trade Injury Compensation Act ( S. 2709 ), intended to establish a Beef Industry Compensation Trust Fund with the duties imposed on products of countries that do not comply with certain WTO dispute resolution decisions; a Senate Agriculture subcommittee hearing was held on this matter. There also have been resolutions intended to express the sense of Congress that the Administration should continue to take action against the EU under the dispute. The dispute is regularly noted in USTR's annual trade policy reports as an example of the EU's continued use of non-tariff trade barriers to limit or prevent U.S. beef exports, despite the United States' measures to ensure the safety of the food supply. In addition, the dispute has been raised as an issue under ongoing T-TIP negotiations by Members of Congress who are hoping to resolve long-standing trade disputes involving SPS and other non-tariff barriers, including the EU's hormone ban. Some in Congress have further maintained an interest in the U.S.-EU hormone dispute because of the concerns raised by some U.S. importers that may have been affected by the United States' active and ongoing trade sanctions against the EU, which have effectively restricted U.S. imports of selected EU products. Previously, in 1999 and 2000, former Representative Menendez introduced two bills that would exempt certain small importing businesses from higher tariffs imposed against EU products under the U.S.-EU beef hormone dispute. Finally, resolution of the hormone dispute could remove a critical irritant to the overall U.S.-EU trade relationship. In addition, the way in which this dispute is ultimately resolved could have important implications for future WTO disputes involving the use of SPS measures to restrict trade. The 1997 WTO meat hormone decision was the first to deal with SPS measures and, along with subsequent decisions, it provided an affirmation of the SPS Agreement and its requirements that countries base SPS measures on scientific justification and risk assessment. Beyond that, the case is a critical test of the durability of internationally agreed-upon rules and procedures for resolving disputes that are in conflict with popular concerns and national political decisions. Appendix A. Initial Retaliation List (July 1999) Appendix B. Revised Retaliation List (January 2009) Appendix C. "Reduced" Product List (March 2009) Appendix D. Chronology of the U.S.-EU Beef Hormone Dispute 1981-1988— The European Commission institutes a series of restrictions on livestock production (Directives 81/602, 88/146, and 88/299) limiting the use of natural hormones to therapeutic purposes, banning the use of synthetic hormones, and prohibiting imports of animals and meat from animals that have been administered with hormones. Between 1986-1987, the United States raises the EU hormone ban in the Committee on Technical Barriers to Trade ("Standards Code"), and invokes dispute settlement under the Tokyo Round Agreement on Technical Barriers to Trade in the General Agreement on Tariffs and Trade (GATT). The EU delays implementing its ban until January 1, 1989. In late 1987, President Reagan announces, and suspends, retaliatory tariffs (100% ad valorem ) on about $100 million worth of EU imports. Also during this time, various scientific reviews are initiated, including studies by the commission, the Joint Expert Committee on Food Additives (JECFA) of the World Health Organization and the United Nations Food and Agriculture Organization, the Committee on Veterinary Drugs of the Codex Alimentarius Commission ("Codex"), and the U.S. Food and Drug Administration and comparable institutions in other countries. 1989— The EU fully implements its ban on meat and meat product imports from animals treated with six growth promotants, three of which are naturally occurring—estradiol-17β, progesterone and testosterone—and three of which are synthetic—zeranol, trenbolone, and melengestrol. These six hormones are approved for use in the United States. The EU's ban effectively cuts off U.S. beef exports to the European Union. The United States institutes retaliatory tariffs (100% ad valorem ) on EU imports valued at $93 million, which remain in effect until May 1996, when the EU seeks a WTO panel against the U.S. action. 1995— The GATT Uruguay Round Agreement, including the Sanitary and Phytosanitary (SPS) Agreement, enters into force. Codex decides Maximum Residue Limits (MRLs) are not necessary for the three natural hormones and adopts MRLs for the two synthetics. The EU concludes that there is no evidence of health risk from the five hormones approved for use in the United States. 1996— The EU votes to maintain the ban. The United States requests a WTO dispute settlement panel case against the EU, claiming the ban is inconsistent with the EU's WTO obligations. Australia, Canada, and New Zealand join the United States in the complaint. The commission issues a new Directive 96/22, which repeals the 1981 and 1988 directives, and confirms and extends the prohibitions. The law becomes effective July 1, 1997. 1997— A WTO dispute settlement panel releases its report, ruling that the EU ban on the use of hormones to promote the growth of cattle is inconsistent with its obligations under the SPS Agreement (specifically, Articles 3.1, 5.1, and 5.5), in that the ban is not based on science, that is, on an adequate risk assessment or according to relevant international standards. The EU appeals the dispute panel's decision and also initiates a series of scientific studies on these six hormones. 1998— The WTO Appellate Body (AB) upholds the dispute panel's decision but overrules some panel findings. The AB decides the EU had not scientifically proven that the hormones in question posed a cancer risk to consumers; the AB also acknowledges that countries may adopt stricter standards, if supported by an adequate risk assessment. The AB rules the EU ban does not constitute a hidden barrier to international trade. The WTO Dispute Settlement Body (DSB) adopts the panel decision and the AB rulings on the ban. The EU says it will implement the WTO ruling in "as short a time as possible." Neither party is able to agree on a "reasonable period of time" for implementation; the arbitrator decides the EU needs 15 months (until May 13, 1999). 1999— In February, the EU outlines three options to resolve the dispute: (1) compensation, (2) removal of the ban coupled with a suitable labeling system, and (3) the conversion of the ban to a temporary measure. The United States sends a letter to EC Commissioners of Agriculture and of Trade outlining a possible labeling system. The United States backed by most of the U.S. beef industry, decides against various compensation measures, preferring instead removal of the ban. The EU decides it wants to conduct additional risk reviews before considering removing the ban. In March, the U.S. announces it will consider trade sanctions against the EU and publishes a preliminary list of products that could be subject to increased tariffs if the dispute is not resolved. In April, the EU issues its first review and opinion based on studies by the EU's Scientific Committee on Veterinary Measures relating to Public Health (SCVPH) on the potential human health risks associated with consumption of hormone-treated beef. The SCVPH opinion states that it has evidence to show that a growth hormone (estradiol-17β) used in U.S. cattle production is carcinogenic, among other potential health risks to consumers. The report draws criticism from the United Kingdom's Veterinary Products Committee, as outlined in a report. The EU deadline for implementing the AB ruling expires on May 13. In July, the United States and Canada seek WTO authorization to suspend tariff concessions and retaliate against the European Union. The WTO sets the levels at $116.8 million (United States) and C$11.3 million (Canada). The Office of the U.S. Trade Representative (USTR) announces its decision to impose a 100% ad valorem rate of duty on a specified list of products from certain EU member states, effective July 29. The product list includes beef, pork, goose livers, cheese, truffles, onions, carrots, preserved tomatoes, sausage casings, soups, yarn, mustard, juice, chicory, toasted breads, chocolate, jams, glue, and wool grease. The U.S. list targets France, Germany, Italy, and Denmark, but excludes the United Kingdom. 2000— In May, the EU issues its second review and opinion based on studies by the EU's SCVPH on the potential human health risks associated with consumption of hormone-treated beef. The review concludes that the new information does "not provide convincing data and arguments demanding revision of the conclusions" of the SCVPH April 1999 opinion on the "potential risks to human health from hormone residues in bovine meat and meat products." Congress passes legislation as part of the Trade and Development Act of 2000 ( P.L. 106-200 ), requiring the USTR to review and periodically revise the list of products subject to retaliation when another country fails to implement a WTO dispute decision. This periodic revision of the product list has become known as "carousel retaliation." 2001— The commission provides documentation of studies and journals for publications. The United States and European Union initiate compensation discussions. 2002— In April, the EU issues its third review and opinion based on studies by the EU's SCVPH on the potential human health risks associated with consumption of hormone-treated beef. The review concludes its review of the 17 studies initiated in 1998, and again confirms the previous findings of the two earlier reviews (1999 and 2000). 2003— In September, the commission issues Directive 2003/74, amending 96/22. The new law permanently bans the use of estradiol in farm animals and provisionally bans use of the five other hormones, while it seeks more complete scientific information. The EU declares its effort to replace its original ban with a provisional ban is in compliance with its WTO obligations, citing Article 5.7 of the SPS Agreement (allows for provisional measures when there is insufficient scientific evidence, provided that a risk assessment is conducted within a reasonable time). In October, the EU issues a press release claiming its ban is supported by the 1999 and 2002 SCVPH reviews, which constitute "a thorough risk assessment based on current scientific knowledge " and thus fulfill its WTO obligations. The United States questions whether the SCVPH studies constitute a risk assessment. The EU claims the United States and Canada have no legal basis for continuing trade sanctions against the EU. In December, the EU refers the dispute to the WTO for a multilateral decision. 2004-2005— The EU initiates a new dispute claiming that because it has modified its ban, the United States (and Canada) should remove its trade sanctions against the EU, as the continued retaliation by the United States and Canada is no longer consistent with WTO rules. The United States and Canada cases are effectively merged under the one panel cases, given largely identical substance, even though they are technically separate. Australia and Mexico join the consultations. The EU requests that a new WTO panel be established and the substantive panel meeting takes place in September 2005. It is the first WTP panel open for observation by the public. 2006— The WTO panel announces that due to the complexity of the dispute, and the administrative and procedural matters involved, the panel will not complete its work until October 2006. The United Kingdom's Veterinary Products Committee issues a second report criticizing the SCVPH findings. In October, USTR decides against revising the list of EU products subject to higher U.S. import tariffs under the dispute. This decision is supported by the National Cattlemen's Beef Association and the U.S. Meat Export Federation. The U.S. Court of International Trade determines this action meets requirements under "carousel retaliation." 2007— The WTO panel again announces that due to the complexity of the scientific issues involved and scheduling difficulties, the panel's final report is delayed until June 2007. In June, the European Food Safety Authority (EFSA) adopts an opinion related to hormone residues in bovine meat and meat products based on its review of the scientific data. EFSA concludes that the new publicly available data do not provide quantitative information for a risk assessment and therefore do not call for a revision of previous risk assessments. In July, the WTO panel issues its interim report, including findings and conclusions. The expected final report date is delayed until October 2007, and eventually is issued in December. 2008— In March, the WTO panel report is circulated to members. The panel announces that it found fault with all three parties (EU, United States, and Canada) on various substantive and procedural aspects of the dispute. The panel report claims the EU had not presented sufficient scientific evidence to justify the import ban, including the EU's 2003 risk assessment report. The panel report faults the United States and Canada for maintaining its trade sanctions. Both parties file appeals citing procedural errors and disagreements with the panel findings. In October, the WTO's AB issues a mixed ruling that allows for continued imposition of trade sanctions on the EU by the United States and Canada, but also grants that the EU can continue to ban imports of hormone-treated beef from the United States and Canada. The AB reverses the dispute panel decision by stating that the EU's ban is not incompatible with WTO law, thus granting the EU more deference in deciding the basis for its food safety regulations. The USTR announces in October that it is seeking comment on possible modification of the list of EU products subject to increased tariffs under the dispute. In December 2008, the EU requests consultations under Article 21.5 of the DSU to determine whether it is in compliance with its WTO obligations in the underlying beef hormone dispute. 2009— In January, USTR announces changes to the list of EU products subject to increased tariffs under the dispute, adding countries and raising the tariff on select products, effective March 23, 2009. The EU claims USTR's action constitutes an "escalation" of the dispute, and is "more punitive" than the current trade sanctions. In May 2009, following a series of negotiations, the United States and the EU sign a memorandum of understanding (MOU) in an attempt to resolve this long-standing dispute by further opening up the EU market to non-hormone treated beef. The terms of this agreement are to be phased in over the next few years. As part of Phase 1 of the MOU, the EC adopted regulations opening a tariff quota for 20,000 metric tons imports of high-quality beef (HQB), effective August 2009. The United States agreed not to implement its January 2009 revised ("carousel") sanctions, which would have resulted in higher retaliatory duties on selected EU exports to the United States. Trade sanctions would remain in effect on certain EU exports until the final phase of the agreement. 2010— In October 2010, a U.S. Court of Appeals issued a decision in a case regarding duties paid by importers from the EU under the dispute, which could make them eligible for refunds. 201 1 — In May 2011, USTR announced it was suspending higher duties for imported products listed under the dispute, ahead of the scheduled date under the MOU. 201 2 — As part of Phase 2 of the MOU, in June 2012, the EU issued regulations increasing the HQB quota to 48,200 MT and changing the quota management system to a "first come, first served" basis, fully effective by August 2012. 201 3 — In October 2013, the EU approved a two-year extension of Phase 2 of the MOU, allowing for access of U.S. beef raised without the use of growth promotants in exchange for continued U.S. suspension of retaliatory import duties on some EU food products. The extension will remain in place until August 2015. Earlier that year, the EU had lifted its previous ban to allow the use of lactic acid as a pathogen reduction treatment (PRT) on beef carcasses, half-carcasses, and beef quarters in the slaughterhouse. Also, in July, the United States and EU entered into formal free trade negotiations as part of the Transatlantic Trade and Investment Partnership. 201 6 — In December 2016, USTR took steps to reinstate retaliatory tariffs on the list of EU products under the dispute. A public hearing is scheduled for 2017. Sources: Compiled by CRS from various USDA and WTO documents, and other information. | The United States and the European Union (EU) have engaged in a long-standing and acrimonious trade dispute over the EU's decision to ban hormone-treated meat. Despite an ongoing series of dispute settlement proceedings and decisions by the World Trade Organization (WTO), there is continued disagreement between the United States and the EU on a range of legal and procedural issues, as well as the scientific evidence and consensus concerning the safety of hormone-treated beef. To date, the EU continues to ban imports of hormone-treated meat and restricts most meat exports to the European Union to a limited quantity of beef imports that are certified as produced without the use of hormones. Starting in 1981, the EU adopted restrictions on livestock production limiting the use of natural hormones to therapeutic purposes, banning the use of synthetic hormones, and prohibiting imports of animals and meat from animals that have been administered the hormones. In 1989, the EU fully implemented its ban on imports of meat and meat products from animals treated with growth promotants. Initially the ban covered six growth promotants that are approved for use and administered in the United States. The EU amended its ban in 2003, permanently banning one hormone—estradiol-17β—while provisionally banning the use of the five other hormones. As part of this dispute, the United States suspended trade concessions with the EU by imposing higher import tariffs on EU products. The first U.S. action in 1989 imposed retaliatory tariffs of 100% ad valorem duty on selected food products, and remained in effect until 1996. The second U.S. action in 1999 again imposed a 100% ad valorem duty on selected foods from EU countries. Over the years, the United States and the EU have attempted to resolve this dispute through a series of WTO dispute consultations, settlement panels, arbitration proceedings, and formal appeals. One of the earlier WTO panel decisions in 1997 ruled against the EU on the grounds that the ban is inconsistent with the EU's WTO obligations under the Sanitary and Phytosanitary (SPS) Agreement because the EU had not conducted a risk assessment. In response, the EU commissioned studies and reviews to address the scientific basis of its ban on hormone-treated meat. Following each of these reviews, the EU reaffirmed its position that there are possible risks to human health associated with hormone-treated meat, given the available scientific data. The EU claims it has complied with its WTO obligations and has challenged the United States for maintaining its prohibitive import tariffs on EU products. The United States disputes whether the EU has conducted an adequate risk assessment to support its position and maintains there is a clear worldwide scientific consensus supporting the safety to consumers of eating hormone-treated meat. In October 2008, the WTO issued a mixed ruling allowing the United States to continue its trade sanctions, but allowing the EU to maintain its ban. In January 2009, the U.S. Trade Representative (USTR) announced its intent to make changes to the list of EU products subject to increased tariffs under the dispute, including changes to the EU countries and products affected, and higher tariffs on some products. The EU claimed this action constituted an "escalation" of the dispute. In May 2009, following a series of negotiations, the United States and the EU signed a memorandum of understanding (MOU), which phased in certain changes over the next several years. As part of this MOU, the EU granted new market access to U.S. exports of beef raised without the use of growth promotants, and the United States suspended its retaliatory tariffs on certain EU products. However, in December 2016, USTR took steps to reinstate retaliatory tariffs on the list of EU products under the dispute given continued concerns about U.S. beef access to the EU market. This issue has also been raised in ongoing trade negotiations between the United States and the EU to establish a free trade area as part of the Transatlantic Trade and Investment Partnership (T-TIP). |
In existence since 1965, Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services, as well as long-term care, to nearly 60 million people at an estimated cost to the federal and state governments of roughly $333 billion in FY2006, making it as large as Medicare, the federal health care program for the elderly and certain individuals with disabilities. Among major domestic entitlement programs, only Social Security costs more. Each state designs and administers its own Medicaid program under broad federal guidelines. For states, it is the second largest spending item after education. Medicaid is expected to represent 2.5% of GDP in FY2006. The expenditure growth is even more striking. Program spending increased by more than 49% between 2000 and 2005, exceeding growth in general and medical inflation, and the rates of growth in spending for both Medicare and Social Security over the same period. Medicaid spending has grown partly because medical care keeps getting more expensive, and because over time, federal law has been expanded significantly to cover more people and more benefits. Certain state financing mechanisms have also played a role in increased spending under Medicaid. As Medicaid entered the 1980s and 1990s, more attention—and blame—for steadily rising Medicaid costs was attributed to the economic incentive to provide more care under the fee-for-service (FFS) delivery system, in which payments are made for each unit of service delivered. Under this system, Medicaid budgets were somewhat unpredictable, and outlays were significantly affected by the quantity and types of care provided. It was also unclear whether state Medicaid programs were getting good value for their ever increasing Medicaid dollars. Following the lead in the private sector among large employers, many states began to turn to managed care for their Medicaid programs. The goal, then and today, is both to rein in Medicaid costs by making payments on a predetermined, per-person-per-month basis, rather than for each unit of service delivered, and to provide a better, coordinated system of care for beneficiaries, with an emphasis on preventive and primary care services. But Medicaid managed care has not fully achieved either goal yet. Data from FY2003 (most recent available) indicate that while about two-thirds of Medicaid beneficiaries nationwide participate in some form of managed care, the majority of expenditures still occur in the FFS setting, mainly because expensive long-term care services are rarely offered through managed care. In addition, while there are some data suggesting improvements in the quality of care delivered in Medicaid managed care, commercial (employer-based) and Medicare managed care plans continue to do better on some measures of effectiveness. Before getting into the specifics of how care is delivered under Medicaid, it is important to understand who is eligible for the program and the range of benefits that may be covered. The Medicaid statute (Title XIX of the Social Security Act) defines more than 50 distinct population groups as being potentially eligible. Some eligibility groups are mandatory, meaning that all states must cover them; others are optional. To qualify for Medicaid coverage, applicants' income (e.g., wages, Social Security benefits) and often their resources or assets (e.g., value of a car, savings accounts) must meet program financial requirements . These requirements vary considerably among states, and different rules apply to different population groups within a state. Medicaid eligibility is also subject to categorical restrictions —generally, it is available only to specific categories of people, including the elderly, persons with significant disabilities, members of families with dependent children, and certain other pregnant women and children. Other individuals (e.g., childless adults with no disability) are not eligible for Medicaid no matter how poor they are, unless they are covered under a special waiver. In recent years, Medicaid has been extended to additional groups with specific characteristics, including certain women with breast or cervical cancer and uninsured individuals with tuberculosis. Medicaid benefits are identified in the federal statute and regulations as either mandatory or optional, and include a wide range of medical care, items and services. Examples of benefits that are mandatory for most Medicaid groups include (1) inpatient hospital services (excluding services for mental disease), (2) laboratory and x-ray services, (3) physician services, and (4) nursing facility services for persons age 21 and over. In addition to prescribed drugs that are offered by all states, other optional benefits covered by many states include for example: (1) routine dental care, (2) physician-directed clinic services (frequently for mental health care), (3) therapies (e.g., physical, occupational and speech), and (4) transportation (in order to receive medical care). In general, most Medicaid beneficiaries, whether covered via a mandatory or an optional eligibility group, are entitled to all the standard mandatory and optional benefits offered by a state Medicaid program. Under the recently enacted Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ), as of March, 31, 2006, states may offer new packages of benefits to certain groups of Medicaid beneficiaries. This new benefit option includes benchmark and benchmark-equivalent coverage that is nearly identical to the plans offered through the State Children's Health Insurance Program (SCHIP), with some additions. Nearly all states operate their SCHIP programs under managed care arrangements. Under DRA, benchmark coverage includes the care and services available through: (1) the standard Blue Cross/Blue Shield preferred provider plan under the Federal Employees Health Benefits Plan (FEHBP), (2) health coverage for state employees, (3) health coverage offered by the largest commercial HMO in the state, and (4) Secretary-approved coverage, which may include any other package of benefits that the Secretary of Health and Human Services (HHS) determines will provide appropriate coverage for the targeted population. Benchmark-equivalent coverage must include certain services, and must have the same actuarial value as one of the benchmark plans, with at least 75% of the actuarial value for selected services. A number of groups are explicitly exempted from mandatory enrollment in this new benefit option, including most individuals with special needs living in both the community and long-term care settings. Other groups can be required to enroll in the new benefit option, including most generally healthy children and certain adults (e.g., some parents and childless adults with no disability). There are two major types of service delivery systems under Medicaid—fee-for-service and managed care. These two approaches to delivering services to Medicaid beneficiaries differ in important ways across several key dimensions, including: choice of providers for beneficiaries, how much professional management and coordination of medical care is provided, which entity has direct oversight responsibilities for service delivery, how states pay providers for services rendered, and assuring access to and quality of care. In many cases, these two delivery systems are not entirely independent approaches to providing medical care under Medicaid. In a number of states, there are hybrid models that combine various features of fee-for-service and managed care for a given population or set of interrelated services. At a given point in time, beneficiaries may obtain all their services under a single system of care, or different sets of services under each system simultaneously (e.g., primary and acute care under managed care arrangements, and long-term care such as home health services or on-going rehabilitative services under the fee-for-service delivery system). Each of these features of delivery systems is described in more detail below. The fee-for-service (FFS) delivery system was the predominant system of care both within and outside of Medicaid until about the mid-1990s. Under FFS, beneficiaries have unrestricted provider choice; that is, they can seek services from any Medicaid participating provider. Hence, beneficiaries are largely responsible for their own medical care management and coordination. The term "fee-for-service" evolved as a short-hand way to describe the method used to reimburse providers for services rendered. For Medicaid, payment rates for each type of service are set by the state within broad federal guidelines. The state directly (or through a fiscal intermediary) pays each participating provider for each covered service received by a Medicaid beneficiary. That is, each individual service rendered is paid a specified amount or rate. In essence, there is a one-to-one correspondence or "match" between payments and the quantity and types of care actually delivered. Until the late 1990s, states had to obtain waivers of certain Medicaid rules to require that Medicaid beneficiaries get their services through managed care. For example, authority provided by Section 1915(b) of the Social Security Act was used by many states to waive the requirements that services be available statewide (so that managed care could be implemented in specific sub-state regions), and that beneficiaries have freedom of choice among all Medicaid providers (so that managed care enrollees could be required to receive certain services from a specified subset of managed care providers). Section 1115 of the Social Security Act provides additional flexibility to test benefit package and service delivery innovations. This authority has also been used to implement managed care demonstrations. In FY1998, nearly all states had at least one such waiver for some population subgroups or regions. The Balanced Budget Act of 1997 (BBA-97; P.L. 105-33 ) eliminated the need for waivers that many states complained were unnecessarily complex and time-consuming. BBA-97 also included managed care provisions that established standards for quality and solvency, and provided additional protections for beneficiaries (described below). Under Medicaid managed care, beneficiaries choose (or are assigned to) a primary plan as a "medical home." In turn, these plans provide care coordination and management. State Medicaid agencies must contract with at least two plans, or may offer one plan with a choice of at least two plan providers. Comprehensive, traditional plans like health maintenance organizations (HMOs) make available to enrolled beneficiaries a broad range of preventive, primary and acute care services. Under primary care case management (PCCM) plans, primary care physicians provide basic medical care, and serve as case managers or gate-keepers (via referrals) to specialty care (e.g., mental health services, dental care). Such specialty care may be provided by another managed care entity that offers only specialty care, called prepaid health plans (PHPs), or by providers in the FFS delivery system. PHPs may be limited to certain ambulatory services (prepaid ambulatory health plans or PAHPs) or specific types of inpatient care (prepaid inpatient health plans or PIHPs). A beneficiary's choice of provider under managed care is restricted; that is, beneficiaries must seek care for specified services from a specified list of plan providers. Between 1990 and 2002, states increased their use of comprehensive managed care contractors with primarily public enrollment (i.e., more than one-half of the plan's enrollment was made up of Medicaid, Medicare and SCHIP enrollees) and decreased the use of such plans serving a primarily commercial population (i.e., one-half or less of the plan's enrollment was comprised of Medicaid, Medicare and SCHIP beneficiaries). As of June of 2004, data from CMS show that despite these trends, nationwide, commercial MCOs outnumbered Medicaid-only MCOs (156 versus 131), and more Medicaid beneficiaries were enrolled in commercial plans than Medicaid-only plans (9.7 million versus 7.8 million). Paying for services under most Medicaid managed care arrangements is significantly different from methods used under the FFS delivery system. Traditional managed care plans, such as HMOs, agree to make available a specified set of services for which the State Medicaid Agency pays a fee on a "per member per month" (PMPM) basis, called a premium or capitation rate. These rates typically reflect the average FFS cost of providing care to specified groups (or subgroups) of beneficiaries expected to enroll in the plan. Such premiums are paid each month, regardless of the quantity or types of contracted care actually rendered to enrolled beneficiaries. Because the PMPM rates and the number and type of beneficiaries to be enrolled are generally known in advance, managed care expenditures, for both the plans and the State Medicaid Agency, are more predictable than FFS payments and budgets can be set accordingly. PHPs also involve capitated payments, but for limited benefit packages (e.g., inpatient substance abuse treatment, dental care, transportation). Traditional managed care plans and PHPs must actively "manage" care for plan beneficiaries to control their financial risk. Such plans face a financial loss if more care is rendered than the agreed upon capitation rate accommodates. Conversely, if less care is rendered than is assumed in the premium, the plan will experience a financial gain. Overall, the economic incentive is to deliver less care or less costly care, so long as beneficiary health is not compromised as a result. That incentive may be passed on to contracted medical providers, such as physicians and hospitals, via what is sometimes called sub-capitation (i.e., when plans pay their contracted providers a capitation rate for all or a selected subset of services) or via other kinds of financial rewards/penalties for performance. In contrast, the payment methods under the PCCM model are a blend of both FFS and traditional managed care. The majority of expenditures associated with PCCM programs are FFS payments. The case manager (i.e., an internist or pediatrician) is paid a small, pre-set monthly fee (e.g., $2 to $3) per enrolled beneficiary to handle coordination of, and referral for, other services, particularly specialty care. In addition, the case manager is typically paid on a FFS basis for direct delivery of basic primary care to his/her enrolled beneficiaries, as are the medical specialists to whom a referral is made. The PCCM model of managed care has sometimes served as a first step toward more traditional models of managed care such as HMOs. In addition, PCCM programs have been implemented in rural areas where no traditional managed care plans operate, given few potential beneficiaries. PCCM programs may also be used for populations that frequently need a broad range of specialty care services (e.g., individuals with disabilities). Under managed care, oversight responsibilities are shared among the State Medicaid Agency, the managed care plans, and the plan providers. The State Medicaid Agency has direct oversight of its contracted managed care plans, and establishes payment rates for these entities, as well as the parameters governing the amount, duration and scope of benefits covered in these contracts, in accordance with federal and state requirements. Similarly, the managed care plans have direct oversight of the plan providers. These plans set medical care and referral policies, in accordance with the contractual agreement negotiated with the State Medicaid Agency. The plans also determine payment methods and rates for plan providers. The providers deliver or prescribe medically necessary care to plan beneficiaries within the guidelines specified by the managed care plan. The specific details of a given state/plan/provider arrangement may vary from this generic scenario. Also, State Medicaid Agencies typically directly oversee PCCM programs as well, although some states contract with administrative service organizations (ASOs) to help administer these programs. Under the FFS delivery system, there is no plan "middle man." Generally, the State Medicaid Agency deals directly with all Medicaid participating providers statewide, in terms of both medical care policies (e.g., amount, duration and scope of covered benefits) and setting payment methods and rates specific to different types of providers (e.g., hospitals versus physicians versus physical therapists). There are several requirements in federal statute to assure access to and quality of care under both the Medicaid FFS and managed care delivery systems. Some of these requirements are very general and broad, while others, particularly for nursing facilities, are detailed and specific. Examples of such assurances include the following: Services must be provided in a manner consistent with simplicity of administration and in the best interest of the recipients (Section 1902(a)(19)); States must assure that payments are consistent with efficiency, economy, and quality of care, and are sufficient to enlist enough providers so that care is available at least to the same extent that such services are available to the general population in the geographic area (Section 1902(a)(30)(A)); A medical evaluation and a written plan of care is required for certain people and services (Section 1902(a)(26)); and States must regularly survey and certify nursing facilities to ensure that such care meets certain standards for staffing and service delivery, as well as to assure that resident rights are protected (Section 1919). When BBA-97 was passed, there was a lot of concern that beneficiaries may be harmed under managed care without additional significant safeguards. Thus, there are many additional requirements for assuring access to and quality of managed care under Medicaid. For example, the federal statute includes provisions requiring plans to assure coverage of emergency services under managed care (Section 1932(b)(2)); have a system in place to address grievances (Section 1932(b)(4)); demonstrate adequate capacity and services (Section 1932(b)(5)); and meet a series of quality assurance standards (Section 1932(c)). Nationwide, enrollment in Medicaid managed care has increased considerably over time. In June of 1996, 40.1% of 33.2 million Medicaid enrollees, at that point in time, participated in some form of managed care. Eight years later, that proportion had increased to 60.7% among 44.4 million Medicaid eligibles enrolled in June of 2004. Counting the number of Medicaid beneficiaries enrolled in various forms of managed care is difficult for several reasons. Beneficiaries may receive managed care services under multiple arrangements within one year. For example, some individuals may be enrolled in a PCCM program for part of the year, then switch to an HMO for the remainder of the year. Other individuals may be enrolled in an HMO or PCCM program for their primary care and simultaneously receive specialty services from one or more PHPs (e.g., for mental health care and/or dental services). A variety of other scenarios are also possible. To obtain unduplicated counts of beneficiaries by type of managed care experience, we examined person-level patterns of payments using a special FY2003 Medicaid claims database provided to CRS by the Centers for Medicare and Medicaid Services (CMS), the federal agency that administers the Medicaid program. In descending order of frequency, among the roughly 52 million Medicaid beneficiaries nationwide that had any payments made on their behalf in FY2003: 64% (33.3 million individuals) had managed care expenditures, 22% (11.5 million beneficiaries) had managed care payments made for HMOs only, 18% (9.5 million people) had managed care expenditures for both HMOs and PHPs, 11% (5.9 million) had managed care payments for PCCMs only, 10% (5.0 million) had managed care expenditures for PHPs only, and 3% (1.6 million) had managed care payments for other combinations of the three types of managed care. Table 1 provides national data on the unduplicated number and percentage of Medicaid beneficiaries by type of managed care payments and basis of eligibility for FY2003. Among the elderly, a little less than one-third had any managed care experience, and the predominant form of that care was PHPs only (about 19%). Slightly more than one-half of individuals with disabilities had managed care experience, mostly through PHPs only (17%) or both HMOs and PHPs (15%). Among children, nearly 80% had managed care experience, most with HMOs only (31%) or both HMOs and PHPs (22%). Finally, 61% of adults had managed care experience, and like children, most adults were enrolled in HMOs only (25%) or both HMOs and PHPs (21%). Table 2 displays state-by-state data on the percentage of Medicaid beneficiaries by type of managed care experience. In eleven states, roughly 85% or more of beneficiaries had managed care experience, and in eight of these eleven states (excluding South Dakota, Kentucky and Iowa), beneficiaries were primarily enrolled in HMOs and PHPs, or PHPs alone. With some exceptions, among all remaining states with lower concentrations of beneficiaries with managed care experience, there was substantial enrollment in HMOs only or PCCMs only. In order to provide more information on the types of Medicaid PHPs, a different data source was analyzed. Tables 3 and 4 show additional detail on the types of PHPs available by state as of June, 2004. Prepaid Inpatient Health Plans (PIHPs; see Table 3 ) provide less than comprehensive services and deliver or arrange for inpatient hospital or institutional services. In June of 2004, there were 119 PIHPs in 18 states. The majority of such plans provided either mental health services only (63 plans with 3.2 million beneficiaries), or a combination of mental health and substance abuse services in an institutional setting (34 plans with 3.4 million beneficiaries). Prepaid Ambulatory Health Plans (PAHPs; see Table 4 ) provide less than comprehensive services and deliver or arrange for services outside of an institutional setting. In June of 2004, there were 34 PAHPs in 13 states. While half of these plans (17) were for dental services, most PAHP beneficiaries (2.4 million individuals) were enrolled in a PAHP providing transportation services. Data limitations related to the PCCM experience hinder a fully accurate accounting of managed care versus fee-for-service spending patterns under Medicaid. The monthly fees paid to case managers for care management and coordination under PCCM programs are counted as managed care expenditures. However, the medical services delivered by case managers are paid on a FFS basis, as are the payments made for related specialty care received as a result of referrals by case managers. The available data do not provide a means to treat payments for PCCM-related primary and specialty care services as managed care expenditures. With these data caveats in mind, Medicaid expenditure patterns are summarized below. Despite the fact that nearly two-thirds of Medicaid beneficiaries have experience with some form of managed care, expenditures for managed care services are dwarfed by benefit expenditures under the FFS delivery system. As shown in the bottom row of Table 5 , in FY2003, total federal and state spending on Medicaid services reached $233.2 billion. The vast majority of service spending—nearly 84%—was for care provided under the FFS delivery system. A little over one-third of total benefit expenditures was for long-term care, including both institutional and non-institutional services. Prescription drugs, one of the fastest growing categories of expenditures, accounted for nearly 15% of total service spending. All other FFS care, mostly acute and primary care services (e.g., inpatient and outpatient hospital, physician services, clinic care), accounted for nearly one-third of total benefit expenditures. Managed care accounted for just 16% of total Medicaid service expenditures in FY2003. As shown in Table 5 , in Arizona, nearly 85% of all Medicaid benefit spending was for managed care. Unlike other states, Arizona has had a statewide managed care waiver in place since the beginning of its Medicaid program in 1982. In all remaining states, less than one-half of total service expenditures was made for managed care, and there was considerable variation across these states in the proportion of total service spending on managed care. Table 6 provides additional detail on Medicaid benefit expenditures by type of managed care and state. HMO plans account for the bulk of Medicaid managed care expenditures in most states. Expenditures for PHPs exceeded 20% of total managed care spending in twelve states. Finally, in seven states, all Medicaid managed care spending was for PCCM programs. Table 7 provides details on national Medicaid benefit expenditures by delivery system and type of beneficiary. Expenditures under the FFS delivery system dominate service spending by basis of eligibility in FY2003. For the elderly and individuals with disabilities, 90 to 95% of all Medicaid benefit spending involved care in the FFS delivery system, and most of the expenditures for these two groups was for long-term care services. In addition, nearly 30% of benefit spending for persons with disabilities was for other FFS care, mostly acute and primary care services. (For the elderly, Medicare, not Medicaid, is the principal payor for primary and acute care services.) For adults and children, about two-thirds of total benefit expenditures occurred under the FFS delivery system, and much of that spending was for acute and primary care services (as shown in the all other FFS column of Table 7 ). Total benefit expenditures by type of managed care and beneficiary for FY2003 are shown in Table 8 . For each type of beneficiary, the majority of Medicaid managed care expenditures was for HMO plans. In addition, nearly 30% of managed care expenditures made on behalf of individuals with disabilities was for services delivered by PHPs. Nationally, most Medicaid beneficiaries participate in some form of managed care. However, benefit expenditures under Medicaid, especially for long-term care services, still largely occur in the FFS delivery system. State variation in the proportion of beneficiaries and expenditures associated with managed care is the rule rather than the exception. Such variation is likely due at least in part to political, geographic, and market considerations unique to each state. States continue to redesign their Medicaid programs and experiment with managed care via waiver authority. In addition, states may rely on managed care delivery systems for the new Medicaid benefit package option now available through DRA (described above). Recent examples include new programs in Florida using Section 1115 waiver authority, and Idaho, Kentucky and West Virginia, all using the DRA benefit option. Whether via waiver or the DRA option, these new programs provide access to a different set of tailored benefits for different groups of beneficiaries, based on their anticipated health care needs, rather than giving all beneficiaries access to the full range of Medicaid services covered in each state. Groups participating in these new programs include not only healthy children and adults, but in some cases, also the elderly and individuals with disabilities living in the community and those needing institutional care. Most programs will start off in a subset of counties. Some programs will allow beneficiaries to "opt out" of the new Medicaid benefit plans and enroll in employer-sponsored or private health insurance subject to capped payments (e.g., Florida, Kentucky) or remain in traditional Medicaid (e.g., Idaho). Incentives such as access to additional benefits or credits for purchasing other goods and services may be offered to encourage healthy behaviors (all four states). Access to enhanced benefits may be subject to certain conditions such as signing a member agreement to fully comply with recommended medical treatment and wellness behaviors (e.g., West Virginia). All four states expect to use managed care delivery systems in these new programs. Although managed care under Medicaid holds the potential for providing coordination and management of a variety of medical and related health services for beneficiaries, that potential has been largely limited to sub-populations of generally healthy adults and children. Significant challenges still remain for serving the elderly and individuals with disabilities under traditional models of managed care, most likely because of the wide range and intensity of services they require to meet their on-going special health care needs. Relative to other services, long-term care is expensive and an individual's need for such care may change repeatedly over time. For states that want to save money on long-term care under Medicaid, these factors make setting adequate per-person-per-month payment rates difficult, in turn leading to an inability to attract managed care plans to this market. In addition, many mainstream managed care plans lack experience with both these special needs populations and with delivering long-term care services. How successful has Medicaid managed care been in reducing program costs and providing beneficiaries with better, coordinated care? This report is not intended to provide a detailed review of this literature. However, there is some evidence that savings can be achieved through Medicaid managed care. For example, in one analysis synthesizing results from 14 studies, the Lewin Group concluded that (1) comprehensive, prepaid managed care plan models typically yield cost-savings compared to program costs under a FFS model, (2) savings can be gained in programs that serve individuals with disabilities, and (3) although cost savings is largely attributable to decreases in inpatient utilization, some savings is also associated with moving prescribed drugs from the FFS setting into managed care. There is also some evidence that Medicaid managed care plans are not as effective as employer-based or Medicare plans, but some improvements have been observed in recent years. For example, the National Committee for Quality Assurance (NCQA) regularly publishes reports for commercial (i.e., employer-based), Medicare and Medicaid managed care plans. Table 9 shows a few examples of the 40+ measures voluntarily reported to NCQA by more than 500 health plans for 2005. In general, higher percentages represent greater effectiveness of care and member satisfaction. On the selected effectiveness of care measures for preventive services, acute medical care and mental health services, the ratings for commercial and Medicare plans exceed those for Medicaid plans. Nonetheless, very similar (high) ratings were observed for both Medicaid and commercial plans on two acute care measures—appropriate treatment for children with upper respiratory infection and persistence of beta-blocker treatment after a heart attack. All three types of plans struggled with antidepressant medication management, probably reflecting the challenges of helping persons with severe mental illness regardless of the public or private sector health care system involved. Member satisfaction measures were consistently high for Medicaid plans. NCQA noted that regional differences in plan performance are large as are variations within each plan type (e.g., among Medicaid plans). Thus, attaining high quality in managed care is an on-going, continuous process for Medicaid, commercial and Medicare plans. Building on the reforms introduced in BBA-97, what additional role can Congress play with respect to managed care under Medicaid? For example, Congress could elect to expand the use of Medicaid managed care to address some of the issues identified in this report, in particular with respect to managed long-term care, and with holistic integration of primary, acute and long-term care for special needs populations. Congress could also choose to monitor and evaluate access to and quality of Medicaid managed care programs, as well as assess the short- and long-term costs and savings attributable to various forms of managed care for different sub-populations of Medicaid beneficiaries. CRS Report RL33495, Integrating Medicare and Medicaid Services Through Managed Care . CRS Report RL33357, Long-Term Care: Trends in Public and Private Spending . CRS Report RL32219, Long-Term Care: Consumer-Directed Services Under Medicaid . CRS Report RL32977, Dual Eligibles: A Review of Medicaid ' s Role in Providing Services and Assistance . | In terms of federal spending, Medicaid is one of the largest major domestic entitlement programs in the U.S. today. During the 1980s and 1990s, steadily rising Medicaid costs were attributed to the economic incentive to provide more care under the traditional, widespread fee-for-service (FFS) delivery system in which provider payments are made for each unit of service delivered. During that time, following the lead in the employer health insurance market, many states began to turn to managed care for their Medicaid programs. The goal, then and today, is both to rein in Medicaid costs by making payments on a predetermined, per-person-per-month (PMPM) basis rather than for each unit of service rendered, and to provide a better, coordinated system of care for beneficiaries, with an emphasis on preventive and primary care services. The reality of service delivery under Medicaid is gradually moving along this path. In terms of beneficiary participation, managed care is the dominant delivery system in Medicaid. Based on data from FY2003 (the latest available for all states), Medicaid managed care is widely used by children and adults, but less so among the elderly and those with disabilities. However, there is still significant penetration of managed care in these latter populations with special health care needs. In terms of expenditures, the FFS delivery system still dominates Medicaid spending, largely because more expensive long-term care services available under Medicaid are seldom offered through managed care arrangements. Also, many users of long-term care services, the elderly and those with disabilities, are not enrolled in managed care programs. One of the next big challenges for Medicaid managed care is to develop and evaluate managed long-term care and holistic integration of primary, acute, and long-term care for special needs populations. This report provides an overview of Medicaid managed care. It includes a discussion of the major features of both the managed care and the traditional fee-for-service delivery systems in Medicaid. The report also provides a series of tables that illustrate the distribution of people, services, and dollars across both systems of care. It concludes with a summary of some of the current policy issues facing Medicaid managed care, and a list of additional CRS resources. This report will be updated as legislative activity warrants. |
Article II, Section 2 of the U.S. Constitution provides that the President shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments. A number of the appointments made by President Barack H. Obama to his Administration or by Cabinet Secretaries to their departments have been referred to, especially by the news media, as "czars." For some, the term is being used to convey an appointee's title (e.g., climate "czar") in shorthand. For others, it is used to convey a sense that power is being centralized in the White House or certain entities. When used in political science literature, the term generally refers to White House policy coordination or an intense focus by the appointee on an issue of great magnitude. Congress has noticed these appointments and in the 111 th Congress examined some of them. The Senate Subcommittee on the Constitution of the Committee on the Judiciary, and the Senate Committee on Homeland Security and Governmental Affairs, for example, conducted hearings on the "czar" issue on October 6, 2009, and October 22, 2009, respectively. Legislative action has focused on prohibitions on the use of appropriated funds to compensate certain appointees. P.L. 113-76 , the Consolidated Appropriations Act, 2014, enacted on January 17, 2014, prohibits the use of funds to pay the salaries and expenses for the (1) Director, White House Office of Health Reform; (2) Assistant to the President for Energy and Climate Change; (3) Senior Advisor to the Secretary of the Treasury assigned to the Presidential Task Force on the Auto Industry and Senior Counselor for Manufacturing Policy; and (4) White House Director of Urban Affairs. A similar provision was included in P.L. 112-74 , the Consolidated Appropriations Act, 2012, enacted on December 23, 2011. Division C of the law included the Financial Services and General Government (FSGG) Appropriations Act. The Office of Management and Budget's Statement of Administration Policy on this provision reiterated the President's authority with regard to appointments in stating that, Section 632 would prohibit the use of funds for several positions that involve providing advice directly to the President. It also would deny funding for any "substantially similar positions." As the President indicated in an April 15, 2011 statement regarding virtually identical provisions in prior legislation, the President has well-established authority to supervise and oversee the Executive Branch, and to obtain advice in furtherance of this supervisory authority. The President also has the prerogative to obtain advice that will assist him in carrying out his constitutional responsibilities, and do so not only from Executive Branch officials and employees outside the White House, but also from advisors within it. One issue of interest to Congress may be whether some of these appointments (particularly some of those to the White House Office), made outside of the advice and consent process of the Senate, circumvent the requirements of the Appointments Clause of the U.S. Constitution. A second issue of interest may be whether the activities of such appointees are subject to oversight by, and accountable to, Congress. This report provides background information and selected views on the role of some of these appointees, provides legal analyses of the appointments clause and oversight by Congress of presidential advisors, and discusses options to enhance the accountability of such appointees to Congress. Every American President, since George Washington, has needed advice and assistance. The President's Committee on Administrative Management (commonly referred to as the Brownlow Commission), which had been established by President Franklin D. Roosevelt, closely examined this need. The committee's charge, "A careful study of the organization of the Executive branch of the Government ... with the primary purpose of considering the problem of administrative management," resulted in a report that was submitted to the President and then released to Congress on January 12, 1937. Stating that, "The President needs help," the committee recommended that the President "should be given a small number of executive assistants who would be his direct aides in dealing with the managerial agencies and administrative departments of the Government." The Reorganization Act of 1939 "empowered the President to propose plans of reorganization, subject to a veto by a majority of both houses of Congress, and to also appoint six administrative assistants." On September 8, 1939, President Roosevelt issued Executive Order (E.O.) 8248, to create the enclave of federal agencies known as the Executive Office of the President (EOP). Many, if not most, of the President's closest advisors and assistants on matters of policy, politics, administration, and management are within the EOP. Over time, some of the EOP's components have been created by the President and others have been established by Congress. Some components, such as the White House Office (WHO), Office of Management and Budget (OMB, formerly the Bureau of the Budget), the Council of Economic Advisers, and the National Security Council, have endured to the present day, appearing to hold permanent status. Notwithstanding these continuing functions, a President may have need for special assistance that a new White House office or position may provide. As described by one scholar, No president is confined by the organization charts of the past.... A president's priorities change—as do his views of the nation's priorities—and may well expand in new directions. The White House, as the support center for furthering those priorities, will be flexible and will adapt to those changes. Its organizational structure will jump beyond the "continuing" arrangements. If a president wants to begin important new initiatives, to dramatize the extent of his personal commitment, to respond quickly to today's crisis or tomorrow's threat, he will be pressed to create new organizational forms to support his efforts. The "czar" moniker has been attached to some of these special assistant positions since at least the Administration of President Roosevelt. A cartoon drawn by Clifford Kennedy Berryman and published on September 7, 1942, probably in the Evening Star (Washington, DC), showed three of President Roosevelt's appointees—"czar" of prices, Leon Henderson; "czar" of production, Donald Nelson; and "czar" of ships, Emory S. Land—crowded together on one throne, wearing crowns and ermine-trimmed robes, and wondering where the new economic "czar" would sit. Succeeding Presidents appointed special assistants who were similarly, at times, referred to by the news media as "czars." As examples, President Richard Nixon appointed John Love, the so-called energy "czar," as the Director of the Office of Energy Policy in 1973, and President Clinton appointed John Koskinen, the so-called Y2K "czar," as the chairman of the President's Council on Y2K Conversion in 1998. Early in his Administration, President Obama created several new positions, including the Assistant to the President for Energy and Climate Change, the Deputy Assistant to the President and Director of Urban Affairs, and the Director, White House Office of Health Reform, that were not subject to Senate confirmation, the incumbents of which were dubbed "czars." Additionally, several sub-Cabinet-level positions that require Senate confirmation have similarly been termed "czars." For example, David Hayes was referred to by some in the news media as the "water czar'' during his tenure as Deputy Secretary at the Department of the Interior. Further, the incumbents of some other positions that are authorized in statute and subject to Senate confirmation, such as the Administrator of the Office of Information and Regulatory Affairs at the Office of Management and Budget, have also been referred to as "czars." Several Special Envoy or Special Representative positions, such as the Special Envoy for the Middle East, have been similarly described. As envisioned by the Brownlow Commission, which had recommended a few ("probably not exceeding six") additional executive assistants to the President, the aides were to have "no power to make decisions or issue instructions in their own right" and be "possessed of high competence, great vigor, and a passion for anonymity." An analysis of the commission's suggestion for such staff observed that These men were to act as anonymous servants exercising no initiative independently of the President's wishes. No authority was delegated to them. Their function was to extend the President's power to listen wherever useful information could be gathered and to see whatever needed to be seen to provide the information required for decisions. In order to give them the utmost responsibility, to presidential will, as well as ultimate flexibility, their functions were not to be defined except as the President saw fit to define them. As such they would not constitute either an additional institution or certainly not an independent one, but rather an extension of the Presidency itself. Indeed, President Roosevelt's executive order stated that the administrative assistants should have "'no authority over anyone in any department or agency' and should 'in no event be interposed between the President and the head of any department or agency.'" Since this beginning, Presidents have continued, at times, to appoint special assistants as a way to reassure the public that immediate and sustained attention is being devoted and a broad viewpoint is being applied to crisis situations or problems that cut across departments and agencies. One scholar has noted that, "the expectations surrounding presidential performance far outstrip the institutional capacity of presidents to perform," and therefore This gives presidents a strong incentive to enhance their capacity by initiating reforms and making adjustments in the administrative apparatus surrounding them—but here too there is a fundamental imbalance: the resources for acting upon this strong incentive are wholly inadequate, constrained by political and bureaucratic opposition, institutional inertia, inadequate knowledge, and time pressures. It is this imbalance that channels presidential effort into areas of greatest flexibility and generates the major institutional developments we observe, politicization and centralization. Describing a subset of special assistants in the Administration of President Dwight Eisenhower as "Very Special Assistants for Very Special Problems," another scholar stated this rationale for them: From time to time every President is presented with a public policy issue of extraordinary messiness: an aroused public demanding action, many departments involved, political opponents charging that he is asleep when he should be grabbing the wheel. Substantive responses may require billions; thoroughgoing reorganizations will take years—and the President has neither. He does, however, have an instant option which will portray himself as taking charge and as jolting stodgy governmental machinery to move faster: he can appoint a White House "Czar." No Senate confirmation is needed and a suite can always be found in the Executive Office Building next door. It is a legitimate presidential gambit; the "czar" sometimes achieves real success (although often being a pain in the side to the Cabinet). The title of special assistant conveys "a sense of action" and the individual is frequently announced, sometimes with considerable fanfare, as one who will "knock heads," "cut red tape," and "ensure coordinated effort." Whether such an appointee ultimately performs his or her role in this manner is uncertain at the outset. As one reporter wrote with regard to two of the current Administration's appointees, The new White House Office of Urban Policy might work in lockstep with the Domestic Policy Council, the National Economic Council, and a host of departments and agencies. Or maybe not. Obama's new White House office for energy and climate change ... may work companionably with the White House Council on Environmental Quality, the president's national security adviser, the president's science adviser, the NEC [National Economic Council], the new administrator at EPA [Environmental Protection Agency], and the Ph.D. physicist chosen to lead the Energy Department. Or maybe not. According to another reporter, a "czar" "has to drive those he's working with toward a plan to present to the president," but some aspects of the role are undefined: Budgetary power? Not clear. Accountability? Not to Congress. The capacity to dictate policy? Umm, probably not. The ability to impose solutions through sheer force of personality? In some cases, most likely yes. More generally, the size of the White House staff is sometimes raised as a concern when presidential appointments are discussed. Some caution that too many advisors may insulate the President, diminishing his "direct influence and dilut[ing] the impact of his personal leadership." In his book entitled The Cycles of American History , the historian Arthur M. Schlesinger, Jr., observed that "The larger the staff grows, the more endless meetings the staff calls, the more useless paper the staff generates, the more the President will hunker up behind it; the less he will know what is going on. The staff becomes the shock absorber, shielding the President against the facts of life." Lines of authority may also be more difficult to discern, as another scholar asserts: The historical record suggests that czars generally fail to find solutions to the problems they are commissioned to confront. Instead, czars confuse matters. They disrupt lines of authority and accountability and they compromise bureaucratic discipline. They sometimes foment suspicion on Capitol Hill and rivalries within the Executive branch. The mere presence of policy "czardoms" undermines the morale of officials in the standing table of organization who retain responsibility for developing and implementing policy while their authority and credibility are eclipsed by the czar. The decline of the Cabinet "as a useful instrument of presidential counsel or assistance" is often mentioned as a consequence of concentrating power in White House assistants. A document published by the Center for the Study of the Presidency expressed the view that "the Cabinet has been subordinated to the Presidential staff" since the Administration of President John F. Kennedy. Mr. Schlesinger described the effect of concentrated power in the White House of President Richard Nixon, for example, as enfeebling the Cabinet, which "became, with few exceptions, a collection of faceless clerks." This lessening of the Cabinet's role was described in a May 1971 speech by Senator Ernest F. Hollings, when he remarked that It used to be that if I had a problem with food stamps, I went to see the Secretary of Agriculture, whose Department had jurisdiction over that program. Not any more. Now, if I want to learn the policy, I must go to the White House and consult John Price. If I want the latest on textiles, I won't get it from the Secretary of Commerce, who has the authority and responsibility. No, I am forced to go to the White House and see Mr. Peter Flanigan. I shouldn't feel too badly. Secretary Stans [Secretary of Commerce] has to do the same thing. John Podesta, a former White House Chief of Staff, who headed President Obama's transition team, believes that "the very strong or important role that Cabinet secretaries play" is not being displaced by the current Administration. As quoted in a National Journal article, he emphasized, however, that, "when you have problems that really cut across a swath of agencies, it's very important with respect to the president's priorities to have a strong central place within the White House where people can get on the same strategy and that actions are keyed up and accountability exists." An expert on government and organization, however, believes that, in the end, the efficient operation of government that is sought through such approaches to management as creating czars may not be the outcome that is achieved: Presidents, not caring about management, tend to rely on political personnel to overcome what they believe to be bureaucratic resistance and incompetence. Instead of properly reconstructing the institutional capacity of the presidency, they are lured by 'shortcuts.' ... Therefore, among other things, they tend to create 'czars' who are deemed, at least initially, to be close to the president and thus can get around the departments and agencies to achieve their policy objectives, many of which are not enumerated in law. Presidents are always tempted to bring issues to the White House, but then when they do, they often regret the stress it puts upon themselves and their limited institutional resources. More than 30 years ago, a study of presidential staffing concluded that, "White House assistants to succeeding presidents, since 1939, have become highly conspicuous, multiple in number, possessed of great power, and virtually unaccountable to anyone but the Chief Executive for their actions." The question of accountability reverberates today. One scholar who questions whether these positions should continue to be outside of the advice and consent of the Senate process has suggested that, "we need to seriously consider requiring Senate approval of senior White House staff positions." He recommends that such a requirement not become effective until January 2017, however, "To allow for thoughtful bipartisan deliberation" and to encourage Congress "to take the long view of whether senatorial confirmation is appropriate in terms of constitutional design." Another viewpoint holds that significant authority can only be conferred by the U.S. Constitution or Congress and that "To subject the qualifications" of special assistants (who "In many respects ... are equivalent to the personal staff of a member of Congress") "to congressional scrutiny—the regular confirmation process—would trench upon the president's inherent right, as the head of an independent and equal branch of the federal government, to seek advice and consent where he sees fit." Regardless of which viewpoint one subscribes to, "The Constitution grants Congress extensive authority to oversee and investigate executive branch activities" through the "review, monitoring, and supervision of the implementation of public policy." Several options for congressional oversight of presidential advisors are discussed later, below. Section 105 of Title 3 of the United States Code authorizes the President to appoint and fix the pay of employees in the White House Office "who shall perform such official duties as the President may prescribe." With regard to employees at the highest pay grades, the President may appoint 25 employees at salaries that may not exceed Executive Schedule Level II ($181,500, salary became effective in January 2014) and 25 employees at salaries that may not exceed Executive Schedule Level III ($167,000, salary became effective in January 2014). Section 113 of Title 3 of the United States Code requires the President to transmit to the House of Representatives and the Senate, and make available to the public, annual reports containing information in the aggregate and by office on the number of employees who are paid at a rate of basic pay equal to or greater than the rate of basic pay then currently paid for Level V of the Executive Schedule (5 U.S.C. §5316) and who are employed in the White House Office, the Executive Residence at the White House, the Office of the Vice President, the Domestic Policy Staff, or the Office of Administration, and the aggregate amount paid to such employees; the number of employees employed in such offices who are paid at a rate of basic pay which is equal to or greater than the minimum rate of basic pay then currently paid for GS-16 of the General Schedule (GS) but which is less than the rate then currently paid for Level V of the Executive Schedule and the aggregate amount paid to such employees; the number of employees employed in such offices who are paid at a rate of basic pay which is less than the minimum rate then currently paid for GS-16, and the aggregate amount paid to such employees; the number of individuals detailed under 3 U.S.C. Section 112 of this title for more than 30 days to each such office, the number of days in excess of 30 each individual was detailed, and the aggregate amount of reimbursement made as provided by the provisions of section 112; and the number of individuals whose services as experts or consultants are procured under 3 U.S.C. Chapter 2 for service in any such office, the total number of days employed, and the aggregate amount paid to procure such services. Each report must be transmitted within 60 days after the close of the fiscal year covered by the report. Additionally, Section 6 of P.L. 103-270 , the Independent Counsel Reauthorization Act of 1994, enacted on June 30, 1994, requires the President to submit an annual report on White House Office personnel to the Senate Committee on Homeland Security and Governmental Affairs and the House Committee on Oversight and Government Reform on July 1. The report is to include a list of each individual employed by or detailed to the White House Office to Congress, including his or her name, position and title, and annual rate of pay. If the President determines that disclosure of any item of information with respect to any particular individual would not be in the interest of the national defense or foreign policy of the United States, he can exclude the individual and state the number of individuals so excluded. At the request of the Senate and House committees, the information that is excluded will be made available for public inspection by the committees. President Obama submitted the most recent report to Congress on July 1, 2013, and had it posted on the White House website. As previously noted, the term "czar" has been applied to a variety of positions that are (1) located in various parts of the federal government, (2) filled through various appointment mechanisms, and (3) established under various legal authorities. One characteristic common to these positions is that each is filled by political appointment, rather than through a competitive civil service selection process. Political appointees serve at the pleasure of the appointing authority, usually no longer than the duration of an Administration, rather than for the duration of a career. Consequently, most politically appointed positions must be filled anew at the beginning of an Administration. The process of selecting a candidate for a politically appointed position usually includes vetting, a sometimes lengthy process. The vetting process for presidential appointees is designed to examine the background of nominees to advice and consent positions and other appointees, to determine their suitability for a particular position, assess their professional and personal qualifications, and, in the case of the former, gauge whether they would meet the confirmation demands of the Senate. The current process often includes a background investigation conducted by the Federal Bureau of Investigation (FBI) and a review of financial disclosure materials conducted by the U.S. Office of Government Ethics and an ethics official for the agency to which the candidate is to be appointed. The process might also include the review of a White House Personal Data Statement, or similar materials, by White House officials. Some of the contours of the vetting process, such as financial disclosure requirements, are set in law. Other aspects of the vetting process, such as the content of White House data statement, if there is one, as well as the extent of background investigations, vary by Administration. A smooth vetting process hinges, in large part, on the honesty and thoroughness in the response of the individual being vetted. Historically, prospective applicants and nominees have been forthcoming. But in unusual instances, an individual has intentionally withheld vital information or even deceived federal investigators about his or her activities, including possible criminal conduct. Background investigation requirements have been established for determining suitability for government employment, granting an appropriate security clearance, or meeting the protective responsibilities of the U.S. Secret Service. Consequently, the nature of a background investigation will vary according to a prospective appointee's circumstances. The requirements of background checks are formalized in various executive orders, presidential or administrative directives, and public laws. These requirements differ: they serve different purposes, are issued and amended at different times, and are instituted by different authorities. They range from following up on responses to questionnaires submitted by the prospective appointee; to searches of relevant databases; to interviews with colleagues, neighbors, relatives, and friends. Investigations for vetting purposes differ from those for security clearances. The former may be under severe time constraints and secrecy may surround the names of the candidates. The latter may require a longer time frame and have no secrecy surrounding the identity of the individual. Suitability checks and security clearances differ from one another. A suitability check is designed to determine whether a person should be hired for government employment, while a security clearance is used to determine eligibility for access to classified national security information. The background investigation resulting from each assessment is governed by its own executive orders, administrative directives, and public laws. Consequently, each assessment follows its own set of requirements. Even though some requirements are the same for both, a security clearance for the higher levels is more extensive and exacting than a suitability check. The U.S. Secret Service has responsibility for protecting the President; the Vice President; members of their immediate families; many other executive officials, including individuals in the EOP and in various departments and agencies; and representatives of the President traveling abroad. As such, the Secret Service may conduct background investigations of individuals who might be in close proximity to one of its protective assignments. The Secret Service is to have a copy of the background investigation conducted by another agency for each EOP employee. The background investigation requirements for employment in the EOP and presidential discretion over coverage are recognized in a provision of law regarding executive office personnel background investigations and leaves of absence. It provides not only for background investigations and completion of an appropriate questionnaire but also empowers the President to exempt individuals from its demands: (a) Hereafter, the employment of any individual within the Executive Office of the President shall be placed on leave without pay status if the individual has not, within 30 days of commencing such employment, submitted a completed questionnaire for sensitive positions (SF-86) or equivalent form; or has not, within six months of commencing such employment ... had his or her background investigation, if completed, forwarded by the counsel to the President to the United States Secret Service for issuance of the appropriate access pass. (b) Exemption. Subsection (a) shall not apply to any individual specifically exempted from such subsection by the President or his designee. Other authorities governing federal employment also support the President's discretion over background checks for certain hires. One is included in Executive Order 13467, issued by President George W. Bush on June 30, 2008, regarding suitability checks and security clearances for federal employees, applicants, and contractors. E.O. 13467 includes a determination of who is covered: "Covered individual" means a person who performs work for or on behalf of the executive branch, or who seeks to perform work for or on behalf of the executive branch, but does not include: (i) the President or (except to the extent otherwise directed by the President) employees of the President under section 105 or 107 of title 3, United States Code; or (ii) the Vice President or (except to the extent otherwise directed by the Vice President) employees of the Vice President under section 106 of title 3 or annual legislative branch appropriations acts. The provisions cited in the order refer to sections of law that provide for the appointment of certain EOP personnel. As previously noted, the President is authorized to appoint and fix the pay of a certain number of employees in the White House Office (§105) and in the Domestic Policy Staff and Office of Administration (§107). The Vice President is authorized to do the same, in order "to provide assistance to the President in connection with the performance of functions specifically assigned to the Vice President by the President in the discharge of executive duties and responsibilities" (§106). Reinforcing presidential (and vice presidential) discretion is the definition of "agency" in E.O. 13467: "Agency" means any "Executive agency" as defined in section 105 of title 5, United States Code, including military departments, as defined in section 102 of title 5, United States Code, and any other entity within the executive branch that comes into possession of classified information or has designated positions as sensitive, except such an entity headed by an officer who is not a covered individual. Along these same lines, an earlier executive order—E.O. 12968, Access to Classified Information , issued by President William Clinton, in 1995—exempts the President and Vice President. Section 1.1(e) of the Clinton order states that "'Employee' means a person, other than the President or Vice President, employed by, detailed or assigned to, an agency." A predecessor order—E.O. 10450, Security Requirements for Government Employment , issued by President Dwight D. Eisenhower, in 1953—applies only to persons "employed in the departments and agencies of the Government." Whether any officer or employee of the federal government is required to file public financial disclosure statements depends on the rate of compensation that the officer or employee receives from the federal government, and the number of days such an individual works for the federal government. All persons appointed by the President to any positions in the government, including presidential "advisors" or "special assistants" in the White House, and who are compensated above a threshold amount (at a rate equal to or greater than 120% of the base salary of a GS-15) for work on more than 60 days in a calendar year, are required to file public financial disclosure reports under the provisions of the Ethics in Government Act of 1978, as amended. Individuals appointed in the federal government who meet the compensation threshold and who work the requisite number of days are to file an "entrance" report within 30 days of assuming the position, and then annually on May 15 of each year, with the "designated agency ethics officer at the agency by which he is employed." White House assistants and advisors in most instances would file with an ethics officer in the White House. These reports are public, and are required by law to be reviewed and then made available to the public within 30 days of filing at the agency where the reports are filed. If a nominee is required to receive Senate confirmation, then the Ethics in Government Act provides that once the President has transmitted to the Senate the nomination of a person required to be confirmed by the Senate, that nominee must within five days of the President's transmittal (or any time after the public announcement of the nomination—but no later than five days after transmittal), file a financial disclosure statement. This financial disclosure statement is filed with the designated agency ethics officer of the agency in which the nominee will serve, and copies of the report are transmitted by the agency to the Director of the Office of Government Ethics (OGE). The Director of OGE then transmits a copy to the Senate committee which is considering the nomination of that individual. In addition to public reports for more senior officers and employees under the Ethics in Government Act, there are provisions for confidential financial disclosure reports for those who do not meet the salary threshold. The confidential reporting requirements are intended to complement the public disclosure system, and apply to those employees who do not have to file under the public reporting provisions of the Ethics in Government Act. Generally speaking, the confidential reporting requirements apply to certain lower-level or "rank and file" employees, that is, those officers or employees who are compensated below the threshold rate of pay for public disclosures (GS-15 or below, or less than 120% of the basic rate of pay for a GS-15), and who are determined by the employee's agency to perform duties or exercise responsibilities in regard to government contracting or procurement, government grants, government subsidies or licensing, government auditing, or other governmental duties which may particularly require the employee to avoid financial conflicts of interest. Such a person may be required to file a confidential report if he or she performs the duties of such a position "for a period in excess of 60 days during the 12 month period ending September 30." Additionally, unless required to file public reports, confidential reports are required from all "special Government employees" in the executive branch (those employees who are employed by the government for not more than 130 days in a year), including specifically "those who serve on advisory committees." The disclosure provisions of federal law and regulation, it should be noted, apply only to persons who are "officers or employees" of the federal government, and thus do not apply, for example, to so-called "representatives" of outside, private, or non-federal entities appointed to advisory committees. Executive Order and Regulations. Under an existing executive order, issued by President George H. W. Bush in 1989, a presidential appointee to a "full-time noncareer position" may not receive any compensation as outside earned income from any outside employment activities during that presidential appointment. The term "Presidential appointee to a full-time noncareer position" is defined in the ethics regulations issued by OGE as follows: (2) Presidential appointee to a full-time noncareer position means any employee who is appointed by the President to a full-time position described in 5 U.S.C. 5312 through 5317 [the Executive Schedule] or to a position that, by statute or as a matter of practice, is filled by Presidential appointment, other than: (i) A position filled under the authority of 3 U.S.C. 105 or 3 U.S.C. 107(a) for which the rate of basic pay is less than that for GS-9, step 1 of the General Schedule; (ii) A position, within a White House operating unit, that is designated as not normally subject to change as a result of a Presidential transition; (iii) A position within the uniformed services; or (iv) A position in which a member of the foreign service is serving that does not require advice and consent of the Senate. Statutory Limitations . In addition to the complete ban on outside income for "full-time" presidential appointees under the executive order, federal law limits the amount of compensation that may be earned by certain other federal officials, and the types of paid outside work in which such officials may engage, under provisions of the Ethics Reform Act of 1989. These statutory provisions would be relevant when a presidential appointee is not a "full-time" federal employee, but is more than a "special Government employee," that is, when such employee works for the government on more than 130 days in a year. The coverage of government officials under these restrictions and limitations is dependent on the rate of federal compensation of the official, the number of days of employment with the government (that is, whether one is a "regular" employee of the government as opposed to a "special Government employee"), and the nature of the appointment and employment as to whether one is a "noncareer officer or employee" as opposed to having a career position. Under the statutory limitations, a covered officer or employee may not have "outside earned income" (that is, compensation, salaries, wages, or fees for outside, private employment activities) that exceeds 15% of the annual rate of pay for a Level II on the Executive Schedule. Furthermore, such covered noncareer officials may not receive any compensation for affiliating with a firm to provide professional services involving a fiduciary relationship; may not permit their names to be used by any such firm; may not receive any compensation for practicing a profession which involves a fiduciary relationship; may not serve for compensation as an officer or member of the board of any association, corporation, or other entity; and may not receive compensation for teaching without prior notification of and approval by the appropriate supervisory ethics office. These particular outside employment restrictions apply when all three of the following conditions are met: Government Compensation. An officer or employee of the government to be covered must, in the first instance, be compensated at a rate of annual pay above a GS-15, or if not on the General Schedule, then compensated at a rate of basic pay equal to or greater than 120% of the minimum rate of base pay for a GS-15. At current rates of pay, as of this writing, the base salary of a GS-15 (excluding locality pay) is $98,156 and thus the threshold pay rate would be $117,787.20 or above. Career v. Noncareer Employee. An officer or employee is covered only if that person is a "noncareer officer or employee" of the government. The OGE regulations expressly define "covered" noncareer employees as follows: (a) Covered noncareer employee means an employee, other than a Special Government employee ... who occupies a position classified above GS-15 of the General Schedule, or, in the case of positions not under the General Schedule, for which the rate of basic pay is equal to or greater than 120 percent of the minimum rate of basic pay payable for a GS-15 of the General Schedule, and who is: (1) Appointed by the President to a position described in the Executive Schedule, 5 U.S.C. 5312 through 5317, or to a position that, by statute or as a matter of practice, is filled by Presidential appointment, other than: (i) A position within the uniformed services; or (ii) A position within the foreign service below the level of assistant Secretary or Chief of Mission; (2) A noncareer member of the Senior Executive Service or of another SES-type system, such as the Senior Foreign Service; (3) Appointed to a Schedule C position or to a position under an agency-specific statute that establishes appointment criteria essentially the same as those set forth in §213.3301 of this title for Schedule C positions; or (4) Appointed to a noncareer executive assignment position or to a position under an agency-specific statute that establishes appointment criteria essentially the same as those for noncareer executive assignment positions. For purposes of applying this definition to an individual who holds a General Schedule position or other position that provides several rates of pay or steps per grade, his rate of basic pay shall be the rate of pay for the lowest step of the grade at which he is employed. Regular v. Special Government Employee . The term "officer or employee" for the purposes of these particular statutory compensation restrictions expressly excludes any "special Government employee," as defined in 18 U.S.C. Section 202 (that is, an officer or employee of the Government who is compensated to perform duties on no more than 130 days in any period of 365 days). All officers and employees of the executive branch are also covered by general conflict of interest and ethical standards regarding conflicting or incompatible outside employment activities, as set out in executive branch-wide regulations by the Office of Government Ethics, as well as other statutory restrictions on certain outside activity or compensation. Concern has been raised that the President's hiring, or use, of various presidential advisors circumvents the requirements of the Appointments Clause of the U.S. Constitution. The Appointments Clause establishes that the President shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments. Under the text of the clause, it is "[o]fficers of the United States," whose appointments are established by law that are to be subject to Senate confirmation. Thus, principal officers will be appointed in this manner; however, Congress may choose to vest the appointment of those they consider "inferior [o]fficers" in either the President, the courts of law, or in the heads of departments. Before delving further into the Appointments Clause, it is first useful to briefly discuss the authority of Congress in relation to the creation and operation of the executive bureaucracy. Although the infrastructure of the executive branch and other entities charged with the execution of the law is not specified by the Constitution, it is clear that the Framers intended to vest the task of creating the governmental structure in Congress alone. Thus, it seems evident that the President cannot establish executive offices. Congress has been generally given wide latitude to use its legislative power to structure the modern administrative state by creating and locating offices, determining qualifications for officeholders, prescribing their appointment, and establishing general standards for the operation of the offices under the Necessary and Proper Clause. The judiciary generally will interfere with this legislative power only in cases where such an exercise clearly constitutes an attempt by Congress at aggrandizement or encroachment. Accordingly, because the Appointments Clause has been deemed "among the significant structural safeguards of the constitutional scheme," Congress is to ensure that it adheres to the strictures of the Appointments Clause when prescribing the appointment for certain offices. A key first question is to determine whether a person qualifies as an officer of the United States, or whether a person is a non-officer, or employee, whose "appointment" is not of the kind that invokes the constitutional requirements of the Appointments Clause. If a person is an employee, then the appointing authority, whether it is Congress or the President, need not comply with the requirements of the clause. In the case of Congress, this could mean that it is free to vest the appointment power in itself, for example; in the case of the President, this could mean that he is free to appoint persons, as authorized by statute, into positions that need not have been established as an office by Congress. However, if a person is acting as an "Officer of the United States" then the Appointments Clause must be obeyed. This means that Congress must have established an office to be filled by an officer, who will be subject to Senate confirmation if it is a principal officer. An inferior officer may be appointed in the same manner unless Congress chooses to vest such appointment in the President alone, in the courts, or in heads of departments. The Supreme Court has long held that "'[o]fficers of the United States' does not include all employees of the United States.... Employees are lesser functionaries subordinate to the officers of the United States." It has stated that office or officer "embraces the ideas of tenure, duration, emolument, and duties, and that the latter [are] continuing and permanent, not occasional or temporary." To a certain extent, the standard for such determinations was further delineated by the Supreme Court in Buckley v. Valeo . There, the Court analyzed provisions of the Federal Election Campaign Act of 1971 (Act), which established an eight-member Federal Election Commission (FEC) to oversee federal elections. Specifically at issue was the congressionally mandated composition of the FEC, which was to consist of two non-voting ex-officio members and six voting members. According to the act, each of the six voting members were required to be confirmed by the majority of both houses of Congress, with two members being appointed by the President pro tempore of the Senate, two members by the Speaker of the House of Representatives, and two by the President. The Court looked to the powers and duties of the FEC and described them as falling into three general categories: (1) functions relating to the flow of information—receipt, dissemination, and investigation; (2) functions with respect to promoting the goals of the act—rulemaking and advisory opinions; and (3) functions necessary to ensure compliance with the statute—informal procedures, administrative determinations and hearings, and civil suits. Given the nature of the duties assigned by law to the FEC, the Court concluded that the FEC was exercising executive power, as it found that the FEC's enforcement power "is authority that cannot possibly be regarded as merely in aid of the legislative function of Congress." Through its analysis of the FEC's powers, the Court established that the Appointments Clause applies to agencies that have even a tangential connection to the executive branch. Thus, the Court held that the method of appointment prescribed in the Federal Election Campaign Act violated the Appointments Clause because certain powers of the FEC could only be discharged by "Officers of the United States," who must be appointed in conformity with the Appointments Clause. In reaching this conclusion, the Court held the term "Officers of the United States," to mean "any appointee exercising significant authority pursuant to the laws of the United States" (emphasis added). Such officers, whether principal or inferior, must be appointed in conformity with the Appointments Clause. In its analysis, the Court compared the office of FEC commissioner with lower-level positions that had been identified as "inferior officers" in earlier cases. It determined that the FEC commissioners, at a minimum, were inferior officers whose appointment would be subjected to Senate confirmation or be vested in the President, the courts of law, or heads of department as prescribed by the Appointments Clause. The Court did not engage in a substantive analysis of the meaning of "significant authority" to distinguish principal officers from inferior officers in order to determine what mode of appointment would be appropriate for FEC commissioners. Justice White, in his concurring opinion, explored further the idea of what constitutes "significant authority" by expounding upon the duties and powers of the FEC, stating that it "is evident from the breadth of their assigned duties and the nature and importance of their assigned functions ... [that] members of the FEC are plainly 'Officers of the United States' as that term is used in Art. II, §2, cl. 2." The Court later declared in Edmond v. United States that the exercise of "significant authority pursuant to the laws of the United States marks, not the line between principal and inferior officer for Appointments Clause purposes, but rather, as we said in Buckley , the line between officer and non-officer." The Department of Justice's Office of Legal Counsel (OLC) has also expounded on the officer/employee distinction, stating that only "[a]n appointee (1) to a position of employment (2) within the federal government (3) that carries significant authority pursuant to the laws of the United States is required to be an 'Officer of the United States.'" Each of these three conditions is independent, and all three must be met in order for the position to be subject to the requirements of the Appointments Clause. A subsequent OLC opinion discusses two essential elements of an office subject to the Appointments Clause. OLC stated that it took the phrase "significant authority pursuant to the laws of the United States," and other similar phrases "to be shorthand for the full historical understanding of the essential elements of a public office." The first element is the delegation by legal authority of a portion of the sovereign powers of the federal government. OLC described the "delegation of sovereign authority" as involving "a legal power which may be rightfully exercised, and in its effects will bind the rights of others, and be subject to revision and correction only according to the standing laws of the State, in contrast with a person whose acts have no authority and power of a public act or law absent the subsequent sanction of an officer or the legislature." The second element is that the position must be "continuing," which OLC described as having two characteristics. The first is that "an office [for purposes of the Appointments Clause] exists where a position that possesses delegated sovereign authority is permanent, meaning that it is not limited by time or by being of such a nature that it will terminate by the very fact of performance." The second characteristic of "continuing" deals with delegated sovereign authority that is temporary. Whether such a temporary position qualifies as "continuing" depends on the presence of three factors. These three factors are the position's existence should not be personal, meaning that the duties should continue even though the person is changed; the position should not be "transient"; and the duties should be more than "incidental" to the regular operations of the government. In other words, "the nature of the delegated sovereign authority will affect whether a temporary position is an office." For example, the special independent counsel position in Morrison v. Olson was an office subject to the Appointments Clause, because the duties assigned to the particular position were not personal and not "'transient,' but rather indefinite and expected to last for multiple years, with ongoing duties"; nor was the position "'incidental' [to the regular operations of government], but rather possessed core and largely unchecked federal prosecutorial powers, effectively displacing the Attorney General ... [and] the counsel's court-defined jurisdiction, was not necessarily limited to the specific matter that had prompted his appointment." As delineated by the Court and as characterized by the aforementioned OLC opinion, it appears that an individual who is to occupy a position that has the following two characteristics, (1) delegation of sovereign authority and (2) continuing, must be appointed pursuant to the Appointments Clause, and conversely, a position of employment that does not satisfy either of these elements need not be filled pursuant to the clause. If it is determined that one is acting as an officer because he or she is exercising significant authority pursuant to the laws of the United States, the manner of appointment required under the Appointments Clause necessarily requires a determination of whether the officer is a principal officer or an inferior officer. As stated above, the Appointments Clause requires Senate confirmation for principal officers, but gives Congress the discretion to provide for the appointment of inferior officers without advice and consent. Although the Supreme Court has determined various offices to be inferior, it has acknowledged that its "cases have not set forth an exclusive criterion for distinguishing between principal and inferior officers for Appointments Clause purposes." In fact, it observed that "[t]he line between 'inferior' and 'principal' officers is one that is far from clear, and the Framers provided little guidance into where it should be drawn." In its analyses, however, the Court has relied on several factors such as whether the officer was subject to removal by a higher officer, that the officer performed only limited duties, that the jurisdiction was narrow, and that the tenure was limited. These particular characteristics were examined in Morrison v. Olson when the Supreme Court held that the special independent counsel was an inferior officer. With regard to examining other positions, "the nature of each government position must be assessed on its own merits." The Court in Edmond further stated, "Generally speaking, the term 'inferior officer' connotes a relationship with some higher ranking officer or officers below the President ... [and] whose work is directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate." Thus, in analyzing whether one may be an inferior officer, the Court's decisions appear to focus on the extent of the officer's discretion to make autonomous policy choices and the location of the powers to supervise and to remove the officer. Generally, advisor positions each have their own characteristics, duties, and functions. One cannot categorically say that all or none of them are the type of positions which would invoke the Appointments Clause. This section analyzes the application of the Appointments Clause to three positions that are illustrative of positions that have been established in statute, by the White House, and via a regulation: They are (1) the Director of the Office of National Drug Control Policy, often referred to as the "Drug Czar"; (2) the Director of the White House Office of Urban Affairs; and (3) the Special Master for TARP Executive Compensation, often referred to as the "Pay Czar." The Office of National Drug Control Policy (ONDCP), established by statute, is charged with the duties of (1) developing national drug control policy, (2) coordinating and overseeing the implementation of the national drug control policy, (3) assessing and certifying the adequacy of National Drug Control Programs (NDCP) and the budget for those programs, and (4) evaluating the effectiveness of the national drug control policy and the NDCP agencies' programs by developing and applying specific goals and performance measurements. ONDCP is headed by a Director, who is required to be appointed by the President with the advice and consent of the Senate, and the rank is to be the same as the head of an executive department (i.e., Cabinet level). The Director's responsibilities include but are not limited to assisting the President in the establishing of the policies, goals, objectives, and priorities for the NDCP; promulgating and submitting to the President the National Drug Control Strategy; coordinating and overseeing the implementation of the described policies and goals of the agencies under the National Drug Control Strategy; making recommendations to the NDCP agency heads with respect to implementation of federal counter-drug programs; making recommendations to the President with respect to organization, management, and budgets of the NDCP agencies; appearing before duly constituted committees and subcommittees of the House of Representatives and of the Senate to represent the drug policies of the executive branch; and notifying any NDCP agency if its policies are not in compliance with the strategy and transmitting such notice to the President and relevant committees of jurisdiction. Additionally, the Director has the power to "select, appoint, employ, and fix compensation of the officers and employees that may be necessary to carry out the functions of the Office." The Director is also empowered to make available competitive awards to fund demonstration projects by eligible partnerships for the purpose of reducing the use of illicit drugs by chronic drug users. In light of the above Appointments Clause discussion, the first question that must be answered is whether the Director qualifies as an officer of the United States. A review of the Director's general responsibilities might lead one to conclude that the Director is not an officer because it is not evident that the position is one where "significant authority" is exercised, given that much of it seems to be coordination and evaluation based. However, in codifying this position, Congress empowered the Director to "select, appoint, employ, and fix compensation of such officers and employees of the Office" (emphasis added); distribute appropriated funds to fund demonstration projects; make interagency fund transfers; and distribute a periodic bonus payment to any employee in the office. To the extent that these duties connote the exercise of executive functions, it could be argued that the Director of ONDCP is an officer who exercises significant authority pursuant to the laws of the United States. Furthermore, these duties, combined with the fact that Congress gave the Director a rank equivalent to an agency head and required him to be appointed by the President subject to Senate confirmation, could be taken to support the conclusion that the Director is a principal officer of the United States. As discussed in the previous sections, President Obama issued an executive order that established within the EOP the White House Office of Urban Affairs. The Office of Urban Affairs is to be headed by the Deputy Assistant to the President, Director of Urban Affairs. The Director is required to report to the Assistant to the President for Intergovernmental Affairs and Public Liaison and to the Assistant to the President for Domestic Policy. The executive order states that the principal functions of the Office of Urban Affairs are, to the extent permitted by law, to provide leadership for and coordinate the development of the policy agenda for urban America across executive departments and agencies; to coordinate all aspects of urban policy; to work with executive departments and agencies, including the Office of Management and Budget (OMB), to ensure that federal government dollars targeted to urban areas are effectively spent on the highest-impact programs; and to engage in outreach and work closely with state and local officials, with nonprofit organizations, and with the private sector, both in seeking input regarding the development of a comprehensive urban policy and in ensuring that the implementation of federal programs advances the objectives of that policy. The Office of Urban Affairs is to coordinate with various specified agencies to the extent permitted by law, and nothing in the executive order is to be construed as impairing or affecting the authority granted by law to a department, agency, or head thereof, or interfere with the functions of the Director of OMB relating to budgetary, administrative, or legislative proposals. Similar to some of the functions of the ONDCP, the functions to be carried out by this office do not appear to rise to the level that would require the Director to be an officer of the United States. There is arguably no delegation of sovereign authority in the sense that the Director is not exercising a legal power, the effect of which will bind the rights of others. Nor is the Director permitted to carry out any legislative, executive, or judicial function similar to the FEC commissioners, who have been found to be at least inferior officers. In this situation, as is the case with other similar advisor/assistant positions located and created in the EOP, the Director of Urban Affairs appears to, or could, exert great political influence over the various agencies with whom he is required to coordinate because the Director apparently has the "ear of the President" and is taking action pursuant to the President's wishes. However, such political influence does not necessarily amount to the exercise of significant legal authority, which would consequently require that the position be established and filled in accordance with the Appointments Clause. Drawing upon the statutory language in the Emergency Economic Stabilization Act of 2008 (EESA) that authorizes the Secretary of the Treasury to establish the Troubled Asset Relief Program (TARP) and to "issue such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities or purposes of this Act," the Secretary established via regulation the Special Master for TARP Executive Compensation (Special Master), often referred to as the "Pay Czar." Under the regulation, the Special Master serves "at the pleasure of the Secretary, and may be removed by the Secretary without notice, without cause, and prior to the naming of any successor Special Master." The Secretary has delegated to the Special Master the authority to interpret the application of the restrictions on executive compensation for TARP recipient employees; administer Section 111(f) of EESA, which requires the Secretary to review bonuses, retention awards, and other compensation paid before February 17, 2009, to determine whether any such payments were inconsistent; approve compensation payments to, and compensation structures for, certain employees of TARP recipients receiving exceptional financial assistance; provide advisory opinions, as requested or as appropriate, regarding payments to or compensation structures for other employees of TARP recipients; and perform other such duties as the Secretary may delegate from time to time relating to executive compensation issues under TARP. In delineating the Special Master's interpretative authority, the rule states that the Special Master has the responsibility for interpreting Section 111 of EESA, the regulations, and any other applicable guidance and to determine whether such requirements have been met in any particular circumstance. The regulations also provide that in the case of any final determination that a TARP recipient is required to receive, the final determination of the Special Master "shall be final and binding and treated as the determination of the Treasury." The Special Master could be viewed as an officer of the United States rather than an employee of the Treasury Department, as he appears to have been delegated authority that permits him to interpret the law and regulations and decide their applicability to others. Furthermore, although the Special Master serves at the pleasure of the Secretary, the regulation states that his final determinations are to be treated as the determination of the Treasury. It does not appear that those determinations are subject to review by the Secretary. These factors could strongly indicate that the Special Master is in fact exercising significant authority, such that an officer of the United States must carry out the duties of this position. If so, the relevant constitutional issue would center on whether the Special Master is exercising significant authority that rises to the level of a principal officer, which would require him to be appointed by the President subject to Senate confirmation, or whether the Secretary has retained sufficient control of his actions either explicitly or implicitly, which could allow the Special Master to be characterized as an inferior officer. The Special Inspector General for TARP (SIGTARP), a position established by Congress, questioned whether the Special Master is a principal officer because, in his view, "the Secretary appears to be without authority to control the actions of the Special Master in any ... meaningful manner" other than removal. OLC issued an opinion concluding that the Special Master is not a principal officer for purposes of the Appointments Clause. Relying on the factors in Morrison , OLC stated the Special Master is removable at will, has limited duties that apply only to a particular jurisdiction—namely, "the compensation practices of particular TARP recipients and certain of their employees"—and that his tenure is of limited duration. OLC disagreed with the SIGTARP's interpretation that the regulation insulates the Special Master's decisions from the Secretary's review. OLC gave deference to Treasury's view that the Special Master's "decision remains subject to further review within the Treasury," because the "Rule lacks a clear enough preclusion of Secretarial review to overcome the presumption of Secretarial supervisory authority." More significant is OLC's conclusion that Supreme Court decisions strongly indicate that an individual may still be an inferior officer even if a principal officer does "not exercise plenary authority over [the] subordinate." These factors, taken together, illustrate OLC's view that the Special Master is an officer rather than an employee of the United States, and qualifies as an inferior officer. However, in accepting that the Special Master is an officer, rather than employee, of the United States, the establishment of this office through a rule may raise additional concerns. In particular, one constitutional issue is that Congress did not explicitly establish the Office of Special Master nor did it vest the Secretary with the explicit authority to appoint such an officer, if in fact the Special Master is considered to be an officer. On the other hand, an argument could be made that Congress implicitly authorized the establishment of such an office by vesting the Secretary with the authority to develop the appropriate procedures to implement the provisions of EESA. These three cases illustrate that an Appointments Clause analysis is best done on a case-by-case basis. First, one looks at the functions and duties of the particular position in question. This assists in determining whether such position is one where significant authority is exercised, meaning that the position primarily is one where there has been a delegation of sovereign power. Within the narrower context of presidential assistants and advisors, it is important to examine these positions remembering that the exertion of great political influence or authority does not presumptively rise to the level of exercising legal authority pursuant to the laws of the United States. However, if it is determined that the position is one where significant authority is exercised, then the position and appointment is to be made in accordance with the strictures of the Appointments Clause. Generally, Congress's legal authority to obtain information, including, but not limited to, confidential, sensitive, or deliberative information, is extremely broad. While there is no express provision of the Constitution or specific statute authorizing the conduct of congressional oversight, the Supreme Court has firmly established that such power is essential to the legislative function and can be implied from the general vesting of legislative powers in Congress. In Watkins v. United States, for instance, the Court emphasized that the "power of the Congress to conduct investigations is inherent in the legislative process. That power is broad. It encompasses inquiries concerning the administration of existing laws as well as proposed or possibly needed statutes." The Court in Watkins further stressed that Congress's power to investigate is at its peak when focusing on alleged waste, fraud, abuse, or maladministration within a government department. Specifically, the Court explained that the investigative power "comprehends probes into departments of the federal government to expose corruption, inefficiency, or waste." The Court went on to note that the first Congresses held "inquiries dealing with suspected corruption or mismanagement of government officials." Given these factors, the Court recognized "the power of the Congress to inquire into and publicize corruption, maladministration, or inefficiencies in the agencies of Government." Moreover, in a more recent decision, Eastland v. United States Serviceman's Fund , the Court reiterated that the "scope of its power of inquiry ... is as penetrating and far-reaching as the potential power to enact and appropriate under the Constitution." As a corollary to this accepted oversight authority, the Supreme Court has likewise determined that the "[i]ssuance of subpoenas ... has long been held to be a legitimate use by Congress of its power to investigate." In particular, the Court has repeatedly cited the principle that A legislative body cannot legislate wisely or effectively in the absence of information respecting the conditions which the legislation is intended to affect or change; and where the legislative body does not itself possess the requisite information—which not infrequently is true—recourse must be had to others who do possess it. Experience has taught that mere requests for such information often are unavailing, and also that information which is volunteered is not always accurate or complete; so some means of compulsion are essential to obtain what is needed. All this was true before and when the Constitution was framed and adopted. In that period the power of inquiry—with enforcing process—was regarded and employed as a necessary and appropriate attribute of the power to legislate—indeed, was treated as inhering in it. While the congressional power of inquiry is broad, it is not unlimited. The Supreme Court has admonished that the power to investigate may be exercised only "in aid of the legislative function" and cannot be used to expose for the sake of exposure alone. The Watkins Court underlined these limitations, stating that There is no general authority to expose the private affairs of individuals without justification in terms of the functions of the Congress ... nor is the Congress a law enforcement or trial agency. These are functions of the executive and judicial departments of government. No inquiry is an end in itself; it must be related to, and in furtherance of, a legitimate task of the Congress. Moreover, an investigating committee has only the power to inquire into matters within the scope of the authority delegated to it by its parent body. Once having established its jurisdiction, authority, and the pertinence of the matter under inquiry to its area of authority, however, a committee's investigative purview is substantial and wide ranging. A recurring criticism of the President's use of special advisors has been that they are not subject to the confirmation process in the Senate and, therefore, are "largely insulated" from congressional oversight and "wholly unaccountable" to Congress. The connection between the Senate's confirmation power and Congress's more general oversight prerogatives, however, appears to be derived from practice and tradition, rather than being legally or constitutionally grounded. As a matter of constitutional law, there appears to be no direct connection between the Senate's authority to give "advice and consent" to presidential appointees and Congress's more general power to conduct oversight and perform investigations of government officials and activities. The Senate's confirmation power is expressly provided for by the text of the Constitution, while congressional oversight has, as discussed above, been repeatedly considered by the Supreme Court to be an implied congressional power. The fact that a special advisor to the President does not receive a confirmation hearing arguably has no legal or constitutional impact on Congress's authority or ability to conduct oversight of that position, its duties and functions, or the individual holding it. As a practical and political matter, however, in recent years, several Senate committees have found that extracting an on-the-record, under-oath commitment from nominees regarding their cooperation in congressional oversight has been helpful in future oversight efforts. While promises made at confirmation hearings appear to have changed the practical relations between Congress and the executive, they have not changed the legal dynamic. For example, as a result of these on-the-record statements during confirmation hearings, it appears that Congress has been able to exercise many of its oversight responsibilities with a simple request from a committee of jurisdiction to the Secretary. In other words, such a promise from a nominee has, in many cases, obviated the need to use compulsory procedures, such as subpoenas, to obtain routine information and testimony. That said, it is important to note that the executive branch is not legally obligated to respond to congressional committee requests. The fact that the executive branch responds is arguably out of a sense of comity between the branches, or as a political accommodation, or to avoid the political retribution for a failure to comply. A legal obligation to comply attaches only on the issuance of a subpoena by the inquiring committee. Even by making a commitment during a confirmation hearing to cooperate with congressional oversight, the nominee is not waiving any potential claims of privilege or other legal rights the executive branch may assert to withhold information from Congress, and may still require the issuance of a subpoena. Nor has Congress, by extracting such a commitment on oversight from the nominee, abdicated any legal rights or abilities that it may have to extract information via the issuance of a subpoena. The continued contentious nature of this relationship is best evidenced by the nine Cabinet-level officials whom, since 1975, at least one committee or subcommittee has voted in contempt of Congress for failing to produce subpoenaed documents. Thus, it is clear that even officials who have obtained the advice and consent of the Senate are not immune from legal disputes between the branches. Moreover, the fact that a special presidential advisor has not been subject to a confirmation hearing has not prevented congressional committees from seeking their testimony on more than 70 documented occasions. Although there is little doubt that the advice and consent process may, as a political and practical matter, make oversight less acrimonious and, therefore, more efficient, the fact that an official has not been confirmed does not have any legal bearing on Congress's ability to exercise its oversight prerogatives. As the preceding discussion indicates, Congress's oversight authority appears sufficiently broad to conduct inquiries of presidential advisors, regardless of where in the organizational structure of the Administration they are housed. That being said, the Administration still retains the ability to claim common law, as well as constitutionally based, privileges with respect to arguably sensitive information, documents, and testimony. For example, the Administration may attempt to assert a claim of "deliberative process" privilege with respect to information directly related to the development of advice to the President, formulation of policy, and the ultimate decisions within a given special assistant's portfolio. Assertions of "deliberative process" privilege by the White House and administrative agencies have not been uncommon in the past. In essence, it is argued that congressional demands for information as to what occurred during the policy development process would unduly interfere, and perhaps "chill," the frank and open internal communications necessary to the quality and integrity of the decisional process. Such a privilege claim may also be grounded on the contentions that it protects against premature disclosure of proposed policies before they are fully considered or actually adopted, and to prevent the public from confusing matters merely considered or discussed during the deliberative process with those on which the decision was based. However, as with other claims of "common law" privileges such as the attorney-client privilege and work product immunity, congressional practice has been to treat their acceptance as discretionary with the committee of jurisdiction. Moreover, appellate court decisions underline the understanding that the "deliberative process" privilege is a common law privilege that is easily overcome by a showing of need by an investigatory body and have recognized the overriding necessity of an effective legislative oversight process. In addition, it would appear possible for the Administration to make the constitutional claim of "executive privilege"—sometimes referred to as "presidential communications privilege"—with respect to the role of certain presidential advisors. In the event of such a claim, it should be noted that the vast majority of these interbranch disputes have been resolved through political negotiation and accommodation; thus, few have reached the courts for substantive resolution. In fact, it was not until the Watergate-related lawsuits in the 1970s—seeking access to President Nixon's audio tapes—that the existence of a presidential confidentiality privilege was judicially established as a necessary derivative of the President's status in the U.S. constitutional scheme of separated powers. Of the seven court decisions involving interbranch information access disputes, three have directly involved Congress and the executive, but only one of these resulted in a judicial decision on the merits. One other case, involving legislation granting custody of President Nixon's presidential records to the Administrator of the General Services Administration, also determined several pertinent executive privilege issues. Taken together, the holdings in several Watergate-era lower court decisions, the Supreme Court's decision in United States v. Nixon , and other post-Watergate cases established the broad contours of the presidential communications privilege. Under those precedents, the privilege, which is constitutionally rooted, can be invoked by the President when asked to produce documents or other materials or information that reflect presidential decision making and deliberations that he believes should remain confidential. If the President does so, the materials become "presumptively privileged." The privilege, however, is qualified, not absolute, and can be overcome by an adequate showing of need. Finally, while reviewing courts have expressed reluctance to balance executive privilege claims against a congressional demand for information, they have acknowledged they will do so if the political branches have tried in good faith but failed to reach an accommodation. However, until the District of Columbia Circuit's 1997 ruling in In re Sealed Case, and its 2004 ruling in Judicial Watch Inc. v. Department of Justice , these judicial decisions had left important gaps in the law of presidential communications privilege, which increasingly became focal points, if not the source, of interbranch confrontations. Among the more significant issues left open included whether the President has to have actually seen or been familiar with the disputed matter; whether the presidential privilege encompasses documents and information developed by, or in the possession of, officers and employees in the departments and agencies of the executive branch; whether the privilege encompasses all communications with respect to which the President may be interested or is confined to presidential decision making and, if so, is limited to any particular type of presidential decision making; and precisely what kind of demonstration of need must be shown to justify release of materials that qualify for the privilege. The unanimous D.C. Circuit panel in In re Sealed Case authoritatively addressed each of these issues in a manner that may have drastically altered the future legal playing field in resolving such disputes. Moreover, the D.C. Circuit's ruling in the Judicial Watch case reinforces that likelihood. In In re Sealed Case (Espy), the appeals court addressed several important issues left unresolved by the Watergate cases: the precise parameters of the presidential privilege; how far down the chain of command the privilege reaches; whether the President has to have seen or had knowledge of the existence of the documents for which he claims privilege; and what showing is necessary to overcome a valid claim of privilege. The case arose out of an Office of Independent Counsel (OIC) investigation of former Agriculture Secretary Mike Espy. When allegations of improprieties by Secretary Espy surfaced in March of 1994, President Clinton ordered the White House Counsel's Office to investigate and report to him so he could determine what action, if any, he should undertake. The White House Counsel's Office prepared a report for the President, which was publicly released on October 11, 1994. The President never saw any of the underlying or supporting documents to the report. Secretary Espy announced his resignation on October 3, to be effective on December 31. The Independent Counsel was appointed on September 9 and the grand jury issued a subpoena for all documents that were accumulated or used in preparation of the report on October 14, three days after the report's issuance. The President withheld 84 documents, claiming both the executive and deliberative process privileges. A motion to compel was resisted on the basis of the claimed privileges and after in camera review the district court quashed the subpoena, but in its written opinion did not discuss the documents in any detail and provided no analysis of the grand jury's need for the documents. The appeals court reversed. At the outset, the court's opinion carefully distinguishes between the "presidential communications privilege" and the "deliberative process privilege." As previously discussed, the court observed that both privileges are "executive privileges" designed to protect the confidentiality of executive branch decision making. According to the court, however, the "deliberative process" privilege applies generally to executive branch officials, is a common law privilege which requires a lower threshold of need to be overcome, and "disappears altogether when there is any reason to believe government misconduct has occurred." On the other hand, the court explained, the presidential communications privilege is rooted in "constitutional separation of powers principles and the President's unique constitutional role" and applies only to "direct decisionmaking by the President." The privilege may be overcome only by a substantial showing that "the subpoenaed materials likely contain[] important evidence" and that "the evidence is not available with due diligence elsewhere." The presidential privilege applies to all documents in their entirety and covers final and post-decisional materials as well as pre-deliberative ones. Turning to the chain-of-command issue, the court held that the presidential communications privilege must cover communications made or received by presidential advisors in the course of preparing advice for the President, even if those communications are not made directly to the President. The court rested its conclusion on "the President's dependence on presidential advisors and the inability of the deliberative process privilege to provide advisors with adequate freedom from the public spotlight" and "the need to provide sufficient elbow room for advisors to obtain information from all knowledgeable sources." Thus, the privilege will "apply both to communications which these advisors solicited and received from others as well as those they authored themselves. The privilege must also extend to communications authored or received in response to a solicitation by members of a presidential adviser's staff." The court, however, was acutely aware of the dangers to open government that a limitless extension of the privilege poses and carefully limited its reach by explicitly confining it to White House staff, and not staff in the agencies, and then only to White House staff that has "operational proximity" to direct presidential decision making. We are aware that such an extension, unless carefully circumscribed to accomplish the purposes of the privilege, could pose a significant risk of expanding to a large swath of the executive branch a privilege that is bottomed on a recognition of the unique role of the President. In order to limit this risk, the presidential communications privilege should be construed as narrowly as is consistent with ensuring that the confidentiality of the President's decisionmaking process is adequately protected. Not every person who plays a role in the development of presidential advice, no matter how remote and removed from the President, can qualify for the privilege. In particular, the privilege should not extend to staff outside the White House in executive branch agencies. Instead, the privilege should apply only to communications authored or solicited and received by those members of an immediate White House advisor's staff who have broad and significant responsibility for investigation and formulating the advice to be given the President on the particular matter to which the communications relate. Only communications at that level are close enough to the President to be revelatory of his deliberations or to pose a risk to the candor of his advisers. Of course, the privilege only applies to communications that these advisers and their staff author or solicit and receive in the course of performing their function of advising the President on official government matters. This restriction is particularly important in regard to those officials who exercise substantial independent authority or perform other functions in addition to advising the President, and thus are subject to FOIA and other open government statutes. The presidential communications privilege should never serve as a means of shielding information regarding governmental operations that do not call ultimately for direct decisionmaking by the President. If the government seeks to assert the presidential communications privilege in regard to particular communications of these "dual hat" presidential advisers, the government bears the burden of proving that the communications occurred in conjunction with the process of advising the President. The appeals court's limitation of the presidential communications privilege to "direct decision making by the President" makes it imperative to identify the type of decision making to which it refers. A close reading of the opinion makes it arguable that it is meant to encompass only those functions that form the core of presidential authority, involving what the court characterized as "quintessential and non-delegable presidential power." In the case before it, the court was specifically referring to the President's Article II appointment and removal power, which was the focal point of the advice he sought regarding Secretary Espy. That said, it is clear from the context of the opinion that the description was meant to be in juxtaposition with the appointment and removal power and in contrast with "presidential powers and responsibilities" that "can be exercised or performed without the President's direct involvement, pursuant to a presidential delegation of authority or statutory framework." The reference the court uses to illustrate the latter category is the President's Article II duty "to take care that the laws are faithfully executed," a constitutional direction that the courts have consistently held not to be a source of presidential power, but rather an obligation on the President to see to it that the will of Congress is carried out by the executive bureaucracy. The appeals court's decision, then, arguably confines the parameters of the newly formulated presidential communications privilege by tying it to those Article II functions that are identifiable as "quintessential and non-delegable," which would appear to include, in addition to the appointment and removal powers, the commander-in-chief power, the sole authority to receive ambassadors and other public ministers, the power to negotiate treaties, and the power to grant pardons and reprieves. On the other hand, decision making vested by law in agency heads, such as prosecutorial decision making, rulemaking, environmental policy, consumer protection, workplace safety, and labor relations, among others, would not necessarily be covered. Of course, the President's role in supervising and coordinating (but not displacing) decision making in the executive branch remains unimpeded. However, his communications would presumably not be cloaked by a constitutionally based privilege. Such a reading of this critical part of the court's opinion is consonant with the court's view of the source and purpose of the presidential communications privilege and its expressed need to confine it as narrowly as possible. Relying on United States v. Nixon, the In re Sealed Case court identified "the President's Article II powers and responsibilities as the constitutional basis of the presidential communications privilege.... Since the Constitution assigns these responsibilities to the President alone, arguably the privilege of confidentiality that derives from it also should be the President's alone." Again, relying on Nixon , the court pinpoints the essential purpose of the privilege: "[T]he privilege is rooted in the need for confidentiality to ensure that presidential decisionmaking is of the highest caliber, informed by honest advice and knowledge. Confidentiality is what ensures the expression of 'candid, objective, and even blunt or harsh opinions' and the comprehensive exploration of all policy alternatives before a presidential course of action is selected." The limiting safeguard is that the privilege will apparently only apply in those instances where the Constitution provides that the President alone must make a decision. "The presidential communications privilege should never serve as a means of shielding information regarding governmental operations that do not call ultimately for direct decisionmaking by the President." The District of Columbia Circuit's 2004 decision in Judicial Watch, Inc. v. Department of Justice appears to lend substantial support to the above-expressed understanding of Espy . Judicial Watch involved requests for documents concerning pardon applications and pardon grants reviewed by the Justice Department's Office of the Pardon Attorney and the Deputy Attorney General for consideration by President Clinton. Some 4,300 documents were withheld on the grounds that they were protected by the presidential communications and deliberative process privileges. The district court held that because the materials sought had been produced for the sole purpose of advising the President on a "quintessential and non-delegable Presidential power"—the exercise of the President's constitutional pardon authority—the extension of the presidential communications privilege to internal Justice Department documents, which had not been "solicited and received" by the President or the Office of the President, was not warranted. The appeals court reversed, concluding that "internal agency documents that are not solicited and received by the President or his Office are instead protected against disclosure, if at all, by the deliberative process privilege." Guided by the analysis of the Espy ruling, the panel majority emphasized that the "solicited and received" limitation "is necessitated by the principles underlying the presidential communications privilege, and a recognition of the dangers of expanding it too far." Espy teaches, the court explained, that the privilege may be invoked only when presidential advisors in close proximity to the President who have significant responsibility for advising him on non-delegable matters requiring direct presidential decision making have solicited and received such documents or communications or the President has received them himself. In rejecting the government's argument that the privilege should be applicable to all departmental and agency communications related to the Deputy Attorney General's pardon recommendations for the President, the panel majority held that such a bright-line rule is inconsistent with the nature and principles of the presidential communications privilege, as well as the goal of serving the public interest.... Communications never received by the President or his Office are unlikely to be revelatory of his deliberations ... nor is there any reason to fear that the Deputy Attorney General's candor or the quality of the Deputy's pardon recommendations would be sacrificed if the presidential communications privilege did not apply to internal documents.... Any pardon documents, reports or recommendations that the Deputy Attorney General submits to the Office of the President, and any direct communications the Deputy or the Pardon Attorney may have with the White House Counsel or other immediate Presidential advisers will remain protected.... It is only those documents and recommendations of Department staff that are not submitted by the Deputy Attorney General for the President and are not otherwise received by the Office of the President, that do not fall under the presidential communications privilege. Indeed, the Judicial Watch panel makes it clear that the Espy rationale would preclude Cabinet department heads from being treated as being part of the President's immediate personal staff or as some unit of the Office of the President: Extension of the presidential communications privilege to the Attorney General's delegatee, the Deputy Attorney General, and his staff, on down to the Pardon Attorney and his staff, with the attendant implication for expansion to other Cabinet officers and their staffs, would, as the court pointed out in In re Sealed Case , pose a significant risk of expanding to a large swatch of the executive branch a privilege that is bottomed on a recognition of the unique role of the President. The Judicial Watch majority took great pains to explain why Espy and the case before it differed from the Nixon and post-Watergate cases. According to the court, "[u]ntil In re Sealed Case , the privilege had been tied specifically to direct communications of the President with his immediate White House advisors." The Espy court, it explained, was for the first time confronted with the question whether communications that the President's closest advisors make in the course of preparing advice for the President and which the President never saw should also be covered by the presidential privilege. The Espy court's answer was to "espouse[ ] a 'limited extension' of the privilege' 'down the chain of command' beyond the President to his immediate White House advisors only," recognizing "the need to ensure that the President would receive full and frank advice with regard to his non-delegable appointment and removal powers, but was also wary of undermining countervailing considerations such as openness in government.... Hence, the [ Espy ] court determined that while 'communications authored or solicited and received' by immediate White House advisors in the Office of the President could qualify under the privilege, communications of staff outside the White House in executive branch agencies that were not solicited and received by such White House advisors could not." The situation before the Judicial Watch court tested the Espy principles. While the presidential decision involved—exercise of the President's pardon power—was certainly a non-delegable, core presidential function, the operating officials involved, the Deputy Attorney General and the Pardon Attorney, were deemed to be too remote from the President and his senior White House advisors to be protected. The court conceded that functionally those officials were performing a task directly related to the pardon decision but concluded that an organizational test was more appropriate for confining the potentially broad sweep that would result from a functional test; under the latter test, there would be no limit to the coverage of the presidential communications privilege. In such circumstances, the majority concluded, the lesser protections of the deliberative process privilege would have to suffice. The important 2008 district court opinion in Committee on the Judiciary v. Miers has also played a role in defining the outer contours of executive privilege. In 2007, the House Judiciary Committee issued subpoenas to White House Chief of Staff Joshua Bolten, in his role as custodian of White House documents, and to former White House Counsel Harriet Miers as a part of its investigation of the termination and replacement of several U.S. Attorneys. President Bush, through his White House Counsel, asserted executive privilege in response to the subpoenas and ordered Ms. Miers and Mr. Bolten not to produce any documents or appear to give testimony to the committee. Throughout negotiations with the committee, the executive branch argued for a broad conception of executive privilege that would not only shield disclosure of White House and executive branch communications but would also provide an absolute immunity from compelled congressional process for senior presidential advisors. Following their continued refusal to cooperate, criminal contempt citations and resolutions authorizing civil enforcement of the subpoenas were approved by the House against Ms. Miers and Mr. Bolten. After the Department of Justice refused to bring the criminal contempt citation before a grand jury, the committee filed a civil action for declaratory judgment and injunctive relief to enforce the subpoenas. The district court's 2008 opinion rejected the executive's position that present and past senior advisors to the President are absolutely immune from compelled congressional process, which it noted was unsupported by existing case law. It also rejected the executive's claim that requiring testimony would have a "chilling effect" on the candid advice advisers provide to the President, since advisers routinely testify before Congress as part of their jobs. Additionally, the court noted that advisers could assert executive privilege on a question-by-question basis as appropriate during their testimony. Throughout its analysis, the court reaffirmed Congress's essential, constitutionally based role in conducting oversight and enforcing its own subpoenas. However, the court did not address the validity of any specific claims of executive privilege over the documents at issue. Pending appeal to the U.S. Court of Appeals for the District of Columbia Circuit, the newly arrived Obama Administration negotiated a compromise with the newly elected House. Ultimately, some, but not all, of the requested documents were provided to the committee and Ms. Miers was permitted to testify, under oath, in a closed but transcribed hearing. Taken together, Espy and Judicial Watch arguably have effected important qualifications and restraints on the nature, scope, and reach of the presidential communications privilege. As established by those cases, and until reviewed by the Supreme Court, to appropriately invoke the privilege the following elements appear to be essential. First, the protected communication must relate to a "quintessential and non-delegable presidential power." This requirement would arguably not include decision making with respect to laws that vest policymaking and implementation authority in the heads of departments and agencies or which allow presidential delegations of authority. Second, the communication must be authored or "solicited and received" by a close White House advisor (or the President). The judicial test is that an advisor must be in "operational proximity" with the President. This effectively means that the scope of the presidential communications privilege extends only to the boundaries of the White House and the Executive Office complex. Finally, the presidential communications privilege remains a qualified privilege that may be overcome by a showing of need and unavailability of the information elsewhere by an appropriate investigating authority. The Espy court found an adequate showing of need by the Independent Counsel; while in Judicial Watch , the court found the privilege did not apply and the deliberative process privilege was unavailing. Applying the law of executive privilege to the potential congressional oversight of presidential advisors will largely need to be done on a case-by-case basis. As the above discussion indicates, these advisors appear to reside both inside the Executive Office of the President (EOP), as well as within several of the agencies or departments, such as Treasury and Homeland Security. With respect to the advisors contained within the EOP, there appears to be a greater likelihood of claims of executive privilege, specifically the "presidential communications privilege." Based on the position descriptions that are publically available, however, it is unclear whether information sought from any of these advisors would satisfy all three parts of the test established by Espy and Judicial Watch and qualify to be withheld under a theory of executive privilege. Arguably, given their location inside the EOP, these advisors all meet the "operational proximity" prong of the test. However, even granting that prong of the test, it would still need to be determined that the communications seeking the privilege's protection relates to a "quintessential and non-delegable presidential power." Thus, a presidential advisor such as the National Security Advisor may satisfy this prong, as that advice likely relates to the President's "Commander-in-Chief" and/or authority with respect to the conduct of foreign affairs. Conversely, advice from other presidential advisors within the EOP, such as the Assistant to the President for Energy and Climate Change, the White House Director of Urban Affairs, Director of the White House Office of Health Reform, or the Director of the National Economic Council, arguably do not satisfy this prong of the test, as their functions are not related to "quintessential and non-delegable presidential power," but rather relate to more general law execution authority. Finally, it is important to note that the privilege in all cases is a qualified one and, therefore, can be overcome by a showing of need and unavailability of the information elsewhere. The consideration of legislation by Congress would likely be considered sufficient to satisfy the need requirement. As to unavailability, that will depend on exactly what information the committee is seeking, but seeing as how there are few, if any, alternative sources to discern what takes place inside the EOP, it does not appear that this prong would present much difficulty for an oversight committee with proper jurisdiction. Turning to those advisors who have been placed inside the various executive agencies, as Judicial Watch indicates, the farther from the EOP an advisor resides the more difficult it becomes to justify the use of the presidential communications privilege. Thus, advisors in the administrative agencies are arguably more likely to assert the common law "deliberative process" privilege, rather than the "presidential communications privilege." As noted above, common law privileges are accepted at the discretion of the committee chair and, therefore, raise far more difficult political concerns. Assuming that a claim of "presidential communications privilege" is raised to a request or subpoena to an advisor inside an agency, it would appear difficult to satisfy the requirements of the D.C. Circuit's test. An advisor housed within an agency, like the Pardon Attorney in Judicial Watch , is not within "operational proximity" to the President and, thus, is likely not to be considered protected, even if they are dealing with "quintessential and non-delegable presidential powers." Further complicating matters is the fact that few advisors within an agency are engaged in providing advice with respect to such functions. Thus, if a position such as the Pardon Attorney could not satisfy the D.C. Circuit, it is unlikely that any other advisory position would satisfy the standard. In examining the concerns surrounding presidential advisors, Congress may decide that no action is needed. However, should it decide otherwise, there are some legislative and non-legislative options. One option that might be considered is a change to the President's authority to hire non-advice and consent persons within the EOP. Currently, as discussed above, federal law permits the President to hire employees within the EOP at specific salary levels and does not require any additional accounting or justification to Congress about how those positions are filled or salary levels determined. One solution to this lack of information would be to adopt language conditioning the use of that authority on the receipt by Congress of information relating to the salaries, expenses, and other budgetary impact of the creation of advisory positions or offices within the EOP. The proposed language could be structured as a "report and wait" provision, which permits the President to select his personnel, but requires those selected to wait for a set amount of time before starting work, so that Congress can review the submitted materials required by the proposed legislation. So-called "report and wait" provisions have been consistently upheld by federal courts as a constitutional exercise of Congress's oversight functions. As the United States Court of Appeals for the Federal Circuit has noted, We take notice that since early in the 19 th Century there have been marked differences between the United States Congress and other parliamentary bodies. One is the greater development of the committee system here.... Committee chairmen and members naturally develop interest and expertise in the subjects entrusted to their continuing surveillance. Officials in the executive branch have to take these committees into account and keep them informed, respond to their inquiries, and it may be, flatter and please them when necessary. Committees do not need even the type of "report and wait" provision we have here to develop enormous influence over executive branch doings. There is nothing unconstitutional about this: indeed, our separation of powers makes such informal cooperation much more necessary than it would be in a pure system of parliamentary government. It should be noted, however, that while "report and wait" provisions are constitutionally valid, by their plain language they do not create a legal obligation for Congress to take any action. Under the terms of this specific provision, if Congress takes no action within the number of days as determined by the bill, the employee can start work. Should Congress decide to act to nullify the President's creation of the position or office, it is obligated to do so in accordance with the Court's holding in INS v. Chadha . In other words, Congress's action needs to comply with the Constitution's requirements for bicameralism and presentment. Thus, the only options available to nullify a presidential action under this provision would be either a bill (H.R. or S.) or a joint resolution of disapproval (H.J. Res. or S.J. Res.), both of which require passage by both houses and the signature of the President. Of course, Congress would retain other mechanisms to make its views on such a position known. These would include, but are not limited to, committee hearings, language in committee reports, or the adoption of sense of the House/Senate resolutions. That said, however, none of those methods would be legally binding or would in any way prevent the employee from beginning work. Because concern has been raised that President Obama has created new offices within the EOP and has designated presidential advisors or assistants, who are not subject to the advice and consent of the Senate, to be in charge of certain policy portfolios where they have been characterized as exerting political influence and possibly wielding significant legal authority, another option would have Congress codify these positions on a case-by-case basis and make those positions subject to the Senate confirmation process. In the past, Congress has taken action to codify positions existing within the EOP. For example, during the Nixon Administration, Congress passed legislation requiring Senate confirmation of future Directors and Deputy Directors of the Office of Management and Budget (OMB). This legislation also set four-year terms for the OMB officials and formally transferred to the OMB Director powers held by the President but delegated to OMB. During consideration of the OMB legislation, it was argued by Roy Ash, then Director, that "the OMB director serves as the personal agent of the President in the performance of presidential duties" and that as an advisor he "conducts no programs that directly affect the public, makes no grants and engages in no significant contractual arrangements" and therefore should not be subject to confirmation. However, it was the sense of Congress that the role of the OMB and the decisions made by those in charge had changed since its establishment in 1921 and that Senate confirmation of the Director and Deputy Director was "fully justified and long overdue." Regarding some of the positions in the EOP that the President created for his presidential assistants to fill, Congress could choose to codify them on a case-by-case basis as it has done in the past. However, this raises the question of whether Congress and the President should make permanent such positions within the White House, many of which appear to have been created to address time-sensitive issues of the present. Moreover, this option still leaves the President the ability to hire assistants pursuant to Title 3, and nothing precludes the President from consulting with these assistants on issues that the codified positions would have jurisdiction over. Another option would be to reduce the number of employee-assistants the President is authorized to hire under 3 U.S.C. Section 105 and/or require these employees to be subject to Senate confirmation, without regard to the policy areas they may cover (and without necessarily making them officers of the United States). If Congress were to reduce the number of employees the President is authorized to hire, this would arguably limit the President in his or her ability to use such assistants as advisors in charge of coordinating various policy areas. Such a provision therefore may be effective in that the President would turn to existing positions within the agencies to coordinate policy. Alternatively, reducing the number of presidential employee-assistants may be ineffective, as nothing precludes the President from utilizing persons outside the government for the same or similar purposes. Turning to the idea of confirming presidential staff, Congress, in the past, attempted to require that future appointments of certain positions in the EOP be subject to confirmation by the Senate. One such bill focused on the Executive Secretary of the National Security Council, the Executive Director of the Domestic Council, and the Executive Director of the Council on International Economic Policy, with the Senate Committee on Governmental Affairs stating its opinion that "the officers in question have responsibilities well beyond those of personal advisors or consultants to the President." The committee report concluded that "Congressional insistence that the exemption from confirmation be strictly limited to genuine staff assistants to the President will help restore the confirmation process to the role intended by the Constitution." Thus, while Congress could make these employees/assistants subject to Senate confirmation, it runs the risk of diluting the meaning and weight carried by the advice and consent requirement, as this process is generally reserved for officers of the United States under the text of the Appointments Clause. Furthermore, as discussed above, Congress has recognized that staff assistants are not intended to be subject to the advice and consent process. However, as with any legislative option, either of these two proposals would require the signature of the President, who may not be inclined to enact legislation that arguably interferes with his or her ability to efficiently run the EOP and therefore execute the laws. Unlike legislation—which requires either the affirmative consent of the President in the form of his signature or sufficient votes to override his veto—congressional oversight, at least initially, requires that only the legislative branch act. Congress, especially the committees of jurisdiction or appropriations, might elect to conduct oversight hearings regarding a number of the potential issues related to the positions discussed in this report. For example, although the current statutes already prescribe reporting requirements for White House staff, Congress may want to examine whether additional data might be appropriate. Data that might be informative would include the duties and responsibilities of positions, planned initiatives, staffing limitations, and public accessibility of meetings and documents for each office. Such data could, for example, be included in the report on White House staff required by 3 U.S.C. Section 113 or in the annual budget justification for the EOP submitted to Congress with the President's budget. Another area that might be the subject of congressional oversight could be the vetting process for high-level appointees. Such oversight might review the variations in and content of the White House questionnaire, and the processes for background investigations and financial disclosure. Should it be determined that the increase of presidential advisors that are not subject to advice and consent of the Senate is not adequately addressed by leaving it to the various committees of jurisdiction, Congress may wish to consider the creation of a special or select joint committee to address this particular issue. For example, a joint committee could be created with jurisdiction over only those executive branch employees that are created by executive order, presidential memorandum, regulation, or other non-legislative action and, therefore, not otherwise subject to advice and consent of the Senate. Such a committee could consist of both House and Senate Members, because it would be exercising oversight prerogatives held by both chambers and not textually committed functions such as the confirmation power, which rests exclusively with the Senate. Thus, by concurrent resolution (H. Con. Res., S. Con. Res), Congress could establish a committee to review the qualifications, duties, and responsibilities of those persons given positions by the President without the advice and consent of the Senate. Membership could be via appointment by the Speaker and minority leader in the House and the majority and minority leaders in the Senate, or it could be left to the political caucuses in both the House and Senate. The committee could be politically balanced with equal numbers of members from both political parties, or, similar to the existing standing committees, reflect the prevailing partisan ratio of Congress. To perform its functions, the committee could be delegated the authority to hold hearings, administer oaths to witnesses, issue and enforce subpoenas, and report on its findings. Although the committee activities would be similar to a confirmation hearing, there would be no final vote on the qualifications or fitness of the appointee to hold the job. Nevertheless, such a committee would arguably be in a position to perform oversight of the hiring of presidential advisors and could provide a mechanism for Congress to more consistently review the qualifications of those being given substantial influence over the development of policy within the White House and the executive branch. Potential advantages to such a committee might include the fact that it would be a single entity dedicated to the sole purpose of vetting non-advice and consent advisors. Such a specialized function would allow the committee to, over time, become well-versed in addressing the numerous legal and political issues that it may face; not the least of which would likely be a recalcitrant executive branch. Moreover, because the committee would have only the one function, it would not be distracted by other more pressing legislative concerns and, thus, would be able to dedicate all of its time to performing oversight. On the other hand, it might be argued that a thorough vetting of such positions requires underlying knowledge and expertise in the programs and policies that the advisor would likely be working on. Such a body of knowledge already exists among the members and staff of the existing standing committees of jurisdiction. Therefore, the standing jurisdictional committees may be in a better position to conduct the necessary oversight of such influential positions. Moreover, many of the standing committees already perform oversight of the executive branch and may be more familiar with the legal and political nuances that accompany a particular policy issue, implementing White House office, or executive agency. Two Senate committees conducted hearings on the issue of the appointment of so-called "czars" in the Executive Branch in October 2009. This section of the report provides a summary of selected viewpoints expressed at each hearing. The Senate Subcommittee on the Constitution of the Committee on the Judiciary conducted a hearing entitled "Examining the History and Legality of Executive Branch 'Czars'" on October 6, 2009. In his opening statement, the subcommittee chairman, Senator Russell Feingold, noted that No one disputes that the president is allowed to hire advisers and aides.... But Congress and the American people have the right to ensure that the positions in our government that have been delegated legal authority are also the positions that are exercising that authority. If—and I am not saying this is the case—individuals in the White House are exercising legal authority or binding the executive branch without having been given that power by Congress, now, that's a problem. And Congress also has the right to verify that any directives given by a White House czar to a cabinet member are directly authorized by the president. The ranking Member, Senator Tom Coburn, stated the importance of "open, transparent government" in his opening remarks: And the president ought to be about ... re-establish[ing] the confidence ... that everything's above board, that it's transparent, that we can see it's working. And if people truly do have significant authority and are not confirmed by the Senate, then that's a problem. And so I don't know whether that's the case or not. Two Senators submitted statements for the hearing record. In his statement, Senator Richard Durbin noted the "important principles" of "transparency and accountability to Congress": Public officials, including those who work for the President, should be responsive to congressional inquiries. Members of Congress can expect to be fully and timely informed about the activities of executive branch officials who are designated by the president to coordinate policy across executive agencies. His statement also expressed disagreement "with those who say the Obama Administration is acting differently than past administrations when it comes to the use of czars and presidential advisers," noted that "there is ample opportunity for congressional oversight over these advisors," and concluded that "President Obama's advisors aren't doing anything more than the law and the Constitution allow." Senator John Cornyn's statement noted that, "These czars present serious accountability concerns" and included these points: First, it seems that some of President Obama's czars may wield a measure of authority usually reserved to principal officers of the United States. In particular, some appear to exercise significant authority and have broad terms of duty, jurisdiction, and tenure.... If these czars are principal officers, they must be subject to Senate confirmation as required by the Constitution.... Second, even if none of the czars are principal officers, their ability to exercise decision-making authority absent congressional oversight is troubling. Controlling access to the President and possessing great responsibilities, czars can act unchecked in ways that significantly influence or duplicate the duties of Senate-confirmed officials.... Third, any distribution of taxpayer funds by unaccountable czars is unacceptable. Because we do not know exactly what the czars do, it is difficult to determine how much influence they have over the granting of federal money. Five witnesses presented testimony before the subcommittee, each of whom presented an opening statement. Among the viewpoints expressed in those statements were the following. Bradley H. Patterson, Jr., scholar on the presidency and author of "To Serve the President," discussed the meaning of the term, "czar," and the issues of confirmation for and testimony from White House advisors: My definition of czar means, first, that this person reports only to the president.... Public [Law] 95-570 is silent about any requirement for Senate confirmation of these appointments. I interpret this silence as evidencing the intent of Congress to reconfirm in 1978 the historic practice of not requiring Senate approval of White House staff members, whether they're called czars or not. Likewise, White House staffers do not give formal testimony to congressional committees, unless, as in the Watergate instance, criminality is alleged.... White House officers constantly visit the Hill for informal conferences with members and staffs.... White House staff members have no legal responsibility other than to assist and advise the president.... It would be unthinkable that law clerks at the Supreme Court should be in any way accountable to the president or to Congress. It would be unthinkable that the appointments of any of the personal legislative or committee staff here at the Capitol should be approved by the White House, and likewise, vice versa.... The president's personal staff are independently responsible only to the president. And in the end, he [the President] is the only czar that is. And he is accountable to the American electorate. Matthew Spalding, director, B. Kenneth Simon Center for American Studies, The Heritage Foundation, discussed "czars" and the bureaucratic state: Czar is ... a clever label. It's clearly meant to imply ... certain positions a breadth of authority and leveled status beyond the particulars of the formal title, seemingly beyond the confines of the normal process.... The rise of government by bureaucrats, largely due to the delegation of power from Congress to administrative agencies, combined with the removal of those agencies from the president's control, has given rise to efforts by presidents from both political parties to get the bureaucratic state under control through various mechanisms. The rise of czars in the current administration is merely another manifestation ... of this phenomenon. Tuan Samahon, associate professor, Villanova University School of Law, discussed the meaning of the term, "officer," under the Constitution: This line between non-officer and officer is not defined by the appointments clause, itself, but we do have some authority. Recently, under the Bush administration, the Justice Department's Office of Legal Counsel in April of 2007 issued an opinion that synthesized and harmonized the Supreme Court's opinions on who is an officer for appointments clause purposes ... two requirements that are necessary ... in order to be an officer, you must hold an office, which in turn is defined as a position to which is delegated by legal authority a portion of the sovereign powers of the federal government, what the Supreme Court in Buckley v. Valeo termed significant authority. The second requirement is that this position must be continuing. John C. Harrison, James Madison Distinguished Professor of Law, University of Virginia School of Law, discussed the requirements that underlie the exercise of legal authority and whether White House staff have such authority: There are two governing legal principles.... the first one, the appointments clause. It is a necessary condition for the exercise of actual legal authority in the government for someone in the executive branch, for anyone other than the president to have been appointed to an office pursuant to the appointments clause, to be either a superior officer or an inferior officer. The other necessary condition for the exercise of power by anyone other than the president is some source of statutory authority, because only the president has constitutional power and the president's constitutional powers are essentially non-delegable. The consequence of those two principles is that it is extremely doubtful whether anyone on the White House staff, the sort of person sometimes called a czar, could actually exercise legal authority, at least as a formal matter.... although it is common for there to be a divergence between influence in the government and actual formal legal authority, especially with respect to the White House staff—it is extremely common for members of the White House staff to be extremely influential, even though they cannot take any genuinely legal binding decision—whether that division between legal authority and informal practical influence is a good thing is a difficult question of policy. TJ Halstead, deputy assistant director, American Law Division, Congressional Research Service, Library of Congress, testified on the application of the Appointments Clause to White House advisors and the viability of any legislative proposal to limit the use of such advisors: [T]here's no indication that these advisers—particularly those serving in unconfirmed positions within the executive office of the president—have been vested with any actual executive authority, and that precludes a categorical conclusion that the requirements of the appointments clause apply to their service.... under current jurisprudential principles, it's difficult to discern a basis upon which a review in court would conclude as a legal matter that the existence of these advisers runs contrary to our constitutional system.... Also, it's not clear that legislative proposals, even if enacted, would have much, if any, effect on presidential utilization of advisers, as it does not appear possible for Congress to prohibit either implicitly or explicitly a president from relying upon personal advisers irrespective of whether they are confirmed or draw salary. Mr. Halstead also discussed the oversight authority of Congress: Given the limitations that are inherent in any judicial or legislative response to this controversy, it seems that the most effective congressional response may be one that is based simply on persistent and aggressive assertion of the oversight prerogatives of the House and Senate. Longstanding Supreme Court precedent recognizes the power of Congress to engage in oversight of any matter related to its legislative function. And even while there is no explicit provision in the Constitution authorizing congressional oversight, the Supreme Court has declared that that power is so essential as to be implicit in the general vesting of legislative authority in the Congress.... Congress's power in the oversight context certainly extends to the receipt of testimony from presidential advisers. Research conducted by my colleagues at CRS has revealed numerous instances where such advisers have testified before committees, effectively disposing of the argument that separation of powers principles impose a structural bar to the appearance of these advisers before Congress.... [T]he oversight process ... requires sustained and focused effort from members of Congress and their staff ... a robust oversight regime focusing on specific, substantive executive action taken in areas over which such advisers have political influence could be an extremely effective approach and would enable Congress as an institution to more forcefully assert its constitutional prerogatives and to ensure compliance with its enactments. Following the opening statements, Senator Feingold established for the record that none of the witnesses had appointments clause concerns "for so-called czars that are housed in federal agencies and report to Senate-confirmed officials." Several specific questions were then discussed. First, Senator Feingold asked "what would these [White House] advisers have to be doing ... that would trigger an appointments clause issue? And specifically, how should we analyze the widely reported duty that some of these officers have to ... 'coordinate policy development' ... between two or more departments?" In response, Mr. Harrison replied, I think the sort of thing that would be problematic would be if someone like that were to do one of two things: one, to give an order to someone with actual legal authority that did not simply represent carrying forward the president's order, that was not just communicating the president's order; or were that person—and I think this is highly unlikely—to purport to take some actual binding measure himself or herself, for example, issuing a regulation or authorizing an expenditure, an exercise of formal legal authority. Mr. Spalding stated as an example that he found "to be somewhat troubling ... the climate czar being a chief negotiator, doing automobile emissions standards based on a Supreme Court interpretation of the Clean Air Act ... [Y]ou're now at several stages of separation, getting into some operational regulatory questions, not the EPA administrator, whom you have approved." Responding to a similar question raised by Senator Sheldon Whitehouse later in the hearing, he cited as any instance "if an agent of the president is actually doing things that go to the extent of seeming to step on an officer that has been approved by Congress.... given the legislative instructions from Congress to carry out the law, that strikes me as potentially raising a serious issue." In another question, Senator Feingold queried whether the Senate should "be concerned about the possibility that an NSC [National Security Council] staffer may end up having more ability to influence foreign policy decisions than, say, a Senate-confirmed ... assistant secretary of state," given that "the NSC plays an important role in coordinating the work of different departments and agencies." In response, Mr. Patterson noted that President Obama had not accepted the recommendation of the Project on National Security Reform "that the assistant to the president for national security affairs be confirmed by the Senate and be given a great deal more authority," and he didn't think "any future president would, either." He further stated that recommendations of NSC staff members would be made to the President through the national security advisor. Senator Coburn quoted the Special Master for TARP Executive Compensation, Kenneth Feinberg's statement that "I have the discretion conferred upon by Congress [sic] to attempt to recover compensation that has already been paid to executives" and then asked for a legal analysis of the special master's position. In response, Mr. Harrison stated that two questions would have to be answered: So the question, first, would be whether the secretary of the treasury had the statutory authority to create that office pursuant to his authority under TARP or some other legislation and then whether he has appropriately exercised it so as to constitute Mr. Feinberg an inferior officer.... The second question—because he is an inferior officer, clearly not a principal or superior officer, because the Senate didn't confirm him—... would be whether he receives adequate supervision from a principal officer, someone who is Senate-confirmed, ... and to know that, you would need to know the extent to which he is overseen presumably by the secretary of the treasury, perhaps some other higher officer in the ... Department of the Treasury. There are a number of cases in the Supreme Court, in the lower courts about exactly how much supervision is required.... But the basic principle is that for an inferior officer to operate permissibly, the inferior officer has to be subject to substantial supervision from somebody higher up.... I don't think there's any difficulty with your calling an inferior officer to testify ... [Y]ou can call the secretary of the treasury, so you can find out about the legal nature of the relationship ... [Y]ou could find out about both sides, about whether the secretary thinks he's supervising Mr. Feinberg and how much supervision Mr. Feinberg thinks he's getting .... And I think the Treasury Department would have to take the position that Mr. Feinberg is at least—is an inferior officer, because I believe he is exercising some significant authority pursuant to the laws of the United States. Mr. Spalding testified that "Congress needs to be more careful in the types of legislative discretion it gives, which in many cases gave rise to the creation of these czars in the first place" and cited the TARP legislation as "a great example of that." He further explained, "do you give too much discretion, which then allows for the type of policy this person is pursuing ... Is that actually violating your legislative direction to the officer, secretary of treasury, in carrying out your legislative intent?" Building on Mr. Spalding's statements, Mr. Samahon reiterated the importance of statutes stating clearly who has the power to appoint, thereby making clear the "judgment of who is actually an inferior officer," and noted that, under the case of Morrison v. Olson "you could just be very, very powerful and therefore, deemed not an inferior officer." Senator Feingold asked Mr. Halstead "if he [Mr. Feinberg] is an inferior officer in the Treasury Department, is there any reason he can't be asked to" testify? Mr. Halstead replied, No, not at all ... there are roughly 75 instances since ... the end of the World War II era where presidential advisers, high-level presidential advisers, have appeared before congressional committees. Now the fact that there's no structural separation of powers prohibition against the appearance of these individuals is a much different thing than saying it's going to be easy to get them to appear before Congress .... [when the invitation to testify is declined] at that point, it becomes a question for a committee and Congress as an institution as to whether or not to assert the institutional prerogatives and powers that it has to compel testimony from certain individuals .... [I]t's not uncommon as a practical matter for the Senate to obtain the commitment of a nominee to an advice and consent position that they will affirmatively agree to appear before the committee when requested .... to get a commitment from the secretary of the treasury or to any individual so appointed or to any other position that they would not only adhere to that agreement in relation to their general duties, but also to inquiries from the committee as to the impact that these advisers or other personnel are having on their carrying out or conduct of the legal authorities that are vested specifically in them. Responding to a question asked by Senator Coburn on a so-called "czar" perhaps exercising authority that he or she doesn't have by statute, Mr. Spalding expressed this viewpoint: "[T]he main question at issue is responsibility and accountability. One of the problems with the modern administrative state is it's not oftentimes clear who's actually responsible and thus who is accountable, especially from a ... congressional or executive point of view.... Congress could write clear laws that make these things known." Finally, Senator Feingold noted, "as chairman of the African Affairs Subcommittee of the Foreign Relations Committee, I've supported the appointment of a special envoy to Sudan. There's also a Senate-confirmed inferior officer who's the assistant secretary for the bureau of African affairs. Should I be concerned that this special envoy and his staff may unconstitutionally infringe ... or ignore the assistant secretary's authority?" Mr. Harrison responded: I doubt an arrangement like that would create a constitutional question, provided that the special envoy was appointed appropriately as an inferior officer ... and the lines of authority were clearly drawn ... both in the statute and in whatever the president and the State Department set up.... the real concern is less constitutional ... and more practical. Any time you have overlapping responsibilities, it's extremely important that people know who ... makes what decisions and ultimately ... who is in charge of actually acting for the United States. Responding to Senator Feingold's follow-up question, "And I take it a legitimate concern for the congressional oversight, regardless of whether it raises legal issues," he stated, "Making sure ... that the government is set up properly ... and is functioning properly is a central role of the Congress." Mr. Samahon stated his view that, "I think there is potentially a problem ... [G]oing back to the OLC [Office of Legal Counsel] April 2007 opinion that, if one is exercising diplomatic functions, one would plainly seem to be an officer. What the question would then be is whether being a special envoy is a continuing office such that the second requirement for officerhood is met. If that's the case, then we have someone who should be subject to presidential nomination with Senate advice and consent. Mr. Halstead noted that, "With regard to congressional oversight prerogatives in such a context, the Supreme Court has stated that the ... oversight prerogatives of Congress are at their peak when looking into allegations of maladministration, governmental inefficiency ... So it would clearly be something that would be very suited for congressional inquiry." Senator Feingold concluded the hearing by stating that Administrations going back decades have created positions with important portfolios that are not subject to Senate approval. This is certainly not an isolated issue with the Obama administration ... Congress may need to act to make sure that, going forward, the proper checks and balances are in place. The Senate Committee on Homeland Security and Governmental Affairs conducted a hearing entitled "Presidential Advice and Consent: The Past, Present, and Future of Policy Czars" on October 22, 2009. In his opening statement, the chairman, Senator Joseph Lieberman, stated that these questions would be examined: "have presidents of both parties, including President Obama, consolidated power excessively in the White House through the appointment of these officials contrary to at least the spirit of the Constitution if not our laws, particularly as against the authority of members of the cabinet," .... "does the growing use of czars in the White House, in the administration this and past ones, frustrate Congress in carrying out its constitutional responsibility to oversee the expenditure of the public's money, which we appropriate," and what can or should be Congress's response. Senator Susan Collins, the ranking Member, expressed these concerns about "czars" in her opening statement: The proliferation of czars diminishes the ability of Congress to conduct its oversight responsibilities and to hold officials accountable for their actions. These czars can create confusion about which officials are responsible for various policy decisions. They can duplicate or dilute the statutory authority and responsibilities that Congress has conferred on cabinet officials and other senior executive branch officials .... In addition the proliferation of czars can circumvent the constitutionally mandated process of advice and consent. Czars can exercise considerable power and influence over major policy, and yet they are not required to clear the rigorous Senate confirmation process. Czars bypass this important constitutional protection through a unilateral grant of authority from the president .... Positions subject to Senate confirmation or otherwise recognized by our laws such as the director of national intelligence, the national security advisor and the chairman of the Recovery Accountability and Transparency Board do not raise the same concerns with accountability, transparency and oversight because they are recognized in law and because many of these positions are subject to Senate confirmation. Later, she provided an example to illustrate her concerns and discussed an amendment that she had offered during the Senate's consideration of the Department of the Interior, Environment, and Related Agencies Appropriations Act for FY2010: For example, I think Congress should be able to call the president's climate czar, Carol Browner, the energy and environmental czar, to ask her about the negotiations that she conducted with the automobile industry that led to very significant policy changes with regard to emission standards. I think that's particularly important because the Supreme Court in 2007 held that it was the Environmental Protection Agency that had that very responsibility under the Clean Air Act. And yet these negotiations were not undertaken by the EPA administrator, but rather by the White House czar .... [W]hat I offered on the Senate floor, but it fell to a point of order unrelated to the merits, is that ... the president make available to Congress to testify, upon a reasonable request, individuals who have responsibility for interagency development or coordination of any rule, regulation or policy and that it would apply to only those individuals who are without statutory authority ... the second half of the amendment also called on the president to provide us twice a year with a written summary of the activities of these officers within the White House. Senator Robert Bennett requested "as a point of personal privilege a few moments in an opening statement" to make remarks, that included the excerpts below, "Because the White House has specifically identified me as being hypocritical on this issue by virtue of my position with respect to a Y2K czar" : In November of 1997 I requested that President Clinton appoint a Y2K czar. I was the chairman of the Y2K committee ... in the Congress to deal with a problem that ... cut across the entire government .... [I]n February of 1998 President Clinton appointed a Y2K czar, John Koskinen ... [O]ne of the first things ... [he] did ... was to call me ... and set up a pattern of regular consultation. Every Wednesday afternoon ... [he] called me ... and set up a pattern of regular consultation .... That was a very different situation than the situation described by Senator Collins and the letter which I saw .... the kind of circumstance we created then was very different from the kind of circumstance that we see now. Later, he expressed this observation: Congress passed a law creating the Council of Economic Advisers, and yet there is an economic czar, Paul Volcker ... And the question is, who has the president's ear on the economy? And then there's ... Larry Summers. And if you want to influence the president, if you're a member of the Congress, whom do you call? ... the Council of Economic Advisers? ... Larry Summers? Or ... Paul Volcker? ... we do happen to have a Cabinet officer of health and human services with whom I have never had a conversation about health care, not because I have any opposition to her but because it's my perception that Nancy-Ann DeParle is calling the shots rather than the Secretary Sebelius. Senator Claire McCaskill's opening remarks noted that [T]alking about the Y2K czar ... that was not confirmed by the Senate .... how ubiquitous the czar was working with the legislature that he was constantly around. I kept thinking of Nancy-Ann DeParle ... we can't walk down the hall without seeing her. She is in the chairman's offices constantly of the committees, and the ranking members. And she's visited across the aisle time after time ... So I think there is [sic] situations where a special advisor is created and that doesn't mean they're not working closely with Congress in order to solve a problem. During the discussion on White House advisors and testimony before Congress in the question and answer period, Senator Lieberman read this excerpt from the letter sent by Senator Robert Byrd to President Obama: Whether an executive official is confirmed by the full Senate or appointed by the president alone to serve on the White House staff, that official holds the position by virtue of the authority that the Congress has granted to the president. Such White House staffers receive a salary by virtue of the spending authority that Congress has granted to the executive branch. Even presidential assistants and advisors have a constitutional obligation to answer questions before the Congress, if it is necessary for the Congress to fulfill its constitutional oversight and investigative functions. Four witnesses presented testimony before the subcommittee. Each of the witnesses presented an opening statement. Among the viewpoints expressed in those statements were the following. Thomas J. Ridge, former assistant to the President for homeland security, and Secretary of Homeland Security, discussed the importance of clear responsibilities for White House advisors: [P]residents have the discretion and authority to appoint advisors who can assist them in carrying out their presidential obligations. My interest ... reside[s] in the issues of effective management, transparency, and lines of authority. Who's reporting to whom? How specific is the job description? Does the individual initiate, coordinate or execute policy? To whom does that individual report? Is it the same person to whom the individual is accountable? .... Some of today's White House czars have come to their positions with little public clarification of duty, and they already have a department of subject authority led by a Senate-approved secretary .... [D]o these individuals - these so-called 'czars' ... direct or develop policy? Are they accountable to the president, to the secretary, or to both? To whom do private constituencies look to provide input, guidance or opinion? Who resolves the conflict between the two? ... [W]ithout a clear delineation of responsibilities and reporting authority, this creates both a huge potential management problem and, clearly, the appearance of potential conflict ... [I]t can diminish the capacity of both advisor and secretary to operate effectively in accordance with the department's mission ... [F]rom time to time, it can cause confusion for those under the chain of command of the secretary, as well as outside the department purview. James P. Pfiffner, professor, School of Public Policy, George Mason University, discussed the role of White House advisors: [S]taff personnel certainly may have considerable power or influence as opposed to authority. But this power is entirely derivative of the president. White House staffers may communicate orders from the president, but they cannot legally give orders themselves ... White House staffers often make important decisions, but the weight of their decisions depend entirely on the willingness of the president to back them up .... White House czars play essential roles that lift the burden of coordination from the president. They help to reduce the range of options. But if the number of czars proliferate, they can clog and confuse presidential authority .... Czars may create layers between the president and Cabinet secretaries .... Members of Congress, as well as national leaders, may be confused as to the locus of authoritative decisions. Foreign leaders may not know who speaks for the president ... [C]zars can pull problems into the White House that could be, and should be, settled at the Cabinet level ... [O]nly those issues that are central to the president's policy agenda should be in the White House .... czars are often frustrated because they're supposed to be in charge of a policy area, but they do not have the authority commensurate with their responsibilities. Czars cannot enforce decisions on departments or agencies ... [They] control neither personnel nor budgets, and for these they must depend on Cabinet secretaries .... White House staffers enjoy proximity to the president ... Cabinet secretaries are often at a disadvantage in securing presidential attention. He also noted the role of Congress: The Framers of the Constitution ... placed Congress in Article I for a reason. In republican governments, the legislature should predominate in policymaking, as James Madison made clear in Federalist 51. Lee A. Casey, partner, Baker Hostetler, and former attorney-advisor, Office of Legal Counsel, U.S. Department of Justice, discussed the authority of White House advisors: [White House] advisors ... have no power beyond the fact that they are close to the president. They cannot transform executive branch policy into the policy of the United States. They can't sign regulations. They can't submit legislation to Congress. Their authority is very limited ... [I]t has been the consistent position of the Justice Department under both Republican and Democratic administrations that people in those advisory roles need not be appointed in accordance with the Appointments Clause, that is by and with the advice and consent of the Senate ... [T]hey cannot take action that would create a legal obligation, either on behalf of the government or ... the citizenry at large. The president can implement policy and transform it into government policy, only through officers that have been appointed under the Appointments Clause, and who are responsible through the oversight process to Congress. During a discussion on testimony and documents from White House advisors, in the question and answer section of the hearing, he stated, Whenever you start getting close to advice that is prepared for and given to the president, you start, obviously, getting into some very difficult separation of powers issues. But to the extent that the czars who actually hold offices at the agencies, some of which have been confirmed by the Senate, undertake a policymaking role in addition to the role they serve in their office, that is fine ... so long as they do not attempt to exercise authority that was not otherwise properly delegated to them. [author name scrubbed], former specialist in American national government, Congressional Research Service, Library of Congress, discussed the history of the use of policy "cars" by Presidents: For war mobilization, [Franklin D.] Roosevelt had at least three successive primary czars: William S. Knudsen at the Office of Production Management ... Donald Nelson, chairman of the War Production Board ... and James F. Byrnes, who led the Office of War Mobilization ... it also appears that these 'czars' were accountable to Congress. An examination of the April 1941 to April 1943 hearings of the ... Senate Special Committee Investigating the National Defense Program ... chaired by Senator Harry S. Truman ... indicate that Knudsen appeared once, his deputy appeared twice, and Nelson thrice. At the conclusion of his statement, Mr. Relyea suggested several options for Congress to consider: When a president prohibits congressional testimony by a czar or other presidential agent, efforts should be made to obtain the desired information in some other way, such as the provision of responsive, factual documents ... a Freedom of Information Act request ... or written answers to interrogatories, testimony by a department or agency official heading the unit in which the czar or presidential agent is located, or a briefing of congressional committee leaders or staff. The authorization [for the White House Office, Executive Office of the President, and the Office of the Vice President] might be revisited with a view to the adequacy of its allotments, ... reporting requirements and ... scope, should it be extended to other Executive Office entities. Following the opening statements, Senator Lieberman asked, with regard to White House advisors, what if they "actually begin to act like officers, that they are making decisions, they're forcing decisions on Cabinet secretaries ... What should our response be?" In response, Mr. Casey stated that "to the extent they act like officers, their actions are not valid, their actions are not legally enforceable. A court will not enforce an order or a rule signed by a presidential advisor." As follow-up questions, Senator Lieberman asked about the validity of claims that such advisors "should not be called to testify on their policy coordination" and whether Congress "should legislate to compel" White House advisors "to testify ... about the policy coordination role that they're playing?" Mr. Casey noted that, "the advice someone gives directly to the president ... is clearly privileged" and stated that "it is difficult to think of a system ... regulating the independence of presidential advice ... that would not raise serious separation of powers issues." To Mr. Ridge, "one of the challenges associated with the ability of Congress to even have a basis for inquiry, ... would be resolved, if, in making the appointment, there was public revelation of precisely the function that that advisor was going to play within the White House." He added that he thought that Congress is not "in a position to do that, because ... the president hasn't outlined specifically what those coordinating responsibilities are." Senator Collins provided an "example of a czar position that I think is very troubling" and then asked the witnesses to comment: In 2007, this committee wrote legislation that became law that created within the Executive Office of the President a Senate-confirmed position to be coordinator for the prevention of weapons of mass destruction. And the coordinator's role—which is defined in this law—says that this individual should serve as the principal adviser to the president on all matters relating to the prevention of weapons of mass destruction, proliferation and terrorism .... This was to be a Senate-confirmed coordinator located within the Executive Office of the President. Now, neither President Bush nor President Obama ever filled this statutorily created position, but both of them created and filled a White House policy czar for weapons of mass destruction. That individual, the WMD czar, has exactly the same functions that were set forth in the law .... [T]his is ... a prime example of ... both presidents appointing a White House policy czar, which completely circumvents a statutorily confirmed position created by Congress. Both Mr. Ridge and Mr. Pfiffner responded that this circumstance is "very troubling." According to Mr. Ridge, "the conditions are ... so evident ... that your claim for this individual to testify before you should be legitimized – since you created the position, they filled it, but they didn't send a name to the Hill." To Mr. Pfiffner, "the fact that that confidential responsibility overlaps or duplicates a position that is supposed to be" a presidential appointment with consent of the Senate "is very troubling." Mr. Casey stated that he did not "find it troubling" and suggested that perhaps, "why the office hasn't been filled" is "because there is a feeling that it's simply too close to the president's own authority," thereby raising "very serious separation of powers concerns." Mr. Relyea noted: "in 1944, with [James] Byrnes at the head ... of the Office of War Mobilization [OWM], that was seen as too powerful in some regards. He was the president's agent ... appointed without Senate confirmation. OWM had been created by executive order. Congress said 'We're going to reconstitute the office,' and they did by statute .... Set it up as a Senate-confirmed, statutorily created entity. I think that might be an answer here; that you eliminate, either by funding or by its role, this White House unit and ... [replace it with] a congressional creation." Senator McCaskill, while noting that the Weapons of Mass Destruction Commission had recommended repeal of the WMD coordinator position because "they don't think it's an appropriate Senate-confirmed position," stated that she tended to agree with Senator Collins that "it would [be] incumbent to fill it, unless and until it is repealed." Senator Lieberman also queried whether "some of these positions that are now within the White House, that appear to be policy coordinating, not within the inner circle ... of the president" should be made statutory. In response, Mr. Relyea noted that, "even though Congress creates ... a staff authorization for the White House office, provides the funds for the White House office personnel, thus far ... Congress has not seen fit to invade that domain and has left it to the president." Mr. Casey stated: "I think the real question is whether by creating one of these offices, you can then effectively prevent the president from looking to someone else to be his adviser on the issue. And I think that, ... is where the constitutional problem is .... it raises very serious separation of powers issues. I'm not exactly sure what the courts would do." Mr. Pfiffner suggested, as a solution, "comity between the branches from both sides, so the president doesn't keep trying to keep things away from Congress ... And that Congress doesn't get too heavy handed, on the other hand." Mr. Ridge cautioned that, "if you decide to legislate ... don't undermine the credibility and the function of the secretary who, ultimately ... is accountable to you." Later, during the discussion of Senator Collins's amendment to the Department of the Interior, Environment, and Related Agencies Appropriations Act for FY2010, Mr. Relyea asked whether consideration had been given to "legislation that would overturn the implementation capacity in that executive order," referring to the type of document issued by the President for some of the White House advisor positions. Senator Lieberman concluded the hearing by stating that "I think we both [he and Senator Collins] share a desire to do something about this to help Congress uphold our constitutional responsibility for oversight. But ... we understand the balance here, as reflected in the Constitution." | A number of the appointments made by President Barack H. Obama to his Administration or by Cabinet secretaries to their departments have been referred to, especially by the news media, as "czars." For some, the term is used to convey an appointee's title (e.g., climate "czar") in shorthand. For others, it is being used to convey a sense that power is being centralized in the White House or certain entities. When used in political science literature, the term generally refers to White House policy coordination or an intense focus by the appointee on an issue of great magnitude. Congress has noticed these appointments and in the 111th Congress examined some of them. The Senate Subcommittee on the Constitution of the Committee on the Judiciary, and the Senate Committee on Homeland Security and Governmental Affairs, for example, conducted hearings on the "czar" issue on October 6, 2009, and October 22, 2009, respectively. One issue of interest to Congress may be whether some of these appointments (particularly some of those to the White House Office), made outside of the advice and consent process of the Senate, circumvent the requirements of the Appointments Clause of the U.S. Constitution. A second issue of interest may be whether the activities of such appointees are subject to oversight by Congress. This report provides background information and selected views on the role of some of these appointees. Additionally, it discusses some of the constitutional concerns that have been raised about presidential advisors. These include, for example, the kinds of positions that qualify as the type that must be filled in accordance with the Appointments Clause, with a focus on examining a few existing positions established by statute, executive order, and regulation. The report also reviews certain congressional oversight processes and assesses the applicability of these processes to presidential advisors. Legislative and non-legislative options for congressional consideration are presented. |
On August 16, 2004, President Bush unveiled one of the most sweeping changes to the numbersand locations of military overseas basing facilities since the beginning of the Cold War. Announcing aplan that had been under study for approximately three years, the Department of Defense would movethousands of personnel from installations in Europe and Asia to bases within the United States. Simultaneously, the military would shift its approach away from huge bases such as Ramstein Air ForceBase, which has all of the comforts of the U.S. -- family housing, supermarkets, convenience stores,theaters, and so forth, to reliance on more austere facilities in Central Asia, Africa, and the Middle Eastthat would be less elaborate and lack most of these benefits. In 2004, the Congress chartered theCommission on the Review of Overseas Military Facility Structure of the United States (also known asthe Overseas Basing Commission) to provide an independent assessment of the DOD overseas basingneeds. (1) The DOD plan could prompt budget and oversight decisions for the second session of the109th Congress. These might include approval, modification, or rejection of the DOD proposal. Congress could also have to consider appropriations requests for construction of infrastructure atnew overseas or expanded continental United States (CONUS) locations, as well as fund increasedimpact aid to local communities. Congress would have to oversee new acquisition programs formobility and logistics capabilities (such as airlift) needed for the strategy. Congress may alsoconsider whether the plan will be executable given the results of the 2005 round of the BaseRealignment and Closure (BRAC) process. Finally, the Senate may consider new or revised treatieswith new basing partners submitted for its advice and consent. The Department of Defense Global Posture Review, also known as the Integrated GlobalPresence and Basing Strategy (IGPBS), is intended to realign United States overseas forces over asix-to-eight-year period from the bases (basing "posture") left over from the Cold War (2) to a new posture optimizedto support current allies and confront new potential threats. (3) Overall, U.S. installationsoverseas would decline from 850 to 550. Roughly 70,000 personnel, mostly from the Army, wouldreturn to the United States. The Congressional Budget Office projects the initial cost of thisrelocation effort to be $7 billion, but with a potential savings payoff of $1 billion per year if thenumber of U.S. troops permanently based overseas were reduced to a minimum number needed toreceive and host deployments. (4) The Defense Department plan envisions three tiers of bases. It would retain some of the large"main operating bases,"such as Ramstein AFB in Germany, which have all of the comforts of theUnited States -- family housing, schools, supermarkets, convenience stores, theaters, and populationsin the tens of thousands. (5) Secondly, the military would establish an overseas network of "forward operating sites," whichwould be more austere installations and hosting smaller numbers of personnel. Military personnelwould deploy to these bases for temporary duty (typically one year or less, unaccompanied byfamilies), in contrast to the permanent change of station moves in which an entire family moves toa new base for two or more years. Finally, minimalist "cooperative security locations," would likelybe run by host nation personnel and would not host U.S. forces on a day-to-day basis. Theselocations would be used in the event of a crisis to give U.S. forces access to the region. They wouldalso allow U.S. forces to train with local allies and participate in cooperative activities, such asdisaster relief or peacekeeping, which could improve military-to-military ties. (6) U.S. forces would also relyincreasingly on off-shore prepositioning and sea basing to provide logistical support. (7) The biggest changes would happen in Europe, where the military would shutter nearly 200facilities and ultimately draw down roughly 40,000 troops (from 105,570 as of June 2005). (8) Some of the forces remainingin Europe would periodically deploy from bases in Germany for temporary duty to locations inRomania, Bulgaria, or Central Asia. Both Romania and Bulgaria have energetically campaigned towin U.S. bases. Camp Bondsteel in Kosovo, Eagle Base in Bosnia-Herzegovina, and Manas AirField in Kyrgyzstan typify the new forward operating sites. While representing a full time U.S.presence, these bases would lack the elaborate infrastructure of the major installations that evolvedin western Europe. Overall, the focus of military basing would shift south and east, closer to currentMiddle-Eastern hot-spots and Central Asia. (9) For East Asia, the plan advocates consolidating bases in South Korea, with a drawdown ofnearly 12,500 personnel (from a strength of 32,744 troops in June 2005), (10) and move headquarters forremaining units out of expensive Seoul to locations further south. Adjustments are also envisionedfor troop dispositions in Japan. Reports indicate the United States is proposing to move the 1st Armyheadquarters from Washington state to Camp Zama, near Tokyo; to reposition the 5th Air Forceheadquarters from Tokyo to Guam; and to relocate 7,000 of the 15,000 Marines currently onOkinawa to Guam or to other locations in Japan. (11) Other U.S. forces in Asia could potentially deploy to thePhilippines, Malaysia, or Singapore for exercises, training, and as-needed forward basing. Relianceon air and naval capability would increase in the Pacific given the vast distances in the region. The U.S. military presence in Africa is expanding. (12) Officials view Africa asan increasingly important region in the war on terror. The U.S. already has established Memorandaof Understanding (MOUs) with Gabon, Ghana, Namibia, Senegal, South Africa, and Uganda, wherethe focus would be on training and cooperation. (13) The United States established a Combined Joint TaskForce-Horn of Africa (CJTF-HOA) in 2002, which is currently located at Camp Lemonier inDjibouti. This task force currently focuses on delivering military-to-military training and performingpublic works projects in an area including Djibouti, Eritrea, Ethiopia, Kenya, Somalia, Sudan, andYemen. The United States hopes to expand these activities into Uganda and Tanzania. There iseven discussion within DOD of transforming the CJTF-HOA into a unified command withresponsibility for all of Africa. U.S. Central Command and U.S. European Command currently splitresponsibility for Africa. (14) There are strong arguments motivating the need for a revision to the alignment of U.S. basesoverseas. This structure is a legacy of the Cold War confrontation, and in some cases the U.S.presence may now be less welcome. In testimony before the Senate Armed Services Committee,Secretary of Defense Donald Rumsfeld listed multiple reasons for reworking the overseas militarybasing dispositions. He argued that the current arrangements were "seriously obsolete," oriented todeter and fight the large standing militaries of the Warsaw Pact in Europe rather than the currentthreats. However, he gave no geographic specifics on where he viewed the new threats as residing. He stated that updating the military's global posture was part of the Department's largertransformation effort, but his comments did not clarify how the transformational goals such as speedor precision (in his words, to "do more with less") drove the overseas basing strategy decisions. Heargued that relocating personnel and facilities in some cases could reduce frictions with hostgovernments and enhance cooperation with allies. He also indicated that nations that imposedrestrictions or conditions on the use of U.S. forces from their territory would be viewed as lesssatisfactory locations. (15) He did not specifically cite the countries he saw as sources of friction with respect to the presenceof U.S. forces or the conduct of U.S. operations. However, it was widely assumed he was referringto friction with Germany over the invasion of Iraq and German restrictions on U.S. trainingexercises. During his June 2005 testimony to the Senate Armed Services Military ConstructionSubcommittee, Principal Deputy Undersecretary of Defense for Policy Ryan Henry echoed many ofSecretary Rumsfeld's themes. He noted an increased reliance on pre-positioned equipment andforces that move to forward operating sites on a temporary basis, but did not explain the anticipatedmix between these forces and permanently stationed forces, or what the department would need forairlift and sealift to sustain this approach. He also suggested that the new strategy would improvemilitary families' quality of life because they would experience fewer disruptive overseas moves, andthe military member would have a more predictable deployment schedule. However, the strategy'sreliance on more frequent short deployments which would increase the frequency of familyseparations would seem to some to contradict this assertion. (16) Deputy Undersecretary Henry also claimed a linkage with the 2005 BRAC round and theanticipated Quadrennial Defense Review (QDR) study, a study that Congress mandates DOD toaccomplish every four years to allocate missions and guide military procurement. (17) He did not, however,address the criticism that the first QDR performed after 9/11 should precede a realignment of globalbasing structure, rather than trail it by over a year. Likewise, the interaction of impacts from there-basing and from the relocations driven by the 2005 BRAC process have not been clearlyarticulated. While it is possible that basing arrangements optimized for Cold War adversaries maynot be suitable to counter current threats, the selection criteria for new base locations have not beendelineated. On August 15, 2005, the congressionally chartered Overseas Basing Commission releasedits final report. The Commission visited with senior military leaders, defense analysts, and seniorofficials from other government agencies, and traveled extensively for site visits. While theCommission concurred with the need to reshape the structure of U.S. overseas basing, in general,the report was critical of the DOD's overseas restructuring process and proposal. (18) There were several areas in which the Commission's report concurred with DOD. It laudedthe concept of transforming of the military from a Cold War structure to meet new requirements. Itagreed that the shifting of forces in South Korea and the return of most Army heavy forces fromCentral Europe was appropriate. It also supported the concepts of forward operating sites andcooperative security locations, with their reduced personnel and smaller infrastructure. TheCommission agreed that these arrangements would give more options in a crisis and moreopportunities to work with new allies, thus expanding positive U.S. influence. However, the report'smajor finding held that "the timing and synchronization of the global re-basing initiatives must berethought." (19) Chairman Cornella argued that DOD's plan overemphasized a purely military perspective,and neglected to fully reflect the concerns of all members of the national security interagencycommunity. For example, State Department concerns about opportunities to enhance alliancerelationships through exercises and exchanges and to exert political and diplomatic influence in theregions under review were allegedly given inadequate attention. The Commission believed thedesire to implement base withdrawals quickly, rather than specific strategic decisions andcoordination, seemed to be driving the selections. Further, the report held that the locations werepicked based on today's threats rather than a long term threat assessment. It expressed concern thatthe plan disregards the politics and values of some of the new potential allies, which might notdovetail with U.S. interests. (20) The report questioned the timing of the moves in a environment of fast-paced current militaryoperations. The Commission expressed concern that the strain of conducting this sweeping seriesof moves, while also conducting major conflicts in Iraq and Afghanistan has the potential to threatenthe capability of the force. Forces would either be preparing to deploy, deployed, or returning fromdeployment, while also trying to reestablish their unit's support structure, military personnel, andfamilies at new bases. Further, it viewed the pace of the aggressive time line proposed by DOD,projected as 2006 through 2011, as overly ambitious. (21) The Commission noted that mobility and equipment prepositioning were key to the successof the re-basing strategy. However, it expressed concern that current and projected strategic airliftand strategic sealift were inadequate for the Defense Department's concept, which relies heavily ontransporting troops to crisis areas rather than permanent forward basing. It also held that sufficientprepositioned supply stocks do not now exist. Most importantly, it argued that future budget plansfor projected sea and airlift procurement did not account for the re-basing plan's needs. (22) The report highlighted claims that the re-basing plan would harm the quality of life ofvolunteer military personnel. It noted that the military has insufficient plans to ensure both thatrequired support facilities at U.S. bases gaining personnel are in place for new personnel on arrival,and that facilities are preserved at the losing base overseas until the last person is gone. Thesesupport facilities include commissaries, exchanges, hospitals, and child care capacity on base, andoff base support capability provided by the local and state communities such as schools and housing. Without this support, young military families with limited incomes may suffer in areas of spouseemployment, family health, and cost of living. The Commission also argued that the heightenedtempo of temporary overseas rotations that is central to the plan will result in frequent familyseparations over the course of a career that could threaten retention and recruiting. The decision tostay in the military is very much a family decision, and when many child growth milestones aremissed, or a spouse experiences enough home emergencies and worry while the military member isdeployed overseas, the decision can tip to separation from the military. (23) Significantly, the report contended that the DOD might have underestimated the total costto implement their base realignment process. The Commission's independent analysis calculated a$20 billion bill for the moves, while the DOD has only budgeted $4 billion through 2011. Thedanger is that the services will need to spend from their operations and maintenance budget accounts(which should normally be used to buy day-to-day material such as expendable equipment, fuel, orammunition) to cover the difference. This could result in potential damage to force readiness, giventhe concurrent budget demands caused by combat operations in Iraq and Afghanistan. (24) The Commission, given all its reservations, recommended a slowing and reordering of thepace of overseas re-basing until that the acquisition of key capabilities, such as mobility andprepositioned supplies, required to support the new strategy had occurred. It also maintained thatbetter budget support for establishing forces at new locations (mainly back in the U.S.), such asfunding for the movement of people and equipment and building at these locations is required. Further preparatory activities were needed for local communities to absorb thousands of new militaryfamilies, such as support for additional schools and roads. (25) In general, the Commission held that a coherent national strategy did not sufficiently guidethe overseas posture review and that a formal national debate on the larger scope of Americansecurity post-Cold War should precede further re-basing moves. It argued that completion of the2005 Quadrennial Defense Review, the Base Realignment and Closure Commission report, and theMobility Capabilities Study (26) were key to providing an overall architecture for updating ouroverseas posture. The Commission strongly recommended diligent Congressional oversight of thisprocess to ensure a cohesive basing strategy. (27) The Defense Department responded to the Commission's report upon its release in May 2005. Principal Deputy Undersecretary for Policy Ryan Henry and Acting Under Secretary of the ArmyRay Dubois met with the press and delivered specific counterpoints to many of the report's findings. Mr. Henry rebutted the Commission's critique of the DOD choices for strategic dispositions. Wherethe Commission viewed the DOD selections as based on today's threats, he asserted that the conceptstrove to base the forces in locations that supported flexibility and speed of response to anywherein an unpredictable environment. (28) Critics may contend, however, to simply assert that future threatsare unpredictable sidesteps the challenge of articulating a strategic vision, which includes aprojection of anticipated threats. Mr. Henry also took issue with the Commission's argument that DOD had not sufficientlycoordinated the Global Posture Review across government agencies. He cited meetings with theregional combatant commanders that began shortly after the 2001 QDR, as well as consultations withthe Department of State, the National Security Council, and 45 briefings to Members of Congressand to committee staffs. He maintained that Congress had indicated satisfaction with the amountof oversight consultation to this point. He also highlighted visits to the leadership in over 20 foreigncountries that could be affected by the relocations. While he noted the number of meetings, he didnot indicate whether the briefings were in-depth or ongoing, nor the state of progress, particularlyregarding the delicate status of forces agreements that guide basing rules with the foreign countries. He stated that the Global Posture Review was intended to serve as a starting point to feed the 2005QDR, as well as the 2005 BRAC and the Mobility Capability Study, all of which were to becoordinated in parallel. Therefore, it would fall to the QDR to address the timing of lift procurementand other needed equipment acquisition to ensure it supports the Integrated Global Presence andBasing Strategy (IGPBS). However, since the QDR is intended to be the keystone documentoutlining DODs future strategic vision, selecting how the military will align its bases beforedetermining the strategy they are trying to achieve raises questions of appropriate sequence. Mr. Dubois disputed the Commission report's concerns that DOD was shortchanging militaryfamilies' quality of life. He responded that the re-basing plan's decisions were incorporated into theBRAC analysis. He noted that the DOD held discussions with the Department of Education, as wellas state governors and leaders of communities that would be vital partners in supporting returningpersonnel and dependents. He did not, however, indicate if additional impact aid for thesecommunities was planned. He also did not address plans to expand infrastructure on or near affectedinstallations. He held that the re-basing would give other payoffs to improve quality of life; notingthat the number of family permanent changes of station (PCSs) would be fewer, thus reducing theturmoil of overseas moves. Although reducing the number of PCS moves may offer greater stability,it assumes that all military bases are of equal desirability in their geographical location and facilities,which is often not the case. DOD also appears to assume the overseas stationing in permanentEuropean bases (such as Germany, Italy) are undesirable to military families, which is also often notthe case. In fact, the opportunity to periodically live overseas is, for some, an advantage of a militarycareer. Mr. Dubois also did not address, however, the stress that increased unaccompanied overseasdeployments would place on families, or the troops deployed at isolated, "bare-bones" locations. Neither official addressed the potential impact on recruiting or retention. Finally, Mr. Henry downplayed the disparity between the Defense Department's and theCommission's cost figures. He suggested that the Commission's study included costs that otherprograms in the defense budget covered, while DOD figures only focused on the additional costsdriven specifically by the moves. Mr. Dubois also noted that the military would eventually accruesavings in operations and maintenance accounts as they drew down from maintaining expensiveoverseas locations. Yet even if these costs will be covered by other programs in the budget, thereis no indication that the department has proposed an increase for those budget items, such asconstruction, airlift procurement, or sealift procurement. Further, it is unclear that the compensationthe U.S. would get from the new host nations would offset that currently received from establishedallies. Commonly, countries in which U.S. bases are located provide various forms of "host nationsupport." This could include basic utility services, construction, and even cash payments inrecognition of the benefit to local economies. However, many of the new locations, such asKyrgyzstan, are demanding payments from the U.S. to allow basing in their countries. Reaction to the Pentagon's plan continued to emerge from beyond the Commission. Alliance relationships formed one topic for debate. Historically, European allies have beenespecially desirous of keeping a significant U.S. presence, which they view as supporting Europeanstability and integration. Security guarantees to other allies have encouraged their support ofnon-proliferation regimes. Some critics, such as Philip H. Gordon at the Brookings Institution, fearthat moving forces away from long term allies to basing in nations less likely to restrain U.S. militaryoperations would give the Administration more latitude to take unilateral military action in futurecrises without consultation, thus further harming relationships and the U.S. image. (29) Others have reinforcedthe concern that the moves could erode ties with traditional, long term American allies, withparticular focus centered on the relationship with Germany. Some, such as [author name scrubbed] at the Centerfor Strategic and Budgetary Assessments, even suggested that the moves were intended aspunishment of Germany by the Bush administration for its opposition to U.S. operations inIraq. (30) At the sametime, it bears recognition that land restrictions and real estate costs for some U.S. allies has led tolimitations on training and exercises. Further, prudent U.S. relocations could reduce frictions withlocal populations, especially in Okinawa and South Korea. Advocacy groups for military personnel and families echoed the report's warnings regardingthe impact of the re-basing strategy on quality of life. Some, like Joyce Raezer of the NationalMilitary Family Association, suggested that DOD's record of preparation for past unit moves showedthat services were not ready for families at new locations, and that services closed before oldlocations were empty. Likewise, they fear the strain on civilian infrastructure, such as roads, schools,and housing, could cause problems with the relocations. For example, as a new brigade recentlyassumed posting at Fort Drum (Watertown, New York), soldiers had to move up to 75 miles awayfor housing. (31) Suchlong commutes will strain soldiers on shift work or delay their response in a crisis. Scarce housingalso could harm troops' standard of living, particularly for families where both adults are active dutymembers, or single parent households. It could also drive up rent costs for junior enlisted membersand could limit civilian spouse employment opportunities. For example, schools in Watertownbecame overcrowded, and the single hospital in town lacked capacity for the new patients. However,other larger communities, such as El Paso Texas, have expressed enthusiasm for the job growth andhomebuilding surge these moves would prompt. (32) Other Department of Defense transformational programs that interact with the IGPBScontinue to progress. The 2005 round of Base Realignment and Closure findings entered into forceon November 9, 2005. The BRAC Commission reviewed Pentagon proposals to close or realignover 800 installations. Most of the DOD BRAC list remained unchanged, with the Commissionadopting 86% of the DOD's proposal. Congress did not approve a resolution that would haveprevented the BRAC results from automatically entering into force (H. J. Res 65). However, DODwill not have implementation plans ready until early 2006. Closings must start by 2007, and mustbe complete by 2011. (33) The 2005 Quadrennial Defense Review (QDR) is under final review and scheduled to be sentto Congress on February 6, 2006. To spur movement on the contentious QDR study, acting DeputySecretary of Defense Gordon England recently directed Pentagon leadership to focus their analysison three core missions: homeland defense, global war on terrorism, and conventional major warfarein order to streamline deliberations from more than 160 issues originally nominated forconsideration. Ensuring sufficient "enabler" forces, which include logistics and mobility functions,remains a point of contention and is a critical aspect of QDR linkage with the Global PostureReview. With regard to force structure, reports indicate that in order to free funds for a potentialQDR call to increase Army and Marine forces for the war on terror, the Navy might drop from 11to 10 carrier battle groups. Secretary of Defense Rumsfeld had proposed this idea as early asSeptember 2004, but it would also seem to cut into the power projection and mobility conceptspivotal to the global re-basing strategy. (34) The Mobility Capabilities Study was completed at the end of July 2005 and DOD has beenbriefing the results to Congressional defense committees and staffers. Despite assumptions of achanged threat environment, the study finds that the currently planned program, which was shapedbefore the September 11, 2001 attacks, is sufficient to support national strategy. It argues that noadditional airlifters, sealift ships, or aerial refueling tankers are needed and calls for ending purchasesof C-17 and C-130J transports. It also requires retaining and modernizing all Air Force C-5transports, which historically have a poor availability rate. (35) The recommendation toend C-17 construction contradicts recommendations from former U.S. Transportation Commandcommander General John Hardy, who called for at least 42 more aircraft. (36) A September 2005Defense Science Board report also questioned the sufficiency of airlift and tanker capabilities andproposed that DOD should "keep open the option to acquire additional C-17s" given theunpredictable threat and budget environment. (37) In examining the DOD methodology behind the MobilityCapabilities Study, the Government Accountability Office also expressed concerns regarding thevalidity of the modeling and simulation tools used in developing the results. (38) Congress incorporated its concerns regarding the Global Posture Review into the FY2006National Defense Authorization Act (PL 109-163). Congress directed the DOD to submit a reportby March 30, 2006. This report would address selection criteria, a process for analyzing alternativelocations, and descriptions of minimum infrastructure for each the types of facilities envisioned. Thelegislation requires DOD to detail funding for these overseas locations in the annual budgetsubmission. Congress also ordered DOD to notify congressional defense committees when basingagreements are completed with foreign governments. One unidentified congressional stafferexpressed concern that the information DOD had forwarded to Congress has been too"subjective." (39) The FY2006 Authorization specifically addressed the mobility requirements for the overseasbasing plan and seemed to express skepticism regarding the findings of the Mobility CapabilitiesStudy. Congress included authorization for the Air Force to purchase up to 42 additional C-17airlifters. However, exercise of that authority is contingent on the DOD first conducting are-assessment of airlift requirements for national defense. This assessment must specifically takeinto account the structure proposed by the IGPBS. The legislation tasks DOD to submit thisassessment with the QDR, or up to 45 days after the QDR is delivered to Congress, if more time isrequired. (40) Congress also gave direction regarding the stateside infrastructure needs that would arisefrom returning forces. The FY2006 Authorization legislation also requires the Secretary of Defenseto consult with state and local governments, as it develops its global posture implementation plans,regarding infrastructure and support needs driven by personnel returning from overseas basing. (41) The legislation alsoincluded a Sense of the Congress that the quality-of-life support facilities should be ready at basesgaining personnel before they arrive, and maintained at closing bases until the personnel havedeparted. (42) Lastly, theFY2006 Authorization incorporated a Sense of the Congress that roads leading to militaryinstallations that gain significant numbers of personnel from the IGPBS or BRAC should bedesignated as defense access roads. (43) This section also directs the Secretary of Defense to conduct astudy of the surface transportation infrastructure around bases affected by BRAC and the IGPBS andits adequacy to support the gains from redeployments. That report is due to Congress by April 15,2007. (44) There have been several recent positive events that help the implementation of the GlobalPosture Review to move forward. On December 6, 2005, Secretary of State Rice signed anagreement with Romanian Foreign Minister Razvan Ungureanu to station U.S. forces at the MihailKogalniceanu air base near Constanta, on the Romanian Black Sea coast. U.S. forces would alsobe able to use the Babadag, Smardan, and Cincu training ranges. The new location would house theEastern European Task Force, with roughly 1,500 personnel. Reports indicate that negotiations forbasing in Bulgaria are also nearing conclusion. (45) The United States also concluded an agreement with Japanregarding operations on Okinawa. The agreement would relocate the 3, 000 Marines at Futenma toland to be reclaimed off-shore at Camp Schwab. (46) Other recent international developments potentially cast shadows on key assumptionsunderlying the Global Posture Review. There might be indicators of an international shift in thedegree of welcome extended by other countries to basing U.S. forces. For example, a statement bySouth Korean President Roh Moo-hyun would seem to place limits on the United States ability toemploy forces stationed in Korea to missions beyond the peninsula. (47) In another case,Kyrgyzstan has demanded a 100-fold increase (from $2 million to $200 million) in the rent theUnited States pays for use of Manas air base. Kyrgyz President Bakiyev had also been trying tocharge the United States an additional $80 million for jet fuel. The United States had already paidfor this fuel, but the payment was allegedly misappropriated by former President Akayev. The DODhas refused this additional charge, claiming the corruption is a Kyrgyz internal problem. The Kyrgyzgovernment has also begun agitating for compensation for claimed environmental damage due toaircraft emergency fuel dumping. (48) In yet another instance, Russian officials quickly expresseddismay at the recently concluded U.S. basing agreement with Romania. Russian Defense MinisterIvanov suggested that the move put the future of the Conventional Armed Forces in Europe (CFE)treaty in doubt and appeared to threaten withdrawal from the treaty. The State Department counteredthat the U.S. agreement was in compliance with CFE and other understandings with Russia. (49) Of particular concern to the re-basing plan are recent developments in Uzbekistan. On July29, 2005, the United States was formally notified that it had 180 days to leave its air base atKarshi-Khanabad, in Uzbekistan. This base has served as a vital hub for missions flown to supportoperations in Afghanistan, and was prototypical of the cooperative security locations envisioned inthe Pentagon re-basing plan. The last contingent of U.S. troops departed on November 21, 2005,ending four years of operations there. One reason for this eviction might have been StateDepartment pressure on the Tashkent government regarding recent human rights abuses. (50) Another reason for theeviction might have been encouragement from China and Russia, who have indicated increasingunease regarding U.S. military activity in the Central Asia region -- a region seen by the UnitedStates as strategically vital to the war on terror. Commentators contend that Russia, and particularlyChina, are exploiting the perception of U.S. support for democratic revolutions in Georgia and theUkraine as examples of a U.S. threat to the power of the area's authoritarian leaders, such asPresident Karimov in Uzbekistan. During the demonstrations that prompted the harsh Uzbekgovernment response and attendant U.S. criticism, China publicly expressed support for Karimov'sactions. Furthermore, shortly before the United States' eviction, Karimov visited Beijing, where hegarnered $1.5 billion in contracts and agreements between China and Uzbekistan. (51) Finally, the political and security climate in some locations proposed for U.S. forward basescould require a disproportionate amount of manpower be dedicated to local security requirements. For example, while President Hamid Karzai has signaled a desire for a permanent U.S. militarypresence in Afghanistan, an upsurge of violence killed seven U.S. troops in a four day period inAugust 2005. This increase of attacks also wounded two embassy staffers, four years after the defeatof the Taliban. (52) Othercountries reported to be under consideration for, or already hosting U.S. troops confront significantterrorist threats of their own. For example, the "Lord's Resistance Army" continues to stage brutalattacks in Uganda, with a limited cease-fire having failed at the beginning of the year. InTurkmenistan, a country under consideration to host the U.S. forces removed from Uzbekistan,government crackdowns on terrorists have led to accusations of major violations of human rights andcivil liberties curtailments. (53) The Overseas Basing Commission pointedly emphasized the importance of Congressionaloversight of the overseas basing realignment process. Some of the issues Congress may wish toconsider include the following: Does the IGPBS have adequate linkage to an overarching strategic framework agreed uponby all key government parties in the national security strategy process? While most may agree thata revision of the overseas basing structure left from the Cold War is overdue, some would argue thatdeveloping a re-basing strategy without completing the Defense Department's Quadrennial DefenseReview and achieving buy-in across government agencies and with Congress is premature. Thesemoves may have major impacts across many aspects of U.S. foreign and security policy. The lackof overarching strategy and analysis may also be construed by some to miss vital linkages inexecution timing and schedule, which could lead to implementation pitfalls in the future. Are the Defense Department's cost projections for the overseas realignment accurate? Willprojected savings outweigh the cost of realignment and associate systems procurement? The DODand the Overseas Basing Commission disagree on these points. Others might also contend thatproposing a re-basing strategy before completing the 2005 Base Realignment and Closure round andthe Mobility Capabilities Study could result in mismatches of supporting infrastructure or mobilityassets. The consequence could be a shift of these unfunded requirements onto the services, whichare already under pressure from the cost of ongoing combat operations. Is it feasible to conduct the basing realignment moves given the deployment tempo drivenby ongoing military operations in Iraq and Afghanistan? Units returning from combat deployments,only to immediately pack up families and relocate, can put immense burdens on an already stressedforce. This burden is exacerbated if the bases receiving new troops lack sufficient supportinginfrastructure. Can the services permanently sustain the long term pace of frequent deploymentsrequired by the strategy? At some undetermined point, members may experience enough degradedquality of life for their families, and endure such frequent separations, that retention or recruitingbegin to suffer. What will be the effect of the re-basing on the relationship with long term U.S. allies, suchas Germany, where a drawdown is proposed? Lack of presence could find the United Statesreducing its voice in European or Asian affairs, and finding it harder to motivate internationalcoalitions or support when needed. Have sufficient legal arrangements, such as status of forcesagreements and overflight rights, been negotiated in advance of the arrival of U.S. forces in new hostnations? The Overseas Basing Commission argued that the preliminary diplomatic legwork had notbeen fully accomplished. Do the political climates in the new host nations support U.S. values ofdemocracy and human rights? While some nations, such as Romania, have actively sought a U.S.presence, others, such as Uzbekistan, have ended those arrangements as soon as they begin to annoyor lose their profitability. Is the re-basing proposal affected by standing treaties to which the U.S.is a state party, such as the Conventional Forces in Europe treaty? Early evidence may indicate thatDOD and the State Department need to further examine potential treaty impacts. | On August 16, 2004, President Bush announced a program of sweeping changes to thenumbers and locations of military basing facilities at overseas locations, now known as theIntegrated Global Presence and Basing Strategy (IGPBS) or Global Posture Review. Roughly 70,000personnel would return from overseas locations from Europe and Asia to bases in the continentalUnited States (CONUS). Other overseas forces would be redistributed within current host nationssuch as Germany and South Korea, while new bases would be established in nations of EasternEurope, Central Asia, and Africa. In the Department of Defense's (DOD) view, these locationswould be better able to respond to potential trouble spots. The second session of the 109th Congresscould have to consider approval of the DOD proposal, or review appropriations requests forconstruction of infrastructure, increased impact aid to local communities, and new acquisitionprograms for mobility and logistics capabilities (such as airlift). Finally, the Senate may have toconsider ratification of new or revised treaties. In August 2005, the congressionally mandated Commission on the Review of OverseasMilitary Facility Structure of the United States (also known as the "Overseas Basing Commission")formally reported its findings. It disagreed with the "timing and synchronization" of the DODoverseas re-basing initiative. It also saw the initiative as potentially at odds with stresses on the forcefrom operations in Iraq and Afghanistan, and possibly hampering recruiting and retention. TheCommission questioned whether sufficient interagency coordination had occurred. It expresseddoubts that the military had enough airlift and sealift to make the strategy work, and noted that DODhad likely underestimated the cost of all aspects associated with the moves (DOD budgeted $4billion, the Commission estimated $20 billion). DOD disagreed with much of the Commission'sanalysis. Meanwhile, some have voiced concern that the DOD plan would harm long-standingalliance relationships, while others questioned DOD's plans to accommodate the thousands of troopsreturning to the U.S. Critics also argued that the 2005 Base Realignment and Closure (BRAC)round, which entered into force on November 9, 2005, and the Quadrennial Defense Review (QDR),which is to be completed in early 2006, should have been finalized before completing the overseasbasing plan. Congress acted on some of its concerns with the re-basing plan in the FY2006 DefenseAuthorization Act, tasking DOD with follow-on studies of overseas basing criteria and mobilityrequirements. It also directs DOD to further examine the state and local impacts on installationsgaining personnel from the re-basing implementation. Recent international diplomatic and security developments could further influence debate onoverseas basing. Uzbekistan, one of the test cases for the new strategy, recently evicted U.S. forcesfrom the base in that Central Asian nation. Some analysts argue this eviction was prompted byRussia and China, who have begun to express concern with U.S. expansion of influence in theregion. This report will be updated as necessary. |
Congress may continue to consider fiscal stimulus as unemployment remains high even though the economy is recovering from the 2007-2009 recession and a recent provision has been acted to avert much of the so-called fiscal cliff, a set of tax increases and spending cuts. Several types of tax cuts were partially or fully enacted for purposes of short run economic stimulus in the recent past (2001-2008). These tax revisions were the first in some time that were motivated, at least in part, by the need for expansionary fiscal policy. In the late 1990s, the economy experienced a protracted period of significant growth, and, in the decade prior to that most tax legislation addressed a need for deficit reduction (the objective of most tax change between 1982 and 1997, as was the case in the 1990 and 1993 tax changes) or a desire for structural change (in the 1986 and 1997 tax revisions). Different types of stimulus provisions were enacted in the period 2001-2008: the 2001 tax cut was aimed at individuals, but most of its provisions, especially the rate cuts, which were phased in over a number of years, were not based on the recession that was apparent in 2000 and that appeared in the spring of 2001. When concerns about the economy continued towards the end of 2001 and in 2002, the Congress enacted bonus depreciation. And, in 2003, the tax provision advanced to stimulate the economy was a reduction in dividend taxation. In February 2008, a stimulus package containing a rebate similar to the 2001 rebate, and bonus depreciation, was adopted. In February 2009, as the recession continued, a package consisting of a mix of spending and tax cuts was adopted (the American Recovery and Reinvestment Act). In this case, the income tax cut was in the form of a two-year income tax cut that appeared in withholding rather than a rebate, in part in response to views of some economists that lump-sum rebates were less effective. During 2010 as unemployment continued to be high, no general individual tax cuts were enacted, although in March 2010, a temporary credit against payroll taxes was allowed to employers for hiring workers who had been unemployed. This tax provisions was small compared to the 2008 and 2009 tax cuts ($13 billion). Bonus depreciation was extended, but that extension was largely retroactive. In December of 2010, a package that extended the Bush tax cuts for two years and provided for a one-year reduction in payroll taxes for workers was adopted ( P.L. 111-312 ). It also increased bonus depreciation to 100% for 2011, returning to 20% in 2012. In recent legislation, to address the fiscal cliff, most of the 2001 and 2003 tax cuts were made permanent (except for very high income taxpayers), including rate cuts and dividend reductions. Bonus depreciation was extended for a year, but the payroll tax was not extended. Of course, the policy issues did not solely reflect the need for short run stimulus. However, the crucial element in evaluating alternative provisions is whether they induce spending. This report discusses the rebate and bonus depreciation as mechanisms for stimulating the economy in the short run based on evidence of the effectiveness of these proposals in expanding spending. The findings reported below suggest that one-time rebates are effective in stimulating spending, and that the effects of tax cuts are largest in lower-income households, while provisions directed at businesses and investment income may have more limited effects. The 2001 tax cut was not primarily enacted because of concerns about a recession and most of the provisions were phased in over a number of years. However, concerns about a slowing economy did motivate the advance tax rebate provided in 2001. Because the tax cut was enacted close to mid-year (in May) it was difficult to provide a tax cut for 2001 that could be reflected appropriately in withholding. By the time withholding changes could be put into place, much of the year would have passed and either withholding changes would be inadequate (deferring tax cuts until returns were filed the following year), or if made larger to compensate for the partial year effect would have resulted in a withholding increase for some taxpayers at the beginning of 2001. The rebate proposal provided for the mailing out of checks to taxpayers in the fall of 2001 that were advance reductions for the introduction of a 10% rate bracket for 2001. They were, however, based on taxpayers' 2000 tax returns and any excess credits did not have to be repaid when returns for tax year 2001 were filed. (Taxpayers whose credits were smaller than those allowed on 2001 returns, however, received additional relief when tax returns were filed). The checks were mailed out between July and October. The rebate met some important standards for an effective tax cut stimulus. Unlike many stimulus proposals in the past, particularly in the 1960s and 1970s, where the stimulus occurred during the recovery rather than the recession phase (potentially adding to inflationary pressures), its impact occurred during the recession. In addition, tax cuts are most effective as a stimulus if they are spent, and the tax reductions affected lower and moderate income taxpayers who have a high propensity to spend. At the same time, there was some concern that lump sum payments might be spent in the same fashions as a continued increase in income through tax reductions. There was some evidence that temporary rebates in the past were not spent. It appears, however, that most of the rebate was spent fairly quickly: at least 20% to 40% in the quarter received and two-thirds by the end of the second quarter after receipt. Studies of the 2001 rebate also point to the importance of directing the rebate to households with low incomes and with fewer liquid assets. In the study by Johnson, Parker, and Souleles, households with low incomes were estimated to have increased spending by more than the rebate, while middle-income individuals spent less than 20%. Households with few liquid assets also increased spending more. Another study found that households with lower credit card limits, or who were near their limits, or used their credit cards intensively, increased spending the most. The Joint Tax Committee study discusses some important administrative issues surrounding a cash rebate. Following the September 11, 2001, attacks, concerns once more arose about the economy. A tax package proposal that included a business tax cut in the form of reduction in the corporate alternative minimum tax and an acceleration of rate reductions failed to achieve passage in 2001. In 2002, a bill was adopted and the centerpiece, as far as tax provisions were concerned, was a temporary, two-year, provision for bonus depreciation. This provision, responding to a concern about lagging business investment, allowed businesses to deduct 30% of the cost of most business equipment purchases when incurred rather than depreciating them over several years (typically five to seven years). Bonus depreciation was increased to 50% in 2003 and extended through 2004. Among the business tax incentives, a temporary investment subsidy should have the most "bang for the buck." By directing the subsidy at investment, the stimulus does not provide a windfall for existing capital. By making the provision temporary there is an incentive to make investment now rather than later. Nevertheless, a study of the effect of temporary expensing by Cohen and Cummins at the Federal Reserve Board found little evidence that bonus depreciation was effective in stimulating investment. They suggest several potential reasons for a small effect. One possibility is that firms without taxable income could not benefit from the timing advantage. In a Treasury study, Knittel confirmed that firms did not elect bonus depreciation for about 40% of eligible investment, and speculated that the existence of losses and loss carry-overs may have made the investment subsidy ineffective for many firms, although there were clearly some firms that were profitable that did not use the provision. Cohen and Cummins also suggested that the incentive effect was quite small (largely because depreciation already occurs relatively quickly for most equipment), reducing the user cost of capital by only about 3%, that planning periods may be too long to adjust investment across time, and that adjustment costs outweighed the effect of bonus depreciation. Knittel also suggests that firms may have found the provision costly to comply with, particularly because most states did not allow bonus depreciation. A study by House and Shapiro found a more pronounced response to bonus depreciation, given the magnitude of the incentive, but found the overall effect on the economy was small, which in part is due to the limited category of investment affected and the small size of the incentive. Their differences with the Cohen and Cummins study reflect in part uncertainties about when expectations are formed and when the incentive effects occur. A study by Hulse and Livingstone found mixed results on the effectiveness of bonus depreciation, which they interpret as weakly supportive of an effect. One issue that these studies do not provide insight to is the desirable length of time to allow the temporary provision. If the time is too long, the provision is not very effective because the stimulus may be delayed, but if it is too short firms do not have time to make adjustments. Cohen and Cummins also report the results of several surveys of firms, where from 2/3 to over 90% of respondents indicated bonus depreciation had no effect on the timing of investment spending. Overall, bonus depreciation did not appear to be very effective in providing short-term economic stimulus. It is possible, however, that a stimulus during current times, when losses are not as large as they were in 2002-2004 when the economy was already in a recession, could be more successful. The February 2008 stimulus package included an individual tax rebate. Unlike the 2001 rebate, this rebate provided for refundability for taxpayers with at least $3,000 of earnings, Social Security benefits, or veterans benefits. It also included bonus depreciation of 50% for one year. In a preliminary study of households, Broda and Parker found that 20% of the rebate was spent in the first month. They predict that the 2008 rebate will have a significant effect on spending in subsequent months. Their study also found higher levels of spending for lower income households and those with fewer liquid assets. Parker, Souleles, Johnson, and McClelland, examining the timing of payments and spending, found 12% to 30% was spent on consumption in the first three months, and adding spending on consumer durables raised the share to 50% to 90%. They also found that a larger fraction of the payment was spent by lower-income households. Finally, they tested whether self-reporting provided a reliable measure of spending and concluded that self- reporting understated the amount of spending. | Although the economy is recovering from the 2007-2009 recession, unemployment continues to be high and further stimulus may be considered in the 113th Congress. Recent legislation in the American Taxpayer Relief Act of 2012 (P.L. 112-240) averted part of the so-called "fiscal cliff," a set of tax increases and spending cuts that were scheduled to occur at the beginning of 2012. Shortly a decision must be made about continuing with sequestration, a set of automatic spending cuts that were delayed by two months by P.L. 112-240. In addition, while most changes were permanent, bonus depreciation was extended for only a year. Stimulus (or avoiding contraction) could include individual tax cuts and business tax provisions. In recent years, several different types of short run fiscal stimulus measures have been enacted: an individual income tax rebate in 2001, a temporary investment incentive (bonus depreciation) in 2002, and dividend relief in 2003. The February 2008 stimulus included a rebate, bonus depreciation, and small business expensing. A stimulus adopted in February 2009 included a large component of spending, but also extended bonus depreciation and small business expensing. It also enacted an income tax credit that was spread over two years. In December of 2010, in addition to temporarily extending the expiring Bush tax cuts and unemployment compensation, a temporary one-year payroll tax credit was adopted. This payroll credit was extended through 2012, but was not extended by P.L. 112-240. Two types of stimulus provisions have been subject to specific empirical study. They suggest that the 2001 and 2008 rebates were an effective stimulus but bonus depreciation had a limited effect. They also suggest that tax cuts directed to lower-income households are more likely to be effective in stimulating spending. Bonus depreciation was extended for another year by P.L. 112-240, and a large share of other provisions affected high income taxpayers. Thus many of the tax increases averted by the legislation probably had small effects on the economy. |
As of January 2011, there have been four Directors of National Intelligence (DNIs). On April 21, 2005, Ambassador John Negroponte was confirmed as the first DNI, a position established by the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108 - 458 ; hereinafter, the Intelligence Reform Act). There was considerable media speculation at the time as to whether the new DNI would have the authority necessary to effectively manage the intelligence community, long viewed by observers as more of a loose confederation of 16 separate intelligence entities than an integrated community. On January 22, 2007, Ambassador Negroponte was nominated as Deputy Secretary of State, and retired Admiral J. Michael McConnell was confirmed as his successor on February 7, 2007. Retired Admiral Dennis C. Blair became the third individual to serve as DNI when he was confirmed on January 28, 2009. On May 20, 2010, Blair announced his resignation as DNI effective May 28, 2010. On August 9, 2010, retired Air Force Lt. General James R. Clapper, Jr. was sworn in as the fourth DNI, having previously served as the Under Secretary of Defense for Intelligence. Historically, the Director of Central Intelligence (DCI) had three primary responsibilities that were codified in the National Security Act, as amended. First, the DCI was responsible for providing national intelligence (as opposed to tactical intelligence for military commanders) to the President and other senior officials, and "where appropriate," to Congress. Second, the DCI served as head of the intelligence community with authorities to establish priorities for collection and analysis, to develop and present to the President the annual budget for national intelligence programs, and, within tightly prescribed limits, to transfer funds and personnel from one part of the National Foreign Intelligence Program (NFIP), renamed the National Intelligence Program (NIP) under the Intelligence Reform Act, to another. And, third, the DCI served as head of the Central Intelligence Agency (CIA), directing the collection of information by human sources, supervising the wide-ranging analytical efforts of the CIA, and, when directed by the President, undertaking covert actions. Many outside observers, Members of Congress, and various commissions over the years argued that the DCI position was unworkable. They contended that DCIs, frustrated by the challenges involved in managing the entire intelligence community, focused narrowly on the CIA, and that the result was an ill-coordinated intelligence effort that has poorly served the nation. Some also asserted that DCIs lacked adequate legal authorities to establish priorities and to ensure compliance by intelligence agencies beyond the CIA. In particular, it was suggested that major intelligence agencies in the Department of Defense (DOD)—the National Security Agency (NSA), the National Reconnaissance Office (NRO), and the National Geospatial-Intelligence Agency (NGA)—have been more responsive to the needs of the military services than to the requirements of national policymakers. And, finally, some observers, while conceding that DCI authorities under the National Security Act were limited, nevertheless contended that DCIs failed to fully assert their authorities, particularly when their priorities conflicted with those of the Secretary of Defense, viewed by many as the dominant voice in the intelligence community because of the Secretary's control over an estimated 85% of the intelligence budget. In July 2004 the National Commission on Terrorist Attacks Upon the United States (9/11 Commission) recommended that the DCI position be replaced by a National Intelligence Director to manage the national intelligence program and oversee the agencies that contribute to it. In response, a number of bills were introduced and, after extended deliberations, Congress approved and the President signed on December 17, 2004, the Intelligence Reform Act. It established the new position of DNI along with a separate head of the CIA. Having accepted this principle, however, there were significant differences of opinion about the particular authorities that should be given to the DNI, especially with regard to the preparation and execution of the budgets of the large intelligence agencies in DOD. These differences were addressed by a provision in the act (§1018) requiring that the President issue guidelines to ensure that the DNI's authorities are exercised in a way that "respects and does not abrogate the statutory responsibilities" of other departments. No such guidelines have been issued. Some maintain that this reflects the fact that in asserting his existing authorities, the DNI has not done so in a way that has caused DOD or other agencies housing intelligence components to call for the issuance of the guidelines. The Intelligence Reform Act assigns to the DNI two of the three principal responsibilities formerly performed by the DCI. The DNI will provide intelligence to the President, other senior officials, and Congress, and the DNI will head the intelligence community. But, unlike DCIs, the DNI will not oversee the CIA. Rather, the act establishes the new position of Director of the Central Intelligence Agency (DCIA), who will report to the DNI. The act also restates the major responsibilities of the DCIA, which include (1) collecting intelligence through human sources and by other appropriate means (but with no police, subpoena, or law enforcement powers or internal security functions); (2) correlating and evaluating intelligence related to the national security and providing appropriate dissemination of such intelligence; (3) providing overall direction for and coordination of collection by human sources outside the U.S., in coordination with other government departments; (4) performing other functions and duties related to intelligence affecting the national security as the President or DNI may direct (a formulation that, some observers believe, is intended to encompass the planning and carrying out of covert actions); and (5) under the DNI's direction, coordinating relationships between U.S. intelligence services and those of other countries. In April 2007 DNI McConnell reportedly told a conference of federal officials that he lacked sufficient authority to lead the 16-agency intelligence community, citing his lack of direct line management authority over every intelligence agency except CIA, because each was a part of another Cabinet-level department. The same month, the executive branch submitted an FY2008 Intelligence Authorization Act that would have strengthened the DNI's authorities. DNI McConnell also announced a "100 Day Plan," an initiative intended to improve integration and collaboration within the intelligence community by revising "existing statutes, regulations, and directives," as part of an effort to "delineate clearly the roles and responsibilities of the heads of intelligence community components, as well as to clarify DNI authority regarding national intelligence agencies." In doing so, McConnell conceded that the Intelligence Reform Act had "significantly clarified and strengthened DNI authorities," but that IC leadership had "not fully defined those authorities in guidance" to the intelligence community. To in part address this deficiency, in 2008 President George W. Bush revised Executive Order (EO) 12333, which generally defines the IC's roles and mission. During Senate confirmation proceedings in January 2009, DNI Blair said he would withhold judgment as to whether the DNI's authorities were sufficient until he had been confirmed and been able to exercise his authorities. But he stated that he would exercise those authorities to the fullest and would advise the President and Congress if he concluded that he needed more. Similarly, Gen. Clapper in prepared testimony in July 2010 stated that he had no plan to recommend any "dramatic change to what we have today—but, rather, [I] would work to improve it." The two congressional intelligence committees appear to have taken somewhat differing approaches to the issue of DNI authorities. In its version of the FY2008 Intelligence Authorization Act, the Senate Intelligence Committee approved several proposals intended to strengthen the DNI authorities, while the House Intelligence Committee in its version adopted a more limited number of new authorities and expressed disappointment that the DNI had not played a more aggressive role in coordinating the intelligence community using his existing authorities. The Senate FY2009 bill would have given the DNI several new authorities, including the authority to increase employee compensation; expand from one year to up to three years the length of time the U.S. government personnel may be detailed to the DNI's office on a non-reimbursable basis; convert competitive service positions and incumbents within the intelligence community to excepted positions; provide enhanced pay authority for critical position in portions of the intelligence community where that authority does not exist; authorize intelligence community elements, under certain circumstances, to adopt compensation, performance management, and scholarship authorities that have been authorized for any other intelligence community element; conduct accountability reviews of significant failures or deficiencies within the intelligence community; use National Intelligence Program funds to address deficiencies or needs that arise in intelligence information access or sharing capabilities; delegate to certain senior officials the authority to protect intelligence sources and methods from unauthorized disclosure; and approve interagency financing of national intelligence centers. The House bill would have provided the DNI with a more limited number of new authorities, including the authority to increase employee compensation; and expand from one year to up to three years the length of time the U.S. government personnel may be detailed to the DNI's office on a non-reimbursable basis. The House report did not explicitly address DNI authorities. In a report accompanying the FY2008 intelligence report, however, the House Intelligence Committee noted its disappointment that DNI "has not assumed a more directive role in coordinating the Intelligence Community." The committee also expressed its concern that the DNI "has not taken a consistent approach on whether the Office of the Director of National Intelligence (ODNI) will serve as coordinator, or executor, of Intelligence Community functions" and that the DNI "remains unable to set goals and requirements for important skills, including foreign language capability." While both committees included in their respective FY2009 authorization bills DNI authority enhancements that were virtually identical to those each chamber had approved the year before, and the House approved its version, the full Senate did not act on an authorization bill reported by the Senate Intelligence Committee. Congress did not approve an FY2009 intelligence authorization bill. In September 2010 both the House and Senate passed intelligence authorization legislation for FY2010 and the bill was signed by President Obama on October 7 th . Although there was not an accompanying annex specifying authorized levels of expenditures inasmuch as FY2010 was nearing its end, the act included a number of legislative provisions that serve to enhance the DNI's authorities as well as provide to congressional oversight committees additional visibility into the Nation's intelligence effort. Principally, the act provided that the DNI can undertake accountability reviews of individual intelligence agencies as well as assessing appropriate personnel levels. He is to conduct initial vulnerability assessments of each major new system, review changes in acquisition costs, and terminate programs unless they are essential as set forth in assessment forwarded to Congress. The DNI is also to submit budget projections, Future Years Intelligence Plans in coordination with the Office of Management and Budget. Taken together, these new provisions give the DNI greater management authorities over the entire Intelligence Community by supplementing provisions of the 2004 Intelligence Reform Act. Intelligence authorization legislation for FY2011 and FY2012, P.L. 112-18 and H.R. 1892 , respectively, has not included extensive provisions on the authorities of the DNI, but rather reflects the intelligence committees' ongoing oversight of existing authorities. To strengthen the DNI's authority, Congress in 2004 approved the Intelligence Reform Act, providing the DNI additional powers in certain areas, including in those of personnel, tasking, and acquisition. Arguably, most important, the act enhanced the DNI's control over the budgets of the intelligence community's 16 agencies. According to one observer, the DCI through the years had "been pressing his nose against the glass looking in," having never possessed the budget clout some argue the DNI now possesses. Other observers acknowledge that the act provided the DNI more authority, but question whether this enhanced authority will be sufficient and whether the DNI will aggressively assert it in any case. The Intelligence Reform Act accords the DNI several new and enhanced budget authorities that were unavailable to DCIs. First, it provides that at the DNI's exclusive direction, the Director of the Office of Management and Budget (OMB) shall "apportion," or direct, the flow of congressionally appropriated funds from the Treasury Department to each of the Cabinet level agencies containing intelligence community elements. This change is designed to strengthen the DNI's control over intelligence community spending. If, for example, an agency fails to comply with certain of the DNI's spending priorities, the DNI can withhold that agency's funding. DCIs had no such authority. Second, the DNI is authorized to "allot" or "allocate" appropriations directly at the sub-Cabinet agency and department level, providing the DNI additional control over spending. If a departmental comptroller refuses to act in accordance with a DNI spending directive, the law requires that the DNI notify Congress of such refusal. DCIs had no such authority or reporting obligation. Third, the DNI is authorized to "develop and determine" the National Intelligence Program (NIP) budget. By contrast, DCIs were authorized to " facilitate [emphasis added] the development" of the intelligence community's annual budget. Fourth, the DNI is authorized to "ensure the effective execution of the budget," and to monitor its implementation and execution. Except in the case of the CIA, DCIs had no such authority. Fifth, the DNI is authorized to provide budget guidance to those elements of the intelligence community not falling within the NIP. Again, DCIs had no such authority. Notwithstanding these stronger budget authorities, the DNI's power to influence and shape DOD intelligence spending is generally seen as more extensive but not necessarily different in kind than those exercised by DCIs. More than any other Cabinet official, the Secretary of Defense has substantial budgetary and administrative authorities that were not "abrogated" by the 2004 legislation. The Intelligence Reform Act authorizes the DNI to "participate in the development by the Secretary of Defense of the Joint Military Intelligence Program and the Tactical Intelligence and Related Activities Program." The role of DCIs in such activity was also "participatory" in nature. In 2010, DNI Clapper expressed an intention to prepare and submit a National Intelligence Program budget independent of the Defense Department budget, but, after expressions of concern within the House of Representatives, he has not implemented this proposal. The DNI, with OMB approval, is authorized to transfer or reprogram NIP funds after affected department heads, or in the case of the CIA, its director, have been "consulted." DCIs, by contrast, were permitted to transfer such funds, but only if the affected parties did not object. The DNI, with OMB approval, is authorized to transfer personnel within the intelligence community for periods not to exceed two years. Before doing so, however, the DNI is required to jointly develop with department and agency heads procedures to govern such transfers. DCIs, by contrast, could transfer such personnel only if the affected parties did not object and only for periods up to one year. The Intelligence Reform Act gives the DNI expanded appointment authority and increases the number of positions over which the DNI can exercise such authority. Specifically, the DNI's "concurrence" is required before a department or an agency head having jurisdiction over a certain appointment can appoint an individual to fill such a vacancy, or recommend to the President an individual to be nominated to fill the such a vacancy, as the case may be. Absent DNI concurrence, the DNI, or the department head, may advise the President directly of such nonconcurrence. DCI appointment authorities were more limited, both in terms of the degree of concurrence authority and with regard to the number of positions over which the DCI exercised such authority. The DNI is authorized to serve as the exclusive milestone decision authority on major acquisitions, except with respect to DOD programs, in which case the DNI shares joint authority with the Secretary of Defense. DCIs had no such statutorily based authority. The DNI is authorized to "manage and direct the tasking of, collection, analysis, production, and dissemination of national intelligence ... by approving requirements and resolving conflicts." Although DCIs were authorized to exercise certain collection authorities, statutory authorities did not explicitly address analysis, production, and dissemination authorities. The Intelligence Reform Act establishes a hybrid structure, one in which the NCTC director reports to the DNI with regard to counterterrorism intelligence analysis and operations, and to the President with regard to the development and coordination of national interagency counterterrorism policy. The act specifically stipulates that the NCTC director reports to the President, rather than to the DNI, with respect to "planning and progress of joint counterterrorism operations (other than intelligence operations)." While DCIs had unqualified control over the DCI's Counterterrorism Center, the authorities of the DCI's Center's authorities did not extend beyond the intelligence community, whereas certain of NCTC's authorities, by contrast, extend across the executive branch. Some observers suggest that the new and enhanced authorities described above could be interpreted differently by different agencies. They note that Section 1018 of the act requires that the President issue guidelines to ensure that the DNI's authorities are implemented "in a manner that respects and does not abrogate the statutory authorities" of other departments. Although such guidelines have not been promulgated, as was noted earlier, some observers believe that if such guidelines were to be issued, they could serve to weaken the DNI's authorities. Some commentators have suggested that ambiguities exist within the Intelligence Reform Act that cover complex relationships among disparate agencies with their own statutory authorities. In such a situation, much will undoubtedly depend on how the DNI understands his position, and on the patterns of cooperation and deference that are set in his tenure. The 112 th Congress may be interested in the relationships between the DNI and the Defense Department and the law enforcement community. Whether the DNI's authorities under the act are sufficient to meet the responsibilities set forth in the 2004 act is subject to differing assessments. What is clear, however, is that the statute provides the DNI substantially more authority—not only in regard to the budget, but also in the areas of personnel, tasking, and acquisition—than DCIs had under the National Security Act of 1947, as amended. Just how much more overall authority the DNI actually wields will likely depend on several factors. Among them: (1) will the DNI aggressively assert the new authorities? (2) will the President and Congress back the DNI if he does? and (3) will the DNI successfully establish a transparent intelligence community budget process that will permit him to make and effectively enforce informed budget decisions? | In passing the Intelligence Reform and Terrorism Prevention Act of 2004 (P.L. 108-458) in 2004, Congress approved the most comprehensive reform of the U.S. intelligence community since it was created over 50 years ago. Principal among enacted changes was the establishment of a new position of the Director of National Intelligence (DNI) to serve as head of the intelligence community (IC) and principal adviser to the President on intelligence matters related to the national security and to oversee and direct the implementation of the National Intelligence Program. Some observers have questioned whether the act provides the DNI the authority necessary to effectively carry out these responsibilities. Others assert that the DNI's authorities are significantly stronger than those of the former Director of Central Intelligence (DCI), but suggest that DNIs have failed to aggressively assert the authorities they have been provided. During his Senate confirmation proceeding in January 2009, DNI Dennis C. Blair said that he would withhold judgment as to whether his authorities were sufficient but over time would advise the President and Congress if he concluded they were not. He also assured Senators that he would exercise his authorities to the fullest. The abrupt announcement of his resignation in May 2010 suggested to some that he had been unable to exercise his authorities to meet his responsibilities and, for some, raised questions about the viability of the DNI position. In 2007, Admiral Blair's predecessor, DNI Michael McConnell, acknowledged his authorities were stronger than those of the DCI and conceded that he had not issued certain guidance to the IC clarifying the new authorities (the subsequent 2008 revisions to EO 12333, initiated by DNI McConnell, were intended to provide such guidance). Nevertheless, he argued that effectively managing the IC would require authorities in addition to the ones Congress approved in 2004. The FY2010 Intelligence Authorization Act (P.L. 111-259), signed by President Obama on October 7, 2010, provided a number of enhancements to the DNI's authorities. He is required to assess personnel levels at all intelligence agencies and forward them to Congress at the same time as the President's budget submission. He is also required to undertake initial vulnerability assessments of each major system and is provided with authority to assess critical cost growth in major systems and terminate programs unless Congress is provided with an explanation. The DNI is further granted authority to conduct accountability reviews of elements of the Intelligence Community. These new authorities enhance those included in the Intelligence Reform Act and provide the DNI with additional tools to coordinate all intelligence agencies. While the DNI's authorities are stronger than those that were available to the DCI, whether they are sufficient to implement the 2004 intelligence reforms mandated by Congress, it has been argued, will continue to depend on several factors, including the degree to which the authorities themselves are adequate, the DNI's willingness to assert those authorities, and the extent to which the DNI receives presidential and congressional support. The provisions in the FY2010 Intelligence Authorization Act permit more extensive congressional oversight in the 112th Congress. |
No. Congress wrote restrictions that would have prevented the closure of military installations without prior congressional action into several National Defense Authorization Acts during the 1960s and 1970s, but each of these bills was vetoed. Nevertheless, Congress has been able to place in statute provisions that delay actions to reduce operations at or close installations that employ civilians above certain numbers. What is commonly referred to as a "BRAC (Base Realignment and Closure) round," a comprehensive reduction of Department of Defense (DOD) real property, has been carried out under the provisions of temporary statutes. The authorization for the most recent BRAC round expired on April 16, 2006. As outlined below, the President and his subordinates have considerable existing authority to close military installations. Article II, Section 2, of the Constitution appoints the President as the commander in chief of the Army, the Navy, and the state Militias (National Guards) when they are called into federal service. This gives the President the authority to deploy those forces, which in common practice has included creating and closing the installations needed to house and train them. Title 10 of the United States Code encompasses laws pertaining to the federal armed forces. Section 113 of Title 10 (10 U.S.C. §113) creates a Secretary of Defense, who is the principal assistant to the President in all matters relating to DOD and who has authority, direction, and control over the department. The Secretary is second to the President in commanding operational military forces. Other sections within Title 10 create the secretaries of the military departments (Army, Navy, and Air Force). These offices are under the authority, direction, and control of the Secretary of Defense, and their statutory powers include the administration of federal real property (facilities and land) needed to carry out the functions of their departments. The authority to create, realign, or close installations under their administration has commonly been held to be one of those powers. Article I, Section 8, of the Constitution gives the Congress the authority to raise revenues and pay the debts of the United States, to provide for the common Defense, and to raise armies, maintain a Navy, and regulate the Militias when called to federal service. Therefore, Congress funds the operations of DOD through its annual defense and military construction appropriations acts and sets DOD organization and policy through the annual National Defense Authorization Act. Through this legislation, Congress authorizes the acquisition and transfer of title of military real property; funds the construction, maintenance, and operation of military installations; empowers DOD to waive statutory requirements in the disposal of property, and otherwise enables DOD to shape and maintain its infrastructure inventory. Nevertheless, primarily because the President and his subordinates have been responsible for the deployment of military forces, Congress has been hesitant to direct the creation or disestablishment of specific military installations. Yes. Congress has passed, and the President has enacted, restrictions on presidential powers to close military installations using the annual appropriation and defense authorization bills. Yes, some are. Principal among them are 10 U.S.C. §2687 (Base Closures and Realignments), enacted in 1977, and 10 U.S.C. 993 (Notification of Permanent Reduction of Sizable Numbers of Members of the Armed Forces), enacted in 2011. These sections impose a "notify, evaluate, and wait" process on the Secretary of Defense and the secretaries of the military departments before they may take actions to close or realign any military installation that meets certain criteria. Under 10 U.S.C. §2687 , for military installations at which at least 300 civilian personnel are authorized to be employed, the Secretary of Defense or a secretary of a military department may take no action to carry out a closure until he submits to the Committees on Armed Services of the House and Senate 1. notification of the closure as part of the department's annual request for appropriations; 2. an evaluation of the fiscal, local economic, budgetary, environmental, strategic, and operational consequences of the closure; 3. the criteria used to consider and recommend the military installation for closure; and 4. a period of 30 legislative days or 60 calendar days, whichever is longer, expires following the day on which the notice and evaluation is submitted to the committees. The statute defines a realignment as any action that both reduces and relocates functions and civilian personnel positions. Exempted from the definition of a realignment is a reduction in force resulting from workload adjustments, reduced personnel or funding levels, skill imbalances, or other similar causes. For realignments at installations of at least 300 authorized civilian positions, it imposes the same restrictions on the secretaries as a closure if the realignment involves a reduction by more than 1,000, or by more than 50%, in the number of civilian personnel authorized to be employed there. The section also bans the preparation of any facility at another military installation intended to accept employees relocated by the closure or realignment until the four conditions listed above have been fulfilled. While Section 2687 is predicated on the predicted reduction of civilian employees at an installation, 10 U.S.C. §993 lays out a similar, though slightly different, process where a reduction in uniformed military personnel is involved. Section 993 prevents the secretaries concerned from taking any irrevocable action to implement a reduction of more than 1,000 members of the armed forces at an installation until they 1. notify the Committees on Armed Services of the reduction (there is no restriction on when such notification may be given); 2. justify the reduction and evaluate its local strategic and operational impact; 3. wait for a period of 21 days after the notification is submitted (14 days if submitted in electronic format). Both statutes state that they do not apply in cases where the actions are being taken for reasons of national security or a military emergency No. U.S. Joint Forces Command, a major combatant command, was headquartered in several military installations in the Hampton Roads, Virginia, area. During August of 2010, Secretary of Defense Robert Gates announced that the command would be disestablished and its headquarters staff would be disbanded, an event that occurred on August 31, 2011. Although the civilian employment within the headquarters exceeded the number needed to invoke Section 2687, it was not concentrated on a single installation. Rather, the disbandment represented either a reduction in force or a realignment at each of the several installations it affected. At none of the installations did the reduction in numbers reach a realignment threshold. Section 993, pertaining to the number of uniformed personnel, was not enacted until after JFCOM was disestablished. Therefore, there was no statutory requirement for congressional notification and justification. No. As outlined earlier, BRAC has been a process established under specific authorization from Congress that has been time-limited. There have been five distinct BRAC rounds, of which the last four have been carried out under the provisions of the Defense Base Closure and Realignment Act of 1990, as amended. The authority under that act expired on April 16, 2006. Therefore, there can be no future BRAC round until and unless Congress passes and the President signs legislation that specifically authorizes one. Because the relevant statutory authority has expired any such future round need not follow processes used in prior rounds. The issues involved with the closing of any military installation can cover a range not necessarily restricted to those regarding real property. For questions related to the following broad areas, please consult with the following CRS experts: 1. Military personnel, manpower, pay, benefits: [author name scrubbed], Specialist in Military Manpower Policy ( [email address scrubbed] , [phone number scrubbed]) 2. Defense budget, policy: [author name scrubbed], Specialist in U.S. Defense Policy and Budget ( [email address scrubbed] , [phone number scrubbed]) 3. Military construction, installations, BRAC: [author name scrubbed], Specialist in National Defense ( [email address scrubbed] , [phone number scrubbed]). | These FAQs examine the provisions in the Constitution and in permanent statute that define and limit federal authority to disestablish or diminish employment at defense sites. They do not discuss the special, temporary BRAC (Base Realignment and Closure) process that Congress has periodically authorized for the reduction of defense infrastructure. |
Federal assistance to public transportation is provided primarily through the public transportation program administered by the Federal Transit Administration (FTA). The federal public transportation program was authorized through FY2014 as part of the Moving Ahead for Progress in the 21 st Century Act (MAP-21; P.L. 112-141 ) and extended through May 31, 2015, as part of the Highway and Transportation Funding Act of 2014 ( P.L. 113-159 ). MAP-21 made significant modifications to the public transportation program. While maintaining the previous funding level, MAP-21 simplified the structure of the public transit program by eliminating some programs and consolidating others, recast some discretionary programs as formula programs, strengthened FTA's role in safety oversight, and introduced performance management into the planning process. This report highlights some of the issues likely to arise as Congress considers further extension of MAP-21 or reauthorization. It begins with an overview of public transportation, its funding, and the federal public transportation program as currently authorized. Public transportation (also known as public transit, mass transit, and mass transportation) is defined in federal law (49 U.S.C. §5302) as regular, continuing shared-ride surface transportation services that are open to the general public or open to a segment of the general public defined by age, disability, or low income; and … does not include—(i) intercity passenger rail transportation …; (ii) intercity bus service; (iii) charter bus service; (iv) school bus service; (v) sightseeing service; (vi) courtesy shuttle service for patrons of one or more specific establishments; or (vii) intra-terminal or intra-facility shuttle services. The main forms of public transportation are bus, heavy rail (subway and elevated), commuter rail, light rail, paratransit (also known as demand response), and ferryboat. About 51% of public transportation trips are made by bus, 35% by heavy rail, 5% by commuter rail, and 5% by light rail (including streetcars). Paratransit accounts for about 2% of all public transportation trips, and ferries less than 1%. Transit ridership dropped precipitously at the end of the Second World War due to a number of interrelated factors, particularly rising incomes, growing automobile availability and use, and residential and employment decentralization. Despite the longer-term downward trend, ridership has risen over the past two decades from a low of 7.8 billion trips in 1995 to 10.6 billion trips in 2012. Consequently, ridership is at a level not seen since the late 1950s, although the population has grown by about 140 million people since then. Public transportation accounts for about 2% of all daily trips and about 5% of trips to and from work (commute trips). Ridership is heavily concentrated in a few large cities and their suburbs. About 75% of all public transportation trips are made in 10 large urbanized areas: New York, Los Angeles, Chicago, Washington, San Francisco, Boston, Philadelphia, Seattle, Miami, and Atlanta. The New York City urbanized area alone, including parts of New Jersey and Connecticut, accounts for about 4 of every 10 public transportation trips nationally. Almost a third of workers in the New York metropolitan area commute by public transportation, but in only four others (San Francisco, Washington, Boston, and Chicago) does the share exceed 10%. Major federal involvement in public transportation dates to the Urban Mass Transportation Act of 1964 (P.L. 88-365). In the mid-1960s, with much lower ridership than existed at the end of World War II and mounting debts, many private transit companies were reorganized as public entities, and federal funding was initially used to recapitalize them. Today, most federal support still goes for capital projects, but the program has evolved to support operational expenses in some circumstances, as well as safety oversight, planning, and research. MAP-21 authorized $10.6 billion for the federal public transportation program in FY2013 and $10.7 billion in FY2014. Funding made available for those years in appropriations bills was slightly higher ( Table 1 ). The Highway and Transportation Funding Act of 2014 extends the FY2014 authorized funding level though May 31, 2015. Excluding funding provided in the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ) and the Disaster Relief Appropriations Act, 2013 (DRAA; P.L. 113-2 ), public transportation program funding has been between $10 billion and $11 billion since 2009 ( Figure 1 ). ARRA provided an extra $8.4 billion in FY2009. DRAA provided $10.9 billion in FY2013 for FTA's Public Transportation Emergency Relief Program in response to Hurricane Sandy, particularly to repair the damage to the public transportation systems of New York and New Jersey. About 5% of the $10.9 billion, approximately $545 million, was subject to sequestration, leaving about $10.3 billion for emergency relief. Typically, about 80% of federal public transportation program funding comes from the mass transit account of the highway trust fund and 20% comes from the general fund of the U.S. Treasury. It should be noted, however, that the distinction between money from the highway trust fund and money from the general fund has become artificial to an extent, in that Congress authorized a $4.8 billion transfer of general fund money into the mass transit account of the highway trust fund in FY2010 and another $4.0 billion transfer in FY2014. Moreover, ARRA and DRAA funding for public transportation came exclusively from the general fund. Public transportation also receives support through provisions that make it an allowable use of some federal highway funds. Most funds "flexed" to transit programs come from the Surface Transportation Program (STP) and the Congestion Mitigation and Air Quality Improvement Program (CMAQ). Flexing is at the discretion of state and local decision-makers, so the amount transferred from highways to public transportation can vary widely from year to year. About $1 billion was flexed in FY2009, whereas $2.4 billion was flexed in FY2012. The percentage of highway funds transferred to transit has ranged from about 2.0% in FY1998 to about 5.7% in FY2012. The Transportation Investment Generating Economic Recovery (TIGER) program has been another source of federal funding for public transportation over the past few years. Enacted initially as part of ARRA, the TIGER program has been funded in five subsequent appropriations bills. Funding, appropriated from the general fund, was $1.5 billion in FY2009, $600 million in FY2010, $527 million in FY2011, $500 million in FY2012, $474 million in FY2013 (after an across-the-board rescission and sequestration), and $600 million in FY2014. Of the $584 million awarded in FY2014, for example, $187 million (32%) went to transit projects. Special-needs paratransit is another area in which funding is available from the federal government outside the public transportation program. Special-needs paratransit, also known as demand response or dial-a-ride, is non-fixed-route service for people with disabilities and the elderly, and typically involves the use of small buses, vans, or passenger cars. The Government Accountability Office (GAO) has identified 73 federal programs in seven federal agencies other than the Department of Transportation (DOT) that fund special-needs transportation services. Although GAO could not estimate the transportation spending in all of these programs, in 21 programs for which data were available transportation funding amounted to $2.3 billion in FY2010. This compares with FTA spending on special-needs paratransit in the same year of about $270 million. The costs of providing public transportation service fall into two main categories, operating expenses and capital expenses. Operating expenses include vehicle operation and maintenance, maintenance of stations and other facilities, general administration, and purchase of transportation from private operators. Capital expenses are related to the purchase of equipment, such as buses, rail lines, and rail stations. In general, federal public transportation programs allow an 80% maximum federal share for capital projects and a 50% maximum share for operating expenses. Operating costs account for about two-thirds of all costs for public transportation and capital expenditures for about one-third. Fares and other operating revenues cover only one-quarter of the total cost, with the remainder provided by federal, state, and local governments. The federal government supports less than 10% of operating expenditures, but more than 40% of capital expenditures ( Table 2 ). There are six major funding programs administered by FTA: (1) Urbanized Area Formula; (2) State of Good Repair (SGR); (3) New Starts; (4) Rural Area Formula; (5) Bus and Bus Facilities Formula; and (6) Enhanced Mobility of Seniors and Individuals with Disabilities. In addition, about 5% of the public transportation program funding is authorized for the Growing States and High Density States Formula ($519 million in FY2013 and $526 million in FY2014). This is not a program per se, but provides additional money to some places and is distributed through the Urbanized and Rural Area Formula Programs ( Figure 2 ). The Growing States apportionment is based on forecasted state population growth, and the High Density apportionment is to states with a population density greater than 370 persons per square mile. Funding for all of these programs, except New Starts, comes from the mass transit account of the highway trust fund. New Starts funding comes from the general fund. There are also several much smaller programs (see the Appendix for a full listing). The Urbanized Area Formula Grants Program provides funding for public transportation in urbanized areas, the 497 places designated by the Census Bureau as having populations of 50,000 or more (based on the 2010 Census). Funding was authorized at $4.398 billion in FY2013 and $4.459 billion in FY2014, up from $4.160 billion in FY2012. These amounts are mostly distributed by formula after funds are deducted for administration or reserved for specific purposes. Funds can be spent on capital, planning, job access and reverse commute projects, and, in some circumstances, operating expenses. For urbanized areas under 200,000 the distribution of Urbanized Area program funds is mainly based on population and population density. In urbanized areas over 200,000 the formula also takes into account bus revenue vehicle miles, bus passenger miles, fixed guideway revenue miles, and fixed guideway route miles. The Small Transit Intensive City (STIC) funding set-aside from the program is 1.5%. This boosts funding for urbanized areas with fewer than 200,000 residents that provide a relatively high level of transit service. In addition, 0.5% is authorized to be apportioned to urbanized areas for state safety oversight program grants, 3% to be apportioned according to the number of low-income individuals in an urbanized area, and $30 million to be set aside for the discretionary ferry boat grants program. The Rural Area Formula Program provides funding to states and Indian tribes for public transportation outside of urbanized areas. Capital, operating, and planning are all eligible expenses. Funding was authorized at $600 million in FY2013 and $608 million in FY2014, up from $465 million in FY2012. The apportionment formula for Rural Area Program funds includes rural land area, population, vehicle revenue miles, and number of low-income individuals. Funding from the program is set aside for the Rural Transit Assistance Program (RTAP), the Public Transportation on Indian Reservations Program, and the Appalachian Development Public Transportation Assistance Program. RTAP funding authorized was $11.9 million in FY2013 and $12.2 million in FY2014. Funding authorized for Public Transportation on Indian Reservations was $30 million annually; $25 million is to be distributed by formula and $5 million competitively. Funding authorized for Appalachian Development was $20 million annually. The State of Good Repair (SGR) Program was created by MAP-21 to replace the Fixed Guideway Modernization Program. The SGR Program provides funding primarily for repairing and upgrading rail transit systems, but also other fixed-guideway systems (such as passenger ferries and bus rapid transit) and bus systems that use high occupancy vehicle (HOV) lanes. Funding for the SGR Program was authorized at $2.136 billion in FY2013 and $2.166 billion in FY2014, a good deal more than the $1.667 billion allotted to the Fixed Guideway Modernization Program in FY2012. The State of Good Repair program has two components: The High Intensity Fixed Guideway SGR Program distributes 97.15% of the funding for maintaining fixed guideway transit systems in a state of good repair. The new formula for distributing these funds uses fixed guideway vehicle miles and route miles for facilities that have been operating for at least seven years. The High Intensity Motorbus SGR program distributes the remaining 2.85% of the funds for bus service provided on a high occupancy vehicle (HOV) facility. Funding is distributed by a formula that uses high-intensity bus vehicle miles and route miles for revenue services that have been operating for at least seven years. The Bus and Bus Facilities Program provides funding to purchase and rehabilitate buses and to construct bus-related facilities, such as maintenance depots. Funding was authorized at $422 million in FY2013 and $428 million in FY2014, down from $984 million in FY2012. Under the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA; P.L. 109-59 ), the Bus and Bus Facilities Program was a heavily earmarked discretionary program. MAP-21 directs funding to be distributed by formula. After each state and territory receives a minimum allocation ($1.25 million to states and $0.5 million to territories), the remaining funds are distributed according to population and service levels. The New Starts Program provides funding to support the construction of new fixed-guideway transit systems and to add to existing systems. Fixed-guideway includes transit rail, bus rapid transit, and ferry. Funding for the New Starts program was authorized from the general fund of the U.S. Treasury at $1.907 billion for both FY2013 and FY2014, a slight reduction from the $1.955 billion authorized in FY2012. Appropriations were $1.855 billion in FY2013 and $1.943 billion in FY2014 ( Table 1 ). MAP-21 made substantial changes to the New Starts Program, allowing program funds to be used for investments in existing fixed-guideway systems that increase the capacity of a corridor by at least 10%. These types of projects are termed "core capacity improvement projects." It also authorized the evaluation and funding of a program of interrelated projects. A New Starts project must go through three distinct stages: project development, engineering, and construction. To enter the project development phase, the applicant now only needs to apply in writing to the FTA and initiate review required under the National Environmental Policy Act (NEPA). A project sponsor does not need to complete an alternatives analysis separate from the alternatives analysis required by NEPA. Along with the NEPA work, during project development the project sponsor develops the information needed by FTA to review the project justification and the local financial commitment. Generally, the project applicant has two years to complete project development. FTA is now also required to use an expedited review process of a sponsor's technical capacity if it has recently and successfully completed a fixed-guideway or core capacity project. A project is permitted to enter into the engineering phase once the NEPA process is concluded, the project is selected as the locally preferred alternative, the project is adopted into the metropolitan plan, and the project is justified on its merits, considering local financial commitment; the mobility, environmental, economic development, and congestion relief benefits; and local land use plans and policies. After engineering, a project may then be approved to enter into a full funding grant agreement with FTA for federal funding assistance and to move into the construction phase. To advance projects more quickly, FTA may use special warrants for projects of which the federal share is $100 million or less or 50% or less of the total project cost. According to FTA, special warrants are "ways in which projects may qualify for automatic ratings on the project justification criteria," thus not requiring further detailed analysis. In a rulemaking, FTA provided this cost-effectiveness example: if there is a certain level of transit ridership in the corridor today, and the proposed project falls within total cost and cost per mile parameters defined by FTA, then it would be ''warranted'' by FTA as cost-effective, it would receive an automatic medium rating on the cost-effectiveness criterion, and the project sponsor would not need to undertake or submit the results of certain analyses. For Small Starts projects, those requesting $75 million or less in federal assistance and costing in total $250 million or less, there are just two phases, project development and construction. Small Starts are also defined to include corridor-based bus rapid transit, service that emulates transit rail but does not necessarily run in a separated right-of-way dedicated to public transportation use. Unlike SAFETEA, which reserved $200 million of the overall program authorization for Small Starts, MAP-21 did not reserve funds for Small Starts projects in FY2013 and FY2014. MAP-21 created a pilot program for expediting New Starts project delivery. The purpose of this new pilot program, limited to three projects, is "to demonstrate whether innovative project development and delivery methods or innovative financing arrangements can expedite project delivery for certain meritorious new fixed guideway capital projects and core capacity improvement projects." To date, no projects have been selected for inclusion in the pilot program. The Enhanced Mobility of Seniors and Individuals with Disabilities Program was authorized at $255 million in FY2013 and $258 million in FY2014. This combines into a single program the former Elderly Individuals and Individuals with Disabilities Program and the New Freedom Program. In FY2012, these two programs were $226 million combined. According to the statutory formula, 60% of the funds are apportioned to large urbanized areas, 20% to small urbanized areas, and 20% to rural areas. Within these categories, funds are to be distributed to specific areas based on the relative size of their elderly and disabled population. The program requires that projects come from a locally developed, coordinated human services transportation plan. The Jobs Access and Reverse Commute (JARC) formula program was eliminated in MAP-21, but the activities carried out under this former program were made eligible expenses under the Urbanized and Rural Area Formula programs. MAP-21 also eliminated several discretionary programs, including the Clean Fuels Grant Program, the Transit in Parks Program, the Over-the-Road Bus Program, and the Alternatives Analysis Program. These programs provided funding for specific purposes that in several cases were also eligible expenses under other programs. For example, public transportation serving national parks and other federal lands remains eligible for federal funding under the existing, but renamed, Federal Lands Transportation and Federal Lands Access programs administered by the Federal Highway Administration, and, in the case of the Alternatives Analysis Program, planning remains eligible under the Urbanized Area Formula Program and is newly eligible under the Rural Area Formula Program. MAP-21 created the Public Transportation Emergency Relief Program, which, like the Appalachian Development Public Transportation Assistance Program, mirrors a previously existing highway program. The emergency relief program, akin to the existing Highway Emergency Relief Program, provides funding for capital and operating costs in the event of a natural or man-made disaster. MAP-21 authorized such sums as may be necessary to carry out this new program. In the aftermath of Hurricane Sandy, $10.3 billion was appropriated in the Disaster Relief Appropriations Act, 2013 ( P.L. 113-2 ), for the Public Transportation Emergency Relief Program. Under MAP-21, the use of performance management is required throughout the transportation planning process. Performance management involves establishing performance measures and setting targets. For example, MAP-21 requires Metropolitan Planning Organizations (MPOs) to establish performance targets, including targets for public transportation, that address performance measures established by the Secretary of Transportation (49 U.S.C. §5303). Each MPO must include in its plan an evaluation of the region's progress toward achieving its performance targets and must develop its Transportation Improvement Program (TIP) to align with the performance targets. Performance targets pertaining to public transportation are to be coordinated with providers of public transportation "to the maximum extent practicable." In a similar vein, public transportation agencies are required to develop an asset management system, including an asset management plan with performance targets based on metrics developed by the Secretary for state of good repair standards (49 U.S.C. §5326). Public transportation agencies must report their progress toward meeting their performance targets annually, but there are no sanctions for failing to meet those targets. DOT is also required to develop performance measures with regard to the Enhanced Mobility of Seniors and Individuals with Disabilities Program. These performance measures are to be developed in consultation with national non-profit groups that advocate for transportation services on behalf of the elderly and disabled. A new discretionary pilot program for transit-oriented development (TOD) planning was established by MAP-21, with funding authorized at $10 million per year in FY2013 and FY2104. Transit-oriented development is concerned with locating housing and businesses near transit stations to promote ridership, job accessibility, and local economic development. This new program provides grants to sponsors of new or expanded fixed-guideway systems to enhance their TOD planning. To date, no funding from this program has been made available. FTA had a limited role in public transportation safety prior to MAP-21, but several provisions in the authorization expanded and strengthened that role. FTA is required to develop a national public transportation safety plan, with safety performance criteria for all modes of public transportation and minimum performance standards for public transportation vehicles (except commuter rail vehicles, which are regulated by the Federal Railroad Administration, or FRA). FTA is also required to establish a certification training program for federal, state, and local employees who conduct safety audits or are responsible for safety oversight. Recipients of urbanized and rural formula funds may use up to 0.5% of their apportionment, about $22 million annually, to pay for the training program. This funding requires a minimum 20% state or local match. Each public transportation agency and state is required to establish a comprehensive safety plan. Additionally, each state with a rail system not regulated by FRA must have a state safety oversight (SSO) program. Formula funding for the SSO program is set aside from the Urbanized Area Formula Program and is provided with an 80% maximum federal share. FTA has authority to inspect and audit the equipment and operations of transit agencies and may issue directives, require more frequent agency oversight, and require that federal funding be spent to correct safety deficiencies. Authorization in MAP-21 of the federal public transportation programs extends through September 30, 2014. Specific issues that may come up as Congress considers extending or reauthorizing the programs include funding levels and revenue sources (particularly as they relate to the highway trust fund), problems with the Bus and Bus Facilities Program, support for operating expenditures, privatization, the operation of the New Starts program, and special-needs paratransit. Growth in public transportation ridership has been used to support calls for significantly higher federal spending. These arguments are often buttressed by infrastructure needs assessments, a number of which have been conducted over the past few years. All of these assessments estimate a substantial gap between current levels of public transportation capital spending and the amount required to prevent an overall deterioration in the condition of public transportation assets and ultimately operational performance. For example, in its most recent report on the condition and performance of highway and public transportation systems, DOT estimates that to bring transit assets up to a good state of repair over the next 20 years would cost about $2 billion more per year than is currently being expended by all levels of government (in 2010 dollars). This estimate does not include any funding for expanding systems. Paying for the backlog plus expanding systems is projected to cost between $5.5 billion and $8.0 billion per year over current spending depending on the expected level of ridership growth. DOT does not make any recommendations about the relative shares of funding that should be borne by federal, state, and local governments. Another view is that funding of public transportation programs should be the responsibility of states and localities rather than the federal government (see, for example, H.R. 3486 / S. 1702 in the 113 th Congress). This does not directly challenge the notion that transportation infrastructure requires greater funding, but it suggests that decisions about funding levels and investment priorities should be made below the federal level. Absent a change in the taxes used to finance the highway trust fund, a reduction in federal involvement in public transportation would leave a greater share of motor-fuel tax revenues to be spent for the benefit of road users. Traditionally about 80% of the funding for the federal public transportation program has come from the mass transit account of the highway trust fund and about 20% from the general fund of the U.S. Treasury. Outlays from the mass transit account have outpaced receipts over the past few years, an imbalance the Congressional Budget Office (CBO) projects will continue in the future under current law. Congress has chosen to transfer general fund monies into the mass transit account to maintain the balance above a minimum prudent level ( Figure 3 ). The primary revenue source for the highway trust fund is the fuels tax. Currently, of the 18.3 cents-per-gallon tax on gasoline and 24.3 cents per gallon on diesel that go to the highway trust fund, 2.86 cents is deposited in the mass transit account. The tax was last raised in 1993. The revenue from the fuels tax for the mass transit account is about $5 billion a year, an amount that is not expected to change very much at the current tax rate. Revenue from the fuels tax and funds flexed from the highway account together amount to about $6 billion per year in total receipts, excluding transfers from the general fund. Outlays from the mass transit account are expected to be about $8 billion in FY2014, and are projected to grow to about $9 billion in FY2018. According to CBO's estimates, the balance in the mass transit account will reach zero toward the end of FY2015, although a balance of $1 billion is low enough to create cash flow problems in the account. A balance of $1 billion or less would likely require some kind of administrative action, such as slowing payments to transit agencies, or legislative action, such as a general fund transfer. Because of the imbalance between receipts and outlays, a more sustainable solution for the mass transit account would have to involve a cut in program spending, an increase in revenues paid in to the account, or a combination of the two. An increase in revenues to the mass transit account could involve a commitment to regular transfers from the general fund. Funding shortfalls in the highway account of the highway trust fund have also required general fund transfers. Consequently, actions will likely need to be taken in the highway program as well as the public transportation program. Like those in public transportation, actions in the highway program might involve a cut in program spending, an increase in revenues paid into the account, or another transfer from the general fund. Another possible solution, proposed in H.R. 7 (112 th Congress) during the 2012 debate over reauthorization of surface transportation programs, is to redirect revenues from the mass transit account to the highway account and to fund the transit account with a general fund appropriation. This was not a popular idea at the time and was dropped from the legislation approved by the House of Representatives. However, this option or options like it may be proposed in the future, particularly as some argue that taxes paid by highway users should not be diverted to non-highway uses. Bus-only transit agencies in small urbanized and rural areas have expressed concern that the Bus and Bus Facilities program does not provide sufficient help for bus acquisition and bus-related investment needs such as construction of bus garages. Two changes made in MAP-21 contribute to the concern. First, funding directed specifically to buses was reduced by more than half, from $984 million in FY2012 to $421 million in FY2013 and $428 million in FY2014, although funding for other programs, which can be used for bus investment, was increased. Second, prior to MAP-21, the Bus and Bus Facilities Program was a heavily earmarked discretionary program that provided substantial sums of money to transit agencies at irregular intervals for large capital expenses, whereas MAP-21 directs smaller amounts to be distributed by formula annually. For small transit systems, these allocations may be too small to provide the resources necessary for substantial bus investments in a single year. To deal with these issues, the American Public Transportation Association has suggested "the restoration of funding to the bus and bus facilities program and the return of a transparent and efficient discretionary element of the program." Federal operating support for public transportation in urbanized areas over 200,000 was largely eliminated in 1997 with the enactment of the Transportation Equity Act for the 21 st Century (TEA-21). TEA-21 continued to allow providers in urbanized areas under 200,000 to use federal funding for both capital and operating expenses, at their option. Because of the serious budget problems faced by many transit agencies whose local revenue sources have been squeezed, there has been pressure to increase the availability of federal funding for operating expenditures. One way in which Congress has done this in the past is by liberalizing the definition of "capital expense" in federal law, allowing federal capital funding to be used to pay for items traditionally considered operating expenses, such as maintenance. For the most part, MAP-21 maintained the prohibition on the use of federal funds for operating expenses in urbanized areas of 200,000 or more residents. However, it added an exception to this general prohibition that is generally known as the "100 bus rule." MAP-21 permitted transit systems in these larger urbanized areas operating 76 to 100 buses in peak service to use 50% of their Urbanized Area apportionment for operating expenses. For transit systems operating 75 or fewer buses in the peak period, the allowable amount is 75%. MAP-21 did not include a provision contained in S. 1813 (112 th Congress) that would have allowed the use of Urbanized Area funds for operating expenses in urbanized areas of 200,000 or more residents with high unemployment rates. Congress is likely to face calls for providing transit operating support in reauthorization legislation. One approach to doing this was included in S. 3189 / H.R. 2746 (111 th Congress), which proposed to allow transit agencies operating 100 or more fixed-route buses to use a portion of Urbanized Area Formula Program funds for operating expenses. Agencies in urbanized areas of between 200,000 and 400,000 people would have been allowed to use up to 50% of program funding for operating purposes, with lesser shares allowed in larger urbanized areas. This measure was not enacted. Alternatively, Congress could consider eliminating federal transit operating assistance altogether. This might lead to improvements in productivity, as without federal support transit agencies might pay more attention to the cost-effectiveness of their services. Many government-owned transit agencies contract with private companies to operate some or all of their services, and in some cases private contractors have taken responsibility for building as well as operating rail lines. Congress has periodically considered whether to encourage privatization. In the 112 th Congress, for example, H.R. 7 included a provision to increase the federal cost share of bus projects from 80% to 90% if the local transit agency contracted out at least 20% of fixed-route bus service. This idea was not adopted in MAP-21. A related issue is federal labor requirements in the transit industry, known as 13(c). As a precondition of federal transit funding 13(c) requires, among other things, the preservation of existing employment rights, privileges, and benefits and the continuation of collective bargaining rights. These protections are thought to be an impediment to privatization and, hence, advocates of privatization have often called for their repeal. Critics of privatization argue that cost savings, if there are any, typically come at the expense of employees in the form of lower wages and reduced benefits. A common criticism of the New Starts program is the length of time required to develop and deliver projects, a criticism that several changes in MAP-21 sought to address. An issue in reauthorization, therefore, will likely be whether the changes in MAP-21 do actually speed the project process, and whether or not this has any effect on the quality of New Starts projects. In addition, MAP-21 is likely to result in a change in the types of projects funded, as newly eligible core capacity projects may divert funds that would otherwise go to building new systems and extending existing systems, and streetcar and bus rapid transit projects may become more prominent in the mix. The net result may be to reduce federal funding available for traditional light rail and heavy rail projects. Special-needs paratransit, also known as demand response or dial-a-ride, is non-fixed-route service for people with disabilities and the elderly, and typically involves the use of small buses, vans, or passenger cars. The demand for special-needs paratransit has grown relatively rapidly since the passage of the Americans with Disabilities Act of 1990 ( P.L. 101-336 ) required that transit agencies with fixed-route service provide "complementary paratransit" to people unable to use fixed-route service due to a disability. Many communities offer a range of non-ADA paratransit services as well. Between 1991 and 2012 paratransit ridership tripled, compared with a 23% increase in public transportation ridership overall. The general aging of the population may portend growing demand in future years. In 2012, operating expenditure per passenger trip for paratransit was $23.33, compared with $3.66 for motor buses and $3.75 for transit service on average. Between 2002 and 2012, paratransit operating expenses doubled in inflation-adjusted terms. The growth in costs means that special-needs paratransit is taking an ever larger slice of transit agency operating budgets, limiting the resources available for fixed-route service. Paratransit accounted for 12% of public transit systems' operating costs in 2012, up from about 4% in 1991. As noted earlier, paratransit currently accounts for about 2% of all public transportation trips. Increasing costs and service demands may lead to pressure for greater federal help for special-needs paratransit. One question is whether Congress wishes to widen or narrow the level of service mandated by the ADA, a change with immediate cost implications. Without addressing the quality or quantity of service, Congress may seek to rein in the costs of special-needs paratransit by requiring or encouraging greater enforcement of eligibility rules; making fixed-route service as accessible as possible; improving the coordination of all paratransit and human services transportation; and encouraging greater use of wheelchair-accessible taxicabs. Some transit agencies already seek to control costs by providing travel training to persons with disabilities and allowing disabled riders to use fixed-route buses and rail systems for free, and such efforts could be encouraged in transit legislation. | The federal public transportation program, administered by the Federal Transit Administration (FTA), is the primary means by which the federal government funds and regulates public transportation, such as local buses, subways, and ferries. The program was reauthorized through FY2014 as part of the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141) and extended through May 31, 2015, as part of the Highway and Transportation Funding Act of 2014 (P.L. 113-159). Funding was authorized at $10.6 billion in FY2013 and $10.7 billion in FY2014, with the extension continuing the FY2014 level of funding for eight months. About 80% of the funding for the federal public transportation program comes from the mass transit account of the highway trust fund and about 20% from the general fund of the U.S. Treasury, although the mass transit account, itself, has received transfers from the general fund, including $4.8 billion in FY2010 and another $4.0 billion in FY2014. MAP-21 simplified the structure of the public transit program by eliminating some programs and consolidating others. The law also recast some discretionary programs as formula programs, strengthened FTA's role in safety oversight, and introduced performance management into the planning process. FTA's six major funding programs and their authorized funding shares are (1) Urbanized Area Formula, 42%; (2) State of Good Repair (SGR), 20%; (3) New Starts, 18%; (4) Rural Area Formula, 6%; (5) Bus and Bus Facilities Formula, 4%; and (6) Enhanced Mobility of Seniors and Individuals with Disabilities, 2%. The authorization of the public transportation program expires May 31, 2015. Extension or reauthorization legislation will be considered in the context of a federal budget deficit that has put pressure on many areas of federal spending, including public transportation assistance. Some Members of Congress have urged that transit spending be supported mostly at the local level. Others argue for higher federal spending to address a backlog of capital expenditures, growing transit and paratransit ridership, and the desirability of encouraging use of public transportation. There has also been pressure to increase federal support of operating expenditures due to budget problems at the local level. An obstacle to greater federal spending, however, is the condition of the highway trust fund. Over the past few years the revenue flowing to the mass transit account has been less than its outlays, a situation that is expected to continue under current law. The primary revenue source for the highway trust fund, the fuels tax, was last raised in 1993. The precarious situation of the mass transit account may require some action before the end of FY2015, depending on the actual amounts of revenue and outlays, but action will almost certainly be needed in FY2016 and beyond. This might involve a cut in program spending, an increase in revenues paid in to the account, or another transfer from the general fund. Other issues that may come up in the debate are privatization and the operation of the New Starts program. Privatization, such as competitive contracting, is frequently touted as a means of controlling costs and improving quality in public transportation. Consequently there have been proposals in Congress for the federal government to promote greater private-sector involvement, and these might come up again in reauthorization. MAP-21 made several changes to the New Starts program to speed project delivery and to allow spending on expanding existing transit rail and other fixed guideway systems. How well these changes work may be an issue in reauthorization, as might the types of projects funded, particularly streetcar and bus rapid transit projects. |
The federal tobacco support program has worked through a combination of commodity pricesupport loans and marketing quotas. Price support loans guaranteed farmers minimum set prices fortobacco (the 2004 loan prices for the two principal types, flue-cured and burley, are $1.69 and$1.873/lb. respectively). These prices were mandated by a formula in the law. (2) Marketing quotas,which specified the maximum quantity of tobacco that could be sold, were assigned by the U.S.Department of Agriculture (USDA) each year to farms that had a history of tobacco production. Thepurpose of quotas was to limit supplies in order to force buyers to pay the loan prices or more (the2004 national basic quotas for flue-cured and burley were 471.3 million pounds and 302.1 millionpounds respectively). Together, the combination of guaranteed minimum prices and managed supplywas designed to create a stable market for farmers and tobacco product manufacturers. Also, thepattern of assigning quotas to farmland with a history of quotas confined production to the traditionalgrowing regions and farms. This system of support had operated since the 1930s and was authorizedin permanent law (7 U.S.C. 1311 et seq. ). (See CRS Report 95-129 , Tobacco Price Support: AnOverview of the Program .) The economic stability that was desired and expected from the tobacco support program was not achieved. First, the support prices for U.S. tobacco, as mandated by law, were higher than pricesfor competing tobacco in world markets. As a consequence, U.S. farmers steadily lost both exportand domestic markets to foreign producers. The declines are pictured in Figures 1 and 2 (based onUSDA data). Second, tobacco support prices were higher than the costs of production. This createdeconomic profits that were capitalized into the marketing quota lease rates and land prices. So,marketing quotas became an asset that added substantial value to farmland, and became a source ofrental income for owners choosing not to grow tobacco themselves. Conversely, rent on quotasbecame a sizable expense for active producers renting quota in an attempt to expand or evenmaintain output in the face of shrinking markets. As with other crops, the number of active tobacco producers has declined over time and production has become concentrated onto fewer but larger farms. In 1982 there were about 180,000farms producing tobacco. By 2002, just 20 years later, the number of active producers was about57,000, a 68% decline. (3) Most of these active tobaccofarmers owned some marketing quotathemselves and also rented quota from about 359,000 other absentee quota owners. (4) In themid-1990s, burley producers owned about 44% of their effective quota and leased the remaining56% at an average cost of $0.33/lb. Lease and transfer of quota had been prohibited for flue-curedtobacco since 1986. Instead, active flue-cured producers rent farmland that had quota attached toit, thereby obtaining the tobacco production rights. In the mid-1990s, flue-cured producers ownedabout 33% of their effective quota and rented the remaining 67% at an average cost of $0.37/lb. (5) Newer USDA cost of production data put the average rental cost of quota in 2003 at $0.63/lb. forflue-cured and $0.57/lb. for burley. (6) One reason for increased consolidation and higher quota rental fees was the sharp decline in quota levels after 1997, as shown in Figure 3 and Table 1. The decline was due to the reversal ofpreviously rapidly growing export markets for U.S.-manufactured cigarettes. The basic quotas forflue-cured and burley tobacco declined 52% and 57% respectively after 1997. Farmers needed tomarket enough tobacco to maintain their revenue and to economically utilize their barns, equipment,and labor. This required renting more quota. Along with these economic pressures to consolidate,several sources of financial aid made it possible for farmers to pay higher rental rates for quota. First, in conjunction with Phase II of the 1998 Master Settlement Agreement, cigarette manufacturers agreed to distribute $5.15 billion to tobacco producers and quota owners over a12-year period. (7) Second, to help offset decreasesin marketing quotas, Congress acted to provideassistance. Four separate emergency assistance laws ( P.L. 106-78 , P.L. 106-224 , P.L. 107-25 , P.L.108-7 ) included what the industry called direct "tobacco loss payments (TLPs)" totaling $860million. Third, Congress directed the Commodity Credit Corporation (CCC) to take ownership ofall 1999 tobacco pledged as price support loan collateral and to assume all financial losses ( P.L.106-387 , as amended). CCC finally completed disposal of this inventory in December 2003 byburying it in landfills. According to CCC data, the total cost of acquisition, interest on principal,storage, and disposal was about $625 million. These three sources of financial assistance, rather than income from the sale of tobacco, are the primary reason active producers were able to pay higher rental rates to absentee quota owners as theybid against each other for their share of a declining national tobacco quota. (See CRS Report RS20802 , Tobacco Farmer Assistance .) Active tobacco producers were being hurt financially both by declining marketing quotas, which reduced their sales revenue, and higher quota rental rates, which raised their production costs. Farmers felt there was little they could do to increase the demand for tobacco, especially since it wasfederal policy to discourage consumption of tobacco products. However, the elimination of quotarents, through a buyout of marketing quotas, could reduce the costs of production substantially forfarmers leasing substantial amounts of quota. At the same time, active producers might continue toreceive the price benefit of a continuing support program. Advocates of this policy approach ( H.R. 245 , Fletcher; H.R. 986 , Goode) proposed to give marketing licenses (or permits specifying quantity limits) to activeproducers, just as with marketing quotas. However, the licenses would be issued only to activeproducers and all forms of rent would be prohibited. This restriction would prevent the licenses fromacquiring any exchangeable value. The initial recipients of the licenses would be current tobaccoproducers wanting to continue as active growers. Active producers, not just absentee landlords, also would have received quota buyout payments under all of the legislative proposals that were offered. This provided the farmers who wanted toquit growing tobacco with sizable benefits. The farmers who remained active producers under thelicense scheme would receive a windfall from their buyout payment since they would have sufferedno losses (they would continue to get the extra income created by licenses and price support). This framework for a quota buyout, of licensed future production and continued price support, was developed by the President's Commission on Improving Economic Opportunity in CommunitiesDependent on Tobacco Production While Protecting Public Health. (8) This commission includedadvocates for tobacco farmers, anti-smoking and health organizations, and rural communitydevelopment proponents. H.R. 245 and H.R. 986 largely were modeledon the Commission's recommendations. There was little disagreement that U.S. tobacco could become substantially more competitive in the domestic as well as export markets if prices declined by the amount paid in quota rents. Sucha price reduction would happen if tobacco support program loan rates were reduced substantially oreliminated. The quota rent paid to absentee landlords would vanish. The decline in revenue fromlower tobacco prices largely would be offset by the elimination of quota rent payments, leaving theproducer in about the same net revenue situation. In fact, a North Carolina agricultural economistonce estimated that in the absence of the price support program, U.S. tobacco production couldincrease by possibly 50%. (9) At the same time, the economic analysis noted there would be substantial adjustment costs associated with dropping support prices to free market levels or eliminating the program. Mostimmediately, the value in quotas would be wiped out. This would eliminate the rental income ofabsentee quota owners. Furthermore, all of the farmland with quota, whether owned by absenteelandlords or active producers, would drop in value. However, the economic adjustments associatedwith a reduction in tobacco prices could be minimized, if not eliminated, by compensating quotaowners for lost asset values. This "free market" policy approach ( H.R. 140 , McIntyre; H.R. 4033 , Jenkins) was most appealing to active producers who wanted to see an expansion of their tobaccoenterprises. These producers likely had a sizable investment in barns and machinery, and probablyrented a large proportion of their annual effective marketing quota. This option was equallyappealing to farmers intending to exit from tobacco production. The farmers most disadvantagedwould have been small to medium sized operations and those that were inefficient because of highcosts or low yields who wanted to continue growing tobacco. As compared to a system of licensed producers, this "free market" option would result in fewer but larger farms because of economies of size. Also, production likely would move within each ofthe tobacco states to the geographic locations with the most suitable soils and climate for economicalproduction. The very fact that production could increase substantially made the "free market" optionunappealing to some anti-smoking and health advocates. Somewhere between the Commission concept of production licenses with continued price support and the free market proposal, S. 1490 (McConnell) proposed to eliminatequotas and price support but allocate a national crop acreage base among active producers. Shouldsupplies become excessive, an acreage limitation program would require reductions in planting. Thisacreage reduction concept was used in conjunction with the support programs for grains and cottonbefore being eliminated by the 1996 farm bill. H.R. 3160 was introduced as a bipartisan consensus proposal by Fletcher, McIntyre, and Goode. This bill was similar to the McConnell bill in most respects. One majorvariation was a different basis for calculating the amount of money paid to quota owners and activeproducers. Under S. 1490 , payments would have totaled about $11 billion, comparedto about $15 billion under H.R. 3160. However, S. 1490 included somecommunity development assistance that was not present in H.R. 3160. The value of tobacco marketing quota depended on several factors, including expectations aboutthe future. Quota owners knew exactly how much rent they earned from active producers. Whatthey did not know was how long the tobacco program would continue to operate, or the size ofnational marketing quotas in future years. Survey data from Kentucky revealed that the average sale price of marketing quotas was $2.58/lb. in 2001 (when lease rates averaged $0.62/lb.), and $2.08/lb. in 2000 (when lease ratesaveraged $0.58/lb.), and $1.75 in 1999 (when lease rates averaged $0.40/lb.). (10) One would expectto get much higher sale prices with annual rents of these magnitudes. These sale prices comparedto lease rates implied a time horizon of about five years, based upon a 5% interest rate. In otherwords, buyers were discounting the purchase price of quota relative to annual rent in anticipation offuture quota reductions or elimination of the program. Most quota buyout bills proposed to pay owners $8/lb. This payment was equal to the present value of annual rental income of $0.40/lb. in perpetuity at an interest rate of 5%. The buyout priceof $8/lb. was a much higher price than sellers of quota were getting in the marketplace. Also, thebuyout offered to pay active producers an additional $4/lb. for all production on the farm. Thepayment to producers typically was described as a "transition payment." A buyout program that payed $8/lb. to quota owners plus $4/lb. to active producers would pay $12/lb. for each pound of quota that qualifies for the program. Depending on the crop years usedto calculate payments and some assumptions about participation levels, a rough and unofficialestimate of the buyout and transition payments ranged from about $11 to $19 billion. How muchwould a typical tobacco farmer receive? The average North Carolina tobacco farmer harvested about 21 acres in 2002, producing about 45,000 pounds. Buying out this average North Carolina producer, who owned 33%of the quota and rented 67%, would cost $298,800 ($118,800 in quota payments and $180,000 intransition payments). In South Carolina, the average tobacco farmer harvested 35 acres in 2002,bringing in about 66,000 pounds. Buying out this average South Carolina producer, who owned 33%of the quota and rented 67%, would cost $438,240 ($174,240 in quota payments and $264,000 intransition payments). Kentucky tobacco farms averaged 4 acres, producing about 7,500 pounds in2002. Buying out this average Kentucky producer, who owned 44% of the quota and rents 56%,would cost $56,400 ($26,400 in quota payments and $30,000 in transitionpayments). The President's Commission recommended that federal excise taxes on cigarettes and other tobacco products serve as the source of revenue for the proposed buyout (estimated at $0.17 per packon cigarettes for five years). However, all of the legislative proposals described in this reportincluded an assessment on manufacturers and importers of tobacco products, or the use of U.S.Treasury funds, rather than an increase in excise taxes on cigarettes. Certainly, manufacturers could benefit from a buyout if the support price for tobacco were reduced. One tobacco manufacturer, Philip Morris, stated its willingness to help pay for a tobaccobuyout program. If U.S. manufacturers could save $0.60/lb. on their 2004 purchase intentions ofabout 450 million pounds, the savings would amount to $270 million. Additional savings wouldaccrue if a drop in the price of U.S. tobacco pushed down the price of foreign supplies. Additionally,overseas operations also would save on the lower prices for both US. leaf and foreign leaf. Onetobacco analyst estimated it would take about 14 years for manufacturers to recover the cost of a $15billion quota buyout program. (11) Philip Morris (12) had coupled its offer to participate in a buyoutwitha proposal for FDA regulation of tobacco products. Health groups also advocated FDA regulation. (13) Philip Morris was the only major manufacturer known to support FDA regulation or a quota buyout. (See identical bills H.R. 4433 and S. 2461 ). Doubts about whether strong divisions in Congress over proposed FDA regulatory authority could be overcome encouraged sponsors of H.R. 4033 (Jenkins; March 25, 2004) toseek about $9.6 billion in funding out of the U.S. Treasury, rather than from assessments onmanufacturers. The bill was cosponsored by most supporters of the so-called House consensus bill. This bill provided $1/lb. lower quota buyout and transition payment rates ($7/lb. and $3/lb.respectively). In contrast to other proposals, Phase II payments to growers would continue andprovide an additional benefit of about $2.6 billion. The Jenkins bill also was included as Title VIIin the House-passed H.R. 4520 , a tax bill called the American Jobs Creation Act of2004. Following the lead of the House in using the tax bill as the legislative vehicle for the tobacco quota buyout, the Senate retrieved its previously adopted S. 1637 , the Jumpstart OurBusiness Strength (JOBS) Act, and amended it by attaching the slightly modified McConnell buyoutbill ( S. 1490 ) and the DeWine-Kennedy FDA tobacco product regulation authority( S. 2461 ). Conferees took up the tax legislation (the differing House and Senate versions of H.R. 4520 ) on October 5, 2004. The Chairman's mark for the conference committeeincluded tobacco quota buyout provisions (Title VI). The tobacco provisions largely reflected theHouse version, but funded the buyout with an assessment on manufacturers and importers of tobaccoproducts rather than from the U.S. Treasury. Like the House version of H.R. 4520, theChairman's mark contained no authority for FDA regulation of tobacco products. The Chairman's mark, like both the House and Senate proposals, eliminated tobacco marketing quotas, acreage allotments, and nonrecourse loan price support authority. It contained no provisionsto control how much tobacco might be grown in the future, who could produce it, or where it couldbe produced. As compensation, the roughly 416,000 current quota owners would be paid $7 perpound (in 10 equal annual installments) on their 2002 basic marketing quotas (totaling about $6.7billion). Similarly, the roughly 57,000 active producers would be paid $3 per pound on their 2002effective marketing quotas (totaling about $2.9 billion). Nearly all of the active producers also werequota owners, and they would get both payments on that portion of the effective quota they alsoowned. Total expenditures were limited to a maximum of $10.140 billion. The expenditures would be made over a 10-year period from FY2005 through FY2014. If domestic cigarette consumptionremained at the current level of about 19.75 billion packs, the cost to manufactures would be about5� per pack each year for 10 years. Remaining Phase II payments of about $2.6 billion frommanufacturers to farmers (adopted in conjunction with the Master Settlement Agreement betweenmajor manufacturers and states) would terminate. Table 1. National Quota Levels and Actual Marketings of Flue-Cured and Burley Tobacco, 1990-2004 Source: Data are from Economic Research Service, Tobacco Outlook , Sep. 2004,and theFarm Service Agency. Table 2. Comparison of Tobacco Quota BuyoutProposals Sent to Conference in the 108th Congress Table 3. Tobacco Quota Holder and Producer Transition Payment Estimates, by State Source: Based on basic and effective quota data from USDA's, Farm ServiceAgency. Table 4. Summary of the Tobacco Quota Buyout Law CRS Report RS21642(pdf) , Comparing Quota Buyout Payments for Peanuts and Tobacco . CRS Report RL32619 , FDA Regulation of Tobacco Products: A Policy and Legal Analysis. CRS Report RS20802 , Tobacco Farmer Assistance . CRS Report 95-129 , Tobacco Price Support: An Overview of the Program . CRS Report RL31528, Tobacco Quota Buyout Proposals in the 107th Congress . CRS Report RL30947(pdf) , U.S. Tobacco Production, Consumption, and Export Trends . Three university-based sites with a focus upon tobacco policy issues are as follows: NC State University, Tobacco Economics http://www.ces.ncsu.edu/depts/agecon/tobacco_econ/ University of Kentucky, Tobacco Economics Online http://www.uky.edu/Agriculture/TobaccoEcon/ University of Tennessee, Tobacco Policy and Economics http://www.agpolicy.org/tobacco.html The Economic Research Service maintains a Tobacco Briefing Room http://www.ers.usda.gov/Briefing/Tobacco/ . The National Agricultural Statistics Service (NASS) keeps track of production and publishes data by commodity http://www.usda.gov/nass/pubs/estindx1.htm . Farm Service Agency (FSA) administers tobacco quota and price support loan programs and publishes fact sheets describing program operations along with activitydetails http://www.fsa.usda.gov/pas/publications/facts/pubfacts.htm . The Foreign Agriculture Service keeps track of tobacco exports and imports by the United States and other countries http://www.fas.usda.gov/currwmt.html . | On October 22, 2004, the tobacco quota buyout was signed into law. Title VI of P.L. 108-357 is known as the Fair and Equitable Tobacco Reform Act of 2004. This legislation eliminated thetobacco quota program and compensated active producers and absentee quota owners for the lostvalue. The concept of a quota buyout was not new, but it gained political momentum after beingendorsed in the final report of a presidential commission on tobacco, Tobacco at a Crossroads, ACall for Action (May 14, 2001), and by the leading U.S. cigarette manufacturer, Philip Morris. Several quota bills were introduced in the 107th Congress without subsequent legislative action. Supporters of a buyout and legislative sponsors again put the proposal on the legislative agenda ofthe 108th Congress by introducing several differing bills. Eventually, H.R. 4033 (Jenkins; March 25, 2004) and S. 1490 (McConnell; July 30, 2003) were attached to unrelated tax legislation ( H.R. 4520 in theHouse and S. 1637 in the Senate), which was taken up by conferees on October 5, 2004. These bills proposed to eliminate tobacco quotas and the price support loan program. Ascompensation, quota owners (including absentee owners) and active producers would receive lumpsum payments. Active producers were to receive $7 per pound in the House version or $8 per poundin the Senate version for the quota they owned in 2002, plus $3 per pound in the House version or$4 per pound in the Senate version for the quantity of tobacco they were allowed to produce. Mostproducers grow more than the quota they own because they lease quota from other landlords. Theabsentee landlords also were be paid for the quota they owned in 2002. The estimated cost of the House and Senate bills was, respectively, $9.6 billion and $12 billion. The source of funding for the two bills differed, coming from the federal treasury in the House billand from tobacco product manufacturers and importers in the Senate bill. Many public health advocates and Philip Morris strongly supported a tobacco quota buyout accompanied by new legal authority for the Food and Drug Administration (FDA) to regulatetobacco products. The proposed FDA authority was included in identical bills in the House andSenate ( H.R. 4433 , Davis-Waxman; and S. 2461 , DeWine-Kennedy). TheFDA authority also was included in the Senate version of the tax bill, but not in the House version,where there was strong opposition. The Chairman's mark for the conference committee on H.R. 4520 included a tobacco title (Title VI) that closely matched the House version, H.R. 4033 , with quotabuyout payments of $7 per pound and active producer payments of $3 per pound. Under theconference agreement, funding would come from assessments on tobacco product manufacturers andimporters (as proposed in S. 1490 ). FDA regulatory authority over tobacco products,however, was not included. This report is intended to serve as a history and evolution of the tobacco buyout. It will not be updated. |
A "lame duck" session of Congress takes place whenever one Congress meets after its successor is elected but before the term of the current Congress ends. From 1940 to 2016, there were 21 lame duck sessions. The most recent la me duck session, which commenced on November 13, 2018, is not included in the data presented in this report. Of the 21 lame duck sessions examined, seven followed an election that switched the majority party in one or both chambers. That is, the party that controlled the House or Senate during the lame duck session did not retain its majority into the next Congress. Tab l e 1 displays these sessions, occurring in 1948, 1954, 1980, 1994, 2006, 2010, and 2014. Like the 2018 lame duck session, three lame duck sessions (1940 to 2016) followed a majority-changing midterm election during a President's first term of office. In each of these sessions (1954, 1994, 2010), the same party had controlled the White House, House, and Senate prior to the election. This report provides additional information on the 1954, 1994, and 2010 lame duck sessions. Lame duck sessions have been held for a variety of reasons. Their primary purpose is to complete action on legislation. They have also been used to prevent recess appointments and pocket vetoes, to consider motions of censure or impeachment, to keep Congress assembled on a standby basis, or to approve nominations (Senate only). In recent years, most lame duck sessions have focused on program authorizations, trade-related measures, appropriations, and the budget. Critics of lame duck sessions object to recently defeated Members or parties managing and acting on the legislative agenda. Proponents consider these post-election sessions to be useful for lawmaking at the end of a Congress. In the last two decades, lame duck sessions have become a routine occurrence during even-numbered years, regardless of which party is in the majority before the election. Prior to 1933, the last regular session of Congress was always a lame duck session. However, the 20 th Amendment to the Constitution changed the dates of the congressional term from beginning and ending on March 4 of odd-numbered years to January 3 of odd-numbered years. As a result, lame duck sessions are no longer an automatic feature of Congress. Today, lame duck sessions consist of any portion of a regular second session that falls after the November election in an even-numbered year and before the next Congress commences on January 3. Between 1935 and 1998, one or both houses held a lame duck session in 12 of the 32 Congresses (74 th -105 th ). In contrast, both houses held a lame duck session in every Congress from the 106 th through the 114 th (2000-2016). These sessions are now an anticipated—although not guaranteed—biennial event. In Congresses featuring a lame duck session, the preceding election break spanned an average of six to seven weeks and generally began by early to mid-October. During the break, the chambers either were in recess or held a series of pro forma sessions. Lame duck sessions begin once regular, consecutive daily sessions resume after an election break. Typically, sessions have started around the third week of November. Between 1935 and 2016, the average session length was about one calendar month. Within that time frame, the House held an average of 15 daily sessions, and the Senate held an average of 18 daily sessions. The shortest lame duck sessions featured a limited agenda. For instance, in 1998, the House spent three days considering the President Clinton impeachment proceedings. In 1948, the House and Senate met for one day, mainly to wrap up the 80 th Congress, and in 1994, the Members spent the two-day lame duck session considering a tariff and trade agreement. The 1948 and 1994 sessions took place after an election that switched the majority party. However, the other majority-change lame duck sessions were similar in length to the overall average. From 1935 to 2016, seven lame duck sessions followed an election that changed the majority party in one or both chambers of Congress. Two occurred during a presidential election year (1948, 1980), two followed a midterm election during the second term of a President (2006 and 2014), and three followed a midterm election during the first term of a President (1954, 1994, 2010). Tabl e 1 displays lame duck sessions that convened after an election that changed the majority party in either the House or the Senate. The table identifies the number of seats the majority party lost as well as the key measures approved during the post-election periods. In each of the lame duck sessions that followed a midterm election in a President's first term in office, the same party controlled the White House, the House, and the Senate. Below, more information is provided on the 1954 (Republican-controlled), 1994 (Democratic-controlled), and 2010 (Democratic-controlled) lame duck sessions of Congress. For a detailed review of lame duck sessions of Congress (1935-2016), see CRS Report R45154, Lame Duck Sessions of Congress, 1935-2016 (74th-114th Congresses) . In the 1954 midterm election, the Republican Party lost its majorities in both chambers during President Eisenhower's first term in office. After the election, the Senate reconvened solely to consider disciplinary actions against Republican Senator Joseph R. McCarthy. (The House remained adjourned for the remainder of the 83 rd Congress.) On November 9, a select investigative committee reported a resolution of censure, which was subsequently debated and amended on the Senate floor. On December 2, the Senate approved the two-count resolution censuring Senator McCarthy for behavior related to his inquiry into alleged communist influence in the federal government. Two years into President Clinton's presidency, the 1994 midterm gave Republicans control of the House and Senate for the next Congress. On November 29, both houses reconvened in order to consider the General Agreement on Tariffs and Trade. The measure, which had stalled in the Senate prior to the election, received bipartisan support in the lame duck. The House passed the bill on the first day of the session, and the Senate passed it on December 1. In the 2010 election, midway through President Obama's first term in office, congressional Democrats lost their House majority as well as six seats in the Senate. On November 15, both chambers reconvened after the election to consider an extensive legislative agenda. Among the measures adopted, Congress passed the Ike Skelton National Defense Authorization Act for Fiscal Year 2011 (NDAA, P.L. 111-383 ), the FDA Food Safety Modernization Act ( P.L. 111-353 ), the Don't Ask, Don't Tell Repeal Act ( H.R. 2965 ), and the James Zadroga 9/11 Health and Compensation Act ( H.R. 847 ). The House and Senate also extended the 2001 and 2003 income tax cuts and adopted a series of continuing resolutions (CRs) to provide government funding through March 4, 2011. In addition, the Senate voted to approve ratification of an arms control treaty with Russia (New START) and confirmed 19 federal judges. | "Lame duck" sessions of Congress take place whenever one Congress meets after its successor is elected but before the term of the current Congress ends. Their primary purpose is to complete action on legislation. They have also been used to prevent recess appointments and pocket vetoes, to consider motions of censure or impeachment, to keep Congress assembled on a standby basis, or to approve nominations (Senate only). In recent years, most lame duck sessions have focused on program authorizations, trade-related measures, appropriations, and the budget. From 1940 to 2016, there were 21 lame duck sessions. Seven followed an election that switched the majority party in one or both chambers. That is, the party that controlled the House or Senate during the lame duck session did not retain its majority into the next Congress. These sessions occurred in 1948, 1954, 1980, 1994, 2006, 2010, and 2014. Three lame duck sessions between 1940 and 2016 followed a majority-changing midterm election during a President's first term of office. In each of these sessions (1954, 1994, 2010), the same party had controlled the White House, House, and Senate prior to the election. This report provides additional information on the 1954, 1994, and 2010 lame duck sessions. The most recent lame duck session, which commenced on November 13, 2018, is not included in the data presented. |
In the past, the oil and natural gas industry considered resources locked in tight, impermeable formations such as shale uneconomical to produce. Advances in directional well drilling and reservoir stimulation have dramatically changed this perspective. It is production from these unconventional formations that has changed the U.S. energy posture and global energy markets. U.S. oil and natural gas production is on the rise, primarily driven by resources from tight formations. The techniques developed to produce shale gas—directional drilling and hydraulic fracturing —have migrated to the oil sector. The United States is the third-largest oil producer in the world but also the fastest-growing producer. The United States surpassed Russia in 2009 as the world's largest natural gas producer. Production from tight formations is expected to make up a significant part of production of each commodity well into the future (see Figure 1 ). This report focuses on the growth in U.S. oil and natural gas production driven primarily by tight oil formations and shale gas formations. It does not address other types of unconventional production such as coalbed methane or tight gas, as their contributions to overall U.S. production have not changed as dramatically as shale gas. There has been continued congressional interest related to unconventional natural gas and oil production. In March 2015, the House Natural Resources Committee's Subcommittee on Energy and Mineral Resources held a hearing addressing the new Bureau of Land Management (BLM) hydraulic fracturing rule. Among actions in the 113 th Congress, the Senate Energy and Natural Resources Committee held three roundtable discussions on natural gas supply and use ; the House Natural Resources Committee held a hearing on hydraulic fracturing legislation and the BLM proposed rule; and the House Energy and Commerce Committee's Subcommittee on Energy and Power held a hearing in June 2013 on U.S. energy abundance. Unconventional formations are fine-grained, organic-rich, sedimentary rocks—usually shales and similar rocks. The shales and rocks are both the source of and the reservoir for oil and natural gas, unlike conventional petroleum reservoirs. The Society of Petroleum Engineers describes "unconventional resources" as petroleum accumulations that are pervasive throughout a large area and are not significantly affected by pressure exerted by water (hydrodynamic influences); they are also called "continuous-type deposits" or "tight formations." In contrast, conventional oil and natural gas deposits occur in porous and permeable sandstone and carbonate reservoirs. Under pressure exerted by water, the hydrocarbons migrated upward from organic sources until an impermeable cap-rock (such as shale) trapped it in the reservoir rock. Although the unconventional formations may be as porous as other sedimentary reservoir rocks, their extremely small pore sizes and lack of permeability make them relatively resistant to hydrocarbon flow. The lack of permeability means that the oil and gas typically remain in the source rock unless natural or artificial fractures occur. Historically, natural gas prices in the United States have been volatile. From 1995 to 1999, the spot price of natural gas averaged $2.23 per million British thermal units (MBtu, sometimes noted as mmBtu) but increased to an average price of $4.68 per MBtu, in nominal dollars, during the 2000-2004 period, an almost 110% rise. Prices hit a peak in December 2005 at $15.38 per MBtu but remained relatively high through July 2008, as can be seen in Figure 2 . Along with the rise in prices, U.S. net imports of natural gas also rose, increasing 32% between 1995 and 2000 and 41% between 1995 and 2007. As U.S. prices and imports continued to trend up, the industry undertook two competing solutions to meet the need for more natural gas—increased liquefied natural gas (LNG) imports and development of techniques to produce shale gas. The LNG import facilities were much higher profile and were cited extensively in industry and popular press. Approximately 50 import projects were proposed, and 8 were eventually constructed during the mid- to late 2000s, along with the recommissioning of older facilities. Although horizontal drilling and hydraulic fracturing have been industry techniques for some time, their application to shale gas formations is relatively new. Advances in directional drilling, particularly steerable down-hole motors, allowed drilling operators to better keep the well bore in the hydrocarbon-bearing shale formations. Well stimulation was also required, and improvements in hydraulic fracturing techniques, particularly multistage hydraulic fracturing and the ability to better control the fractures, contributed to making shale gas production a profitable venture. In 2007, the Energy Information Administration (EIA) first recorded shale gas production, when it accounted for just 7% of U.S. natural gas production. In 2013, shale gas production accounted for almost 40% of U.S. production (see Figure 1 ), while almost all the LNG import terminals were idle and many applied to become export terminals. The application of advances in directional drilling and hydraulic fracturing were first applied to shale gas formations, particularly as natural gas prices increased in the mid-2000s. Methane molecules and those of natural gas liquids (NGLs) are smaller than crude oil molecules and therefore tend to be more responsive to hydraulic fracturing. The success of shale gas development has driven U.S. natural gas production to increase almost every month on a year-on-year basis (see Figure 3 ) from 2008 through May 2014. The rise in shale gas development has also resulted in natural gas prices declining, as shown in Figure 2 . The decline in prices and production in the latter half of 2008 was mainly the result of the economic downturn. However, as the economy picked up in 2009, natural gas resumed its upward production trajectory while prices stayed low. Overall U.S. natural gas production grew, as did the contribution from shale. The continued increase in production can be attributed, in part, to industry improvements in extracting more of the natural gas from the shale formations. Continued progress in hydraulic fracturing and directional drilling techniques has enabled companies to drive down production costs while increasing output. NGLs have taken on a new prominence as shale gas production has increased and prices have fallen. As natural gas prices have stayed low, company interests have shifted away from dry natural gas production to more liquids-based production. NGL is a general term for all liquid products separated from natural gas at a gas processing plant and includes ethane, propane, butane, and pentanes. When NGLs are present with methane, which is the primary component of natural gas, the natural gas is referred to as either "hot" or "wet" gas. Once the NGLs are removed from the methane, the natural gas is referred to as "dry" gas, which is what most consumers use. Each NGL has its own market and its own value. As the price for dry gas has dropped because of the increase in supply and other reasons, such as the warm winter of 2011, the natural gas industry has turned its attention to producing in areas with more wet gas in order to bolster the value it receives (see Figure 4 ). Some companies have shifted their production portfolios to tight oil formations, such as the Bakken in North Dakota and Montana, to capitalize on the experience they gained in shale gas development. Historically, the individual NGL products have been priced against oil, except for ethane. As oil prices have remained higher since 2008 relative to natural gas, they have driven an increase of wet gas production. Because of its low price, dry gas is often treated as a "byproduct" of wet gas and oil production. The prospect of U.S. energy independence is grounded in the production growth from tight oil formations such as the Bakken Formation in North Dakota and Montana and the Eagle Ford Formation in Texas. Relative to other fuels, the United States is more dependent upon imports for its oil requirements, still accounting for about 47% of consumption. Canada is the largest supplier of U.S. oil imports, which is why energy independence is usually mentioned as North American energy independence. The United States added almost 1 million barrels per day (b/d) of oil production between 2012 and 2013 (see Figure 5 ). U.S. oil production has reached levels not seen in more than a decade but is almost 2 million b/d short of the highs in the 1970s. Since 2005, when crude oil imports reached a peak, they have dropped almost 2.4 million b/d, or 24%, through 2013. Also since 2005, U.S. consumption of crude oil and petroleum products has been trending downward, contributing to the decrease in imports. The continued shift of industry resources toward oil-rich production has prompted forecasts of continued growth. Domestic crude oil production is projected to rise through the end of the decade. The tremendous increases are primarily due to dramatic increases in production from the previously mentioned Bakken Formation in North Dakota and the Eagle Ford play in Texas, both tight oil formations. As with other energy sources or fuel production, the development of unconventional oil and gas resources can pose both environmental risks and net benefits, some direct and others indirect. Potential direct risks may include impacts to groundwater and surface water quality, public and private water supplies, and air quality. In addition, some have raised concerns about potential long-term and indirect impacts from reliance on fossil fuels and resulting greenhouse gas emissions and influence on broader energy economics. On the other hand, natural gas is seen by many as a "bridge" fuel that can provide more energy per unit of greenhouse gas produced than some alternatives (e.g., coal) and has only recently been produced in sufficient quantity and at low enough prices to provide a viable alternative fuel that is widely regarded as relatively cleaner-burning (i.e., no mercury or sulfur emissions and substantially lower emissions of nitrous oxides and carbon dioxide per Btu of energy produced compared to coal). This report focuses primarily on measures to address potential direct impacts. Among the variety of potential direct environmental impacts, many may be mitigated with appropriate safeguards, existing technology, and best practices. For example, management of wastewater associated with increased unconventional oil and gas production activity has in some cases placed a strain on water resources and on wastewater treatment plants that were not designed to remove salts and other contaminants from hydraulic fracturing flowback and produced water, and these impacts can be mitigated by investing in additional control technologies. Water quality issues have received much attention, and of these, the potential risks associated with well stimulation by hydraulic fracturing have been at the forefront. Complaints of contaminated well water have emerged in some areas where unconventional oil and gas development has occurred, although regulators have not reported a direct connection between hydraulic fracturing of shale formations at depth and groundwater contamination. In shale formations, the vertical distance separating the target zone from usable aquifers generally is much greater than the length of the fractures induced during hydraulic fracturing. Thousands of feet of rock layers typically overlay the produced portion of shale, and these layers serve as barriers to flow. In these circumstances, geologists and state regulators generally view as remote the possibility of creating a fracture that could reach a potable aquifer. If the shallow portions of shale formations were developed, then the thickness of the overlying rocks would be less and the distance from the shale to potable aquifers would be shorter, posing more of a risk to groundwater. In contrast to shale, coalbed methane (CBM) basins often qualify as underground sources of drinking water. Injection of fracturing fluids directly into or adjacent to such formations may be more likely to present a risk of contamination, and this is where initial regulatory attention and study was focused. State regulators have expressed more concern about the groundwater contamination risks associated with developing a natural gas or oil well (drilling through an overlying aquifer and casing, cementing, and completing the well), as opposed to hydraulic fracturing per se. The challenges of sealing off the groundwater and isolating it from possible contamination are common to the development of any oil or gas well and are not unique to hydraulic fracturing. However, horizontally drilled, hydraulically fractured oil and gas wells pose more development and production challenges and are subject to greater pressures than conventional vertical wells. Identifying the source or cause of groundwater contamination can be difficult for various reasons, including the complexity of hydrogeologic processes and investigations, a lack of baseline testing of nearby water wells prior to drilling and fracturing, and the confidential business information status traditionally provided for fracturing compounds. Investigations by regulators and researchers have generally found that incidents involving residential water well contamination (including methane gas migration) have been caused by failure of well-bore casing and cementing or other well development and operating problems rather than the hydraulic fracturing process. The debate over groundwater contamination risks associated with hydraulic fracturing has been fueled in part by the lack of scientific studies to assess more thoroughly current practices and related complaints and uncertainties. To address this issue, Congress has asked the Environmental Protection Agency (EPA) to conduct a study on the relationship between hydraulic fracturing and drinking water. The "hydraulic fracturing" debate also has been complicated by terminology. Many do not differentiate the well stimulation process of "fracing" or "fracking" from the full range of activities associated with unconventional oil and gas exploration and production. Other water quality concerns—associated with both conventional and unconventional oil and natural gas extraction—include the risks of contaminating ground and surface water from surface spills, leaks from pits, and siltation of streams from drilling and pad construction activities. Because of the large, but short-term, volumes of water needed for the hydraulic fracturing operations used to extract shale gas and tight oil, water consumption issues have emerged as well. Water use issues include the impacts that large water withdrawals might have on groundwater resources, streams and aquatic life (particularly during low-flow periods), and other competing uses (e.g., municipal or agricultural uses). Such impacts may be regional or localized and can vary seasonally or with longer-term variations in precipitation. The management of the large volumes of wastewater produced during natural gas production (including flowback from hydraulic fracturing operations and water produced from source formations) has emerged in many areas as a significant water quality issue as well as a cost issue for producers. In some areas, such as portions of the Marcellus Shale region, capacity is limited for wastewater disposal using underground injection wells (historically, the most common and preferred produced-water disposal practice in oil and natural gas fields), and surface discharge of wastewater is an increasingly restricted option. Such issues, as well as water-use concerns, are driving increased water recycling and reuse in the industry. Air emissions associated with unconventional oil and natural gas production have also raised public health concerns and have drawn regulatory scrutiny. Air pollutants can be released during various stages of oil and natural gas production. Emission sources include pad, road, and pipeline construction; well drilling and completion, and flowback activities and natural gas processing, storage, and transmission equipment. Key pollutants include methane (the main component of natural gas and a potent greenhouse gas), volatile organic compounds (VOCs), nitrogen oxides, sulfur dioxide, particulate matter, and various hazardous air pollutants. According to EPA, the oil and gas industry is a significant source of methane and VOC emissions, which react with nitrogen oxides to form ozone (smog). EPA has identified hydraulically fractured gas wells during flowback as an additional source of these emissions in the natural gas industry. Releases of methane and other pollutants can also occur where natural gas is produced in association with oil and natural gas gathering pipelines and other infrastructure are lacking. In such cases, the natural gas must generally be flared or vented. Flaring reduces VOC emissions compared to venting, but like venting, it contributes to greenhouse gas emissions without producing an economic value or displacing other fuel consumption. Natural gas flaring has become an issue with the rapid and intense development of tight oil from the Eagle Ford Formation in Texas and the Bakken Formation in North Dakota, which have significant amounts of associated gas. Other areas that have experienced large increases in tight oil production have also had increases in the amount of natural gas being flared. Oil and natural gas development is occurring in at least 32 states. Shale gas, tight oil, or other unconventional resources (such as coalbed methane) are found in many of these states, primarily on non-federal lands (see Figure 6 ). States are the principal regulators of oil and gas production activities on state and private lands. The federal government, through the Department of the Interior's Bureau of Land Management (BLM), has responsibility for overseeing oil and gas development on federally managed lands; however, some states require operators on federal public lands within state boundaries to comply with the state's oil and gas rules. Hydraulic fracturing, traditionally without horizontal drilling, has been used for decades to stimulate increased production from existing oil or gas wells. This technique, along with other well stimulation techniques, has been regulated to varying degrees through state oil and gas codes. The detail and scope of applicable regulations vary across the states, and some states have regulated "well stimulation" broadly without addressing hydraulic "fracturing" explicitly. State regulators have noted that hydraulic fracturing operations have been regulated through provisions that address various production activities, including requirements regarding well construction (e.g., casing and cementing), well stimulation (e.g., hydraulic fracturing), well operation (e.g., pressure testing and blowout prevention), and wastewater management. Nonetheless, drilling and fracturing methods and technologies have changed significantly over time as they have been applied to more challenging formations, greatly increasing the amount of water, fracturing fluids, and well pressures involved in tight oil and shale gas production operations. State groundwater protection officials have reported that development of shale gas and tight oil using high-volume hydraulic fracturing, in combination with directional drilling, has posed new challenges for the management and protection of water resources. Consequently, many of the major producing states have revised or are in the process of revising their oil and gas laws and regulations to respond to these advances in oil and natural gas production technologies and related changes in the industry. When revising laws and regulations, some states have added provisions to address hydraulic fracturing specifically, such as requirements for disclosure of chemicals used in hydraulic fracturing. Additionally, various states have adopted measures on water resources protection (including casing, cementing and pressure testing, well spacing, setbacks, water withdrawal, flowback, and wastewater storage and disposal requirements). According to the Ground Water Protection Council (GWPC), the number of states with regulations governing hydraulic fracturing operations specifically increased from 4 in 2009 to 13 in 2013, and the number of states requiring reporting of hydraulic fracturing chemicals grew from 9 in 2009 to 21 in 2013. In February 2015, the GWPC reported that 27 states required chemical disclosure, and at least 18 of these states allow or require companies to meet public disclosure requirements by using the FracFocus website (see Figure 7 ). In December 2014, the New York State environmental commissioner announced plans to prohibit high-volume hydraulic fracturing based on the findings of a public health review. Maryland environmental officials recommended in late 2014 that shale gas drilling be allowed using best practices, following a three-year review of potential risks pursuant to an executive order. In 2013, North Carolina lawmakers enacted legislation prohibiting the issuance of permits for oil and gas development using hydraulic fracturing and horizontal drilling until new regulations were in place and the legislature took affirmative action to allow permits to be issued; in 2014, the state enacted legislation authorizing a regulatory permitting program for shale gas development. While states continue to adopt and implement varying frameworks for oversight and regulation of unconventional gas and oil development, some Members of Congress and various environmental groups have pressed for greater environmental oversight of shale energy development at the federal level. Some advocates of a larger federal role point to a wide range of differences in substance, scope, and enforcement among state regulatory regimes and assert that a national framework is needed to ensure a consistent baseline level of environmental and human health protection and transparency. Such advocates further argue that greater regulatory uniformity would reduce risks and uncertainties to both the industry and the public. Others, including many oil and gas states, argue against greater federal involvement and point to established state oil and gas programs and regulatory structures (which include a range of structures involving commissions, boards, or divisions within natural resource agencies working to varying degrees with, or within, state environmental agencies). In this view, experience lies with the states, and in addition to the relative nimbleness of states to review and revise laws and rules, the states are better able to consider regional differences in geology, topography, climate, and water resources. In the 113 th Congress, as in recent Congresses, the federal role in regulating oil and gas production generally, and hydraulic fracturing specifically, was the subject of hearings, seminars, and legislation. In the 114 th Congress, bills have again been proposed to either limit or expand federal involvement in regulating oil and gas development (see " Legislation " section). Such proposals have been contentious, and Congress has not enacted such legislation since amending the Safe Drinking Water Act (SDWA) in the Energy Policy Act (EPAct) of 2005 ( P.L. 109-58 ) to explicitly exclude from the SDWA definition of underground injection of fluids (other than diesel fuels) related to hydraulic fracturing operations. Provisions of several federal environmental laws and related regulations currently apply to certain activities associated with oil and natural gas production. The Clean Water Act (CWA), for example, prohibits the discharge of pollutants from point sources into surface waters without a permit, and SDWA requires an Underground Injection Control (UIC) permit for wastewater disposal through deep well injection. A SDWA UIC permit is required for the underground injection of fluids or propping agents for hydraulic fracturing operations if the injected fracturing fluids contain diesel fuels. In 2012, EPA issued regulations under the authority of the Clean Air Act that require reductions in emissions related to oil and natural gas production, including emissions of volatile organic compounds (VOCs) from hydraulically fractured natural gas wells. While congressional debate has continued on legislative proposals, the Administration has been pursuing additional initiatives to regulate or otherwise manage activities related to unconventional oil and gas production. EPA has been most active and is considering actions under several pollution control statutes. Among these efforts, EPA is working to (1) establish pretreatment standards to control discharges of wastewater from shale gas extraction to publicly owned wastewater treatment plants; (2) revise water quality criteria to protect aquatic life from discharges of brine produced during oil and gas extraction to surface waters; and (3) subject hydraulic fracturing chemicals to toxic substance reporting requirements. In February 2014, EPA finalized permitting guidance for the use of diesel in hydraulic fracturing operations. The Appendix of this report provides a brief overview of selected federal environmental research and regulatory activities related to the production of tight oil and gas resources. Several of these initiatives are reviewed below. In 2009, the 111 th Congress urged EPA to conduct a study on the relationship between hydraulic fracturing and drinking water to gain a better understanding of potential contamination risks. In 2011, EPA published a final study plan that identified research projects that would address the full life cycle of water in hydraulic fracturing, from water acquisition to chemical mixing and injection through wastewater treatment and/or disposal. The study is intended to (1) examine conditions that may be associated with potential contamination of drinking water sources, and (2) identify factors that may lead to human exposure and risks. As part of the study, EPA has been investigating five reported incidents of drinking water contamination in areas where hydraulic fracturing has occurred. The purpose of the retrospective case studies is to determine the potential relationship between reported impacts and hydraulic fracturing activities. In December 2012, EPA released a status report presenting the agency's efforts on 18 research projects being conducted for the study. Many of the individual research projects have been peer reviewed and published, and these papers are available on the agency website. EPA has designated the hydraulic fracturing study as a "highly influential scientific assessment," which will undergo peer review by EPA's independent Science Advisory Board. EPA is synthesizing the results of the research projects into a draft report and plans to submit it for peer review and public comment in 2015. A final report is not expected to be completed before 2016. In March 2011, the White House issued a broad Blueprint for a Secure Energy Future , which identified a need to "expand safe and responsible domestic oil and gas development and production." Additionally, the President directed the Secretary of Energy to identify steps that could be taken to improve the safety and environmental performance of shale gas production and to develop consensus recommendations on practices to ensure the protection of public health and the environment. In response, the Secretary of Energy's Advisory Board (SEAB) convened the Shale Gas Production Subcommittee to identify and evaluate issues and make recommendations to mitigate possible impacts of shale gas development. The SEAB final report included recommendations for the states, federal government, and industry. The subcommittee recommended, among other actions, that companies and regulators—to the extent that such actions had not been undertaken—adopt further measures to protect water quality and to manage water use and wastewater disposal, publicly report the composition of water and flow throughout the fracturing and cleanup process, disclose fracturing fluid composition, and adopt best practices for well development and construction (especially casing, cementing, and pressure management). The committee also recommended actions to protect air quality through reduction of emissions of air toxics, ozone precursors, methane, and other pollutants. In 2012, the President issued Executive Order (E.O.) 13605, "Supporting Safe and Responsible Development of Unconventional Domestic Natural Gas Resources," to coordinate the efforts of federal agencies overseeing the development of unconventional domestic natural gas resources and associated infrastructure. The order states, "Because efforts to promote safe, responsible, and efficient development of unconventional domestic natural gas resources are underway at a number of executive departments and agencies, close interagency coordination is important for effective implementation of these programs and activities." E.O. 13605 established an interagency working group to coordinate agency activities and to engage in long-term planning to ensure coordination on research, resource assessment, and infrastructure development. In April 2012, the lead agencies—the Department of Energy (DOE), EPA, and the Department of the Interior (DOI/U.S. Geological Survey)—signed a Memorandum of Agreement to develop a multiagency research plan "to address the highest priority research questions associated with safely and prudently developing unconventional shale gas and tight oil reserves." In July 2014, the three agencies released a research and development strategy for unconventional oil and gas resources. While states have the predominant role in regulating oil and gas development on state and private lands, the federal government is responsible for managing oil and gas resources on federal lands. Additionally, some states require oil and gas operators on federal lands within their state to comply with various state rules; consequently, the debate over the federal role in regulating unconventional oil and gas production—and related concerns over possible overlapping, inconsistent, or duplicative rules—has extended to activities on federal lands. The Bureau of Land Management is the federal agency responsible for overseeing oil, natural gas, and coal leasing and production on federal and Indian lands, including split estates, where the federal government owns the subsurface mineral estate and another entity owns the surface. BLM is tasked with leasing subsurface mineral rights not only on BLM-administered land but also for lands managed by other federal agencies, including the U.S. Forest Service. BLM oversees roughly 700 million subsurface acres of federal mineral estate and 56 million subsurface acres of Indian mineral estate nationwide. As of June 30, 2014, there were roughly 47,000 active oil and gas leases and 95,000 wells on public lands. BLM estimates that 2,800 new wells were drilled on federal and Indian lands in 2013 and that hydraulic fracturing was used to stimulate roughly 90% of these wells. On March 26, 2015, BLM promulgated a hydraulic fracturing rule applicable to oil and gas operations on federal and Indian lands. The rule revises BLM's oil and gas rules related to hydraulic fracturing, which were promulgated in 1982 and last revised in 1988, before the widespread use of hydraulic fracturing and horizontal drilling. The rule is scheduled to enter into effect on June 24, 2015. When first proposing the rule in 2012, BLM noted that the "rule is necessary to provide useful information to the public and to assure that hydraulic fracturing is conducted in a way that adequately protects the environment." BLM estimates that the rule will affect roughly 2,800 hydraulic fracturing operations each year; however, based on previous levels of activity on federal lands, the rule could affect as many as 3,800 operations annually, and total compliance costs could reach $45 million annually. BLM received more than 177,000 comments on the proposed rule, and in May 2013, BLM published a Supplemental Notice of Proposed Rulemaking (SNPR) and Request for Comment. BLM reviewed more than 1.4 million comments on the SNPR before issuing the final rule. In developing the rule, BLM reached out to states, industry, and other stakeholders. Some elements of the rule are patterned after state requirements, and the final rule shares overarching features with the 2012 proposal and the 2013 SNPR. Broadly, the rule revises BLM oil and gas regulations to: add reporting and management requirements for fluids used and produced in hydraulic fracturing operations, including stricter storage requirements for fluids that flow back to the surface, require public disclosure of chemicals and proppants used in hydraulic fracturing, and add requirements to ensure that wells are constructed and operated in a manner that ensures wellbore integrity and protects water resources. Following are selected requirements of the final BLM hydraulic fracturing rule: Before hydraulic fracturing operations begin, a detailed "request for approval of hydraulic fracturing" must be submitted to BLM and approved. Operators may submit a request for approval for a single well or may submit a master hydraulic fracturing plan for a group of wells where geologic characteristics are similar. The rule specifies information that operators must provide in the request for approval, including: information regarding wellbore geology (including information on the formation into which fracturing fluids are to be injected, estimated depths of confining zones and occurrences of usable water, and a map regarding known or suspected faults or fractures); a map showing the planned wellbore trajectory and the estimated length, direction, and depth of fractures expected to be propagated; information concerning the source, location, transport, and volume of water to be used in hydraulic fracturing; and estimated volume of fluid to be recovered from the fracturing operations and proposed methods of handling and disposing of the recovered fluids. Prior to hydraulic fracturing operations, an operator must document that the cement is adequate to isolate all usable water formations. If there are indications of inadequate cement, operators must take remedial actions and meet additional reporting requirements. Mechanical integrity testing (pressure testing) of wellbores is required prior to fracturing operations. The rule sets stricter requirements for the interim storage of recovered fluids. Recovered fluids must be stored in above-ground tanks. In very limited conditions, BLM may approve the use of a pit instead of a tank. Companies must disclose information on each additive used in the hydraulic fracturing fluids (chemicals and proppants) with exceptions and requirements for trade secrets. Operators must provide this information to BLM by posting it on the FracFocus website within 30 days of completing fracturing operations. On a case-by-case basis, an operator may request a variance from requirements of the rule if the operator can demonstrate that the objectives of the rule would be met using an alternate approach. States or tribes may work with BLM to craft variances from specific regulatory provisions that would allow compliance with state or tribal requirements to be accepted as compliance with the BLM rule (if the state or tribal provision is at least as protective as the pertinent BLM provision). BLM does not provide for statewide exemptions from the hydraulic fracturing rule. BLM further plans to revise its oil and gas rules to set standards to limit venting and flaring of natural gas at oil and gas production facilities on federal and Indian lands. The disposal of the large volumes of wastewater produced during shale gas extraction has posed challenges for companies, state regulators, and communities—particularly in the Marcellus Shale region. On-site disposal options are limited, and trucking wastewater to distant injection wells is costly. In 2012, the Coast Guard received two requests for approval for the bulk shipment of wastewater resulting from shale gas extraction in the Marcellus Shale to storage or treatment centers and final disposal sites in Ohio, Texas, and Louisiana. The Coast Guard regulates the shipment of hazardous materials on the nation's rivers and classifies cargoes for bulk shipment. For a cargo that has not been classified in the regulations or under prior policy, the ship owner must request Coast Guard approval prior to shipping the cargo. The Coast Guard has identified concerns with shipment of shale gas wastewater in barges. A key Coast Guard concern with the wastewater is "its potential for contamination with radioactive isotopes such as radium-226 and -228. Radium is of particular concern because it is chemically similar to calcium and so will easily form surface residues and may lead to radioactive surface contamination of the barges." Consequently, the Coast Guard currently does not allow barge shipment of shale gas extraction wastewater (SGEWW), and is developing a policy to allow SGEWW to be transported for disposal. In March 2013, the Coast Guard submitted for review to the Office of Management and Budget a draft document, "Carriage of Conditionally Permitted Shale Gas Extraction Waste Water in Bulk." In October 2013, the Coast Guard published a notice of availability of a proposed "policy letter" concerning barge shipments of SGEWW and requested public comment. The Coast Guard received more than 70,000 comments and has been reviewing them. After addressing public comments, the Coast Guard plans to issue a final policy letter that specifies conditions and information requirements that barge owners would be required to meet to receive approval to transport shale gas wastewater in bulk on inland waterways. Contrasting bills were offered in the 113 th Congress addressing unconventional oil and gas development and hydraulic fracturing specifically. Several bills proposed to limit federal regulation of hydraulic fracturing activities, while others would have expanded federal involvement. In November 2013, the House passed H.R. 2728 to amend the Mineral Leasing Act to prohibit the Department of the Interior (DOI) from enforcing any federal regulation, guidance, or permit requirement regarding hydraulic fracturing relating to oil, gas, or geothermal production activities on or under any land in any state that has regulations, guidance, or permit requirements for hydraulic fracturing. Although the language broadly applied to any federal regulation, guidance, and permit requirements "regarding hydraulic fracturing," the prohibition on enforcement applied only to DOI and therefore presumably would have impacted only hydraulic fracturing operations on lands managed by that agency. The bill would have also required DOI to defer to state regulations, permitting, and guidance for all activities related to hydraulic fracturing relating to oil, gas, or geothermal production activities on federal land, regardless of whether those rules were duplicative, more or less restrictive, or did not meet federal guidelines. As passed, H.R. 2728 further would have (1) prohibited the department from enforcing hydraulic fracturing regulations on Trust lands, except with express tribal consent, and (2) required the Government Accountability Office to study the economic benefits of domestic shale oil and gas production resulting from hydraulic fracturing. H.R. 2728 also incorporated the text of H.R. 2850 ( H.Rept. 113-252 ), the EPA Hydraulic Fracturing Study Improvement Act. These provisions proposed to require EPA to (1) follow certain procedures governing peer review and data presentation in conducting its study on the relationship between hydraulic fracturing and drinking water, and (2) issue the final report by September 30, 2016. On November 20, 2013, S. 1743 , a companion bill to H.R. 2728 as introduced, was offered in the Senate. H.R. 2728 was placed on the Senate Legislative Calendar in December 2013. In September 2014, the House passed broad energy legislation ( H.R. 2 ), which included the text of H.R. 2728 in Subdivision D. The Senate did not act on either bill. Similarly, the Fracturing Regulations are Effective in State Hands Act, H.R. 2513 and S. 1234 , proposed to give states sole authority to regulate hydraulic fracturing operations on lands within state boundaries. The legislation further specified that hydraulic fracturing on federal public lands would be subject to the law of the state in which the land is located. S. 1482 , the Empower States Act of 2013, would have generally prohibited the Secretary of the Interior from issuing regulations or guidelines regarding oil and gas production on federal land in a state if the state had otherwise met the requirements under applicable federal law. Among other provisions, the bill also proposed to (1) amend the Safe Drinking Water Act to require federal agencies, before issuing any oil and gas regulation or guideline, to seek comment and consult with each affected state agency and Indian tribe, and (2) require any future rule requiring disclosure of hydraulic fracturing chemicals to refer to the FracFocus database. H.R. 1548 ( H.Rept. 113-263 ) would have prohibited the BLM hydraulic fracturing rule from having any effect on land held in trust or restricted status for Indians, except with the express consent of its Indian beneficiaries. H.R. 2 , Section 25009, included this language. In contrast to the above bills, several others proposed to expand federal regulation of hydraulic fracturing. The Fracturing Responsibility and Awareness of Chemicals Act (FRAC) of 2013 ( H.R. 1921 and S. 1135 ) would have amended the SDWA to (1) require disclosure of the chemicals used in the fracturing process, and (2) repeal the hydraulic fracturing exemption established in EPAct 2005 and amend the term "underground injection" to include the injection of fluids used in hydraulic fracturing operations, thus authorizing EPA to regulate this process under the SDWA. The Climate Protection Act of 2013, S. 332 , Section 301, contained similar chemical disclosure provisions. Additionally, S. 332 proposed to repeal SDWA Section 1425, which provides states with an alternative to meeting the specific requirements contained in EPA UIC regulations by allowing states to demonstrate to EPA that their existing programs for oil and gas injection wells are effective in preventing endangerment of underground sources of drinking water. S. 332 , Section 302, would have required EPA to report to Congress on fugitive methane emissions resulting from natural gas infrastructure. Legislation was also introduced to require baseline and follow-up testing of potable groundwater supplies in the vicinity of hydraulic fracturing operations. H.R. 2983 , the Safe Hydration is an American Right in Energy Development Act of 2013, would have amended the SDWA to prohibit hydraulic fracturing unless the person proposing to conduct the fracturing operations agreed to testing and reporting requirements regarding underground sources of drinking water. The legislation would have required testing (for substances specified by EPA) before, during, and after hydraulic fracturing operations. EPA would have been required to post all test results on its website. Broader oil and gas regulatory bills included H.R. 1154 , the Bringing Reductions to Energy's Airborne Toxic Health Effects Act, which proposed to amend the Clean Air Act to authorize EPA to aggregate emissions from oil and gas wells, pipelines, and related units for purposes of regulating toxic air pollutants. H.R. 2825 , the Closing Loopholes and Ending Arbitrary and Needless Evasion of Regulations Act of 2013, would have amended the Resource Conservation and Recovery Act to require EPA to determine whether wastes associated with oil and gas production meet the criteria for hazardous waste and to regulate any such wastes as hazardous. Legislation in this Congress addressing unconventional oil and gas production repeats themes from 113 th Congress. Again bills have been introduced both to expand and limit federal regulation of hydraulic fracturing operations. Several relevant bills are outlined below. H.R. 1482 , Fracturing Responsibility and Awareness of Chemical Act of 2015, would amend the SDWA to (1) amend the term "underground injection" to include the injection of fluids used in hydraulic fracturing operations, thus authorizing EPA to regulate this process under the SDWA; and (2) require public disclosure of chemicals used in the fracturing process. H.R. 1515 , Safe Hydration is an American Right in Energy Development Act of 2015, would require baseline and follow-up testing of potable groundwater supplies in the vicinity of hydraulic fracturing operations. It would amend the SDWA to prohibit hydraulic fracturing unless the person proposing to conduct the fracturing operations agreed to testing and reporting requirements regarding underground sources of drinking water. The bill would require testing (for substances specified by EPA) before, during, and after hydraulic fracturing operations. EPA would be required to post test results on its website. S. 15 , Protecting States' Rights to Promote American Energy Security Act, would amend the Mineral Leasing Act to prohibit DOI from enforcing any federal regulation, guidance, or permit requirement regarding hydraulic fracturing relating to oil, gas, or geothermal production activities on or under any land in any state that has regulations, guidance, or permit requirements for hydraulic fracturing. The bill would also require DOI to defer to state regulations, permitting, and guidance for all activities related to hydraulic fracturing relating to oil, gas, or geothermal production activities on federal land. A similar bill, H.R. 1647 , would further direct the Comptroller General to examine the economic benefits of domestic shale oil and gas production resulting from the use of hydraulic fracturing. S. 785 , FRAC Act, would amend the SDWA to (1) amend the term "underground injection" to include the injection of fluids used in hydraulic fracturing operations, thus authorizing EPA to regulate this process under the SDWA, and (2) require public disclosure of chemicals and proppants used in the fracturing process. Additionally, the Senate bill would authorize states to seek primary enforcement responsibility for hydraulically fractured wells separately from other underground injection wells. S. 828 would clarify that a state has the sole authority to regulate hydraulic fracturing on federal land within the boundaries of the state. The prospect that by the end of the decade the United States could become a significant exporter of natural gas and the world's leading oil producer is a phenomenal change of circumstances from just a few years ago. The technological advances that drove the changes in the United States have also reversed the global perspective of dwindling oil and natural gas resources and increased the concern about greenhouse gas emissions. Other countries seek to emulate the U.S. production success but have yet to do so. The U.S. oil and gas situation continues to be extremely dynamic, and many questions remain about how the United States will develop its resources. Many observers, including U.S. government officials, have only recently recognized the tremendous resource size and the benefits that will accrue from developing the resources. Even though shale gas development is still considered very new and tight oil production is even newer, the industry has continued to improve its efficiency in extracting the resources, particularly of natural gas. As more industry resources are shifted to tight oil plays, the natural gas sector has had to produce more with less. Some in industry point out that at the beginning of shale gas development about 5% of the resource was able to be extracted; now it is closer to 20% but will likely increase over time. By comparison, the extraction rate for conventional gas is between 30% and 60% of the resource. Development of these resources has generated concern and debate over potential environmental and human health risks. Concerns include potential impacts to groundwater and surface water resources from well development and stimulation operations and wastewater management, as well as air quality impacts from emissions of air pollutants, including methane. These concerns have drawn scrutiny of regulatory regimes governing this industry and have led to calls for greater federal oversight of oil and gas development. A growing concern is that the deep-well disposal of oil and gas production wastewater may be responsible for increasing rates of seismic activity in certain areas. Although primary regulatory authority over oil and natural gas exploration and production on state and private lands generally rests with the states, provisions of several federal environmental laws currently apply to certain activities associated with oil and natural gas exploration and production. Moreover, EPA has been reviewing other statutory authorities and pursuing new regulatory initiatives, and BLM is planning further revisions to its oil and gas rules to address venting and flaring of natural gas on federal and Indian lands. A broader concern among some is that the low price of natural gas is having negative consequences for the development and growth in energy efficiency, renewable energy sources, and nuclear power, potentially resulting in another generation of greenhouse-gas-producing energy sources. The importance of tight oil and shale gas resources to U.S. energy policy and regional economies is likely to keep issues surrounding their development on the agenda in the 114 th Congress. Bills have been introduced to expand and also to constrain federal involvement in oil and gas development involving hydraulic fracturing. Meanwhile, the Administration continues to pursue actions to broaden federal oversight of this industry sector through administrative means. | The United States has seen resurgence in petroleum production, mainly driven by technology improvements—especially hydraulic fracturing and directional drilling—developed for natural gas production from shale formations. Application of these technologies enabled natural gas to be economically produced from shale and other unconventional formations and contributed to the United States becoming the world's largest natural gas producer in 2009. Use of these technologies has also contributed to the rise in U.S. oil production over the last few years. In 2009, annual oil production increased over 2008, the first annual rise since 1991, and has continued to increase each year since. Between January 2008 and May 2014, U.S. monthly crude oil production rose by 3.2 million barrels per day, with about 85% of the increase coming from shale and related tight oil formations in Texas and North Dakota. Other tight oil plays are also being developed, helping raise the prospect of energy independence, especially for North America. The rapid expansion of tight oil and shale gas extraction using high-volume hydraulic fracturing has raised concerns about its potential environmental and health impacts. These concerns include potential direct impacts to groundwater and surface water quality, water supplies, and air quality. In addition, some have raised concerns about potential long-term and indirect impacts from reliance on fossil fuels and resulting greenhouse gas emissions and influence on broader energy economics. This report focuses mainly on actions related to controlling potential direct impacts. States are the primary regulators of oil and gas production on non-federal lands. In recent years, many oil and gas producing states have revised laws and regulations governing oil and gas production in response to changes in production practices as producers have expanded into tight oil, shale gas, and other unconventional hydrocarbon formations. However, state rules vary considerably, leading to calls for more federal oversight of unconventional oil and gas extraction activities and hydraulic fracturing specifically. Provisions of several federal environmental laws can apply to certain activities related to oil and gas production, and proposals to expand federal regulation in this area have been highly controversial. Some advocates of a larger federal role point to a wide range of differences among state regulatory regimes and argue that a national framework is needed to ensure a consistent minimum level of protection for surface and groundwater resources and air quality. Others argue against more federal involvement and point to the long-established state oil and natural gas regulatory programs, regional differences in geology and water resources, and concern over regulatory redundancy. The federal role in regulating oil and gas extraction activities—and hydraulic fracturing, in particular—has been the subject of considerable debate and legislative proposals for several years, but legislation has not been enacted. While congressional debate has continued, the Administration has pursued a number of regulatory initiatives related to unconventional oil and gas development under existing statutory authorities. This report focuses on the growth in U.S. oil and natural gas production driven primarily by tight oil formations and shale gas formations. It also reviews selected federal environmental regulatory and research initiatives related to unconventional oil and gas extraction, including the Bureau of Land Management (BLM) hydraulic fracturing rule (finalized in March 2015) and Environmental Protection Agency (EPA) actions. |
Legislative interest in the patent system was evidenced by the introduction of reform legislation in earlier sessions of Congress. In the 111 th Congress, bills would have amended existing patent law in numerous respects, including changes to the right of a patent owner to obtain compensatory damages, the standard for judicial award of enhanced damages for willful infringement, the ability of patent owners to select the court in which they will bring suit, and the willingness of courts to accept appeals of orders interpreting a patent. Patent reform legislation introduced in earlier Congresses would have made additional changes, including modifications to the doctrine of inequitable conduct. Discussion of these issues may potentially continue in the 112 th Congress. Although the patent system has been the subject of congressional scrutiny over the past few years, the courts have also been active in making changes to important patent law principles. Many changes introduced by the judiciary have concerned topics that are also the subject of congressional consideration. For example, the Supreme Court issued an important decision concerning injunctive relief in eBay Inc. v. MercExchange , L.L.C. at the same time legislation before Congress would have addressed that issue. Some experts believe that as a result of the eBay decision, legislative reform of the principles of injunctive relief in patent law became unnecessary. Indeed, the patent reform bills placed before Congress subsequent to eBay have not addressed this issue. Review of pertinent judicial developments relating to selected patent law topics is timely for several reasons. First, an awareness of recent judicial opinions may assist understanding of the context of current legislative reform proposals. Second, some observers believe that several of these opinions have addressed the very concerns that had motivated legislative reform proposals, thereby obviating or reducing the need for congressional action. Third, a review of legislative and judicial developments provides an instructive historical narrative and allows for a comparison of relative institutional capabilities of these two branches of government. This report reviews the relationship between Congress and the courts in patent reform. It begins by offering a summary of the patent system. The report then discusses a number of topics that have been the subject of both judicial and legislative consideration. The current state of the law is then contrasted with legislative reform proposals before previous Congresses. The report closes with observations concerning the subtle interaction between legislative, administrative, and judicial actors within the patent system and their impact upon the U.S. innovation environment. The U.S. Constitution confers upon Congress the power "To promote the Progress of ... useful Arts, by securing for limited Times to ... Inventors the exclusive Right to their ... Discoveries...." In accordance with the Patent Act of 1952, an inventor may seek the grant of a patent by preparing and submitting an application to the U.S. Patent & Trademark Office (USPTO). USPTO officials known as examiners then determine whether the invention disclosed in the application merits the award of a patent. USPTO procedures require examiners to determine whether the invention fulfills certain substantive standards set by the patent statute. To be patentable, an invention that constitutes a "process, machine, manufacture, or composition of matter" may be patented. It must also be novel, or different, from subject matter disclosed by an earlier patent, publication, or other state-of-the-art knowledge. In addition, an invention is not patentable if "the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains." This requirement of "nonobviousness" prevents the issuance of patents claiming subject matter that a skilled artisan would have been able to implement in view of the knowledge of the state of the art. The invention must also be useful, a requirement that is satisfied if the invention is operable and provides a tangible benefit. In addition to these substantive requirements, the USPTO examiner will consider whether the submitted application fully discloses and distinctly claims the invention. In particular, the application must enable persons skilled in the art to make and use the invention without undue experimentation. In addition, the application must disclose the "best mode," or preferred way, that the applicant knows to practice the invention. If the USPTO allows the patent to issue, its owner obtains the right to exclude others from making, using, selling, offering to sell or importing into the United States the patented invention. Those who engage in those acts without the permission of the patentee during the term of the patent can be held liable for infringement. Adjudicated infringers may be enjoined from further infringing acts. The patent statute also provides for an award of damages "adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer." The maximum term of patent protection is ordinarily set at 20 years from the date the application is filed. At the end of that period, others may employ that invention without regard to the expired patent. Patent rights do not enforce themselves. Patent owners who wish to compel others to respect their rights must commence enforcement proceedings, which most commonly consist of litigation in the federal courts. Although issued patents enjoy a presumption of validity, accused infringers may assert that a patent is invalid or unenforceable on a number of grounds. The Court of Appeals for the Federal Circuit (Federal Circuit) possesses nationwide jurisdiction over most patent appeals from the district courts. The Supreme Court enjoys discretionary authority to review cases decided by the Federal Circuit. Since 2005, a number of bills titled "The Patent Reform Act" have been introduced before Congress. To varying degrees, each of the bills would work substantial changes to the current patent system. The bills have differed in the specific reforms that they have proposed. The many proposed reforms have included a shift to a first-inventor-to-file priority system, allowance of assignee filing, changes to the law of patent damages, introduction of post-grant opposition proceedings, and modifications to the principle of venue as it applies to patent cases. None of this legislation has yet been enacted. Even as Congress has contemplated patent reform legislation, the courts also have been active in issuing patent decisions. Many of these rulings relate to the same legal topics that proposed legislation would address, and several made significant changes to existing law. As attorneys Bill Rooklidge and Alyson Barker observe, "through a variety of important decisions, the courts have embarked on their own patent reform." This paper next reviews a common phenomenon in patent reform: Judicial changes to legal doctrines that are the subject of pending congressional legislation. Numerous patent substantive and procedural doctrines have fallen under legislative scrutiny in recent years. A recent, recurring trend is that the courts have contemporaneously reviewed a number of the same principles. Among them are the availability of injunctions in patent cases, selection of the appropriate venue for trying a patent case, the assessment of damages against adjudicated infringers, the standards governing determinations of willful infringement, extraterritorial patent enforcement, and the availability of patents for tax planning methods. This report reviews each of these episodes in turn. Section 283 of the Patent Act allows courts to "grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable." In practice, for much of its history the Federal Circuit routinely granted injunctions to patent owners that prevailed in infringement litigation. Only in rare instances, when the patented invention pertained to an important public need, would an injunction be denied. An injunction prevents the adjudicated infringer from practicing the patented invention until the patent expires. Some observers criticized injunction practice as encouraging speculation by entities that do not engage in research, development, or manufacturing, but rather acquire and enforce patents against companies with commercialized products. These speculators were sometimes termed "patent trolls," an arguably pejorative term that referred to creatures from folklore that would emerge from under a bridge in order to waylay travelers. Some manufacturers were concerned that the Federal Circuit's injunction practice provided non-manufacturing entities with too much leverage during patent licensing negotiations. In view of industry concerns, the 109 th Congress contemplated amending section 283 of the Patent Act. Under a proposal included within H.R. 2795 , the Patent Reform Act of 2005, courts would have been required to "consider the fairness of the remedy in light of all the facts and the relevant interests of the parties associated with the invention." This legislation was not enacted. As discussion of legislative proposals with respect to injunctions continued, the judiciary reached a number of rulings on this topic. One of them resulted from the well-known patent litigation concerning the BlackBerry handheld device and communication service. In that litigation, a federal district court ruled that the BlackBerry infringed patents held by New Technology Products, Inc. (NTP). When the Federal Circuit affirmed this judgment, many BlackBerry subscribers faced the unsettling prospect of an immediate interruption of service due to a court-ordered injunction. A subsequent settlement between the litigants ensured that an injunction would never come into effect. The BlackBerry patent litigation led to increasing discussion over the availability of injunctions in patent cases, perhaps in part because NTP did not commercialize the patented invention itself. Shortly after the BlackBerry litigation concluded, the Supreme Court issued an important decision concerning injunctive relief in eBay Inc. v. MercExchange, L.L.C. The patent at issue in the eBay case concerned "a system for selling goods through an 'electronic network of consignment stores.'" The district court explained that the patent proprietor, MercExchange, "does not practice its inventions and exists merely to license its patented technology to others." Although a jury concluded that eBay infringed the MercExchange patent, the district court refused to issue an injunction. The district court in part reasoned that MercExchange had licensed its patents to others, did not practice its invention, and had made comments to the media that it desired to obtain royalties from eBay rather than obtain an injunction. On appeal, the Federal Circuit rejected the district court's reasoning and ruled that MercExchange was entitled to an injunction. The appellate court explained that "[b]ecause the right to exclude recognized in a patent is but the essence of the concept of property, the general rule is that a permanent injunction will issue once infringement and validity have been adjudged." The Federal Circuit did recognize that in rare cases a court should decline to issue an injunction, such as "when a patentee's failure to practice the patented invention frustrates an important public need for the invention." In this case, however, the Federal Circuit concluded that the district court had not offered "any persuasive reason to believe this case is sufficiently exceptional to justify the denial of a permanent injunction." The Supreme Court subsequently granted certiorari and issued an opinion vacating the Federal Circuit's judgment. According to Justice Thomas, the author of the unanimous opinion of the Court, neither lower court had followed the correct rules in deciding whether to issue an injunction or not. The Supreme Court explained that the district court had incorrectly reasoned that injunctive relief was unavailable where patent proprietors chose to license their patents rather than commercialize the patented invention themselves. Justice Thomas further explained that although the Patent Act requires that injunctions issue "in accordance with the principles of equity," the Federal Circuit had ignored long-established equitable standards in following a "general rule" that injunctions issue. The Supreme Court directed lower courts to consider four traditional factors for deciding whether an injunction should issue or not in patent infringement cases. Those factors are: (1) whether the patent owner would face irreparable injury if the injunction did not issue; (2) whether the patent owner possesses an adequate legal remedy, such as monetary damages; (3) whether granting the injunction would be in the public interest; and (4) whether the balance of hardships tips in the patent owner's favor. Expressing no opinion about how these factors applied to the dispute between the litigants, the Supreme Court then remanded the case to the district court. In the wake of eBay , some courts have declined to issue injunctions against adjudicated infringers of valid and enforceable patents. Opinions upon the impact of the eBay ruling upon legislative reform of patent injunctions have varied. Some observers believed that "the Supreme Court failed to meaningfully restructure the injunctive grant process in its eBay rejection of the automatic injunction rule" and opined that "the need for legislation ... is renewed rather than removed." Others viewed the Supreme Court's ruling more favorably. For example, attorneys Bill Rooklidge and Alyson Barker describe eBay as a "solution to the perceived injunction problem" that satisfied the concerns of different constituents in the patent filed in an "elegant" manner. The latter view appears to have prevailed, however, as no subsequent versions of the Patent Reform Act have incorporated proposed reforms to injunction practice. Rooklidge and Barker have therefore concluded that the "legislative effort to reform injunctions is finished, at least for the foreseeable future." Patent reform legislation also has proposed changes to the rules governing the doctrine of venue in patent litigation. Venue principles decide which court, out of those that possess personal and subject matter jurisdiction, may most conveniently hear a particular lawsuit. Patent cases are governed by a specialized venue statute codified at 28 U.S.C. § 1400(b). That statute provides that in patent litigation, venue is proper either: (1) in the judicial district where the defendant resides, or (2) where the defendant has committed acts of infringement and has a regular and established place of business. An important question under this provision is where a corporation is deemed to "reside." Prior to 1988, a corporation was viewed as residing in its state of its incorporation. In 1988, Congress adopted a new definition of "reside" as it applies to venue for corporate defendants. Under the new definition, a corporation is presumed to reside in any judicial district to which it could be subject to personal jurisdiction at the time the litigation commences. Congress codified this change in a separate provision found at 28 U.S.C. § 1391. Although Congress arguably did not contemplate that these reforms would hold consequences for the specialized patent venue statute, the Federal Circuit nonetheless held that this amendment should also be read into § 1400(b). The result of the 1988 amendments has been significant for corporate defendants, which constitute the majority of defendants in patent litigation. Although § 1400(b) still governs venue in patent cases, few, if any plaintiffs rely upon the restrictive second prong of that section. Instead they base venue upon the "residence" requirement of the first prong—which now is entirely conterminous with personal jurisdiction, and which for larger corporations is likely to include every federal district in the country. For corporate defendants, then, the venue statute has essentially become superfluous, for the same standards governing personal jurisdiction also dictate whether a court may provide an appropriate venue or not. Some observers allege that the liberal venue statute promotes forum shopping, allowing patent proprietors to bring suit in courts that they believe favor patent owners over accused infringers. One such "magnet jurisdiction" is said to be the rural Eastern District of Texas, and in particular the Marshall, Texas, federal court. According to one account, many observers "wonder how a East Texas town of 25,000—even if it was named after Supreme Court Justice John Marshall—came to harbor an oversized share of intellectual property disputes." In addition, reportedly "many of the local lawyers who once specialized in personal injury cases are turning their attention to intellectual property law." Others believe that the existence of a single appellate court for patent cases, the Federal Circuit, minimizes forum shopping concerns, and that certain district courts attract patent cases due to their expertise and timeliness, rather than an inherent favoritism for patent holders. While the 110 th Congress was considering legislative changes, the Federal Circuit also addressed the venue laws. In its December 29, 2008, decision in In re TS Tech USA Corp ., the Federal Circuit held that the District Court for the Eastern District of Texas abused its discretion in denying a motion to transfer to another venue. Some observers believe that the TS Tech decision eliminated the need for legislative intervention, while others suggest that one current congressional proposal would codify its holding. In TS Tech , Lear Corporation brought a patent infringement suit in the Eastern District of Texas against TS Tech, which operated principal places of business in Ohio, Michigan, and Canada. The district court denied TS Tech's request for transfer to Ohio, in part reasoning that the Eastern District of Texas possessed a local interest in resolving patent infringement disputes involving products sold there. The district court also held that the district presumptively was convenient for one of the litigants because Lear had chosen to file suit there. In its review of the issue, the Federal Circuit granted TS Tech's petition to transfer the litigation to Ohio. Several factors were central to the Federal Circuit's holding. The appellate court reasoned that the district court had given too much weight to Lear's choice of venue. It further explained that the district court had not given sufficient weight to the cost of attendance for witnesses, as well as the inconvenience associated with physical and documentary evidence located distant from Texas. Finally, the Federal Circuit observed that the alleged infringing products were sold throughout the United States. As a result, the Eastern District of Texas had no greater connection to the dispute than any other venue. Some observers believe that these factors are present in many patent cases brought before the Eastern District of Texas, and possibly other magnet jurisdictions. As a result, TS Tech may mean that motions to transfer venue will be granted with greater frequency. Other observers are less impressed, believing that TS Tech did not work a "sea change" in transfer motion practice and observing that the patent dockets of the Eastern District of Texas remain active. Subsequent to TS Tech , several different versions of the Patent Reform Act have proposed changes to the venue provisions governing patent cases. In the 111 th Congress, three bills titled "The Patent Reform Act of 2009" considered this issue. They were H.R. 1260 , introduced on March 3, 2009, by Representative Conyers; S. 515 , introduced on March 3, 2009, by Senators Hatch and Leahy; and S. 610 , introduced by Senator Kyl on March 17, 2009. On April 2, 2009, the Senate Judiciary Committee voted 15-4 to bring S. 515 before the full Senate. None of this legislation was enacted. In the 111 th Congress, H.R. 1260 and S. 610 generally called for venue to exist (1) where the defendant has its principal place of business, (2) where the defendant has committed a substantial portion of its acts of infringement and has an established physical facility, (3) if the plaintiff is an institution of higher education, individual, or small business, the plaintiff's residence, or (4) the place of the plaintiff's established physical facility devoted to research, development, or manufacturing. In addition, H.R. 1260 stipulated that "a party shall not manufacture venue by assignment, incorporation, or otherwise to invoke the venue of a specific district court." In contrast, S. 515 did not present new substantive rules for venue for patent cases. Rather, it succinctly provided that "[f]or the convenience of parties and witnesses, in the interest of justice, a district court shall transfer any civil action arising under any Act of Congress relating to patents upon a showing that the transferee venue is clearly more convenient than the venue in which the civil action is pending." Some observers believed that S. 515 would essentially have codified the holding in the TS Tech case. Commencing with the introduction of the Patent Reform Act of 2005 in the 109 th Congress, each version of omnibus reform legislation has proposed amendments to the damages provisions of the Patent Act. These proposals have been, in the eyes of some observers, the most contentious issue within the debate over the modern patent system. This difference in views may arise from divergent conceptions over the fairness of damages awards levied against infringers. Some commentators believe that current damages standards have resulted in the systemic overcompensation of patent owners. Such overcompensation may place unreasonable royalty burdens upon producers of high technology products, ultimately impeding the process of technological innovation and dissemination that the patent system is meant to foster. Others believe that current case law appropriately assesses damages for patent infringement. These observers are concerned that this reform might overly restrict damages in patent cases, thereby discouraging voluntary licensing and promoting infringement of patent rights. Limited damage awards for patent infringement might prevent innovators from realizing the value of their inventive contributions, a principal goal of the patent system. This debate, at least in part, is fueled by the fact that marketplace circumstances often make the determination of an appropriate damages award in patent litigation very difficult. In some cases, the product or process that is found to infringe may incorporate numerous additional elements beyond the patented invention. For example, the asserted patent may relate to a single component of an audio speaker, while the accused product consists of the entire stereo system. In such circumstances, a court may apply "the entire market value rule," which "permits recovery of damages based upon the entire apparatus containing several features, where the patent-related feature is the basis for consumer demand." On the other hand, if the court determines that the infringing sales were due to many factors beyond the use of the patented invention, the court may apply principles of "apportionment" to measure damages based upon the value of the patented feature alone. As discussion of damages reform has proceeded before Congress, the courts have also been active. One of the more notable cases on patent damages principles arose from the efforts of Lucent Technologies, Inc., to enforce its so-called "Day patent," which related to a method of entering information into fields on a computer screen without using a keyboard. In 2002, Lucent brought an infringement suit against computer manufacturer Gateway, Inc. Lucent asserted that Gateway infringed the Day patent because certain software developed by Microsoft Corporation—Microsoft Money, Microsoft Outlook, and Windows Mobile—were pre-installed in Gateway computers. More particularly, Lucent asserted that the software infringed because it enables the user to select a series of numbers corresponding to a day, month, and year using graphical controls. Microsoft subsequently intervened in order to defend the "date-picker tool" found in its software. At trial, the jury found the Day patent not invalid and infringed. Lucent sought damages of $561.9 million based on 8% of Microsoft's infringing sales, while Microsoft asserted "that a lump-sum payment of $6.5 million would have been the correct amount for licensing the protected technology." The jury then awarded Lucent a single lump-sum amount of $357,693,056.18 for all three Microsoft products. Microsoft subsequently pursued an appeal. The litigation in Lucent Technologies, Inc. v. Gateway, Inc. captured the attention of many observers. In a March 3, 2009, letter addressed to Senator Patrick Leahy, Chairman of the Judiciary Committee, Senator Arlen Specter requested a delay in Senate action on the Patent Reform Act of 2009 until the Federal Circuit heard oral argument in the case . Observing a "symbiotic relationship between the judicial and legislative branches with regard to changes to the patent system," Senator Specter believed that "oral argument has the potential to facilitate a compromise or clarify the applicability of damages theories in various contexts." The Federal Circuit heard oral argument in the Lucent appeal on June 2, 2009, and issued its opinion on September 11, 2009. In its decision, the Federal Circuit upheld the lower court's determination that the Day patent was not invalid and infringed. In the most anticipated portion of the opinion, the appellate court also struck down the jury's damages award as not supported by substantial evidence. A lengthy portion of the Lucent opinion undertook a detailed review of the numerous elements—the so-called Georgia-Pacific factors—that were before the lower court when it reached its damages determination. The Federal Circuit ultimately concluded that the "evidence does not sustain a finding that, at the time of infringement, Microsoft and Lucent would have agreed to a lump-sum royalty payment subsequently amounting to approximately 8% of Microsoft's revenues for the sale of Outlook (and necessarily a larger percentage of Outlook's profits)." Some observers believe that the Federal Circuit has placed renewed emphasis upon the use of reliable evidence of damages in patent trials. For example, patent attorney Johnathan Tropp reportedly viewed Lucent as "an important signal to district courts that they have a responsibility to ... ensure that damages verdicts are appropriate and based on substantial evidence." In addition, Lucent discussed the controversial issue of apportionment. Under the facts of the case, the Federal Circuit concluded that the entire market value rule did not apply: [T]he only reasonable conclusion supported by the evidence is that the infringing use of the datepicker tool in Outlook is but a very small component of a much larger software program. The vast majority of the features, when used, do not infringe. The date-picker tool's minor role in the overall program is further confirmed when one considers the relative importance of certain other features, e.g., email. Consistent with this description of Outlook, Lucent did not carry its evidentiary burden of proving that anyone purchased Outlook because of the patented method. The Federal Circuit went on to speak in a more general way: Although our law states certain mandatory conditions for applying the entire market value rule ... the base used in a running royalty calculation can always be the value of the entire commercial embodiment, as long as the magnitude of the rate is within an acceptable range.... [E]ven when the patented invention is a small component of a much larger commercial product, awarding a reasonable royalty based on either sale price or number of units sold can be economically justified. Some disagreement has reportedly resulted from this language. As legal journalist Steven Seidenberg explains: Some say the ruling allows damages to be calculated based on an infringing product's entire market value, provided the calculation realistically reflects the patent's importance in the infringing product. Others assert that entire market value can be used only when a plaintiff's patented feature drives consumer demand for the infringing product, and that any damage calculations must reflect the relative importance of the infringing product. Each of the three patent reform bills in the 111 th Congress was introduced prior to the issuance of the Lucent opinion. At least one observer, patent lawyer Kevin McCabe, reportedly opined that "the Lucent decision is the Federal Circuit's way of showing Congress that damage reform is unnecessary." In any event, in the 111 th Congress, H.R. 1260 , S. 515 , and S. 610 each addressed monetary remedies in patent cases. In brief, both H.R. 1260 and S. 515 called for a court to select one of the following methods for determining a "reasonable royalty" as the measure of damages: (1) the economic value that is properly attributable to the patented invention's specific contribution over the prior art, (2) the entire market value rule, or (3) other factors, such as terms of the nonexclusive marketplace licensing of the invention. Both bills also stipulated that courts may receive expert testimony as an aid to the determination of the appropriate royalty. In contrast, S. 610 did not expressly address apportionment and the entire market value rule. It instead allowed courts to "consider any factors that are relevant to the determination of a reasonable royalty." However, S. 610 stipulated that the amount of royalties paid for patents other than the patent subject to litigation may only be considered in particular circumstances, and further that the financial condition of the infringer is not relevant to the reasonable royalty determination. S. 610 also required damages experts who intend to present testimony to provide data and other information from which they draw their conclusions, and also mandated that trial judges determine whether such testimony is based upon legally sufficient evidence before allowing it to be considered by a jury. The patent statute currently provides that the court "may increase the damages up to three times the amount found or assessed." An award of enhanced damages, as well as the amount by which the damages will be increased, falls within the discretion of the trial court. Although the statute does not specify the circumstances in which enhanced damages are appropriate, the Federal Circuit has limited such awards to cases of "willful infringement." The appellate court has explained that willful infringement occurs when "the infringer acted in wanton disregard of the patentee's patent rights" based upon such circumstances as copying, closeness of the case, the infringer's concealment of its conduct, and the infringer's motivations. In its 1992 opinion in Read Corp. v. Portec, Inc. , the Federal Circuit explained that: Willfulness is a determination as to a state of mind. One who has actual notice of another's patent rights has an affirmative duty to respect those rights. That affirmative duty normally entails obtaining advice of legal counsel although the absence of such advice does not mandate a finding of willfulness. As framed in Read v. Portec and numerous other judicial opinions issued prior to 2007, the willful infringement doctrine has proved controversial. Some observers believe that this doctrine ensured that patent rights will be respected in the marketplace. Critics of willful infringement believed that the possibility of trebled damages discourages individuals from reviewing issued patents. Out of fear that their inquisitiveness will result in multiple damages, innovators might simply avoid looking at patents until they are sued for infringement. To the extent this observation was correct, the law of willful infringement discouraged the dissemination of technical knowledge, thereby thwarting one of the principal goals of the patent system. Fear of increased liability for willful infringement might have also discouraged firms from challenging patents of dubious validity. In view of these critiques, Congress considered legislative amendments to the law of willful infringement as early as 2005. However, in its 2007 decision in In re Seagate Technology , the Federal Circuit made significant changes to the law of willful infringement itself. The appellate court overturned two decades of its precedent by opting to "abandon the affirmative duty of due care." The Federal Circuit instead explained that accused infringers possessed no obligation to obtain an opinion of counsel. Rather, "proof of willful infringement permitting enhanced damages requires at least a showing of objective recklessness." Under this view, the "state of mind of the accused infringer is not relevant to this objective inquiry." Many observers believe that Seagate significantly limited the circumstances under which courts will conclude that an infringer acted willfully. Due to the Seagate opinion, some commentators believe that congressional reform of willful infringement principles is not needed at this time. Others are more skeptical, believing that the "new objective recklessness standard will result in little practical change because potential infringers will likely continue to seek opinions of competent counsel to protect against a charge of willful infringement." In the 111 th Congress, H.R. 1260 and S. 515 included identical language that would add several clarifications and changes to the law of willful infringement. First, a finding of willful infringement would be appropriate only where (1) the infringer received specific written notice from the patentee and continued to infringe after a reasonable opportunity to investigate; (2) the infringer intentionally copied from the patentee with knowledge of the patent; or (3) the infringer continued to infringe after an adverse court ruling. Second, willful infringement cannot be found where the infringer possessed an informed, good faith belief that its conduct was not infringing. Finally, a court may not determine willful infringement before the date on which the court determines that the patent is not invalid, enforceable, and infringed. No comparable language appeared in S. 610 . U.S. patents are generally effective only in the United States. They normally do not provide protection against acts that occur in other nations. However, one provision of the Patent Act, 35 U.S.C. § 271(f), provides U.S. patent owners with a limited measure of extraterritorial protection. Specifically, § 271(f) prohibits "supplying" a "component" of a patented invention abroad knowing that such components would be combined in a manner that would infringe the patent if such combination occurred within the United States. Congress enacted § 271(f) in order to prevent individuals from avoiding infringement liability under U.S. law by manufacturing parts domestically before shipping them abroad to be assembled into a patented device. Some observers had expressed concerns that § 271(f) had been interpreted overly broadly. In particular, the Federal Circuit had ruled that software designed in the United States, and then transmitted abroad for copying and sale, fell within § 271(f). Some commentators believed that this holding would "impose liability for software developed in America and sold overseas," with the result that "American software developers would have faced a competitive disadvantage vis-à-vis their foreign counterparts." Proposals before Congress would have addressed this concern. In the 109 th Congress, S. 3818 , titled the Patent Reform Act of 2006, would have repealed 35 U.S.C. § 271(f). However, the courts were the first to address the controversy regarding extraterritorial patent protection. In 2007, the Supreme Court issued its opinion in Microsoft Corp. v. AT&T Corp. The issue before the Court was whether § 271(f) applied to a "master disk" of software that Microsoft sent from the United States to a foreign manufacturer. The foreign manufacturer then used the disk to create multiple copies of the software that was then installed on computers that were made and sold abroad. The Supreme Court held that sending the master disk abroad did not constitute "supplying" a "component" of the foreign computers within the meaning of § 271(f). This "narrowing reading of § 271(f)" limited the liability of software firms accused of patent infringement based upon overseas activity. Possibly as a result of Microsoft v. AT&T , proposals to eliminate § 271(f) did not reappear in subsequent versions of the Patent Reform Act. As Senator Patrick Leahy explained on April 18, 2007, shortly before Microsoft v. AT&T was decided: The Patent Reform Act of 2007 is also significant for what is not included.... [W]e do not inject Congress into the ongoing litigation over the extra-territorial provision, section 271(f). S. 3818 would have repealed the provision in its entirety; the Patent Reform Act of 2007 does not, while the interpretation of the provision is currently pending before the Supreme Court. If the Court does not resolve that issue, we will revisit it in the legislative process. Although debate has continued over the soundness of the Microsoft v. AT&T ruling, the lack of legislative interest in amending or eliminating § 271(f) may suggest that concerned actors believe the Supreme Court addressed perceived problems with that statute. Controversy over the newly recognized phenomenon of patents on tax planning methods resulted in proposals to limit or prohibit them. For example, in the 110 th Congress, the Patent Reform Act of 2007 stipulated that a patent may not be obtained on a tax planning method, which was defined as "a plan, strategy, technique, or scheme that is designed to reduce, minimize, or defer, or has, when implemented, the effect of reducing, minimizing, or deferring, a taxpayer's tax liability, but does not include the use of tax preparation software or other tools used solely to perform or model mathematical calculations or prepare tax or information returns." A number of recent court decisions have explored the topic of patentable subject matter—that is to say, what sorts of advances are eligible for patenting. Most notable is the 2010 decision of the U.S. Supreme Court in Bilski v. Kappos . There the Supreme Court reviewed a lower court ruling holding that a patent on a particular "method of hedging risk in the field of commodities trading" was not eligible for patenting because the invention was neither (1) tied to a particular machine or apparatus nor (2) transformed a particular article into a different state or thing. This "machine-or-transformation" standard was widely viewed as narrowing the range of patentable subject matter. In Bilski v. Kappos , the Supreme Court ruled that the risk hedging method at issue was unpatentable. However, the Supreme Court also rejected the holding that the "machine-or-transformation" test was a categorical rule that governed which inventions were patentable. The lower court's "machine-or-transformation" standard was instead a factor to be considered in assessing patentability, the Supreme Court reasoned, but not the sole one. By a 5-4 margin, the Supreme Court also rejected the argument that business methods were categorically unpatentable. The Supreme Court further declined to announce a new test of patentable subject matter, instead suggesting that the analysis must proceed on a case-by-case basis founded on existing case law that rejected patents on laws of nature, natural phenomena and abstract ideas. The impact of the Supreme Court's ruling may influence legislative involvement with respect to tax planning method patents. Prior to the issuance of the Supreme Court opinion, Linda Beale, a member of the faculty of the Wayne State University Law School, explained that "[w]hen the Supreme Court hears the case, it may reverse Bilski and leave Congress no choice but to enact legislative exclusions to the patent laws." On the other hand, Congress may believe that the holding in Bilski v. Kappos appropriately resolves concerns pertaining to patent eligibility. The possibility of legislative intervention regarding tax planning method patents remains to be seen. This discussion of injunctions, venue, damages, willful infringement, extraterritorial patent protection, and tax strategy patents suggests that the courts have modified a number of patent law doctrines that were previously subject to congressional consideration. Of course, many of these principles had been developed through judicial opinions. To that extent, congressional interest in patent reform was itself a reaction to earlier developments in the courts. This interaction between different branches of government has become a hallmark of the recent patent reform process. Notably, the Supreme Court and Federal Circuit have not reacted to every proposal in the various Patent Reform Acts in this manner. For example, Congress has considered legislation that would permit interlocutory appeals of claim construction rulings. The Federal Circuit has not altered its general practice of disfavoring such appeals, however. It also should be appreciated that judicial opinions have worked significant changes to a number of patent principles that were not expressly the target of proposed legislative reforms. For example, some observers believe that the 2007 Supreme Court opinion in KSR v. Teleflex resulted in significant changes to the law of nonobviousness. Of course, judicial changes to one component of the patent system may have an impact upon other doctrines, including those subject to congressional scrutiny. A number of reasons may explain this pattern of judicial involvement in areas of legislative interest. First, Congress considered the initial Patent Reform Act in 2005. During the years that legislation has been pending, many patent infringement cases have been tried and appealed. The courts have therefore had many opportunities to address core patent doctrines. Second, the Federal Circuit hears all appeals from district courts across the United States in both patent acquisition and infringement cases. This concentration of appellate jurisdiction provides one court with the ability to change patent doctrine relatively quickly. Further, although the rulings of other federal courts of appeal bind only a limited portion of the country, Federal Circuit patent precedent has effect throughout the United States. Some additional factors suggest judicial interest in legislative scrutiny of the patent system. The Federal Circuit's location in Washington, DC, may imply an awareness of legislative activity involving patents. That several Federal Circuit judges formerly served as members of congressional staff may also suggest interest in patent reform efforts on the Hill. Whatever the reasons for the persistent interaction between Congress and the courts in the patent reform process, these circumstances raise a number of issues pertaining to institutional competence. The longstanding debate over whether legislatures or courts comprise the most appropriate body to work particular legal reforms has been renewed in this setting. Law professors Dan Burk and Mark Lemley side with the courts, asserting that "Congress has spent the last four years, from 2005 to 2008, in an ultimately futile effort to reform the patent system." They further contend that "[d]uring the period in which Congress tried and failed to reform the patent system, courts were actively involved in fixing many of the very same problems Congress was ultimately unable to resolve." In their view the "fact that courts proved capable of solving many of the problems on which Congress ultimately foundered" indicates that the courts are the most appropriate institution for working needed reforms to the patent laws. On the other hand, legislatures are frequently seen as possessing superior resources to investigate and develop factual evidence. Compared to the courts, Congress possesses greater research capabilities and superior means for obtaining information from informed third parties. The legislative decision-making process may better reflect the views of a wide range of stakeholders and offers the advantage of superior democratic accountability. It should also be appreciated that the judiciary does not oversee a number of significant components of the patent system. For example, the courts cannot directly influence the budget or internal operations of the USPTO. In contrast, Congress possesses authority to determine such matters as the scope of USPTO rule-making authority, the level of fees the USPTO may charge, and the agency's budget. Several previous Congresses have considered enacting a Patent Reform Act. To the extent legislative deliberations are believed to alert the courts to perceived problems with a particular doctrine, however, Congress may be seen as already having prompted a great deal of change to the patent system. Our recent experience highlighting the interaction between the different branches of government during the patent reform process suggests the importance of legislative awareness of judicial developments. It also reminds us that although courts often possess a range of options in interpreting statutory language that the legislature has chosen, authority to alter the Patent Act itself ultimately resides with Congress. | Legislative interest in the patent system has been evidenced by the introduction of reform legislation in the 111th and predecessor Congresses. These bills would have amended existing patent law in numerous respects. Although none of these bills were enacted, discussion of patent reform may continue in the 112th Congress. Although the patent system has been the subject of congressional interest over the past few years, the courts have also been active in making changes to important patent law principles. Many changes introduced by the judiciary have concerned topics that are also the subject of congressional consideration. In particular: The Supreme Court issued an important decision in 2007 concerning the availability of injunctive relief against adjudicated patent infringers in eBay v. MercExchange. In 2008, the Court of Appeals for the Federal Circuit ("Federal Circuit") reached its ruling in In re TS Tech concerning the standards for deciding which venue is appropriate for conducting a patent trial. In 2009, the Federal Circuit handed down its opinion in Lucent Technologies. v. Gateway with respect to the assessment of damages in patent infringement cases. The Federal Circuit issued a decision in 2007 concerning the availability of enhanced damages for willful patent infringers in In re Seagate Technology. The 2007 Supreme Court opinion in Microsoft v. AT&T addressed the scope of extraterritorial protection afforded to U.S. patents. The 2010 Supreme Court opinion in Bilski v. Kappos concerned the issue of patentable subject matter. Some observers believe that several of these opinions have addressed the very concerns that had motivated legislative reform proposals, thereby obviating or reducing the need for congressional action. However, other commentators believe that these decisions have not fully addressed perceived problems with principles of patent law. |
The purpose and scope of this CRS report is to provide a succinct overview with analysis of the major issues in the U.S. policy on Taiwan. Taiwan has been of significant security, economic, and political interest to the United States. While the United States does not diplomatically recognize Taiwan, it is an important autonomous actor in the world. Today, 22 countries including the Vatican have diplomatic relations with Taiwan as the Republic of China (ROC). In what many observers consider as a model democracy, Taiwan's 23 million people enjoy self-governance with free, multi-party elections. After the presidential election in 2008 that ushered in Taiwan's second transfer of power from one party to another, the United States congratulated Taiwan as a "beacon of democracy." Taiwan is a major recipient of U.S. arms sales. In 2013, Taiwan was the 12 th -largest U.S. trading partner and the 7 th -largest export market for U.S. agricultural products. Taiwan ranked in 20 th place among top countries sending visitors to travel to the United States. With active congressional involvement, the United States has played critical roles in Taiwan's economic development, political liberalization from an authoritarian dictatorship to a dynamic democracy, self-defense against the People's Republic of China's (PRC's) military threats, and preservation of international space. Overall, U.S. policy seeks to support security, political, and economic interests that involve peace and stability, the status quo in the Taiwan Strait, Taiwan's efforts to maintain international space, democracy, and human rights in Taiwan, and U.S. businesses in Taiwan. As a critical concern, the United States has interests in the ties or tension across the Taiwan Strait, which affect international security (with potential U.S. intervention), the U.S.-Taiwan relationship, and U.S.-PRC cooperation. The cross-strait relationship has grown closer since the 1980s. When James Lilley arrived as the U.S. representative in Taipei in 1982, he was one of the first officials to encourage cross-strait economic ties as the driver in a trend toward greater peace and security. Indeed, closer economic engagement gradually has increased regular contacts and reduced tension across the Taiwan Strait. U.S. support for Taiwan has posed challenges to U.S. engagement with the PRC, though Washington and Beijing have advanced an overall cooperative relationship since the 1970s. As Washington has engaged with both Taipei and Beijing, long-standing issues for policy have included how to balance U.S. relations with Taiwan and with the PRC, and also how to balance maintaining the relationship with Taipei in its own right as opposed to approaching Taiwan as part of Washington's relationship with Beijing. For decades, Taipei has harbored fears about whether Beijing's cooperation with Washington has occurred at the expense of Taiwan's interests. U.S. policy seeks a cooperative relationship with a rising PRC, which opposes U.S. arms sales and other official dealings with Taiwan as interference in its internal affairs in unifying with Taiwan as a part of China. In an apparent contradiction, Beijing also seeks its preferred U.S. policies to influence Taiwan. However, Taiwan considers itself a sovereign country. As Taiwan shifted from an authoritarian political system, U.S. policy has been mindful of respecting its democracy. After the Kuomintang (KMT) Party's Ma Ying-jeou became president in Taiwan in May 2008, he promptly resumed the dialogue across the Taiwan Strait after its suspension for a decade. The PRC had accused his predecessor, the Democratic Progressive Party's (DPP's) Chen Shui-bian, of pushing for de jure independence of Taiwan. The resumption of the cross-strait dialogue resulted in even closer economic engagement between Taiwan and the PRC as well as a reduction of tension, which was welcomed by the United States. This situation afforded U.S. policy opportunities to strengthen the U.S.-Taiwan relationship and/or shift attention to seek greater cooperation from Beijing. President Ma Ying-jeou has sought U.S. support, including arms sales, for Taiwan's stronger position to sustain cross-strait talks. One view has stressed that the United States and Taiwan needed to strengthen their relationship to pursue U.S. interests. Another approach has stressed that the new era of cross-strait engagement allowed for improved U.S. ties with a rising China and that Taiwan has pursued its own interests in engaging with the PRC. In any case, Washington and Taipei have put more efforts into their respective relations with Beijing, while contending that they have pursued a parallel, positive U.S.-Taiwan relationship. On October 4, 2011, the House Foreign Affairs Committee held a hearing on "Why Taiwan Matters." Assistant Secretary of State for East Asian and Pacific Affairs Kurt Campbell testified that the United States sought a strategic "rebalancing" (or "pivot") of comprehensive priorities to focus more on the Asia-Pacific region. He stated that "a critical part of that overarching strategy is building a comprehensive, durable, and unofficial relationship between the United States and Taiwan." Campbell stressed that "the bedrock of that relationship is our security relationship." He called the TRA one of the most important acts of "legislative leadership" and foreign policy in U.S. history. He recognized that the TRA stipulates that the United States must maintain the capacity to resist coercion, maintain peace and stability, and provide necessary defense articles to Taiwan. He acknowledged that the Administration must "consult actively on Capitol Hill." Campbell also reaffirmed that the Six Assurances as well as the TRA and three U.S.-PRC Joint Communiques form the foundation of U.S. policy on Taiwan. Overall, some salient issues for policy include the following: How might Congress exercise its roles in U.S. policy on Taiwan? How might Congress maintain momentum in strengthening U.S.-Taiwan cooperation? Is the Administration adhering to the TRA in making available defense articles and defense services to enable Taiwan to maintain a sufficient self-defense capability? How effectively is the Administration encouraging Taiwan to strengthen its self-defense, including by increasing the defense budget? How effectively is the Administration encouraging Taiwan to support U.S. interests in peace and prosperity, including in U.S. alliances and cross-strait ties? Is the Administration effectively encouraging Taiwan to play a helpful, peaceful, and stabilizing role in maritime disputes in the East and South China Seas? Should the United States also support Taiwan's observership status (if not membership) in international organizations, such as the World Health Organization (WHO), International Civil Aviation Organization (ICAO), and U.N. Framework Convention on Climate Change (UNFCCC)? Should U.S. policy allow or encourage more senior officials from Taiwan to visit and encourage expanded communication with Taiwan's president? Should policy allow U.S. flag and general military officers to visit Taiwan? How should the United States support transparent, fair, and impartial rule of law, elections, and freedom in Taiwan, while respecting Taiwan's democracy? How can Washington urge Taipei to contribute more in weapons nonproliferation, counter-piracy, foreign aid, and other areas of international security? What is Taiwan's role in the U.S. comprehensive strategy for rebalancing priorities toward the Asia-Pacific (so-called "pivot" to the Pacific)? Should there be another Taiwan Policy Review after the last review in 1994? Should the United States press Taiwan to notify the cross-strait Economic Cooperation Framework Agreement (ECFA) of 2010 to the World Trade Organization (WTO) and pay more attention to benefits for U.S. companies? How can U.S. officials induce Taiwan to further reduce its trade and investment barriers in order to boost bilateral commercial ties? With resumption of talks under the 1994 U.S.-Taiwan Trade and Investment Framework Agreement (TIFA) after they were in limbo for years due largely to Taiwan's restrictions on U.S. beef, what should be U.S. priorities to deepen bilateral economic ties? Why hasn't Taiwan removed restrictions on U.S. pork? Should the United States seek to negotiate a free trade agreement (FTA) or bilateral investment agreement (BIA), and/or support Taiwan's efforts to join regional trade negotiations, such as the Trans-Pacific Partnership (TPP)? Should Taiwan's growing economic dependence on the PRC be of concern to U.S. and Taiwan policy makers, and if so, what is the best way for Taiwan to further diversify its economic partners? Taiwan formally calls itself the Republic of China (ROC), tracing its political lineage to the ROC set up after the revolution in 1911 in China. The ROC does not recognize the PRC founded in Beijing by the Communist Party of China (CPC) in 1949. The PRC claims that the ROC ceased to exist in 1949 and that Taiwan is a province of "one China." (The Qing Empire had incorporated Taiwan as a full province in 1885-1895, when more settlers moved from China to the island.) The PRC and ROC do not recognize each other or two Chinas. The ROC refers to the other side of the strait as the "mainland." The PRC opposes recognition of the ROC or Taiwan's independence, and seeks unification of Taiwan and the mainland as "one China," without renouncing the use of force to achieve this objective. Taiwan has tried to set aside the dispute over sovereignty. In any case, since 1949, the ROC has governed only on Taiwan, and the PRC has ruled mainland China. Previously called Formosa, Taiwan never has been ruled by the CPC or as a part of the PRC, and until 1945, had never been ruled by the ROC. In Taiwan after World War II, October 25, 1945, or "Retrocession Day," marked the ROC's claim of "recovering" Formosa from Japan. However, upon Japan's surrender, that was the first time that the ROC's military forces had occupied the island of Formosa. When the Qing Empire ceded in perpetuity Formosa to Japan under the Treaty of Shimonoseki of 1895, the ROC was not yet in existence. Moreover, the colony's people did not have a say in self-determination of their status or identity. The Kuomintang (KMT), or Nationalist Party of China, has contended that the ROC claimed Formosa at Japan's surrender in August 1945, with no country challenging the island's status. The ROC under KMT forces led by Chiang Kai-shek retreated to Taiwan in 1949, when the Communist forces led by Mao Zedong took over mainland China. Taiwan's people have faced social, ethnic, linguistic, and political issues of whether to identify with Taiwan or China, with two major groups of local "Taiwanese" and "Mainlanders" (people who retreated to Taiwan with the KMT forces and their descendants). The KMT's imposed authoritarian rule and martial law (1949-1987) on Taiwan, including a massacre called the "228 Incident" of February 28, 1947, exacerbated difficulties between the groups. In December 2014, Taiwan's Ministry of Culture announced that it would make public some of the 10,067 cases of political prisoners from the "White Terror" period. One of the first powers to support reforms and the new republic of progressive leaders in early 20 th century China, the United States recognized the ROC from 1913 until the end of 1978. The United States then shifted to recognize the PRC under the U.S. "one China" policy. By the early 1970s, the United States had looked to switch the diplomatic recognition to the PRC based in Beijing while figuring out a framework to maintain the relationship with Taiwan. As a scholar on China and member of the National Security Council staff in 1977-1980 wrote, Many factors produced the change in U.S. policy toward China and Taiwan in the 1970s, some tactical, some strategic. The timing of the initial step was unquestionably related to the Vietnam War and the Sino-Soviet dispute. The second and third steps were facilitated by and partly a response to the Soviet expansion. But these were transitory considerations. From a longer-term perspective, America's China policy of the 1950s and 1960s could not be sustained. It was based on American acknowledgment of an absurd claim. Taiwan was not, as it asserted, the government of mainland China. At the same time, China's position was unrealistic. The People's Republic was not the government of Taiwan. In fact, the two governments ruled different parts of Chinese territory, each asserting that it was the rightful authority for all of China, each denying the legitimacy of the other. The United States has its own "one China" policy (vs. the PRC's "one China" principle) and position on Taiwan's status. Not recognizing the PRC's claim over Taiwan nor Taiwan as a sovereign state, U.S. policy has considered Taiwan's status as unsettled. Since a declaration by President Truman on June 27, 1950, during the Korean War, the United States has supported a future determination of the island's status in a peaceful manner. The United States did not state a stance on the sovereign status of Taiwan in the three U.S.-PRC Joint Communiqués of 1972, 1979, and 1982. The United States simply "acknowledged" the "one China" position of both sides of the Taiwan Strait. Washington has not promised to end arms sales to Taiwan for its self-defense, although the Mutual Defense Treaty of 1954 terminated on December 31, 1979. U.S. policy does not support or oppose Taiwan's independence; U.S. policy takes a neutral position of "non-support" for Taiwan's independence. U.S. policy leaves the Taiwan question to be resolved by the people on both sides of the strait: a "peaceful resolution," with the assent of Taiwan's people in a democratic manner, and without unilateral changes. In short, U.S. policy focuses on the process of resolution of the Taiwan question, not any set outcome. The United States has maintained a non-diplomatic relationship with Taiwan after recognition of the PRC in 1979. The State Department sometimes claims "unofficial" U.S. engagement with Taiwan, despite official contacts that include arms sales. Congress passed a law that did not describe the relationship as official or unofficial. The Taiwan Relations Act (TRA) of April 10, 1979, P.L. 96-8 , has governed policy in engagement with Taiwan in the absence of a diplomatic relationship or a defense treaty. The TRA stipulates the expectation that the future of Taiwan "will be determined" by peaceful means. The TRA specifies that it is policy, inter alia , to consider any non-peaceful means to determine Taiwan's future "a threat" to the peace and security of the Western Pacific and of "grave concern" to the United States; "to provide Taiwan with arms of a defensive character"; and "to maintain the capacity of the United States to resist any resort to force or other forms of coercion" jeopardizing the security, or social or economic system of Taiwan's people. The TRA provides a congressional role in determining security assistance "necessary to enable Taiwan to maintain a sufficient self-defense capability." The TRA set up the American Institute in Taiwan (AIT) to carry out day-to-day cooperation to sustain U.S. interests after the de-recognition of the ROC. Since 1979, the TRA has had bipartisan support in guiding policy with a firm foundation and flexible framework for continued cooperation with Taiwan. In addition to the three Joint communiqués and the TRA, there is a fifth key statement that guides U.S. policy on Taiwan. President Reagan offered " Six Assurances " to Taipei on July 14, 1982, that in negotiating the third Joint Communiqué with the PRC, the United States: (1) has not agreed to set a date for ending arms sales to Taiwan; (2) has not agreed to hold prior consultations with the PRC on arms sales to Taiwan; (3) will not play any mediation role between Taipei and Beijing; (4) has not agreed to revise the Taiwan Relations Act; (5) has not altered its position regarding sovereignty over Taiwan; and (6) will not exert pressure on Taiwan to negotiate with the PRC. (Also see CRS Report RL30341, China/Taiwan: Evolution of the "One China" Policy—Key Statements from Washington, Beijing, and Taipei , by [author name scrubbed].) Since those years when the United States dealt with the KMT authoritarian government in Taipei, the relationship has grown both more robust and more complex with Taiwan's democratization and shared values about freedom. The United States supported Taiwan's political liberalization from an authoritarian dictatorship to a dynamic democracy. Democratization and electoral politics have allowed the people a greater say in Taiwan's identity (as part of China or a separate entity). In 1986, the KMT did not crack down against the formation of Taiwan's second major party, the Democratic Progressive Party (DPP), which has leaned toward Taiwan's independence. The KMT then lifted Martial Law in 1987. In 1999, the DPP passed a Resolution on Taiwan's Future. It declared, inter alia , that after the elections for the national legislature in 1992, direct presidential election in 1996, and constitutional reform to abolish the provincial government, Taiwan became a democratic and independent country. The Resolution stated that Taiwan is not a part of the PRC and that Taiwan's formal national title is "Republic of China." This situation is the "status quo." At times, the PRC has reacted unfavorably to Taiwan's democratic politics and implications for sovereignty, particularly since its first democratic, direct presidential election in March 1996. The PRC's People's Liberation Army (PLA) "test-fired" missiles into sea areas close to Taiwan, which provoked the Taiwan Strait Crisis of 1995-1996. President Clinton deployed two aircraft carrier battle groups near Taiwan in March 1996. The PRC threatened Taiwan after President Lee Teng-hui characterized the cross-strait relationship as "special state-to-state ties" on July 9, 1999. On March 18, 2000, Chen Shui-bian of the DPP won the presidential election. Chen's DPP administration brought Taiwan's first democratic transfer of power from one party to another, after 55 years of KMT rule. In recognition of Taiwan's democracy, President Clinton declared in 2000 another condition that the resolution of the Taiwan question must be peaceful as well as with the "assent" of Taiwan's people. In 2003, President Bush expressed "opposition" to any unilateral decision to change the "status quo." On the TRA's 25 th anniversary, Representative James Leach said at a hearing of the House International Relations Committee on April 21, 2004, that Taiwan has the unique situation in which it can have de facto self-determination only if it does not attempt to be recognized with de jure sovereignty. He urged Taiwan's people to recognize that they have greater security in "political ambiguity." Cross-strait tension rose again when the PRC accused President Chen (2000-2008) of promoting Taiwan's de jure independence (e.g., with a referendum on Taiwan's membership in the U.N. during the presidential election on March 22, 2008). While opposing such referendums, President Bush positioned two aircraft carriers near Taiwan, as the largely symbolic referendums were still targets of the PRC's belligerent condemnation. The referendums failed to be valid. The victory of the KMT's Ma Ying-jeou ushered in Taiwan's second democratic transfer of power from one party to another. Bush congratulated Taiwan as a "beacon of democracy." Some have stressed Taiwan as a model democracy in a Chinese cultural context. (Also see CRS Report RL34441, Security Implications of Taiwan's Presidential Election of March 2008 , by Shirley Kan.) The KMT's March 2008 presidential victory was preceded on January 12, 2008, by a sweeping victory in which it swamped the DPP in elections for the Legislative Yuan (LY). Having won the presidency as well in March, the KMT assumed solid control of the government in May 2008. The 2008 legislative elections were the first held under new electoral rules adopted in 2005 under an amendment to Taiwan's constitution. The rules cut in half the size of the LY to 113 members from its former size of 225 and increased the term of office from three years to four years. The rules also instituted a new single-member district system employing two ballots for voters, similar to systems used in Germany and Japan: one to be cast for a candidate and one to be cast for a political party. As demonstrated by the electoral results, the new system favored larger, well-organized parties and put smaller parties at a disadvantage. Two smaller opposition parties have been the People's First Party (PFP), initially allied with the KMT as "Blue" parties, and the Taiwan Solidarity Union (TSU), siding with the DPP as "Green" parties. Compared to the KMT, the DPP and TSU have been more Taiwan-centric in their perspectives and wary of the PRC. Ties or tension across the Taiwan Strait affect international security (with potential U.S. intervention). Congressional oversight has been concerned with support for U.S. interests, particularly respect for Taiwan's democracy. Since their first direct talks in 1992, Taiwan and the PRC have negotiated through quasi-official organizations: the Strait Exchange Foundation (SEF) in Taipei and the Association for Relations Across the Taiwan Strait (ARATS) in Beijing. In discussing practical issues in initial contact, the two sides agreed to disagree on the meaning of "one China" with the verbal formulation of "One China, Different Interpretations." To Taipei, "China" is the ROC. To Beijing, "China" is the PRC. However, years later, the CPC and KMT shifted to contend that they reached a "1992 Consensus." The DPP has disputed that there was a "consensus" and has argued that any understanding was reached between two political parties without a democratic mandate. The two sides of the Taiwan Strait ambiguously talk about their "cross-strait" (rather than "domestic" or "international") relationship. In the two months between his election and his inauguration on May 20, 2008, President Ma 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. In his inaugural address, President Ma announced his "Three Noes": "no unification, no independence, and no use of force" to maintain the "status quo" and set aside the sovereignty dispute. He called for a "diplomatic truce" with the PRC and pledged to stop using "dollar diplomacy" in a zero-sum game to win or preserve diplomatic recognition around the world. After his inauguration, President Ma moved to improve cross-strait engagement, building on foundations laid by the previous President Chen. KMT Chairman Wu Poh-hsiung met with CPC General Secretary Hu Jintao on May 28, 2008, the highest-level encounter between the two governments after 1949. Along with Washington's actions to maintain the relationship with Taipei, it has pursued closer engagement and reduced tension across the Taiwan Strait. Although the PRC objects to U.S. security assistance to Taiwan as harming cross-strait "peaceful development," economic integration and other engagement between Taiwan and the PRC have intensified. Taipei contends that U.S. support provides it with confidence and strength to engage with Beijing. In June 2008, KMT President Ma Ying-jeou and the PRC leadership resumed the cross-strait dialogue (after a decade) and pursued closer engagement, beyond seeking détente. President Ma announced a priority of economic talks over political negotiations with Beijing. Taiwan's reality involved the PRC as Taiwan's largest trading partner by 2003 and as many as 2 million of its citizens already working and living in the PRC by 2008. By the end of 2009, Taiwan's companies had invested about $150 billion in over 77,000 projects in the past 20 years there. Since 2008, Taiwan has announced 10 rounds of SEF-ARATS talks along with the signing of 21 cross-strait economic or functional agreements. Those agreements included the Economic Cooperation Framework Agreement (ECFA) to lower tariffs or relax access for 539 products and services from Taiwan. Though politically controversial, President Ma promoted the ECFA amid the opposition DPP's protests and negotiated it within months, from January 2010 until it was signed in June 2010. A range of government officials and their counterparts developed routine contacts across the strait, including through phone calls. In May 2010, the two sides opened the first quasi-official agencies (as tourism offices) in Beijing and Taipei. Two dramatic changes cited by Taiwan's people and foreign businesspeople have been direct flights across the strait and Taiwan's increased dependence on tourists from the PRC. From mid-2008, when Taiwan allowed PRC tour groups, until the end of 2011, 3 million PRC tourists visited Taiwan. In June 2011, Taiwan announced deals that accepted individual PRC tourists and increased direct flights from 370 to 560 a week. Taiwan announced that passenger flights expanded to 670 a week in August 2013 and to 828 a week in March 2014. In 2013, PRC visitors (including those from Hong Kong and Macau) accounted for 50.6% of about 8 million visitors to Taiwan. Starting in 2009, Taiwan looked to conclude an agreement on investment protection for Taiwan's business people, but negotiations were difficult over issues that involved dispute resolution (whether to have an international mechanism). After postponing an investment protection agreement expected in June 2012, the two sides announced in August two agreements on investment protection (including some allowance for arbitration) and customs cooperation. At the 9 th round of talks on June 21, 2013, the two sides signed the 19 th agreement (on trade in services). In addition to the quasi-official SEF-ARATS meetings, the officials in charge of cross-strait affairs held their first formal meeting since 1949 on February 11, 2014. Taipei's Mainland Affairs Council (MAC) Minister Wang Yu-chi met with Beijing's Taiwan Affairs Office (TAO) Director Zhang Zhijun in Nanjing, the capital of the ROC authorities before they retreated to Taipei in 1949. The MAC and TAO agreed to start direct communication. Before the meeting, Taipei's LY passed a resolution to prohibit Wang from signing any agreement or compromising Taiwan's sovereignty. There was no recognition of each other's governments. Official PRC media called Wang "Taiwan's MAC official." The MAC called Zhang "the Mainland's TAO Director." Despite the announcements of those agreements, the two sides did not sign an expected agreement on taxation in 2009, in a dispute over the PRC's proposal to tax income from stock trading. At the 7 th round in October 2011, the two sides also announced a "consensus" (not agreement) on industrial cooperation. After failing to reach an agreement between banking regulators in April 2011, the two sides announced a "consensus" in November. Still, the Taiwan side believed it pragmatically negotiated benefits for its banks. Also, at the end of August 2012, Taiwan and the PRC signed a memorandum of understanding (MOU) on currency clearing. Taiwan continues to face challenges in protecting its citizens from detentions in the PRC (including secret detentions in PRC "black jails"). From June 18, 2012, just before the investment protection agreement was expected, until August 11, the PRC's Ministry of State Security (MSS) detained Chung Ting-pang (Bruce Chung), a visitor from Taiwan, for allegedly sabotaging national and public security in activities associated with Falun Gong (a banned group in the PRC). Representative Dana Rohrabacher wrote a letter on July 10 to urge President Ma to speak out strongly against Chung's detention. (Later, on December 18, Chung testified at a hearing chaired by Representative Christopher Smith and Senator Sherrod Brown of the Congressional-Executive Commission on China (CECC). Chung discussed interrogations about his activities and about other Falun Gong practitioners in Taiwan. He also commented that the Ma Administration was relatively passive in securing his release.) Taiwan said it got a separate "consensus" in August on protecting the safety of Taiwan's business people. However, questions remained about protections for visitors not doing business, not detained by the police but the MSS, held in security-related cases, detained in secret, and denied prompt, private, and repeated visits by relatives, officials, and lawyers (not just notifications of detentions to relatives). Other questions concerned Taiwan's enforcement of PRC promises and securing the release of other detained citizens. New York University (NYU) legal scholar, Jerome Cohen, co-authored a critique. The pace has slowed in signing cross-strait agreements since 2008. The initial pace of signing multiple agreements a year was not sustained. While there were two rounds of talks in each year of 2008, 2009, and 2010, the 7 th round took place in 2011, the 8 th in 2012, the 9 th in 2013, and the 10 th in 2014. Signed on February 27, 2014, the 20 th and 21 st agreements (on meteorology and earthquakes) were the first cross-strait agreements that Taiwan's officials reviewed for national security impacts. Taiwan said that the agreements would cover public, not secret or militarily-sensitive, information, so it was unclear why Taiwan would not simply issue the data openly and needed a bilateral deal. The quasi-official SEF and ARATS signed these agreements, despite the first formal meeting on February 11 between officials of Taipei's MAC and Beijing's TAO. Though the Agreement on Trade in Services was signed at the 9 th round of talks in June 2013, it has not been concluded. Some legislators and activists have protested that the Ma Administration did not fully brief the LY and allow time for debate about the agreement, did not show sufficient transparency in the talks, did not adequately consult in advance with the many affected industries, did not present assessments of positive and negative impacts or national security implications, and did not respond to public concerns (particularly of young people worried about relocation of firms and jobs to the PRC and expanding economic dependence on and influence of the PRC). After the agreement was signed, President Ma argued on June 28 that it would help in Taiwan's economic liberalization, involve Taiwan in regional trade talks, and advance cross-strait ties. Both KMT and DPP legislators called for the LY's detailed section-by-section review of the agreement and agreed on a series of 16 hearings from September 2013 to March 2014. However, starting on March 12, 2014, the LY's meetings about the agreement on trade in services triggered a more heated debate and protests. Ruling KMT and opposition DPP legislators fought over procedural disputes. On March 17, a KMT legislator said that committees have reviewed the agreement, but DPP legislators insisted on completing the review before a floor vote. At night on March 18, about 2,000-2,500 college students and other young activists (in what people in Taiwan called the "Sunflower Movement") started to protest how the LY reviewed the agreement by occupying the LY. On March 20, student leaders (in a group called Black Island-Nation Youth Front set up in September 2013 and denied attendance at the LY's hearings) shifted their demands against the Ma Administration to call for a rejection of the agreement and suspension of cross-strait negotiations until the LY passes a law on oversight of agreements with the PRC. According to foreign and domestic accounts, news media, photos, and videos, the protest escalated when hundreds of activists (reportedly not directed by the student leaders) broke into the Executive Yuan's (Cabinet's) office building at night on March 23. Overnight, riot police armed with batons, shields, and water cannons cleared the EY's compound of protesters. Officials called the move a necessary response to an illegal occupation of government offices, but critics called the action an excessive use of force, including against journalists and a lawmaker. Police, protestors, and others were hurt, including a TSU legislator who intervened between them. On March 24, the State Department noted that the agreement is for Taiwan to decide, peacefully and civilly. The TAO in Beijing said on March 26 that the agreement is mutually beneficial and that no one wants to see "peaceful development" disturbed. On March 30, about 116,000 to 400,000 protestors chanted "Reject the Trade Agreement, Defend Democracy" in the streets in front of the Presidential Office. The LY's President ("Speaker" and political rival in the KMT of President Ma), Wang Jin-pyng, pledged on April 6 to oversee the passage of an oversight law on cross-strait agreements before he convenes more inter-party talks on the review of the Agreement on Trade in Services. After Wang's promise, the activists agreed to end the occupation of the LY on April 10. Some in Taiwan were concerned that the delay in concluding the cross-strait trade agreement would harm Taiwan's effort to join the TPP talks. But the State Department's U.S. Senior Official for Asia-Pacific Economic Cooperation (APEC) Robert Wang said in Taipei in April that, "when we look at Taiwan's membership in the TPP, we will be asking Taiwan what areas you are willing to open up on its own, unrelated to which areas Taiwan opens to China. That's another issue." PRC leader Xi Jinping said that Beijing would obtain in-depth understanding of the "real requirements" of Taiwan's people, especially at the grassroots, and care for the disadvantaged groups in society. In June, Xi sent Zhang Zhijun in the first official visit by a TAO Director to Taiwan, and Zhang met with Mayor Chen Chu of the DPP in her southern city of Kaohsiung. The United States has welcomed the reduction in tension brought by economic and people-to-people engagement across the Taiwan Strait. Aside from increased stability and direct flights, however, it has been less clear how the cross-strait agreements, especially ECFA, have benefitted U.S. and other foreign firms. Deputy Assistant Secretary of State David Shear said in July 2010 that "if ECFA is to be a truly successful arrangement, firms from the United States and other countries must also be able to benefit." Taiwan announced that ECFA entered into force on September 12, 2010. However, some were concerned that Taiwan has not notified ECFA to the WTO, as required of its members. Taiwan's officials have claimed that there was a notification, but Taiwan made only an early announcement. Moreover, even as Taipei quickly negotiated ECFA with Beijing from January to June 2010, Taipei did not devote a similar level of attention to resolving the dispute with Washington over beef (see discussion below). Further, in mid-2011, the American Chamber of Commerce (AmCham) in Taipei noted that 41.7% of Taiwan's exports went to the PRC (including Hong Kong) and warned Taiwan against the risks of over-reliance on one market. AmCham urged Taiwan to pursue balanced relationships that include stronger ties with other countries, particularly the United States as part of a national security agenda. Asked in 2014 about the effect of ECFA on their business, 41% of that AmCham's members which answered its survey said that the effect was neutral, 40% saw some positive effect, 4% saw very positive effect, 9% did not know, and the remaining 6% reported some or very negative effect. In addition, some observers pointed out that Taiwan could increase substantive visits to the United States by its Minister of Economic Affairs. Cross-strait flights raised an issue of whether they have helped or harmed U.S. and other foreign airlines, aside from Taiwan and PRC airlines. In September 2012, AmCham published an article, lamenting that the shipping links set up across the strait in 2008 have done little to help Taiwan realize its aspiration of becoming a shipping hub, since the arrangement excluded foreign carriers from cross-strait shipping. Taiwan has tried to use ECFA as a springboard for bilateral and multilateral economic agreements. Taiwan also has faced challenges in joining multilateral trade talks (such as the TPP), although it has the option of unilateral liberalization of trade and investment rules. On July 10, 2013, Taiwan and New Zealand signed a bilateral agreement. Taiwan touted the value of the agreement, because New Zealand is one of the countries in the TPP. Taiwan later signed the Agreement between Singapore and Taiwan on Economic Partnership (ASTEP) on November 7. Questions also have arisen about Taiwan's reviews of technology transfers to the PRC and any national security implications of increasing PRC investments in Taiwan, including how Taiwan's review of PRC investments compares with the U.S. security review by the Committee on Foreign Investment in the United States (CFIUS) and how Taiwan's Ministry of Economic Affairs (MOEA) is cooperating with the PRC's Ministry of Industry and Information Technology (MIIT). The MIIT is part of the PRC's defense industrial structure. In November 2013, as President Ma sought the LY's approval of the cross-strait agreement on trade in services signed in June, the Investment Commission of the MOEA announced stricter rules for investments by PRC companies in Taiwan that threaten security or are sensitive. Further, despite cross-strait engagement, concerns remain about the PLA's challenges to Taiwan. At the hearing of the House Foreign Affairs Committee on October 4, 2011, Acting Assistant Secretary of Defense Peter Lavoy expressed the U.S. concern that a Taiwan that is vulnerable, isolated, and under threat would not be in a position to discuss its future with the PRC and might invite the very aggression U.S. policy seeks to deter. He warned that if the PLA were to attack, it would be able to rapidly degrade Taiwan's ability to resist. Lavoy testified that the Defense Department's report to Congress on Taiwan's air power concluded that Taiwan's defense cannot match the PLA one-for-one. He reiterated the Pentagon's view that Taiwan needs innovative and asymmetric approaches, not simply limited numbers of advanced weapons systems. On March 5, 2013, the Pacific Command's (PACOM's) Commander, Admiral Samuel Locklear, testified to the House Armed Services Committee that the cross-strait relationship was stable and tensions were at historic lows due to economic integration and people-to-people contact. However, he warned that the PLA continued a robust military buildup against Taiwan that contradicted the PRC's stated "peaceful development" of ties with Taiwan. He reported that many of the PLA's developments appeared to be intended for use in a possible conflict with Taiwan (including ballistic and cruise missiles, patrol boats, mines, electronic warfare, and cyber threats). At a hearing of the Senate Armed Services Committee on February 11, 2014, Defense Intelligence Agency (DIA) Director Michael Flynn testified that the primary driver of the PLA's evolving force structure, weapons development, planning, and training remained the preparation for conflict against Taiwan with possible U.S. intervention. The Defense Secretary reported to Congress in June 2014 that the PLA's primary mission remained focused on a potential contingency in the Taiwan Strait and that this focus has continued despite Taiwan's re-election in 2012 of President Ma. The Pentagon reported that, despite closer cross-strait ties, the PLA has continued to develop and deploy capabilities for action against Taiwan. The Defense Department warned that PRC leaders stress the objective of reaching critical economic and military benchmarks by 2020, which include attaining the capability to fight and win potential regional conflicts, including those related to Taiwan. The PLA's Second Artillery (missile force) has deployed more than 1,000 short-range ballistic missiles (SRBMs) across from Taiwan and also has long-range surface-to-air missiles (SAMs) and land-attack cruise missiles (LACMs). The PLA held the MISSION ACTION 2013 joint exercise across from Taiwan that covered amphibious landing operations. However, the PLA Navy lacks the amphibious lift capacity to conduct a large-scale invasion of Taiwan. Observers might watch to see whether President Ma ensures greater transparency about cross-strait negotiations and agreements for Taiwan domestically, the United States and other countries, and international groups. Since 2005, the CPC and KMT have proposed a "peace agreement" and military confidence building measures (CBMs). In campaigning for re-election in October 2011, Ma raised the controversial idea of a cross-strait peace accord. Beijing took the results of Taiwan's elections in January 2012 as validation of the "peaceful development" approach. On that basis, Beijing could continue patient engagement focused first on economics and refrain from pressuring Ma, given cross-party criticism of his leadership and his low approval ratings. Further into Ma's second term, however, Beijing could increase pressure on Taiwan, in preparing for if not pressing for political and military negotiations. In March 2012, two months before Ma's second inauguration, KMT Honorary Chairman Wu Poh-hsiung met in Beijing with CPC General-Secretary Hu Jintao, who called for actions to build "political trust" with the insistence that "the mainland and Taiwan belong to one China." On his part, the KMT's Wu stressed the concept of "one country, two areas." The opposition DPP criticized the "one country, two areas" formulation, stressing that Taiwan is a sovereign country and does not belong to the PRC. A month before Ma's inaugural address, Beijing's Taiwan Affairs Office (TAO) Director Wang Yi visited Washington in April, where he met with Deputy Secretary of State William Burns. Wang indicated Beijing's expectation of future political talks with Taipei. In his second inaugural address on May 20, 2012, President Ma did not repeat either of those phrases. Ma apparently assured Beijing about his cross-strait policy but asserted limits in accommodating on sovereignty. While Ma upheld the "1992 Consensus" (explicitly defined as "One China, Different Interpretations"), he more explicitly and formally added that "one ROC, two areas" defines the two sides of the Taiwan Strait. Ma proposed that the two sides practice "mutual non-recognition of sovereignty and mutual non-denial of governing authority," because the ROC's sovereignty covers Taiwan and the mainland, but the ROC governs only the islands of Taiwan, Penghu, Kinmen, and Matsu. However, Ma reiterated the principle in the first inaugural address of maintaining the "status quo" of what he called "no unification, no independence, and no use of force." He also stressed democracy, human rights, rule of law, and civil society. While Ma noted that national security is the key to the ROC's "survival," he articulated an approach that relied on cross-strait engagement, diplomacy for international space, and defense. On his defense policy, Ma did not explicitly cite the PLA as the threat but called for continued U.S. arms sales in order to sustain the cross-strait engagement. While the English version of his speech called for a "strong national defense" to deter external threats, the original text in Chinese referred to the "national defense forces." At a conference four days later, President Ma invoked the model of West Germany and East Germany on a distinction between sovereignty and jurisdiction. It was unclear if Ma's message was coordinated as part of parallel statements that involved control of Wu's meeting with Hu, a counter to Hu's position, or a compromise. On May 30, when asked about Ma's "One ROC, Two Areas" formulation, the CPC TAO responded that it was not surprising and was consistent with the view that both sides of the strait belong to one China (rather than a "state-to-state relationship") and beneficial to the peaceful development of the cross-strait ties. However, the TAO rejected use of the model of the two Germanys. Beijing's patience could be tested further by the sustained separate identity in Taiwan. Despite the pronouncements of a "one China" by leaders in Taipei and Beijing and closer cross-strait ties, Taiwan's people retain a strong Taiwan-centric identity after over a century of mostly separation from mainland China. Still, Taiwan's people pragmatically have pursued prosperity, security, and their democratic way of life and self-governance. Moderate voters generally have supported economic ties to the PRC amid political separation. In a June 2014 poll in Taiwan, 59% of those surveyed desired the status quo (indefinitely or with a later decision on unification or independence), 18% called for the status quo followed by independence, 6% want independence as soon as possible, 9% favored the status quo followed by unification, only 1.4% called for unification soon, and the remaining 7% voiced no opinion. The results showed the same low support for urgent unification, compared with results back in August 2008 (shortly after Ma became president), when 1.5% desired unification as soon as possible. At the 18 th National Congress of the CPC in Beijing in November 2012, outgoing CPC General Secretary Hu Jintao delivered a report that was drafted by a group led by incoming CPC General Secretary Xi Jinping. The report called for strengthening political, economic, cultural, and social cross-strait ties to achieve eventual "peaceful reunification." While stressing political ties first and without new initiatives, the report indicated that top-level authoritative policy would continue to call for the "1992 Consensus," military CBMs, and a peace agreement. On his part, Taiwan President Ma said in his New Year day address for 2013 that he will cooperate with Xi Jinping on the basis of the "1992 Consensus," but Ma clarified that each side of the strait retains its own interpretation of what "one China" means. Ma said that his policy would seek to expand all aspects of cross-strait ties while stressing economic and people-to-people ties. Ma said that Taiwan will seek to loosen further the restrictions on investments, students, and individual travelers from the mainland, including through amendment of the "Act Governing Relations between the People of the Taiwan Area and the Mainland Area." Moving on to a political matter, Ma said that the two sides would establish reciprocal, representative offices. In addition, President Ma has to deal with a political propensity in his own party to move even closer to the PRC. In February 2013, KMT Honorary Chairman Lien Chan met in Beijing with Xi Jinping. Furthermore, Lien visited the Beijing Aerospace Control Center, though the PLA controls the PRC's space program. Ma's office stressed that he did not give Lien any message to convey. Starting in April 2013, negotiations for setting up the "representative offices" reportedly raised issues (in the KMT and opposition parties) about sovereignty and national flags, legal immunity and inviolability, equal and reciprocal rights, repeated and official visits to (not just notifications of) detained citizens (including Taiwan's intelligence agents in China), travel permits (visas), non-interference in Taiwan's elections, security, and political talks. Before Taiwan completed talks over the representative offices, the Ma Administration asked the LY to approve the authority in June, but KMT, DPP, PFP, and TSU lawmakers balked at granting a "blank check." According to Taiwan officials, Taiwan has about 1,500 citizens who were detained or imprisoned in the PRC. In June, President and KMT Chairman Ma again sent KMT Honorary Chairman Wu Poh-hsiung to Beijing to meet with CPC General-Secretary Xi Jinping and maintain momentum in cross-strait engagement. After adding the phrase of "one country, two areas" the previous year, Wu added this time that the ties are under the "one China framework," another phrase different from the vague "1992 Consensus." Wu conveyed Ma's message that "representative offices" would not be diplomatic offices since cross-strait ties are not "state-to-state" under the ROC's constitution. The DPP criticized the KMT's use of "one China framework" as harming Taiwan's sovereignty. The KMT's use of "one China framework" seemed to complicate efforts for forging a domestic consensus. The nuanced shift came as the DPP shifted to be willing to discuss the "1992 Consensus." In July, the DPP's China Affairs Committee talked about the "1992 Consensus." In October 2013, CPC General Secretary Xi Jinping seemed to raise pressure on Ma Ying-jeou to agree to political talks. At the APEC leaders' summit in Bali, Xi told Ma's representative, former vice president Vincent Siew, that the long-term political differences across the strait should be resolved gradually and that they should not be passed from one generation to another. In an interview with the Washington Post on October 24, Ma defended Taiwan's approach and denied avoiding political issues. He said that Taiwan deals with political issues when the time is ripe. The Administration and Congress have considered various options to strengthen cooperation with Taiwan. In 2011, Taiwan's political campaigning constrained U.S. influence on some priorities, particularly opening Taiwan's market to U.S. beef and pork. There was expectation that after the elections in January 2012, Taiwan would pay greater attention to the relationship with the United States. Both Washington and Taipei describe the relationship as generally a positive one of an economic and security partnership based on shared values. On the U.S. side, the Legislative and Executive Branches took actions to strengthen cooperation and ties. The House Foreign Affairs Committee held hearings on "Why Taiwan Matters" on June 16 and October 4, 2011. In September 2011, the Obama Administration met with visiting delegations from Taiwan's presidential candidates, led by DPP candidate Tsai Ing-wen and the key advisor in KMT President Ma's campaign (King Pu-tsung). However, the Administration promptly gave negative remarks to the Financial Times , saying that Tsai raised doubts about continuing cross-strait "stability," despite professing U.S. neutrality in Taiwan's democratic elections. The Administration then notified Congress on September 21 of three major arms sales programs with a total value of $5.9 billion, including upgrades for Taiwan's existing F-16A/B fighters. The Administration also increased senior visits to Taiwan, sending Assistant Secretary of Commerce Suresh Kumar in September and then U.S. Agency for International Development (USAID) Administrator Rajiv Shah and Deputy Secretary of Energy Dan Poneman in December 2011. After not mentioning Taiwan in an article in Foreign Policy on "America's Pacific Century" in October 2011, Secretary of State Hillary Clinton added the next month that the United States has a strong relationship with Taiwan as an "important security and economic partner." As expected for months, on December 22, the State Department nominated Taiwan as a candidate for the Visa Waiver Program (VWP). The Obama Administration has argued that its efforts to intensify and expand engagement with the PRC have not been at the expense of stronger cooperation with Taiwan. Washington officials contend that they have pursued parallel relationships with Beijing and Taipei. Nonetheless, policy issues have included whether the Administration has ambitious objectives to achieve in engaging with Taipei, has timed arms sales and certain other actions out of concern about the potential reaction from Beijing, strengthened ties with Taiwan in the months before the elections in January 2012 to favor President Ma of the KMT, has been effective in encouraging Taiwan to invest more in defense, or has included Taiwan in the strategic "rebalance" to Asia. On Taiwan's side, President Ma "transited" in the United States, where he sometimes met with Members of Congress and joined public activities: in Los Angeles, Austin, and San Francisco on his way to and from Paraguay and the Dominican Republic in 2008; in San Francisco and Honolulu on his way to and from Panama and Nicaragua in 2009; in San Francisco and Los Angeles on his way to and from Honduras and the Dominican Republic in 2010; in New York and Los Angeles on his way to and from Paraguay, Haiti, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines in August 2013; in Los Angeles in January 2014; and Honolulu and San Francisco in June-July 2014. Ma asserted that he rebuilt U.S.-Taiwan trust by not raising cross-strait tension. With the political season over in January 2012, Ma said he placed priority on cooperation with the United States. However, some observers stressed that Taiwan needed to restore some trust lost in the relationship and reciprocate U.S. efforts to strengthen it. Although Ma served also as the Chairman of the KMT, he faced a challenge (some called a "crisis") for years to lead his administration and party to resolve the disputes over U.S. beef and pork. On the occasion of President Ma's second inauguration on May 20, 2012, Representative Ros-Lehtinen led a CODEL to visit Taiwan. In meetings with the CODEL and the delegation led by former White House chief of staff William Daley that represented the Obama Administration, President Ma said that Taiwan seeks to join the TPP (though in eight years). In his New Year's Day address in 2014, however, President Ma pressed urgently for Taiwan to promote liberalization and avoid its marginalization in regional economic integration. He called for action in 2014 by the Cabinet's Task Force on International Economic and Trade Strategy. On the strategic "rebalance" toward the Asia-Pacific, issues have concerned whether U.S. strategy considers Taiwan's security role narrowly in the Taiwan Strait or broadly in the western Pacific, and what Taiwan has contributed. After not mentioning Taiwan in an article on a U.S. "pivot" to the Pacific in Foreign Policy on "America's Pacific Century" in October 2011, Secretary of State Clinton gave a speech on the same subject the next month in Honolulu and added that the United States has a strong relationship with Taiwan as an "important security and economic partner." At the start of 2012, President Obama and Defense Secretary Leon Panetta issued new Defense Strategic Guidance on how to maintain U.S. military superiority in the face of budget cuts and to "rebalance" priorities, posture, and presence to stress more attention to Asia as well as the Middle East. An issue arose about Taiwan's role in the U.S. comprehensive strategy of rebalancing more diplomatic, defense, and economic attention to Asia. At a conference of defense ministers in Singapore in June 2012, Defense Secretary Panetta discussed the refocus to Asia and mentioned Taiwan by saying that the United States strongly supports the efforts of both the PRC and Taiwan in their engagement. He added that "we have an enduring interest in peace and stability across the Taiwan Strait." Taiwan's Deputy Defense Minister Andrew Yang said he discussed Taiwan's role in the rebalancing strategy with U.S. officials in August and with Deputy Secretary of Defense Ashton Carter on October 2, 2012. Meanwhile, Assistant Secretary of State for Economic and Business Affairs Jose Fernandez visited Taipei in August 2012. He delivered a speech that discussed economic exchanges with Taiwan in the context of the U.S. rebalance to the region. For years, the United States and Taiwan sought to resume trade talks under the Trade and Investment Framework Agreement (TIFA), or TIFA talks. However, Taiwan's restrictions on U.S. beef raised concerns. TIFA talks resumed in March 2013, for the first time since July 2007. Since then, Chairmen Ed Royce and Robert Menendez of the House Foreign Affairs and Senate Foreign Relations Committees, and other Members, have supported a bilateral investment agreement (BIA). Saying that he was "optimistic" about U.S.-Taiwan cooperation, Deputy Assistant Secretary of State Kin Moy also noted a potential BIA in a speech on October 3. He said that "Taiwan remains a close partner with whom we engage in a full range of substantive interactions, including trade negotiations, scientific and technological cooperation, environmental protection, academic and cultural exchanges, delegation visits, and security cooperation." In late October, Taiwan's executives visited Washington, DC, for President Obama's first Select USA Investment Summit. On November 20, former vice president Vincent Siew spoke at the Brookings Institution and sought U.S. support for Taiwan to join the TPP. He led a delegation to the United States of about 20 business executives and a deputy minister of economic affairs to discuss trade and investment with Members of Congress, Administration officials, and U.S. private industry. At a hearing on March 14, 2014, of the House Foreign Affairs Committee to mark the 35 th anniversary of the enactment of the TRA, Chairman Royce said that the United States is not doing enough in arms sales for Taiwan's self-defense to meet the spirit of the TRA. In other actions to reaffirm the TRA, Members attended a congressional reception in the Capitol on April 2. On April 3, the Senate Foreign Relations Subcommittee on East Asian and Pacific Affairs held a hearing on the TRA. In response to Senator Marco Rubio, Assistant Secretary of State for East Asian and Pacific Affairs Daniel Russel did not clearly reaffirm the Six Assurances. After the hearing, Russel clarified to reporters that the Administration remained committed to the Six Assurances as well as the TRA and three Joint Communiques. On April 7, the House agreed (by voice vote) to pass H.R. 3470 , which combines H.Res. 494 (to affirm the TRA) and the Naval Vessel Transfer and Arms Export Control Amendments Act (to authorize the transfer by sale of up to four excess U.S. Navy Perry-class frigates to Taiwan, among other stipulations). On April 9, 52 Senators, led by Senators Menendez and Inhofe, sent a letter to President Obama to mark the TRA and note Taiwan's aspiration for economic integration, such as joining the TPP talks. For years, an issue was whether to resume visits by Cabinet-rank officials. After the United States ended recognition of the ROC, such officials visited Taiwan in 1992, 1994, 1996, 1998, and 2000. In December 2013, the Administrator of the Environmental Protection Agency (EPA), Gina McCarthy, visited the PRC and also was to visit Taiwan. She postponed her visit to Taipei. McCarthy visited Taiwan on April 13-15, 2014, resuming Cabinet-rank visits after 14 years. On the 20 th anniversary of the Taiwan Policy Review of 1994, Representative Ed Royce, Chairman of the House Foreign Affairs Committee, led a total of 29 Members to send a letter, on September 23, 2014, to Secretary of State John Kerry, calling for expanding engagement with Taiwan. The State Department, on October 14, acknowledged that, under the TRA, the United States maintains commercial, cultural, and other ties with Taiwan's people, dropping an insistence of the State Department that the bilateral cooperation is "unofficial." The Department cited the "one China" policy as based on the three U.S.-PRC Joint Communiques and the TRA but did not cite the Six Assurances. The State Department acknowledged that it continually reviews and improves the interactions with Taiwan but did not refer to specific ways of improving cooperation. In November, Principal Deputy Assistant Secretary of State for Economic and Business Affairs Kurt Tong visited Taiwan. He stated that the United States welcomes Taiwan's interest in joining the TPP at a future date. Still, he urged Taiwan to continue to improve its competitiveness through aggressive "unilateral liberalization" to address issues in trade and investment. The United States has watched Taiwan's contribution to international development and security. The United States could work with Taiwan to increase cooperation in international security. Taiwan could boost its defense and foreign aid spending, counter cyber threats, and improve counter-espionage amid cases in Taiwan of alleged spying for Beijing. Taiwan has the option to increase military or civilian missions in humanitarian assistance and disaster relief (HA/DR). In response to Haiti's earthquake in January 2010, Taiwan's Air Force delivered relief supplies on a C-130 transport plane, which received approval for refueling and repair at U.S. bases. After Japan's catastrophic earthquake, tsunami, and nuclear disaster in March 2011, President Ma led Taiwan to be the largest donor of official and private aid that totaled $224 million (including $25 million from the government), though Taiwan did not offer military and coast guard assistance to Japan. The USAID Administrator's visit in 2011 highlighted Taiwan's role as an aid donor. Still, Taiwan's foreign aid amounted to $380 million in 2010 and in 2011, accounting for 0.1% of gross national income (compared to the international average of 0.5%). In September 2012, in Taipei, President Ma spoke at a conference on international aid, touting Taiwan's development aid but promising to maintain the aid budget (not to raise it). However, Taiwan's 2013 foreign aid reportedly dropped by almost 20% (to about $366 million). After a typhoon devastated the Philippines on November 8, 2013, Taiwan's government donated $200,000 and used Air Force C-130 aircraft and a Navy landing ship-tank (LST) to deliver private and official supplies. In the Middle East, starting in 2013, Taiwan provided shelters and other supplies for refugees in Jordan and Iraq to support international efforts against the Islamic State, or ISIL. In 2014, Taiwan donated protective clothing, body temperature scanners, and cash (including $1 million to the CDC Foundation) to support medical efforts to treat Ebola in western Africa. In November 2014, AIT Director Christopher Marut held a ceremony to accept Taiwan's donations to treat Ebola. The United States has gained counterterrorism cooperation at ports through Taiwan's agreements in 2005 and 2006 to participate in the Container Security Initiative (CSI) (to screen and inspect cargo before shipping to U.S. ports) and the Megaports Initiative (to detect and interdict nuclear and other radioactive materials in cargo). The U.S. Department of Energy and Taiwan's Ministry of Finance and Directorate of Customs completed the installation of radiation detection equipment at the southern port of Kaohsiung in February 2011. Visiting Taipei in December 2011, Deputy Secretary of Energy Poneman personally applauded the milestone reached after five years of effort. He remarked that Taiwan has worked with the U.S. National Nuclear Security Administration (NNSA) to strengthen nuclear security at ports to detect nuclear smuggling. The United States also has sought Taiwan's cooperation in nuclear and missile nonproliferation efforts especially concerning Iran and North Korea, reportedly involving Taiwan's companies. For example, in March 2009, the Shanghai-based Roc-Master Manufacture and Supply Company reportedly ordered 108 pressure gauges that could be used in centrifuges to enrich uranium for transfer to Iran from an agent in Taiwan (Heli-Ocean Technology Company) for Inficon Holding, the manufacturer in Switzerland. In July 2010, Taiwan reportedly raided Ho Li Enterprises which received orders since March 2007 from Dandong Fang Lian Trading Company in Dandong, PRC, which was allegedly associated with North Korea's military, for two dual-use, high-technology machine tools that ended up in North Korea earlier in 2010. In August 2012, the United States reportedly asked a Taiwan shipping company not to allow its ship to transfer suspected weapons-related cargo in Malaysia that North Korea shipped via China bound for Burma (Myanmar). Japan then seized the cargo. In October 2012, a U.S. court sentenced a Taiwan woman to two years in prison for using her companies in Taiwan to procure embargoed technology for Iran. In May 2013, an U.S. Attorney's Office in Illinois announced the arrests in Estonia and the United States of two citizens of Taiwan, Alex Tsai and his son, Gary Tsai, for using their Taiwan-based companies to export U.S.-origin goods and machinery that could be used by North Korea to produce weapons of mass destruction. Documents reported that in June 2008, Alex Tsai had been indicted in Taiwan for illegally forging invoices and shipping restricted materials to North Korea, and he was convicted later that year. Still, he could travel internationally. In January 2009, the Department of the Treasury designated Alex Tsai and his two companies for supporting a North Korean company involved in weapons proliferation. The Treasury Department urged all governments to cut off this channel for North Korean procurement. The Department of the Treasury then imposed sanctions against Taiwan's Trans Multi Mechanics Company and its general manager, Chang Wen-Fu, for procurement of dual-use machinery for North Korea and links to Alex Tsai. The sanctions were effective on May 10 pursuant to Executive Order 13382, "Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters." The United States enacted the Comprehensive Iran Sanctions, Accountability, and Divestment Act ( CISADA ) of 2010 ( P.L. 111-195 ) on July 1, 2010, which followed the U.N. Security Council Resolution 1929 of June against Iran's nuclear program. Like others, Taiwan also is expected to comply with U.S. sanctions on Iran for nuclear proliferation in Section 1245 of the National Defense Authorization Act (NDAA) for FY2012 ( P.L. 112-81 ). Taiwan has not announced its own sanctions against dealings with Iran's oil and gas industry, though petroleum refiner CPC Corporation Taiwan is a state-owned enterprise. Taiwan cut some imports of Iran's crude oil. On June 11, 2012, the Secretary of State announced that Taiwan and six other countries "significantly" reduced crude oil imports from Iran and would not be subject to the NDAA's sanctions for a period of 180 days. On December 7, 2012, the Secretary of State again decided to exempt financial institutions in Taiwan (and other countries) from the NDAA's sanctions for 180 days, based on further reductions in oil imports from Iran. On June 5 and November 29, 2013, the Secretary of State again exempted Taiwan (and other countries) from sanctions under the NDAA for FY2012. Major Taiwan shipping companies, Evergreen and Yang Ming, reportedly stopped dealing with Iran by 2013. However, in November 2012, Taiwan's Dragon Aromatics petrochemical company (operating in the PRC) bought its first cargo of Iranian condensate (natural gas in liquid form) from the PRC's Zhuhai Zhenrong oil company (under U.S. sanctions for transfers of gasoline to Iran). In December 2013, after the United States and other countries negotiated an agreement with Iran to restrict its nuclear program, Zhuhai Zhenrong reportedly started negotiations with Iran for a new contract for condensate that could raise oil imports and would be delivered to the Dragon Aromatics petrochemical plant in Fujian province, China. In 2013, Taiwan increased the volume of crude oil imported from Iran by 8.9%, importing $806 million worth of crude oil. Iran's place rose from the eighth-largest source of Taiwan's imported crude oil in 2012 to the seventh-largest source in 2013, according to Global Trade Atlas . In the first three months of 2014, Taiwan reported no imports of crude oil from Iran. On December 20, 2013, the United States and Taiwan, through representatives of the American Institute in Taiwan (AIT) and the Taipei Economic and Cultural Representative Office (TECRO), signed a new agreement on cooperation in civil nuclear energy to replace an agreement that was first signed in 1972, was amended in 1974, and was due to expire in June 2014. On January 7, 2014, President Obama transmitted to Congress the proposed agreement on peaceful uses of nuclear energy under Section 123 of the Atomic Energy Act of 1954. President Obama stated that the agreement would advance U.S. interests in nonproliferation and foreign policy. He reported, inter alia , that in the last two decades, Taiwan showed a reliable record on nonproliferation, that Taiwan has stated its adherence to the Nuclear Nonproliferation Treaty (NPT) as a non-nuclear weapon state, and that Taiwan has followed the standards of the International Atomic Energy Agency (IAEA). The President stated his readiness to start consultations with the Senate Foreign Relations Committee and House Foreign Affairs Committee for 30 days of continuous session review under Section 123b and 60 days of continuous session review under Section 123d. Taiwan could increase counter-piracy security for and/or restrict its ships to reduce the burden on international anti-piracy naval operations in the Gulf of Aden. A bilateral matter involved a U.S. Navy ship and the death of the captain (Wu Lai-yu) of one of Taiwan's fishing boats in a NATO anti-piracy operation off Somalia on May 10, 2011. On July 23, the U.S. government provided a report from the U.S. Fifth Fleet of the Naval Forces Central Command based in Bahrain on the frigate USS Stephen W. Groves' interdiction of the Taiwan-flagged fishing boat that had been hijacked in March 2010 and then used as a pirate mother-ship along with pirate skiffs to attack other ships for more than a year off the Horn of Africa. The U.S. Navy operated under the NATO-led Combined Task Force 508 to conduct an operation on May 10 against the mother-ship to disrupt further attacks. After compelling the pirates to surrender and boarding the ship, the Navy's crew found Wu deceased in his cabin. An investigation found that ammunition fired from the U.S. naval ship during the operation "inadvertently" killed him and three pirates. The naval crew then buried the captain at sea, laid to rest in his ship, which was sunk to prevent it from becoming a hazard to other ships. The United States expressed "regret" that the ship and its captain were lost in the protection of shipping against piracy and sent condolences to Wu's family. The U.S. Navy maintained that it conducted the counter-piracy operation "in accordance with existing rules of engagement and in compliance with international law." However, Taiwan persisted in protests, including a call from the Foreign Minister for U.S. compensation to Wu's family, which demanded $3 million. Taiwan's government could have been trying to deflect political criticism and demands for compensation from Wu's family, since the government, including the navy, apparently took few if any steps to rescue the boat's captives while they were held for over a year. Somali pirates captured another fishing ship from Taiwan in December 2010. A PLA Navy frigate sailing off Somalia took credit for the release of the ship's crew in July 2012, though Taiwan's Foreign Ministry attributed their release to a ransom and international assistance. In August 2013, the LY amended a law to allow private armed guards on Taiwan's ships. The PLA Navy again claimed to escort a cargo ship from Taiwan in the Gulf of Aden on October 1. Concerning maritime disputes in East Asia, there is an issue of whether Taiwan serves as a helpful, stabilizing U.S. security partner. Taiwan has asserted itself as the ROC with sovereign claims and has sought international attention and inclusion in bilateral or multilateral discussions. The disputes in the South China Sea involve overlapping claims by Brunei, Malaysia, PRC, Philippines (a U.S. ally), Taiwan, and Vietnam. In the East China Sea, PRC and Taiwan claims conflict with those of Japan (another U.S. ally). U.S. concerns involve possible conflict between the PRC and Japan over their competing claims to the Senkaku Islands (called Diaoyu Islands by the PRC), which could bring U.S. involvement under the U.S.-Japan defense treaty. Taiwan, asserting itself as the ROC, also claims the islands as Diaoyutai. On June 27, 2012, Assistant Secretary of State Kurt Campbell confirmed at a public forum that the State Department has discussed with Taiwan U.S. concerns about whether it would work with the PRC in the South China Sea and that Taiwan assured that it would be careful. Another issue concerns any cross-strait coordination also in the East China Sea. Taipei's officials have insisted on a position of no cooperation with the PRC. Nevertheless, even if not with explicit coordination, the parallel actions of Taiwan have added pressure against Japan, a U.S. ally. Moreover, there were concerns that the PRC and Taiwan took actions that militarized or escalated tensions. At another event on December 4, Campbell said U.S. officials underscored the expectation that Taiwan not take steps to provoke misunderstandings or tensions over the Senkaku Islands. President Ma has sought support for his "East China Sea Peace Initiative," announced on August 5, 2012, that reiterated the ROC's claim over the Senkaku (Diaoyutai) Islands and called for joint development of resources and a code of conduct to address tension peacefully. The next month, President Ma called for parallel bilateral talks (Taipei-Tokyo, Taipei-Beijing, and Beijing-Tokyo) that might advance to trilateral talks. In his National Day address on October 10, Ma added that his proposed principles also would apply in the South China Sea. There, Taiwan claims the Pratas Islands, Paracel Islands, Macclesfield Bank, and Spratly Islands, occupying since 1956 the largest one of the Spratly Islands (Itu Aba, or Taiping Island). Since 2000, Taiwan has stationed coast guard instead of military personnel on the island. Still, the military has supplied weapons to and trained the coast guard. In April 2013, Taiwan held a live-fire drill with some mortars and grenade launchers on the island. In August, Taiwan announced a budget of $112 million for the coast guard to build a new pier and extend a runway in 2014-2016 to support coast guard or military ships and aircraft. The PRC's U-shape, nine-dash line (marked as a "national border") on its maps of the South China Sea is a legacy of the ROC's maps from the 1940s. An issue is whether Taipei would withdraw or clarify the controversial line in a way consistent with international law. Taiwan gave mixed messages. On September 25, the very day that the PRC and Japan held diplomatic exchanges to try to cool tensions as the United States urged, Taiwan deployed 12 Coast Guard ships to escort about 60 fishing boats into the Senkaku Islands' territorial waters. Reportedly, Japan's Coast Guard ships fired water cannons at Taiwan's fishing boats in the territorial waters, but Taiwan's Coast Guard ships fired water cannons toward Japan's official ships. The ships maneuvered in proximity, raising the risk of accidental collisions or endangerment of lives and property. However, while the media focused on the coast guard, Taiwan also deployed military assets. According to Taiwan's military news media, the military deployed two Knox-class frigates, one Perry-class frigate, F-16 fighters, Mirage fighters, E2-K Hawkeye airborne early warning aircraft, and S-70C ship-borne helicopters (a civilian version of the UH-60 Black Hawk). The United States sold to Taiwan such weapon systems (except for the Mirage fighters sold by France) for Taiwan's self-defense against the PRC. The next day, President Ma visited military units and praised the actions of the boats sailing close to the islands. Ma said that Japan "misappropriated" the islands for 117 years and never returned them. Congress passed the FY2013 NDAA (enacted on January 2, 2013, as P.L. 112-239 ) with Section 1286 (based on an amendment by Senator Jim Webb) to express the sense of the Congress concerning the Senkaku Islands. Congress declared that the peaceful settlement of disputes in the East China Sea requires the exercise of self-restraint by all parties in activities that would complicate or escalate disputes and destabilize the region. The language, inter alia , stressed that while the United States takes no position on the ultimate sovereignty of the Senkaku Islands, the United States acknowledges the administration of Japan over the islands. Further, the legislation reaffirmed the U.S. commitment to Japan under Article V of the Treaty of Mutual Cooperation and Security that addressed an armed attack in the territories under Japan's administration. On January 18, Secretary of State Clinton added U.S. opposition to any unilateral actions that would seek to undermine Japan's administration and urged all parties to prevent incidents. On January 24, 2013, Taiwan sent four Coast Guard ships to "escort" a boat close to the Senkaku Islands, though it sailed with protestors and a TV reporter (not fishermen). Japan's Coast Guard responded. Taiwan's military said that it strengthened air and naval patrols in the area. Taiwan's Coast Guard also warned the PRC's maritime surveillance ships to leave the area, likely concerned about political embarrassment if the PRC claimed to "protect" Taiwan's ships. Still, Taiwan already has faced the PRC's claim of "protecting" Taiwan's ships in the Gulf of Aden. Nonetheless, Taiwan and Japan placed priority on concluding a long-awaited agreement over fishing rights near the Senkaku Islands. Negotiations started in 1996. Taiwan and Japan held their 16 th round of talks in February 2009. On April 10, 2013, they held their 17 th round of formal talks and signed a bilateral agreement that defined an expanded area for joint fishing rights. The agreement did not address the islands' 12-nm territorial sea and set up a commission to institutionalize discussions over disputes. The agreement was not unique but seemed to be a model of tension-reduction. President Ma credited his "East China Sea Peace Initiative" for the agreement and said that it did not prejudice either side's claims to sovereignty over the islands. The opposition DPP Chairman Su Tseng-Chang called the agreement an accomplishment. Japan reportedly was concerned about facing Taiwan-PRC unity amid heightened tensions. On April 23, AIT Chairman Ray Burghardt positively said that the agreement was handled well by both Taiwan and Japan. In 2014, Secretary of State John Kerry positively said that Japan and Taiwan showed that it is possible to promote stability despite conflicting claims. Aside from Japan, Taiwan faced increased tension with another democratic neighbor. On May 9, 2013, the Coast Guard of the Philippines (another U.S. treaty ally) shot at a Taiwan fishing boat (Guang Da Xing 28), resulting in the death of a Taiwan fisherman (Hong Shi-cheng), in the Luzon Strait between Taiwan and the Philippines. Taiwan's initial diplomatic reaction called for an investigation and arrests, and expressed grave concerns. However, the PRC quickly and harshly "condemned" the "barbaric act." This intervention likely placed pressure on Taiwan's leaders, who are said to fear political embarrassment if the PRC send ships to "protect" Taiwan's citizens or demand direct interactions with Manila under a "one China" policy. President Ma also faced stubbornly low approval ratings and a bid for re-election as the KMT Chairman on July 20. The State Department reacted calmly the next day by welcoming the Philippines' pledge to hold a full and transparent investigation along with Taiwan and by urging all sides to ensure maritime safety and refrain from actions that could escalate tensions and undermine a diplomatic or peaceful resolution. (Similarly, in May 2010, Taiwan had urged restraint by both South Korea and North Korea in not escalating tension, when South Korea issued findings that its naval ship ( Cheonan ) was sunk and 46 sailors were killed by North Korea two months earlier.) President Ma initially said that Taiwan's Coast Guard (rather than the Navy) covered the interests of fishermen. Then on May 11, President Ma held a meeting of the National Security Council (NSC) and issued four demands of Manila: an official apology, compensation for losses, investigation and punishment, and negotiations over an agreement on fishing rights. Ma also issued an ultimatum that if the Philippines failed to meet the demands in 72 hours, by midnight on May 15, Taiwan would impose three sanctions: freezing the processing of applications of Filipino workers, recalling Taiwan's envoy, and requesting that Manila's envoy return to help resolve the dispute. On May 12 in Manila, Deputy Presidential Spokesperson, Abigail Valte, said that the Philippines' representative in Taipei, Antonio Basilio, visited the victim's family and "offered his apologies on behalf of the Philippine government." She also said that "as the Philippine Coast Guard has stated, we express our heartfelt sorrow on the unfortunate situation that occurred during one of the anti-illegal fishing patrols conducted by a Philippine fishery law enforcement vessel (MCS 3001) within the maritime jurisdiction (waters off the Batanes group of islands) of the Philippines on the morning of May 9, which tragically resulted in the death of a fisherman from one of the fishing vessels reportedly poaching in the area." However, Taiwan protested that Valte's statement did not contain a formal, government-to-government apology. Meanwhile, by May 12, Taiwan increased Coast Guard patrols and sent the Navy's Lafayette-class and Knox-class frigates to "protect fishermen" between the island and the Philippines. The next day, Taiwan's Ministry of National Defense (MND) announced that it will send a Kidd-class destroyer and Perry-class frigate to join the Coast Guard in drills south of Taiwan on May 16. The Navy also said it would extend its patrol area by about 100 miles southward to the waters near the Batanes islands of the Philippines. The State Department, on May 13, expressed regret for the "tragic death" of the Taiwan fisherman and urged all parties to refrain from provocative actions. Reflecting the public's indignant nationalistic anger in the LY, Taiwan legislators across party lines supported Ma's demands. There was concern about violent targeting of Filipinos in Taiwan. On May 15, President Ma held another NSC meeting, said that the Philippines failed to meet his demands by the deadline, and ordered the implementation of the three sanctions. A Deputy Minister of Justice said that an initial investigation by local prosecutors in Pingtung found 45 bullet holes in the boat's cabin where the crew sought cover and indicated the "deliberate killing" of the fisherman. Philippines President Benigno Aquino sent a "personal representative," Amadeo Perez, to Taiwan to apologize to the fisherman's family and Taiwan's people. On the night of May 15, Taiwan announced 8 more sanctions (for a total of 11 measures): suspensions of normal travel (with an alert), high-level exchanges, economic exchanges, agricultural or fisheries cooperation, technical cooperation, talks on aviation, and visa-free treatment; and a military-coast guard drill. The State Department expressed concern about the increase in tensions between two neighboring democracies and U.S. partners. Taipei rejected Manila's apology as not formal, "nongovernmental," and insincere. On May 16, Taiwan proceeded with the Navy and Air Force exercise, sending a Kidd-class destroyer, a Lafayette-class frigate (with S-70C helicopters), two Mirage 2000 fighters, Indigenous Defense Fighters, and E-2K early warning aircraft. Naval ships sailed south of 20 degrees north latitude, the traditional line of patrol by the Coast Guard, and entered waters around the Batanes Islands. Taiwan's military said it did not use live ammunition. Even as the investigations were ongoing, President Ma declared on May 17 that the shooting was "cold-blooded murder." PRC official media, including CCTV news programs, used the tension and Ma's rhetoric to condemn the Philippines and called for cross-strait actions in support of Taiwan's sanctions. Hackers from Taiwan and the Philippines reportedly exchanged cyber disruptions of government websites. Taiwan's officials called for calm treatment of Filipinos in Taiwan, while Taiwan's sanctions targeted Filipino workers and officials discouraged private, people-to-people ties, including volunteers going to help in the Philippines. On May 19, Taiwan's Ministry of Justice reported that the fishing boat had 45 bullet holes. Based on their Agreement on Mutual Legal Assistance in Criminal Matters, Taiwan and the Philippines agreed to conduct "parallel investigations," after the Philippines rejected a "joint investigation" as violating its sovereignty. Respective investigators were in Taipei and Manila on May 27-31. Taiwan's investigators returned to Manila for talks on June 6-7. Reportedly, issues included the precise location and jurisdiction of the incident (reportedly about 40 miles east of the Philippines' northern Balintang Island), and specific charges against the Coast Guard officers. On May 28, President Ma participated in an annual computerized military war game that focused on crisis-management in scenarios in the East and South China Seas (not the Taiwan Strait). Ma also announced on June 11 that the Navy and the Coast Guard will increase patrols in the South China Sea and that "protecting fishermen" will be another major mission of Taiwan's military. Concerning talks on a fisheries agreement, Taiwan and the Philippines held their first preparatory meeting in Manila on June 14, and both sides, inter alia , agreed to avoid the use of force in patrols. In addition to their agreement on mutual legal assistance, there is another precedent for a bilateral agreement. In 2005, the Minister and Secretary of Agriculture of Taipei and Manila, through representatives, signed a Memorandum of Understanding to promote cooperation in agriculture and fisheries, including helping to prevent poaching on the waters of both sides. (The two sides later held their first formal talks in October 2013 and agreed to set up a hotline.) On August 7, the Philippines reported on its investigation that recommended charges of homicide against eight Coast Guard officers and charges of obstruction of justice against four others. Taiwan issued its report, saying that local prosecutors in Pingtung also charged the eight officers with homicide. The Philippines' President sent an envoy to Taiwan to convey an apology and offer of compensation to the fisherman's family. The next day, Taiwan lifted its sanctions. Meanwhile, the Senate passed S.Res. 167 (Menendez) on July 29, 2013. The resolution, inter alia , stated that the United States has a clear interest in encouraging and supporting nations to work collaboratively and diplomatically to resolve disputes in the Asia-Pacific maritime domains without coercion, without intimidation, without threats, and without the use of force. It noted that the fisheries agreement between Japan and Taiwan could be a model for other agreements. It urged all parties to exercise self-restraint to avoid undermining stability or escalating disputes. Taipei is a full member in some international organizations to which the PRC also belongs, such as the Asian Development Bank (ADB) and the WTO. Still, Taiwan has sought "international space" amid continued constraints from the PRC. Taiwan has been a full member of the APEC forum. For the second time since initiating APEC summits in Seattle in 1993, the United States hosted an APEC summit in 2011 in Honolulu. However, Taiwan's president has not been able to attend any of the APEC summits. The PRC has continued to block Taiwan's participation at international meetings or organizations. On November 14, 2013, Gambia ended its diplomatic recognition of the ROC, surprising the Ma Administration, which defended its "diplomatic truce" with the PRC (whereby Taipei and Beijing suspended vying for diplomatic relationships in a zero-sum game). The PRC insisted that it had no prior contact with Gambia and that it would work with Taiwan on their cross-strait ties. The Clinton Administration's 1994 Taiwan Policy Review promised to support Taiwan's membership in organizations where statehood is not a prerequisite and to support opportunities for Taiwan's voice to be heard in organizations where its membership is not possible. The focus of congressional action for many years was on Taiwan's international participation at the World Health Organization (WHO) and the annual meetings in Geneva of its governing body, the World Health Assembly (WHA). On April 21 and May 6, 2004, the House and Senate passed H.R. 4019 and S. 2092 in support of Taiwan's efforts to gain observer status in the WHO and to make it an annual requirement to have an unclassified report from the Secretary of State on the U.S. plan to help obtain that status for Taiwan. One implication of this legislative change was the end of annual congressional statements and votes on this issue. In signing S. 2092 into law ( P.L. 108-235 ) on June 14, 2004, President Bush stated that the United States fully supported the participation of Taiwan in the work of the WHO, including observer status. President Ma decided to be more flexible than his DPP predecessor in pressing Taiwan's bid to rejoin the United Nations (U.N.), which it left in 1971 (as the ROC). On August 14, 2008, Taiwan submitted instead a letter (via some countries with which Taiwan has diplomatic relations) to allow Taiwan to "participate meaningfully" in U.N. specialized agencies. Only after Ma Ying-jeou was inaugurated as President in May 2008 did the WHO in January 2009 include Taiwan in the International Health Regulations (IHR). At the WHA in May 2009, Taiwan's Minister of Health participated, as an observer, for the first time since the ROC lost membership in the U.N. However, there have been concerns that the invitation had required the PRC's approval, came through a WHO-PRC memorandum of understanding (MOU), and was ad hoc (not routine for every year or only for a KMT President). Indeed, in its required report submitted to Congress in April 2010, the State Department reported that the WHO invited Taiwan to attend the 2009 WHA after the PRC "agreed to Taiwan's participation." Moreover, in May 2011, a secret WHO Memorandum (dated September 14, 2010) came to light in Taiwan, showing that the WHO had an "arrangement with China" to implement the IHR for the "Taiwan Province of China" (instead of "Chinese Taipei"). At the WHA on May 17, 2011, Secretary of Health and Human Services Kathleen Sebelius protested to the WHO, saying that no organization of the U.N. has a right to unilaterally determine the position of Taiwan. In its April 2014 report to Congress on Taiwan in the WHO, the State Department stressed that the unresolved problem of nomenclature continued to hamper Taiwan's effective implementation of the IHR and that the WHO's communication with Taiwan via the WHO Legal Counsel is inconvenient and limiting. The WHO first clears its messages (meant for Taiwan) with Beijing, resulting in delays. The report said that the United States is concerned about the WHO's restrictions on Taiwan's meaningful participation in the WHO's technical bodies, which remains unsatisfactory. The State Department stated that the inconsistent and arbitrary constraints on Taiwan's participation in the WHO limit Taiwan's ability to deal with health emergencies. Deputy Assistant Secretary of State David Shear stated in March 2010 that "the United States is a strong, consistent supporter of Taiwan's meaningful participation in international organizations." He also stated that "Taiwan should be able to participate in organizations where it cannot be a member, such as the World Health Organization, the International Civil Aviation Organization, and other important international bodies whose activities have a direct impact on the people of Taiwan." Taiwan has sought status as an observer in the International Civil Aviation Organization (ICAO) and U.N. Framework Convention on Climate Change (UNFCCC). Taiwan's airlines (China Airlines, Eva Air, and TransAsia Airways) are members of the International Air Transport Association (IATA). Taiwan's Flight Safety Foundation provides indirect communication between domestic aviation authorities and airlines and the ICAO based in Montreal. In 2011, Taiwan joined the Civil Air Navigation Services Organization (CANSO), which is an observer in ICAO. Many believe that Taiwan's direct communication with ICAO would enhance international aviation security and safety. In July 2013, President Ma said that over 1.3 million flights pass through Taiwan's controlled airspace each year. Taiwan's challenges include justifying the practical gains, offering contributions at technical meetings, and gaining PRC support. While the State Department initially stopped short of publicly supporting Taiwan's observer status in ICAO, Congress has supported this stance in passing legislation since 2010. On June 18 and 19, 2013, the House and Senate, respectively, passed H.R. 1151 (Royce) and S. 579 (Menendez), to direct the Secretary of State to develop a strategy to obtain observer status for Taiwan at ICAO. The House passed H.R. 1151 (by 424-0), after Representatives Royce, Faleomavaega, Ros-Lehtinen, and Green spoke in favor. The Senate passed H.R. 1151 (by unanimous consent) on June 27. President Obama signed the bill into law ( P.L. 113-17 ) on July 12, supporting Taiwan's participation at ICAO. On August 28, the State Department submitted a report as required by Section 1(c) of the legislation. The State Department told Congress of U.S. support for "observer status" for Taiwan in all of the meetings of ICAO. The report pointed to the ICAO Council, which meets regularly, in contrast to the ICAO Assembly, which meets triennially. The State Department noted that U.S. support for Taiwan is consistent with the "one China" policy and the TRA. On September 13, AIT welcomed the ICAO Council's President's invitation to Taiwan's civil aviation officials to participate at the 2013 ICAO Assembly as his "guests." However, Taiwan did not become an "observer" at the ICAO Council or Assembly, and the invitation seemed ad hoc (for that meeting). On September 20, Chairman Royce of the Foreign Affairs Committee wrote a letter to the ICAO's Secretary General to express concerns that ICAO denied direct accreditation to Taiwan's reporters. (They later had to join Taiwan's delegation.) Reportedly based on an idea proposed by the PRC and announced by its Civil Aviation Administration, Taiwan attended the ICAO Assembly as a "guest" from September 24 to October 4 in Montreal, Canada. The State Department issued a statement on September 24 to welcome ICAO's invitation to Taiwan and attributed the development to "international cooperation" and the support of ICAO and its members, rather than China's role. At a hearing of the Senate Foreign Relations Committee on February 4, 2014, in answer to Senator John Barrasso, the nominee to be ambassador to ICAO supported Taiwan's observer status in the ICAO Council. Aside from various bilateral or multilateral negotiations that can be protracted and unpredictable, some analysts have argued that Taiwan could take unilateral steps to expand its international space and enhance its security. Taiwan could adjust its policies to be an attractive commercial center. U.S. businesses have stressed that Taiwan could be a prime location for investments. The Defense Department has reported to Congress in annual reports on the PLA that the balance of forces across the Taiwan Strait has continued to shift to the PRC's favor. Moreover, the Secretary's report of March 2009 told Congress that it was no longer the case that Taiwan's Air Force enjoyed dominance of the airspace over the strait. Since 2001, Taiwan has discussed the acquisition of diesel-electric submarines. Since 2006, Taiwan has been unsuccessful in trying to submit a formal request to procure new F-16C/D fighters. One policy issue concerns whether President Obama denied or delayed arms sales out of concern about military exchanges and other aspects of the overall relationship with the PRC. The Administration maintains that it adheres to the TRA. While the PRC has not warned Taiwan of consequences in continuing to seek U.S. weapons, the PRC has claimed to "suspend" many military meetings with the United States. President Obama notified Congress on January 29, 2010, of major arms sales to Taiwan: five programs with a total value of $6.4 billion. Again submitting notifications on one day, President Obama proposed on September 21, 2011, three major arms sales programs with a total value of $5.9 billion, including upgrades for Taiwan's existing F-16A/B fighters. Like Bush, President Obama has not notified Congress of the submarine design program (the only one pending from decisions in 2001) and has not accepted Taiwan's formal request for new F-16C/D fighters. The United States has concerns that Taiwan under President Ma has not given sufficient priority to investing in defense. On October 3, 2013, Deputy Assistant Secretary of State Kin Moy urged Taiwan to increase its defense budget to a level commensurate with its security challenges. Taiwan cut its defense budget in 2009, 2010, and 2011 until an increase in 2012. The 2013 budget was a small drop from that in 2012. Taiwan's 2 014 defense budget faced a small cut (at US$10.4 billion) and makes up 2.0% of GDP. President Ma has failed to reach a bipartisan KMT-DPP goal of raising defense budgets to 3% of GDP, even as Taiwan's military shifts from conscripts to professional personnel. Concerns increased about whether Taiwan's military is hollowing out, partly due to problems in recruitment and retention while shifting to a volunteer force by 2015 with insufficient investment and commitment by the leadership. On July 20, 2013, about 30,000 demonstrators protested at the MND, after the death of a corporal on July 4 reportedly from heatstroke and abuse while in detention. The incident triggered another protest on August 3 by an estimated 100,000-250,000 people against the government's handling of this and other cases. By July, MND reached only 15% of its recruitment goal for the year (4,290 out of 28,531 recruits). In September, MND delayed full conversion to a volunteer force for two years, or by 2017. In the 113 th Congress, Senator John Cornyn, who urged the Administration to approve a sale of F-16C/D fighters to Taiwan, issued a statement on February 8, 2013, at the Heritage Foundation. He said that the fighters have become increasingly important and also highly symbolic for Taiwan as it has faced China's aggressive military modernization and belligerent attitude. However, he noted his disappointment that Taiwan seemed to have backed off its pursuit of new F-16 fighters. On February 26, Senator Daniel Coats introduced S. 12 , the Naval Vessel Transfer Act of 2013, to authorize the transfer of excess U.S. Navy Perry-class frigates to Taiwan, Mexico, and Thailand. Representative Robert Andrews wrote a letter, dated June 4, to Defense Secretary Chuck Hagel, asking about possible U.S. support for Taiwan's indigenous submarine program. The Defense Department's response acknowledged that the United States has reviewed with no decision since 2008 Taiwan's request for a submarine design (without clarity on the status) and noted that Taiwan has not requested technical assistance for its own submarine program. When asked at a hearing of the House Foreign Affairs Committee on March 14, 2014, about any defense systems that Taiwan has requested but the United States has not decided to offer, Deputy Assistant Secretary of State Kin Moy testified that he is not aware of such systems. The House, on June 14, 2013, passed H.R. 1960 (McKeon), the NDAA for FY2014, with Section 1265 that would have directed the President to sell 66 new F-16C/D fighters. The Senate Armed Services Committee's report of June 20 for the NDAA, S. 1197 , extended the deadline to July 15, 2013, for the Defense Department to brief Congress on Taiwan's air power and directed the department to submit a classified report on Taiwan's air force by December 1. (The conference report for the NDAA for FY2013 required the briefing on Taiwan's air force by April 15, and it took place on July 17.) On December 10, the House-Senate agreement that reported on the FY2014 NDAA did not include Section 1265 but called on the President to continue to take steps to enable Taiwan's air force to contribute to a "sufficient" self-defense capability. On January 3, 2014, the Pentagon submitted the classified report on Taiwan's air force. On August 1, the House Foreign Affairs Committee approved H.R. 419 (Ros-Lehtinen), the Taiwan Policy Act of 2013. The bill, inter alia , would seek to strengthen Taiwan's defense by authorizing a number of arms sales, acceptance of Taiwan's letter of request for F-16C/D fighters, and a sale of Perry-class frigates as Excess Defense Articles (EDA). Representative Michael McCaul sent a letter to Defense Secretary Hagel on September 5, 2013, asking about adherence to the TRA and Six Assurances, given a claim by the PLA's Director of the Foreign Affairs Office that visiting PRC Defense Minister Chang Wanquan and Secretary Hagel discussed a "working group" on arms sales to Taiwan. (Hagel did not say there would be such a working group in the press conference.) The next month, Under Secretary of Defense for Policy James Miller replied that the United States does not consult with China before deciding on arms sales to Taiwan and did not agree to do so when Hagel met with Chang. Miller noted adherence to the TRA but did not explicitly cite the Six Assurances. On October 21, 2013, Representative Randy Forbes led eight Members to send a letter to Secretary Hagel, urging him to invite Taiwan's military to participate in RIMPAC 2014 near Hawaii, after the United States invited the PLA Navy to participate at that multinational maritime exercise. Miller replied on November 16 that the U.S. military has included Taiwan in an exercise in Hawaii to deal with hurricanes (called MAKANI PAHILI) and decided to work with Taiwan's military at events other than RIMPAC (asserting no link to the invitation to the PLA). The Senate Foreign Relations Committee reported S. 1683 (Menendez) on November 14, 2013, a bill to authorize the President to transfer up to four excess U.S. Navy Perry-class frigates to Taiwan (by sale), Mexico, Thailand, and Pakistan, and for other purposes. On November 20, the House Foreign Affairs Committee approved H.R. 3470 (Royce) which, inter alia , would authorize the transfers of the frigates to Taiwan (by sale), Mexico, and Thailand. On November 21, Senator Menendez attached the language to authorize transfers of frigates as a subsection called "Naval Vessel Transfer and Security Enhancement Act of 2013" as an amendment on embassy security intended to amend the FY2014 NDAA, S. 1197 . Also, Senator Coats submitted language intended to amend S. 1197 , to authorize the President to transfer excess Perry-class frigates to Mexico, Thailand, and Taiwan. On November 14, Senator Coats submitted an amendment intended to be proposed by him to S. 1197 to state that Taiwan should be invited to RIMPAC 2014 to help its proficiency in HA/DR. The FY2014 NDAA ( P.L. 113-66 ) did not include language on Taiwan. On April 7, 2014, the House passed H.R. 3470 , which incorporated H.Res. 494 and was renamed the Taiwan Relations Act Affirmation and Naval Vessel Transfer Act of 2014. On December 4 and 10, respectively, the Senate and House passed S. 1683 to authorize transfers to Taiwan (by sale) and Mexico. S. 1683 became P.L. 113-276 on December 18. Taiwan expressed concern about whether the cost of its F-16A/B fighter upgrade program would increase after the U.S. Air Force decided not to request funds in its FY2015 budget for the Combat Avionics Programmed Extension Suite (CAPES) program to upgrade U.S. F-16 fighters. Deputy Assistant Secretary of State Kin Moy testified to Congress on March 14, 2014, that a decision on the U.S. CAPES program would not have a significant impact on Taiwan's F-16 upgrade program and that funding for Taiwan's F-16 upgrades are covered by the U.S.-Taiwan agreement on Taiwan's upgrade program. Representatives Forbes and Colleen Hanabusa introduced on April 28, the Asia-Pacific Region Priority Act, H.R. 4495 , with Section 204 to require a report by April 1, 2016, from the Defense Secretary on the posture and readiness of Taiwan's maritime capabilities and to express the sense of Congress that the U.S. Navy should invite Taiwan to participate in RIMPAC. The reporting requirement was incorporated as Section 1236 of H.R. 4435 , FY2015 NDAA, which the House passed on May 22. Also, Section 1240A states that the President shall sell no fewer than 66 F-16C/D fighters to Taiwan. Representative Forbes introduced language in the House Armed Services Committee's report on H.R. 4435 (from the mark-up by the Subcommittee on Strategic Forces) to direct the Missile Defense Agency to report by October 1, 2014, on any benefits and associated costs and security requirements of integrating Taiwan's early warning radar with other U.S. missile defense and sensor systems to improve U.S. missile defense capabilities. The Senate Armed Services Committee introduced on June 2, 2014, its bill for the FY2015 NDAA, S. 2410 (Levin), with Section 1212 to express the sense of the Senate that both the PRC and Taiwan should have the opportunity to participate in the HA/DR parts of RIMPAC and other exercises. On June 26, Senator Coats submitted amendments intended to be proposed to S. 2410 to authorize Taiwan to fly C-130 transport aircraft to and from Guam, and to authorize the Navy to transfer excess vessels to Taiwan. Senator Menendez submitted an amendment, on July 24, intended to be proposed to S. 2410 on embassy security, foreign assistance, and arms exports, including authority to transfer excess Perry-class frigates to Mexico (by grant) and Taiwan (by sale). On September 18, Senator Rubio submitted an amendment intended for S. 2410 to authorize the transfer of Perry-class frigates to Mexico, Thailand, and Taiwan. On December 2, the House and Senate Armed Services Committees issued their agreement on the FY2015 NDAA. Thus, H.R. 3979 retained the House bill's Section 1256 and expanded the scope of the required report from Taiwan's maritime capabilities to its self-defense capabilities; retained language of the Senate bill's Section 1212 and House bill's Section 1236 in the new Section 1259A to express the sense of Congress that the United States should consider opportunities to help enhance the maritime capabilities and nautical skills of Taiwan's navy to contribute to Taiwan's self-defense and to regional peace and stability; and that the PRC and Taiwan should be afforded opportunities to participate in the HA/DR portions of future multilateral exercises, such as RIMPAC; and dropped the House bill's Section 1240A to require a sale of F-16C/D fighters. H.R. 3979 became P.L. 113-291 on December 19, 2014. (Also see CRS Report RL30957, Taiwan: Major U.S. Arms Sales Since 1990 , by [author name scrubbed].) Taiwan sought inclusion in the U.S. Visa Waiver Program (VWP), which eliminates some visa requirements for qualified countries, allowing their citizens to make temporary visits without first obtaining a visa. VWP countries must meet certain criteria, such as offering reciprocal privileges to U.S. citizens, having machine-readable passports, and having a low non-immigrant refusal rate. The Ma Administration has stressed visa waiver status as a benefit for Taiwan's travelers, a symbol of support for his policies, and a step to support Taiwan's international stature. Mariko Silver, Acting Assistant Secretary of Homeland Security for International Policy, visited Taiwan in April 2010 and welcomed Taiwan's adoption of e-passports and looked to Taiwan's resolution of technical security and a new requirement for in-person applications for passports to prevent fraud. The refusal rate for Taiwan's applicants of U.S. non-immigrant visas was at 2.2% in 2010, better than the 3% standard for the VWP. In late 2010, Taiwan announced that it would sign three relevant agreements with the United States to exchange information on stolen or counterfeit passports, on terrorists, and on combating crime. To prevent fraud, Taiwan started on July 1, 2011, a new system to require first-time applicants for passports to apply in person. One implication of Taiwan's gaining visa waiver status was that approximately $15 million would be needed to offset visa processing fees lost per year to AIT (starting in FY2013). On December 22, 2011, the State Department announced the nomination of Taiwan as a candidate for the VWP. The Department of Homeland Security then reviewed Taiwan's candidacy, including through a visit to Taiwan in March 2012 (vs. the higher-profile announcement of candidacy). Once Taiwan was included in the VWP, only Taiwan's e-passports became eligible. Another issue for resolution concerned Taiwan's category of passports issued to "ROC compatriots" whom Taiwan has not accepted for repatriation or given the right of residency (with questions about their true citizenship). On October 2, 2012, the Secretary of Homeland Security designated Taiwan in the VWP, effective on November 1. Taiwan's citizens may travel to the United States for business or tourism for up to 90 days without a visa. Taiwan became the 37 th country to join the VWP. In 2013, about 385,000 visitors from Taiwan contributed $1.4 billion to the U.S. economy. After the United States included Taiwan in the VWP, visits by Taiwan's travelers or tourists to the United States increased by 33% from 2012 to 2013. Taiwan was the 20 th -largest source of visitors. Other options could include Taiwan's inclusion in the Department of Homeland Security's Trusted Traveler and Trusted Trader programs. The Department's Deputy Assistant Secretary Mark Koumans visited Taipei in December 2012. In his speech on supply chain security, Koumans said that increased security can help facilitate (rather than impede) travel and trade. Taiwan asked for an extradition treaty or agreement, and negotiations started in 2010, involving the Departments of Justice and State. Taiwan reportedly sought about 70 fugitives suspected of being in the United States. In August 2013, President Ma Ying-jeou visited Saint Kitts and Nevis and witnessed the signing of an extradition treaty (the ROC's 11 th such treaty). Taiwan had proposed an extradition treaty with the United States as early as 1979. In December 1992, the Senate Governmental Affairs Subcommittee on Investigations recommended negotiation of an extradition agreement with Taiwan as soon as possible. A precedent for congressional consideration could be the U.S.-Hong Kong extradition agreement. Aside from an extradition treaty or agreement, another option could be authorizing statute passed by Congress. (Also see CRS Report 98-958, Extradition To and From the United States: Overview of the Law and Recent Treaties , by [author name scrubbed] and [author name scrubbed].) The TRA reaffirmed that the preservation and enhancement of the human rights of all of Taiwan's people are U.S. objectives. President Ma has contended that he has valued democracy, freedom, and human rights. However, in early November 2008, Taiwan's police allegedly used heavy-handed measures against protestors in providing security for an official from Beijing, ARATS Chairman Chen Yunlin. Freedom House called for an independent investigation. Taiwan sent officials to Washington to defend the police, acknowledging a U.S. role. Concerned observers say that Taiwan under the KMT has not done enough to promote those values in the PRC or judicial reforms in Taiwan. Some have questioned whether the Ma Administration has downplayed democracy promotion by the Taiwan Foundation for Democracy (TFD) and has been less welcoming to those attacked by Beijing, such as political dissidents, Tibetan leader Dalai Lama, Uighur leader Rebiya Kadeer, and Falun Gong practitioners. Trials of former President Chen Shui-bian (who has been sentenced to prison for 20 years in ongoing cases for corruption but also found not guilty of other charges) heightened scrutiny of pre-indictment and pre-trial detentions, prosecutorial leaks, other misconduct, transparency of judicial procedures, and prisoners' freedom of speech. On November 12, 2008, which happened to be the day that ex-President Chen was first detained on charges of corruption, AIT Director Stephen Young expressed the U.S. expectation that Taiwan's judicial process be "transparent, fair, and impartial." Jerome Cohen, a legal scholar at NYU's School of Law who was Ma's professor at Harvard, has written critiques of Taiwan's judicial system as well as commended Ma's signing of the instruments of ratification of the International Covenant on Civil and Political Rights and International Covenant on Economic, Social, and Cultural Rights. He wrote that the prosecution of former President Chen was not a political vendetta by the KMT but showed that no one is above the law in Taiwan. Still, Cohen criticized judicial officials for a skit on "Law Day" in 2009 that mocked the detained Chen and restraints on Chen's ability to defend himself. In a meeting with Professor Cohen in May 2010, President Ma said that judicial officials took actions to reduce human rights concerns about Taiwan's detention system. In his second inaugural address in May 2012, Ma acknowledged the continued need for judicial reform. A number of U.S. and foreign former officials, activists, and academics have written several open letters to President Ma to express concerns that Taiwan's judiciary lacked political independence or objectivity. A letter of April 11, 2011, in the Taipei Times asked whether legal charges against 17 former DPP officials of the Chen Administration for allegedly failing to return about 36,000 documents were "politically motivated" in coming out three years after the transition in 2008 and during electoral campaigns. On June 30, 2011, prosecutors indicted Lee Teng-hui, who was president from 1988 to 2000, for allegedly diverting $7.8 million in diplomatic funds for the establishment of the Taiwan Research Institute in the 1990s. Some foreign observers questioned whether the legal action was timed to affect Lee's support for the DPP in the elections in January 2012 and noted the lack of prompt follow-up. The first hearing on Lee's case was on June 22, 2012, but he could not attend until another hearing on August 10. On November 15, 2013, the Taipei District Court acquitted former president Lee of embezzlement. In contrast, a high-profile case against a ruling KMT politician, Lin Yi-shih, raised controversy, when the Taipei District Court, on April 30, 2013, found him not guilty of corruption and sentenced him to seven years in prison. Lin was charged with using his positions as a legislator and then Secretary-General of the Executive Yuan (Cabinet) to demand payments for contracts with a state-owned corporation. The Control Yuan (the government branch responsible for accountability) impeached Lin in June. In March-April 2012, some Members in Congress (including Representatives Steve Chabot, Dan Lungren, and Ed Royce) raised concerns about Chen's prison conditions and health. In July, Representatives Robert Andrews and Lungren submitted a report by medical professors at the University of California at Davis to the Tom Lantos Human Rights Commission, raising questions about the conditions of ex-President Chen in prison (confined in a small cell) and calling for his medical parole. Chen's conditions in prison reportedly improved in June. However, starting in September 2012, Chen's medical condition deteriorated, requiring extended guarded stays in hospitals. Taiwan's Ministry of Justice denied that political bias influenced Chen's medical care. In October, Representative Howard Berman wrote to President Ma, calling for Chen's release from prison on humanitarian grounds. Also, Senator Sherrod Brown wrote to the AIT Director in Taipei, asking him to visit Chen. Jerome Cohen met with Chen at a hospital in Taipei in December, showing concern about this medical treatment while declining to call for Chen's medical parole. In January 2013, Representative Steve Chabot added his support for Chen's medical parole. Representative Andrews wrote a letter on March 1 to Secretary of State John Kerry, strongly urging his department to take a stance on the treatment of Chen. Two weeks later, the State Department responded that AIT did raise concerns about Chen's health with Taiwan's officials. On April 19, the Justice Ministry suddenly moved Chen from the Veterans General Hospital in Taipei to Taichung Prison's Pei-Te Hospital (in the central city of Taichung), with a special area for Chen with a garden. The Justice Ministry argued that it treated Chen legally and appropriately as a prisoner, medical patient, and former head of state. The DPP continued to call for Chen's medical parole. On May 2 in Taiwan, accompanied by AIT officials, Representatives Chabot and Eni Faleomavaega (of the House Foreign Affairs Subcommittee on Asia and the Pacific) visited Chen at Taichung Prison's hospital. Visitors who saw Chen said his health declined. On January 5, 2015, the Justice Ministry granted Chen bail of about $62,500 and medical parole for an initial one month. Chen returned to his home in Kaohsiung. On February 27, 2014, the State Department issued its worldwide human rights reports for 2013, reporting that Chen attempted to hang himself in April and June 2013 at the Taichung Prison, but the Ministry of Justice initially denied the suicide attempt in April. The report pointed out that Taiwan's principal human rights problems focused on exploitation of migrant workers by fishing firms, exploitation of domestic workers by brokerage agencies, and official corruption (including in the judicial system). The State Department also reported that the right to strike was highly regulated and that there was evidence of forced labor and violations of maximum working hours. Concerning human rights in the PRC, in November 2012, Taiwan's Foreign Ministry denied a visa to the Tibetan Dalai Lama to attend a conference in Taipei. Opposition DPP lawmakers criticized the decision that simply cited "bad timing." Taiwan did not issue a policy statement. In contrast, the State Department confirmed on November 30 that the Assistant Secretary for Human Rights Affairs met with relatives of Tibetans who self-immolated in the Tibetan area. The U.S. Special Coordinator for Tibetan Issues then issued a statement on December 5. The United States expressed concern about violence and increasing self-immolations in the Tibetan areas, called on the PRC government to address policies, including use of force, that exacerbated the tensions, expressed hope that the self-immolations will end, urged the PRC to allow reporters, diplomats, and other observers to the Tibetan areas, and called on the PRC to talk with the Dalai Lama without preconditions. Taiwan last allowed the Tibetan leader and Nobel Peace Prize winner to visit in 2009, in the wake of a major typhoon. Congress and President Bush had awarded in the U.S. Capitol the Congressional Gold Medal to the Dalai Lama in October 2007. Taiwan allowed a visit by PRC activist Chen Guangcheng, who arrived in Taipei on June 24, 2013. The well-known blind human rights activist fled detention in the PRC to the American Embassy, which negotiated his release in May 2012 for a one-year fellowship at NYU. Chen said that Taiwan presented a model in fighting for democracy. However, President Ma declined to meet with Chen, though Jerome Cohen accompanied him and his visit lasted 18 days. The United States has watched Taiwan's elections, because of their critical implications for U.S. interests in democracy, security, and governance. Congressional oversight has covered an issue of whether the Administration has kept a neutral stance with respect to Taiwan's political parties. Taiwan held elections on January 14, 2012, with the first combined presidential and legislative elections on a single day. Beijing seemed to favor incumbent Ma Ying-jeou of the KMT. Ma won re-election with 51.6% of the votes, a victory of 6 percentage points over DPP Chairwoman Tsai Ing-wen, who won 45.6% of the votes. Voter turnout was lower than in previous elections but still considered high (74% out of 18 million eligible voters). Out of 113 seats in the Legislative Yuan (LY), the KMT won the majority with 64 (down from 72 seats), and the DPP won 40 seats (up from 32). Minor parties and an independent won the remaining 9 seats. The State Department congratulated Taiwan for a free and fair election. On August 2, 2012, Senator Lisa Murkowski introduced S.Res. 542 to express the sense of the Senate that the United States should continue to support democracy and human rights in Taiwan after the elections. The bill noted a report by a group of international observers that found the elections were "mostly free but only partly fair." Some observers attributed the DPP's loss to Tsai's lack of clarity and certainty about how she would sustain the status quo and a stable cross-strait relationship. She tried to balance appeals to the pro-independence base and to moderate voters who supported continued cross-strait economic engagement. While Tsai proposed a "Taiwan Consensus," the KMT touted "peaceful development" under the KMT-CPC's "1992 Consensus." Instead of a clearer stance on the ECFA signed in June 2010 amid a dwindling number of DPP-led protestors, Tsai said vaguely that she would use "democratic procedures" to continue the policy. In October 2011, Tsai said "Taiwan is the ROC, the ROC is Taiwan." Tsai focused on income inequality, but Taiwan's economic conditions have been tied to the PRC's economy. Rather than keeping distance from Taiwan's electoral politics, on December 16, 2011, CPC Politburo Standing Committee Member Jia Qinglin warned that cross-strait talks would not continue without accepting the "1992 Consensus." Taiwan's major businesses with interests in the PRC parroted the "1992 Consensus." The DPP also attributed its loss to U.S. actions seen as favoring the KMT, such as the statement to the Financial Times cited above. As a close U.S. observer said, "the administration liked the fact that tensions had been reduced across the Taiwan Strait … and rewarded Ma." While it was difficult to determine the impact of various factors, a post-election poll indicated that the most cited concerns of voters were the economy, income gap, cross-strait ties, and social welfare. The DPP continues as a viable party in Taiwan's electoral politics, with observers watching for potential party unity and rejuvenation in leadership. After Chen Shui-bian's eight years in office, the DPP had suffered a significant loss in the presidential election in 2008. Nonetheless, the DPP under Chairwoman Tsai Ing-wen rebuilt its strength and won a number of local and legislative elections in 2009-2011. The DPP then lost to the KMT in the presidential election in 2012 but with a smaller margin than that in 2008, and the DPP gained seats in the LY. Tsai stepped down as the chair. Some observers have concerns about the DPP in future elections and any reversal of the warming trend in cross-strait ties. Others have confidence about the DPP's evolution as a party that provides democratic checks and balance and about the voters' choices on their status. While the KMT stresses the ROC's legacy that includes "one China," the DPP pursues Taiwan-centric policies based on a legacy of fighting for freedom and a stated priority of ties to democratic countries like the United States and Japan. In contrast to the KMT's touting of the "1992 Consensus," the DPP says that cross-strait talks cannot be simply KMT-CPC deals. President Ma did not hold a formal meeting the DPP's chairman until a meeting with Su Tseng-chang in April 2014. Nonetheless, both the KMT and DPP could continue to use ambiguity, including the "1992 Consensus." The parties could forge a greater domestic consensus about the ROC's name and constitution, Taiwan's ties to the United States, Japan, the PRC, and other countries, and protecting the way of life in Taiwan's democratic, security, and economic interests. No matter which party rules, Taiwan faces challenges from the PRC. The DPP and KMT could clarify their approaches toward the United States and toward the PRC. One question is how the DPP and KMT might reconcile their interpretations of the ROC Constitution, though both parties have governed using its foundation for legitimacy and laws. The DPP and KMT use the ROC national name, flag, and anthem. The DPP's 1999 Resolution on Taiwan's Future stated that Taiwan's constitutional name is the ROC and has jurisdiction over the islands of Taiwan, Penghu, Kinmen, and Matsu. The KMT's view, as Ma insisted in his second inaugural address in 2012, is that the ROC's sovereign territory also includes "the mainland," but the ROC governs only Taiwan, Penghu, Kinmen, and Matsu (small islands). In June 2014, both the KMT and DPP stressed that Taiwan's future is to be decided by its 23 million people, not all Chinese people. Looking toward the presidential election in early 2016, different DPP leaders have proposed ideas. After winning the election to be the DPP's chairman on May 27, 2012, former premier Su Tseng-chang (at age 64) announced restoration of the DPP's Department of "China Affairs," among various departments. While such a move took cross-strait policy out of "international" policy, the approach differed from the KMT and CPC's use of "mainland China." Not until later (in August) did Su set up a Department on Defense Policy. On October 4-8, former premier Frank Hsieh became the most senior member of the DPP to visit the PRC, though on a private visit. He met with senior officials in the PRC State Council, ARATS, and TAO. Hsieh proposed a "constitutional consensus" ("two constitutions with different interpretations") for the "status quo," instead of talking about the "1992 Consensus" ("one China with different interpretations"). Hsieh urged the DPP to accept the ROC constitution. In November, Su named himself as the convener of the higher-level Committee on China Affairs (later set up in May 2013). The DPP has reviewed its position on the PRC to reassure the United States, the PRC, other countries, and Taiwan's voters about the party's intention to continue cross-strait engagement, strengthen Taiwan's defense, and not declare Taiwan's de jure independence. On the eve of his visit to the United States in June 2013, Chairman Su issued a DPP paper on defense policy. It stressed strengthening defense against the PRC, raising the defense budget to 3% of GDP, and cooperating with all democracies. But the DPP supported the KMT on a "military presence" in the dispute with the Philippines, a U.S. ally, over the shooting of a Taiwan fisherman in May. Su's message was that Taiwan is a sovereign country that does not belong to the PRC, but he also said that seeking independence was unnecessary and that the country's name under the constitution is "Republic of China." He said that this is Taiwan's "status quo" and what he called the "Taiwan Consensus." Su said that Taiwan's relationship with the United States is the most important and needs to be strengthened. A DPP legislator, Ker Chien-ming, proposed another idea on December 26, 2013, calling for a "freeze" on the DPP's 1991 platform on independence that called for a "Republic of Taiwan." On January 9, 2014, Su issued the DPP's report on the review of the policy on China, which reaffirmed the 1999 Resolution on Taiwan's Future. The DPP signaled support for continuing cross-strait economic agreements and expressed "goodwill" by welcoming PRC spouses, students, and visitors. The DPP expressed its priorities for Taiwan's ties with fellow democracies, peaceful and positive interactions across the strait, and regional peace and stability (rather than relying on the relationship with the PRC). In May, the DPP again elected Tsai Ing-wen as the Chairperson, indicating that she likely would be the opposition party's presidential candidate again in 2016. In a speech on July 1, she stressed the priority of peace and stability for Taiwan and the region. Still, the DPP is expected to clarify its stance on how to deal with Beijing, though most voters (69%) care more about the economy. Showing the strong perceived concerns about the economy, unequal distribution of wealth and power (concentrated in certain families), and bleak prospects for younger workers to find jobs in Taiwan, as well as President Ma's unpopularity, voters decisively voted against the KMT in local elections on November 29, 2014. The Sunflower Movement in the spring already showed dissatisfaction of many younger people, including toward Ma's approach on cross-strait economic agreements. Although the elections were at the local level (from the major municipalities down to villages), the KMT and Ma Administration together concluded that voters rejected the ruling party and central government's approach to governance and domestic policies in various areas (including food safety). The Premier (head of the Executive Yuan) promptly resigned. Ma later resigned his Chairmanship of the KMT on December 3. He cited a failure to listen to the people, particularly younger people with greater participation in politics. For the heads of 22 cities and counties, the KMT won 6 seats, the DPP won 13, and independents won 3. Voters' turnout was at 68%. In the six major municipalities that account for 69% of the population, the KMT won only in New Taipei, and Mayor Eric Chu won by a narrow margin of 50% to the DPP candidate's 49% of the votes. The DPP won in four of the municipalities, including Taoyuan in the north, a traditional geographic base for the KMT. Independent Ko Wen-je, endorsed by the DPP, won in the capital city of Taipei. DPP Secretary General Joseph Wu said in Washington, DC, that his party did not see the results as a referendum on the KMT's closer cross-strait ties, since the elections concerned domestic issues. This change in Taiwan's political landscape did not change U.S. engagement with Taiwan, and AIT congratulated Taiwan on the local elections as a sign of the vitality of Taiwan's democracy. Beijing might intensify its scrutiny of the DPP. New Taipei's Mayor Chu decided to run, uncontested, to be the KMT Chairman on January 17, 2015. Taiwan has another window for greater attention to governance, between the local elections on November 29, 2014, and the presidential and legislative elections in early 2016. Taiwan's politics have constrained U.S. influence on some priorities, particularly to relax Taiwan's restrictions on U.S. beef and pork. Taiwan banned U.S. beef in 2003 and 2005 out of concern about bovine spongiform encephalopathy (BSE), or mad cow disease. In 2006, Taiwan lifted the ban but imposed restrictions on U.S. beef. U.S. concerns include whether Taiwan abides by science-based rules of the WTO and World Organization for Animal Health (OIE), of which Taiwan is a member, even as Taiwan seeks U.S. support for its participation in international organizations. In April 2009, President Ma gave a speech directed at the Obama Administration, including a promise to open Taiwan's market to U.S. agricultural exports, alluding to the U.S. request conveyed to him since his inauguration day in May 2008 that Taiwan lift restrictions on U.S. beef. In October 2009, President Ma agreed to conclude two years of negotiations on an agreement to relax Taiwan's restrictions on imports of U.S. beef over Taiwan's concern about mad cow disease. The United States maintains that U.S. beef is safe. Under the U.S.-Taiwan agreement signed on October 22, 2009, Taiwan would have allowed bone-in beef, ground beef, and cow parts under 30 months of age without specified risk materials (skulls, spines, brains, etc.). However, both the ruling KMT and opposition DPP complained. In what the Ma Administration admitted as a "crisis," Taiwan raised tension with the Obama Administration and Congress over beef. Taiwan's Legislative Yuan (LY) passed in January 2010 a bill to ban ground beef, parts, and risky materials from areas with mad cow disease in the past 10 years. The U.S. Trade Representative (USTR) and Members of Congress expressed concerns about Taiwan's political, unscientific restrictions and questions of safety concerning U.S. beef, unilateral abrogation of an agreement, and violations of key principles in international trade that harmed U.S. agricultural exports. However, some U.S. businesses questioned the freezing of TIFA talks due to one category of exports, and some observers noted that trade talks continued with the PRC in spite of many disputes. Taiwan then raised another dispute over beef, right before an attempted resumption of TIFA talks expected in late January 2011. On January 15, Taiwan ordered the removal from sale of U.S. beef with a drug to promote leanness called ractopamine, although the United States maintains that the additive is safe. On February 17, the chairmen and ranking Members of the Senate Finance Committee and House Ways and Means Committee (Senators Max Baucus and Orrin Hatch, and Representatives Dave Camp and Sander Levin) wrote a letter to President Ma to express concern that U.S. beef exports to Taiwan stopped effectively, to urge a correction, and to seek confidence to resume the TIFA talks. On July 13, 2011, AIT expressed disappointment in Taiwan's apparently "political" decision to keep the ban by citing the lack of agreement at an international commission on acceptable, maximum residue levels (MRLs) for ractopamine. Representative Royce delivered a speech on November 12, in which he lamented that only with Taiwan (not South Korea and Japan) has the Administration suspended overall economic talks over the "narrow, politically-charged" dispute about beef. With an expectation that President Ma would resolve the dispute after the January 2012 elections, AmCham in Taipei urged Ma to put an end to the dispute before it "further damages" the relationship with the United States. In February and March, AIT issued Fact Sheets about the safety of U.S. beef and ractopamine, which also pointed out that Taiwan itself has established MRLs for over 100 veterinary compounds. The Department of Commerce postponed the visit of Under Secretary Francisco Sanchez scheduled for March 4-6, amid protests, recalls of U.S. beef, and DPP and KMT proposals in the LY to stipulate zero-tolerance for ractopamine. President Ma held "national security" meetings over this "crisis." The Ma Administration then issued four conditions for beef: safe levels of ractopamine, separate allowances for beef and pork (amid objections from hog farmers), labeling of meats, and no imports of organs. To counter the domestic political pressure, Ma argued that a resolution was needed for U.S.-Taiwan ties and Taiwan's international integration to avoid marginalization. On March 6, 2012, Senator Chuck Grassley issued a press release stating that he was encouraged by Taiwan's announcement that it would allow some beef imports containing ractopamine. But he added that there was no scientific reason for Taiwan to set residual levels of a certain additive for beef but not pork. On March 15, 68 Members of Congress led by Representatives Denny Rehberg and Ron Kind sent a letter to the Secretary of Agriculture and the USTR, objecting to Taiwan's protectionist trade restrictions on U.S. pork and beef. They wrote that "further toleration of Taiwan's unnecessary restrictions sets a dangerous precedent for the mistreatment of U.S. products and undermines our efforts to establish objective, internationally-recognized science-based standards for U.S. exports." Then, on April 24, the Department of Agriculture found a cow with mad cow disease, stating that it posed no risk. In the LY, some lawmakers of the ruling KMT voted down attempts by lawmakers of opposition parties led by the DPP to ban U.S. beef (including on April 27 and May 4, 11, and 18). A committee in the LY defeated on May 7 the Cabinet's proposal to allow beef with safe levels of ractopamine, leaving a potential vote in the full LY. Meanwhile, Taiwan sent agricultural officials who arrived on May 6 in Washington and then set up meetings with U.S. officials, associations, and beef processing sites. The officials visited several states over 23 days and found U.S. beef to be safe. AmCham in Taipei complained that the dispute over beef had become "heavily politicized" but commended President Ma for doing the right thing in working on a resolution. Although the Speaker of the LY, Wang Jin-pyng of the KMT, negotiated an agreement between the KMT and DPP to extend the LY's session for two weeks until June 15, 2012, in part to vote on the Cabinet's, or Executive Yuan's (EY's), amendment to the Act Governing Food Safety, the LY did not vote by then. As KMT Chairman, Ma met with the LY's KMT Caucus on June 7 to forge party unity behind his proposal. Starting on June 11, DPP, TSU, and PFP opposition lawmakers occupied the Speaker's podium in the LY's chamber to prevent a vote all week, targeting what some called the "U.S. beef bill" as detrimental to food safety. The DPP's new chairman, Su Tseng-chang, visited the DPP legislators and supported their stance. Some DPP politicians claimed that they were not opposing U.S. beef yet denounced "toxic" or "poisonous" beef. On July 5, Representatives Edward Royce and Gerald Connolly led 10 Members of Congress to write to President Obama to urge a resumption of the TIFA talks, while "Taiwan must take steps to open its market to U.S. agriculture exports." On the same day, the international Codex Alimentarius Commission voted in Rome to adopt MRLs for ractopamine in beef and pork. The DPP cited that development to announce support for international standards and sought to rebuild trust with the United States. However, at a special session of the LY on July 25, all legislators in the DPP Caucus voted against the bill to end the ban on ractopamine in beef. In passing the KMT-supported bill (63-46), 40 DPP, 3 PFP, and 3 TSU legislators voted against it. While the DPP stopped obstructing the legislative process, its vote continued to raise questions about its political leadership and principles (professed to be in concert with Washington), when the elections were over in January and Taiwan's people commonly expressed satisfaction with U.S. products. The DPP defended its stance as part of supporting its own version of the legislation, which included language on differentiating between treatment of beef and pork, while resolving the dispute. After the postponement of his visit in March, Under Secretary of Commerce Sanchez visited Taipei in late October 2012. He highlighted the start on November 1 of the VWP for Taiwan's travelers to facilitate their visits to the United States for tourism and business. Sanchez welcomed the news that U.S. beef was again available, a step to strengthen confidence in Taiwan as a responsible trading partner. However, Taiwan has maintained a ban on ractopamine for pork. At a hearing of the Senate Finance Committee on March 19, 2013, Senator Grassley expressed concern that Taiwan has continued to "discriminate against pork" with an "unjustifiable barrier" despite an expectation of a resolution after Taiwan's political elections (in January 2012). With a population of only 23 million people, Taiwan has evolved to become a highly developed, dynamic, and g lobally competitive economy. Taiwan's gross domestic product (GDP) on a purchasing power parity (PPP) basis was $929 billion, making Taiwan the world's 18 th -largest economy (after Australia). Taiwan's per capita GDP on a PPP basis (a common measurement of living standard s ) was $39,700 , larger than that of Japan and South Korea , and about three-quarters the size of U.S. living standards . Taiwan is a major innovator and producer of information and communications technology (ICT), broadly defined as computer hardware and software; telecommunications; and other knowledge-based industries. According to the Taiwan government, Taiwan's companies are the world's second-largest producers of ICT goods, although 83.3% of Taiwan ICT products are produced outside Taiwan—mainly in the PRC. Numerous surveys have identified Taiwan as a major leader in global technology. For example: A BusinessWeek survey of the 100 best performing global ICT companies in 2009 listed 10 Taiwan firms, 4 of which were among the world's top 10 ICT firms. The World Bank's 2014 Index of Doing Business , which attempts to measure business regulations and their enforcements in 189 economies, ranked Taiwan 16 th in terms of the ease of doing business there. According to the World Bank's Knowledge Economy Index (KEI), which attempts to measure and rank a country's ability to generate, adopt, and diffuse knowledge, Taiwan ranked 13 th out of 145 economies in 2012. According to the World Economic Forum's (WEF's), Global Competitiveness Report 2013-2014, Taiwan ranked 12 th out of 148 economies. The World Economic Forum's (WEF's) Global Information Technology Report for 2013 ranked Taiwan 10 th out of 144 economies in terms of preparedness to leverage ICT advances for measures of the preparedness of an economy to use ICT to boost competitiveness and well-being. The Heritage Foundation's 2014 Index of Economic Freedom ranked Taiwan as the 17 th out of 178 economies. Taiwan's economy is highly dependent on trade. In 2013, Taiwan's exports of goods and services were equal to 72% of GDP. As indicated in Figure 1 , Taiwan's GDP growth is strongly linked to export growth. From 2005 to 2012, net exports (exports minus imports) were the largest contributor to Taiwan's annual GDP growth. The global economic slowdown that began around 2008 caused Taiwan's economy to slow considerably. From 2005 to 2007, Taiwan's real GDP growth averaged 5.4%. Real GDP growth slowed to 0.7% in 2008 and fell by 1.8% in 2009. Real GDP growth surged by 10.8% in 2010, but over the past three years, it has averaged only 2.6%. Taiwan's 2013 merchandise exports were $305 billion, making it the world's 20 th -largest exporter (after India), while its imports totaled $270 billion, making it the world's 18 th -largest importer (after Spain). Taiwan has seen its share of global merchandise exports fall from 2.3% in 2000 to 1.6% in 2013. The proliferation of bilateral and regional free trade agreements (FTAs), which some argue have excluded Taiwan partly due to political reasons, have raised concerns by many Taiwan policy makers that Taiwan's economy (particularly industries dependent on foreign trade) increasingly could become marginalized and less globally competitive, which could undermine future economic growth and living standards (discussed in more detail below). Taiwan has tried to expand trade, amid concerns about the proliferation of regional and bilateral FTAs that exclude Taiwan, especially among Taiwan's major trading partners and competitors. Taiwan's officials have warned that the exclusion of Taiwan from such FTAs could weaken the competitiveness of Taiwan firms, diminishing trade and economic growth. Until very recently, Taiwan had FTAs with only Panama, Nicaragua, El Salvador, Guatemala, and Honduras, which together account for only a minor share of Taiwan's total trade. In contrast, South Korea, a major competitor for many Taiwan exporters, has FTAs in effect with the United States, the 28 members of the European Union, the 10 members of the Association of Southeast Asian Nations (ASEAN), Peru, India, the European Free Trade Association (EFTA), Singapore, and Chile. South Korea has concluded FTAs with Turkey and Columbia and is negotiating with 11 other countries and regions. Until recently, Taiwan's efforts to negotiate FTAs with its major trading partners have proven unsuccessful, largely because of political opposition by China. In an effort to boost economic ties with China in order to take advantage of its rapidly growing economy, and to improve the chances of Taiwan entering into FTAs with other countries, the Ma Administration has sought to liberalize cross-strait trade and investment barriers. This effort included the lifting of restrictions on direct trade, transportation, and postal links. In 2010, the two sides signed the ECFA, an FTA that seeks to significantly liberalize trade and investment barriers over time. The agreement is expected to hasten the pace of cross-strait economic integration and boost economic growth on both sides. The agreement included an "early harvest" provision to eliminate tariffs on various products within three years. As part of the ECFA process, the two sides reached an agreement in June 2013 to liberalize trade in services. Press reports indicate that, since the signing of the ECFA, China has backed away somewhat from opposition to Taiwan seeking trade agreements with other countries, which Taiwan calls "economic cooperation agreements" (ECAs). On July 10, 2013, Taiwan reached an ECA with New Zealand, and signed the Agreement between Singapore and Taiwan on Economic Partnership (ASTEP) on November 7, 2013. Taiwan also has pursued exploratory talks with the European Union, the Philippines, India, Indonesia, and Israel about the possibility of an ECA. Taiwan has expressed interest in a FTA/ECA with the United States for the past several years. Some analysts have urged Taiwan to pursue other agreements with the United States, such as a bilateral investment agreement (BIA), which could boost both trade and investment. In addition, Taiwan is seeking to join various proposed regional FTAs, including the Trans-Pacific Partnership (TPP) that would include the United States; and the Regional Comprehensive Economic Partnership (RCEP), which would include 16 Asian-Pacific countries. The importance of the PRC as a trading partner for Taiwan is significant and has been growing rapidly (see Figure 2 ). Taiwan's total trade with China grew from $31.3 billion in 2000 to $124.4 billion in 2013 (a 297% increase). The PRC is Taiwan's largest trading partner (followed by Japan and the United States), its largest export market, and its second-largest source of imports (after Japan). According to Taiwan's Mainland Affairs Council (MAC), Taiwan's exports to China as a share of total exports rose from 3.2% in 1985 to 28.5% in 2013 (this increases to 39.7% if exports to Hong Kong are included), while Taiwan's imports from China as a share of total imports rose from 0.6% to 15.8% (16.4% if Hong Kong is included). Taiwan has enjoyed large annual merchandise trade surpluses with the PRC (it was $39.2 billion in 2013). Taiwan is a major source of foreign direct investment (FDI) flows to the PRC, although the exact level remains unknown. According to the Taiwan Investment Commission, Taiwan's approved FDI flows to China grew from $2.6 billion in 2000 to 13.1 billion in 2011, but declined during the next two years (totaling $8.7 billion in 2013) (see Figure 3 ). The stock of Taiwan's approved FDI to China from 1991 to 2013 was $133.7 billion, 80% of which is in manufacturing. The top five sectors of Taiwan's cumulative FDI in China from 1991-2013 were electronic parts and components manufacturing ($25.3 billion); computers, electronic, and optical products manufacturing ($18.4 billion); electrical equipment manufacturing ($9.8 billion); wholesale and retail trade ($7.0 billion); and finance and insurance ($6.2 billion). Many analysts argue that a large level of Taiwan's investment in China is not reported to the government. For example, many Taiwan investors are believed to invest in China through a Hong Kong entity in order to avoid scrutiny by Taiwan's government. Some analysts estimate the total level of Taiwan FDI in China could be as high as $300 billion. More than 1 million Taiwan people are estimated to be residing in the PRC, and more than 70,000 Taiwan companies have operations there. According to one report, in 2012, sales by Taiwan's 100 largest corporations to China and Hong Kong totaled $372.8 billion and $47.4 billion, respectively. Hon Hai Precision Industry (also known as Foxconn), a major Taiwan electronics company, reportedly employs over 1 million PRC workers (compared to 46,000 employees in Taiwan). Growing economic integration with the PRC has raised concerns by some groups in Taiwan that Taiwan will become increasing dependent on China for its economic growth, that the movement of manufacturing firms from Taiwan to China will accelerate, and that PRC-invested firms in Taiwan (many of which are state-owned) could end up dominating certain industries in Taiwan. Such concerns may have contributed to the protests that occurred in Taiwan in March-April 2014 over the Cross-Strait Trade in Services Agreement that was under consideration in the LY. U.S. trade data appear to indicate that the relative importance of Taiwan as a U.S. trading partner has declined over the past several years (especially relative to U.S. trade with China, as indicated in Figure 4 and Figure 5 ). For example: Total U.S. trade with Taiwan in 2013 was $63.6 billion, making Taiwan the 12 th -largest U.S. trading partner—down from 6 th in 1989. U.S. imports from Taiwan were $37.9 billion, making Taiwan the 12 th -largest source of U.S. imports—down from 5 th in 1989. U.S. exports to Taiwan were $24.7 billion, making Taiwan the 16 th -largest U.S. export market—down from 9 th in 1989. From 2004-2013, U.S. exports to Taiwan grew by 18.0%, compared a 93.4% increase in total U.S. exports, while U.S. imports from Taiwan increased by 9.5%, compared to a 54.2% rise for total U.S. imports. From 2003 to 2012, U.S. exports to, and imports from, Taiwan grew by 41.1% and 22.1%, respectively, compared to the growth of total U.S. exports and imports during this period of 113.7% and 80.7%, respectively. U.S. data on trade with Taiwan likely understate the importance of Taiwan to the U.S. economy because of the role of global supply chains. To illustrate, Taiwan's manufacturers and traders report data on the amount of export orders they receive from various countries. These data indicate that annual orders for products from U.S. buyers are much larger than the reported level of annual U.S. imports from Taiwan. For example, while U.S. imports from Taiwan in 2013 were $37.9 billion, U.S. entities placed export orders with Taiwan firms in that year worth $107.2 billion. This was nearly three times greater than the U.S.-reported level of imports from Taiwan. The gap between U.S. imports from Taiwan and U.S. export orders to Taiwan firms has widened considerably over the past 10 years. A significant amount of Taiwan's ICT hardware products that are assembled in China are exported. U.S. trade data indicate that computer products and parts are the single largest category of U.S. imports from China. Thus, it is likely that a large share of U.S. imports of computers and computer parts from China originate from Taiwan-invested firms in China. In many cases, U.S. ICT firms place orders for products with Taiwan's firms, which manufacture the products in China, then ship them to the United States, where U.S. firms sell the products under their own brand names. According to Taiwan's Ministry of Economic Affairs (MOEA), U.S. firms such as Apple, Dell, Verizon, and HP are among the major global purchasers of ICT products made by Taiwan firms (primarily Hon Hai/Foxconn). For example, many of Apple's products (such as iPads, iPhones, and iPods), which are developed and engineered in the United States, are assembled by Taiwan's firms in China (using imported parts). The final products are exported globally, including to the United States. According to the Taiwan government, overseas production accounted for 13.3% of Taiwan export orders in 2000, but by 2013, this level reached 51.5%. For Taiwan ICT firms, this ratio rose from 24.9% to 87.3%. The disparity between the data on Taiwan's export orders and U.S. import data largely is explained by the fact that a significant level of products designed and sold by Taiwan's firms are actually built elsewhere, especially in the PRC, and then shipped globally, including to the United States. For example, from 2001 to 2008, the value of Taiwan's information technology (IT) hardware (such as computers) production increased from $42.8 billion to $100.0 billion. However, the share of that production in Taiwan during this time declined from 47.1% to 1.3%, while the share in China increased from 36.9% to 90.6%. Major U.S. imports from Taiwan in 2013 included semiconductors and other electronic components; communications equipment; computer equipment; and motor vehicle parts. Major U.S. exports to Taiwan included industrial machinery; semiconductors and other electronic components; basic chemicals; and aerospace products (see Table 2 ). In 2013, Taiwan was the seventh-largest export market for U.S. agricultural products, valued at $3.1 billion. Major U.S. agricultural exports to Taiwan include soybean and soybean products, wheat and wheat products, processed foods, and beef. In addition, Taiwan is the seventh-largest foreign holder of U.S. Treasury securities, which totaled $179 billion as of January 2014. According to the U.S. Bureau of Economic Affairs (BEA), the stock of U.S. FDI in Taiwan through 2012 was $16.5 billion, while the stock of Taiwan FDI in the United States was $7.8 billion. Taiwan data indicate that the United States is the largest overall source of approved FDI inflows, at $22.5 billion through 2013. Issues . Economic engagement between the United States and Taiwan has been generally positive, although there are a few issues that have proved contentious. Some issues are summarized below. Sanitary and Phyto-sanitary (SPS) Issues . These have ranked among the most contentious issues in the relationship. As noted earlier, Taiwan's restrictions on certain imported U.S. beef products led the United States to suspend the bilateral TIFA talks for several years. Although Taiwan changed its regulations regarding ractopamine in beef, it has not done so for pork. Some Members of Congress have suggested that the United States should initiate a dispute settlement case against Taiwan's pork barriers in the WTO. In addition, Taiwan has rejected agricultural shipments of U.S. cherries, apples, wheat, barley, strawberries, and corn over SPS issues, which, the United States contends, are not justified. Intellectual property rights (IPR) . In recent years, Taiwan has strived to improve its protection and enforcement of IPR. Such improvements led the USTR in January 2009 to remove Taiwan from its annual "Special 301" list of countries whose IPR policies were of the greatest concern to the United States. In 2012, the USTR stated that Taiwan generally provides effective IPR protection and enforcement, although it noted that a number of problems remain, such as infringement of copyrighted material on the Internet and widespread commercial photocopying of university textbooks. However, in February 2013, the International Intellectual Property Alliance (IIPA), a private sector coalition representing U.S. copyright-based industries, stated that Taiwan had "allowed copyright piracy, particularly in the online environment, to spiral out of control." It added that "the enforcement situation in Taiwan has deteriorated in the past several years to the point that, without some signs of positive change, IIPA members will consider recommending that Taiwan again be placed back on the Special 301 Watch List." In February 2004, IIPA stated that Internet Piracy remained the most serious IPR problem in Taiwan and that an effective mechanism to address this issue had yet to be implemented. Government Procurement . In July 2009, Taiwan joined the WTO's Government Procurement Agreement (GPA), which gives U.S. firms (and other members of the GPA) access to an annual procurement market estimated at $6 billion. According to the USTR's office, while Taiwan has made several reforms to open up its government procurement market, U.S. firms have encountered a number of problems, including issues relating to transparency, contract terms and conditions, and licensing and liabilities. Investment Restrictions . Taiwan bans or limits foreign investment in various sectors, including agricultural production, chemical manufacturing, bus transportation, and public utilities. Restrictions exist on FDI in a number of industries, including telecommunications, cable television broadcast services, high-speed rail, and piped natural gas. According to AmCham Taipei, Taiwan FDI inflows have "been woefully below what is common in most other major economies in the Asia-Pacific." TIFA Talks. The United States and Taiwan resumed the TIFA talks in Taipei on March 10, 2013, after a hiatus of nearly six years (previous talks were held in July 2007). The two sides released joint statements on investment principles and ICT services, and announced new TIFA working groups on investment and technical barriers to trade. Deputy USTR Demetrios Marantis stated: The resumption of TIFA talks between Taiwan and the United States represents a new stage in our economic relationship that will more fully open the lines of communication on trade and investment. The dedication of our partners from Taiwan to achieving positive outcomes in investment, information and communication technology services, and other areas is a testament to President Ma's vision for Taiwan's economic opening and deepening ties with regional and global partners. U.S. and Taiwan officials held another round of TIFA talks on April 5, 2014, although they did not announce any major breakthroughs. The TIFA talks did not resolve the dispute over U.S. pork. According to a press release by the USTR's office, the United States indicated that it welcomed the concrete steps Taiwan authorities had taken to improve trade secrets protection and address pharmaceutical issues. It was further noted that in-depth discussions on a range of long-standing agricultural trade issues were held and that both sides recognized the "importance of making meaningful progress on these issues in order to deepen their overall trade ties." Taiwan's commitment to boost resources to improve IPR enforcement steps to liberalize certain investment policies were noted, as well as the need for further progress on Internet piracy, and pharmaceutical and medical device issues. BIA . After a resumption of TIFA talks, Taiwan has made the signing of a BIA with the United States a priority to boost economic ties. Such an agreement could improve the investment climate in both economies by lowering investment barriers, improving transparency, and establishing a dispute resolution mechanism, which could subsequently increase bilateral investment and trade flows. In September 2013, officials in the United States and Taiwan held investment talks under the newly created TIFA investment working group. During the October 2013 APEC summit, Secretary of State John Kerry and former Taiwan vice president Vincent Siew (Taiwan's representative to the APEC summit) held a sideline meeting to discuss the economic relationship. Siew was quoted as saying: "We aim to further talks under the Taiwan-U.S. Trade and Investment Framework Agreement and push for the signing of a bilateral investment agreement en route to concluding a free trade pact." He further stated that "This is part of the building blocks approach that is paving the way for Taiwan to take part in regional trade groupings such as the Trans-Pacific Partnership." The United States also is pursuing a similar agreement with China (a bilateral investment treaty, or BIT), while Taiwan reached a Cross-strait Investment Protection and Promotion Agreement with the PRC in 2012 following ECFA. H.J.Res. 109 (Royce), to approve the proposed agreement on peaceful uses of nuclear energy. H.R. 419 (Ros-Lehtinen), Taiwan Policy Act of 2013, to strengthen the U.S.-Taiwan relationship. H.R. 772 (Faleomavaega), to promote peaceful and collaborative resolution of the South China Sea dispute. H.R. 1151 (Royce)/ P.L. 113-17 , to direct the Secretary of State to develop a strategy to obtain observer status for Taiwan at the triennial International Civil Aviation Organization Assembly. H.R. 1960 (McKeon), National Defense Authorization Act for FY2014. See P.L. 113-66 . H.R. 3470 (Royce), Taiwan Relations Act Affirmation and Naval Vessel Transfer Act of 2014. On April 7, 2014, the House agreed by voice vote to the bill, which added H.Res. 494 as section 101. H.R. 3979 (Barletta)/ P.L. 113-291 , NDAA for FY2015. H.R. 4435 (McKeon), NDAA for FY2015. See H.R. 3979 / P.L. 113-291 . H.R. 4495 (Forbes), Asia-Pacific Region Priority Act. H.Con.Res. 29 (McCaul), to express the sense of Congress that the United States should resume normal diplomatic relations with Taiwan. H.Con.Res. 46 (Andrews), to urge the Government of Taiwan to grant former President Chen Shui-bian medical parole to ensure that he receives the highest level of medical attention. H.Con.Res. 55 (Garrett), to express the sense of Congress that Taiwan and its 23,000,000 people deserve membership in the United Nations. H.Res. 185 (Bentivolio), Taiwan Travel Act, to declare that it should be U.S. policy to encourage visits between the United States and Taiwan at all levels. H.Res. 494 (Royce), to affirm the importance of the TRA (on its 35 th anniversary). See H.R. 3470 . H.Res. 704 (Forbes), to reaffirm the strong support of the U.S. government for freedom of navigation and other internationally lawful uses of sea and airspace and peaceful diplomatic resolution of outstanding territorial and maritime claims and disputes. H.Res. 714 (Faleomavaega), to reaffirm the peaceful and collaborative resolution of maritime and jurisdictional disputes in the South China Sea and East China Sea. S. 12 (Coats), Naval Vessel Transfer Act of 2013, inter alia , to authorize the transfer by sale of four excess Perry-class frigates to Taiwan. S. 579 (Menendez), to direct the Secretary of State to develop a strategy to obtain observer status for Taiwan at the triennial International Civil Aviation Organization Assembly. S. 1197 (Levin), National Defense Authorization Act for FY2014. See P.L. 113-66 . S. 1683 (Menendez)/ P.L. 113-276 , to provide for the transfer of naval vessels to certain foreign recipients. S. 2410 (Levin), NDAA for FY2015. S.J.Res. 31 (Menendez), to approve the proposed agreement on peaceful uses of nuclear energy. S.Res. 167 (Menendez), to reaffirm the strong U.S. support for the peaceful resolution of territorial, sovereignty, and jurisdictional disputes in the Asia-Pacific maritime domains. S.Res. 412 (Menendez), to reaffirm the strong U.S. support for freedom of navigation and other lawful uses of the sea and airspace, and diplomatic resolution of territorial and maritime claims. | This CRS Report, updated through the 113th Congress, provides an overview with analysis of the major issues in U.S. policy on Taiwan. Taiwan formally calls itself the Republic of China (ROC), tracing its political lineage to the ROC set up after the revolution in 1911 in China. The ROC government retreated to Taipei in 1949. The United States recognized the ROC until the end of 1978 and has maintained a non-diplomatic relationship with Taiwan after recognition of the People's Republic of China (PRC) in 1979. The Taiwan Relations Act (TRA) of 1979, P.L. 96-8, has governed policy in engagement with Taiwan in the absence of a diplomatic relationship or a defense treaty. Other key statements of policy are the three U.S.-PRC Joint Communiqués of 1972, 1979, and 1982; and the "Six Assurances" of 1982. (CRS Report RL30341, China/Taiwan: Evolution of the "One China" Policy—Key Statements from Washington, Beijing, and Taipei.) For decades, Taiwan has been of significant security, economic, and political interest to the United States. In 2013, Taiwan was the 12th-largest U.S. trading partner. Taiwan is a major innovator and producer of information technology (IT) products, many of which are assembled in the PRC by Taiwan-invested firms there. Ties or tension across the Taiwan Strait affect international security (with potential U.S. intervention). While the United States does not diplomatically recognize Taiwan, it is an important autonomous actor. Today, 22 countries have diplomatic relations with Taiwan as the ROC. Taiwan's 23 million people enjoy self-governance with democratic elections. Democracy has offered people a greater say in Taiwan's status, given competing politics about Taiwan's national identity and priorities. Belonging to the Kuomintang (KMT), or Nationalist Party, President Ma Ying-jeou won elections in 2008 and 2012 against the Democratic Progressive Party's (DPP's) candidate. The KMT also won a majority of the seats in the Legislative Yuan (LY). In 2014, the Ma Administration faced challenges from the student-led Sunflower Movement in concluding a trade deal with the PRC. The KMT faced major defeats in the local elections on November 29, when many people voted against its domestic policies. Since Taiwan and the PRC resumed their quasi-official dialogue in 2008 under President Ma and cross-strait tension decreased, some have stressed the need to take steps by the United States and by Taiwan to strengthen cooperation to advance U.S. interests. Another approach has viewed closer cross-strait engagement as allowing U.S. attention to shift to expand cooperation with a rising China, which opposes U.S. arms sales to and other dealings with Taiwan, and Taiwan's independence. Washington and Taipei have put more efforts into their respective relations with Beijing, while contending that they have pursued positive, parallel U.S.-Taiwan cooperation. President Ma has sought U.S. support, including for Taiwan's inclusion in the U.S. strategic "rebalance" to the Asia-Pacific, international organizations, talks on maritime disputes in the East and South China Seas, and the Trans-Pacific Partnership (TPP). Other policy issues are whether and when to approve arms sales, and how to bolster economic cooperation and resolve disputes, such as through the Trade and Investment Framework Agreement (TIFA) talks (last held in April 2014). The United States has been concerned about Taiwan's restrictions on U.S. beef and pork, even as Taiwan has claimed attention to international organizations and standards. Taiwan has proposed a bilateral investment agreement (BIA). On September 23, 2014, 29 Members in the House sent a letter to the Secretary of State, calling for expanding engagement with Taiwan. Legislation in the 113th Congress includes H.J.Res. 109, H.R. 419, H.R. 772, H.R. 1151 (P.L. 113-17), H.R. 1960, H.R. 3470, H.R. 3979 (P.L. 113-291), H.R. 4435, H.R. 4495, H.Con.Res. 29, H.Con.Res. 46, H.Con.Res. 55, H.Res. 185, H.Res. 494, H.Res. 704, H.Res. 714, S. 12, S. 579, S. 1197, S. 1683 (P.L. 113-276), S. 2410, S.J.Res. 31, S.Res. 167, and S.Res. 412. (See also CRS Report RL30957, Taiwan: Major U.S. Arms Sales Since 1990.) |
Immigration reform has been hotly debated in recent years. Although many component issues are controversial, the question of legalizing large numbers of unauthorized immigrants in the United States has been a focal point of debate, galvanizing both support for and opposition to reform proposals. Historically less controversial has been legislation known as the "DREAM Act" that proposes a more targeted legalization program to enable certain unauthorized students to obtain legal immigration status. The name DREAM Act derives from the bill title, Development, Relief, and Education for Alien Minors Act, but it refers more broadly to a class of measures to provide immigration relief to unauthorized alien students, whether or not particular bills carry that name. While living in the United States, unauthorized alien children are able to receive free public education through high school. Many unauthorized immigrants who graduate from high school and want to attend college, however, face various obstacles. Among them, a provision enacted in 1996 as part of the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) discourages states and localities from granting unauthorized aliens certain "postsecondary education benefits." More broadly, as unauthorized aliens, they typically are unable to work legally and are subject to removal from the United States. Multiple bills have been introduced in recent Congresses to provide relief to unauthorized aliens who were brought into the United States as children. Prior to the 111 th Congress, DREAM Act bills generally proposed to repeal the 1996 provision and to enable certain unauthorized alien students to adjust to legal permanent resident (LPR) status. In the 111 th Congress, the House approved a different type of DREAM Act measure as an amendment to an unrelated bill ( H.R. 5281 ). Unlike earlier DREAM Act bills, the DREAM Act language added to H.R. 5281 did not include a repeal of the 1996 provision and proposed to grant eligible individuals an interim legal status prior to enabling them to adjust to LPR status. H.R. 5281 died at the end of the 111 th Congress. Bills to legalize the status of unauthorized alien students were again introduced in the 112 th Congress. Some of these bills were similar to the measure approved by the House in the 111 th Congress, while others included more traditional DREAM Act elements. In the 113 th Congress, DREAM Act provisions were incorporated into larger comprehensive immigration reform bills, including the Border Security, Economic Opportunity, and Immigration Modernization Act ( S. 744 ), and were integrated with other legalization provisions in these bills. The Senate passed S. 744 , but it was not considered in the House and died at the end of the 113 th Congress. As of this writing, no DREAM Act bills have been introduced in the 114 th Congress. Under federal law, unauthorized aliens are neither entitled to nor prohibited from admission to postsecondary educational institutions in the United States. State laws vary and may prohibit enrollment in public postsecondary institutions. To gain entrance to available institutions, unauthorized aliens must meet the same requirements as any other student, which vary depending on the institution and may include possessing a high school diploma, passing entrance exams, and surpassing a high school grade point average (GPA) threshold. Although admissions applications for most colleges and universities request that students provide their Social Security numbers, this information typically is not required for admission. Even if they are able to gain admission, however, unauthorized alien students often find it difficult, if not impossible, to pay for higher education. Under the Higher Education Act (HEA) of 1965, as amended, they are ineligible for federal financial aid. In most instances, unauthorized alien students are likewise ineligible for state financial aid. Furthermore, as explained in the next section, they also may be ineligible for in-state tuition rates. Section 505 of IIRIRA places restrictions on state provision of educational benefits to aliens who are not lawfully present in the United States. It directs that such aliens shall not be eligible on the basis of residence within a State (or a political subdivision) for any postsecondary education benefit unless a citizen or national of the United States is eligible for such a benefit (in no less an amount, duration, and scope) without regard to whether the citizen or national is such a resident. There is disagreement about the meaning of this provision, and no authoritative guidance is available in either congressional report language or federal regulations. The conference report on the bill containing IIRIRA did not explain Section 505. (A conference report on a predecessor IIRIRA bill, which contained a section identical to Section 505, described the section as "provid[ing] that illegal aliens are not eligible for in-state tuition rates at public institutions of higher education.") Although Section 505 does not refer explicitly to the granting of "in-state" residency status for tuition purposes and some have questioned whether in-state tuition is a "postsecondary education benefit" for purposes of Section 505, the discussion surrounding the provision has focused on the granting of in-state tuition rates to unauthorized aliens. A key issue has been whether it is possible to grant in-state tuition to resident unauthorized students (and not to all citizens) without violating Section 505. Various states have attempted to do this. For example, a California law passed in 2001 makes unauthorized aliens eligible for in-state tuition at state community colleges and California State University campuses. The measure, however, bases eligibility on criteria that do not explicitly include state residency. The requirements to qualify for in-state tuition under the California law include attendance at a California high school for at least three years and either graduation from a California high school "or attainment of the equivalent thereof." In addition, the law requires an unauthorized alien student to file an affidavit stating that he or she either has filed an application to legalize his or her status or will file such an application as soon as he or she is eligible. California officials have argued that by using eligibility criteria other than state residency, the law does not violate the Section 505 prohibition on conferring educational benefits on the basis of state residency. In November 2010, the California Supreme Court upheld the California law. At least one federal court also has considered whether state laws that authorize in-state tuition for unauthorized students violate Section 505. On June 15, 2012, in the absence of congressional action on DREAM Act bills, the Department of Homeland Security (DHS) issued a memorandum announcing that certain individuals who were brought to the United States as children and meet other criteria would be considered for deferred action for two years, subject to renewal. The eligibility criteria for deferred action for childhood arrivals, or DACA, as the initiative is known, are similar to those for relief in DREAM Act bills. These criteria include the following: (1) under age 16 at time of entry into the United States; (2) continuous residence in the United States for at least five years before June 15, 2012 (that is, since June 15, 2007); (3) in school, graduated from high school or obtained general education development certificate, or honorably discharged from the Armed Forces; (4) not convicted of a felony, a significant misdemeanor, or three or more misdemeanors, and not otherwise a threat to national security or public safety; and (5) below age 31 on June 15, 2012. Consideration for DACA is limited to individuals who entered the United States without inspection or whose lawful immigration status expired as of June 15, 2012. Aliens granted deferred action can apply for employment authorization. The DACA program, however, provides no pathway to a legal immigration status. The program is administered by DHS's U.S. Citizenship and Immigration Services (USCIS). On November 20, 2014, DHS issued another memorandum that directs USCIS to expand eligibility for the DACA initiative and make other changes to the program, as follows: (1) eliminate the "below age 31 on June 15, 2012" requirement; (2) advance the required starting date of continuous residence from June 15, 2007, to January 1, 2010; and (3) extend the initial grant and renewal periods for DACA and accompanying employment authorization from two to three years. In the memorandum, DHS directs USCIS to begin accepting applications under the expanded DACA parameters in 90 days. Traditional DREAM Act bills would enable certain unauthorized alien students to obtain LPR status in the United States through a two-stage process. Requirements to obtain conditional status (stage 1) typically include residence of at least five years in the United States, and a high school diploma (or the equivalent) or admission to an institution of higher education in the United States. Requirements to become a full-fledged LPR (stage 2) typically include acquisition of a degree from an institution of higher education in the United States, completion of at least two years in a bachelor's or higher degree program, or service in the uniformed services for at least two years. In 2010, using data from the March 2006, March 2007, and March 2008 Current Population Survey (CPS) and other sources, the Migration Policy Institute (MPI) published estimates of the population potentially eligible for legal status under S. 729 , a Senate DREAM Act bill introduced in the 111 th Congress. This bill would have established a two-stage process for unauthorized alien students to obtain LPR status. Aliens who met specified age, physical presence, educational, and other requirements could have first applied for conditional LPR status. After meeting additional requirements, including two years of either college or service in the uniformed services, they could have applied to have the condition on their status removed and become full-fledged LPRs. According to the MPI analysis, if this DREAM Act bill had been enacted, about 2.150 million individuals could have attempted to become LPRs under its provisions. This total included estimates of individuals who, on the date of enactment, would already have met the substantive requirements under the bill for conditional status (or for both conditional status and the removal of the condition), as well as estimates of individuals who, on the date of enactment, would have met some, but not all, of the requirements for conditional status. About 43% (934,000) of the estimated 2.150 million potential beneficiaries were children under age 18 in elementary or secondary school. The MPI report also included an estimate of the number of individuals who likely would have obtained LPR status under S. 729 , if it had been enacted: If future behavior mirrors past trends, we project that approximately 38 percent [of the 2.15 million]—or 825,000—of the potential beneficiaries would actually achieve lawful permanent status under the legislation. As part of a 2010 analysis of the costs and likely impact of DREAM Act legislation before the 111 th Congress, the Center for Immigration Studies (CIS) similarly estimated the number of potential DREAM Act beneficiaries using 2009 and 2010 CPS data. Although CIS did not identify the bills at issue in its analysis, the bill requirements mentioned matched those in S. 729 , as described above, and S. 3827 , a similar bill introduced in the 111 th Congress. CIS estimated that there were some 1.998 million unauthorized aliens who would have met the residency and age requirements under the DREAM Act legislation, including 859,000 children under age 18. Of the 1.998 million potential beneficiaries, CIS estimated that 1.426 million individuals would have met the high school graduation, or equivalent, requirement for conditional LPR status (either on the date of enactment or at a later date). CIS, however, did not provide an estimate of the number of individuals who likely would have obtained LPR status under the DREAM Act. Since 2012, MPI has published estimates of the potentially eligible population under DHS's DACA policy based on guidelines issued by the agency. In August 2014, MPI estimated that some 2.1 million unauthorized aliens in the United States could be eligible for DACA relief. As of September 30, 2014, a total of 610,375 requests for consideration of DACA had been approved. Similar, but not identical, Senate and House DREAM Act bills ( S. 952 , H.R. 1842 ) were introduced in the 112 th Congress. Although there were differences between the bills, both were entitled the Development, Relief, and Education for Alien Minors (DREAM) Act of 2011. Both likewise took a step back from some of the revisions incorporated in the DREAM Act measure approved by the House in the 111 th Congress and included some more traditional DREAM Act provisions. By contrast, other House bills ( H.R. 3823 , H.R. 5869 ) more closely resembled the version of the DREAM Act approved by the House in 2010. S. 952 , the DREAM Act of 2011, was introduced by Senator Richard Durbin with 32 original cosponsors. It would have repealed IIRIRA Section 505 and thereby eliminated this statutory restriction on state provision of postsecondary educational benefits to unlawfully present aliens. It also would have enabled eligible unauthorized students (including those in temporary protected status under the Immigration and Nationality Act (INA)) to adjust to LPR status in the United States through an immigration procedure known as cancellation of removal. Cancellation of removal is a discretionary form of relief that an alien can apply for while in removal proceedings before an immigration judge. If cancellation of removal is granted in removal proceedings, the alien's status is adjusted to that of an LPR. S. 952 would have enabled aliens to affirmatively apply for cancellation of removal without first being placed in removal proceedings, and it would have placed no limit on the number of aliens who could be granted cancellation of removal/adjustment of status under its provisions. To be eligible for cancellation of removal/adjustment of status under S. 952 , an alien would have had to demonstrate that he or she had been continuously physically present in the United States for five years immediately preceding the date of enactment of the act; was age 15 or younger at the time of initial entry; had been a person of good moral character since the time of initial entry; and was age 35 or younger on the date of enactment. The alien also would have needed to demonstrate that he or she had been admitted to an institution of higher education in the United States or had earned a high school diploma or the equivalent in the United States. Aliens applying for relief under S. 952 would have been subject to special requirements concerning inadmissibility. The INA enumerates classes of inadmissible aliens. Under the INA, except as otherwise provided, aliens who are inadmissible under specified grounds, such as health-related grounds or criminal grounds, are ineligible to receive visas from the Department of State or to be admitted to the United States by the Department of Homeland Security. S. 952 would have specified the grounds of inadmissibility applicable to aliens seeking relief. An alien applying for cancellation of removal/adjustment of status under S. 952 would have had to show that he or she was not inadmissible on INA criminal, security, smuggling, student visa abuse, citizenship ineligibility, polygamy, international child abduction, or unlawful voting grounds. Applicants also would have needed to satisfy requirements concerning convictions for offenses under federal or state law. In addition, they would have had to submit biometric and biographic data, which would have been used to conduct background checks, and they would have needed to register under the Military Selective Service Act, if applicable. S. 952 would have required that applications for cancellation of removal/adjustment of status be filed not later than one year after the date the alien earned a high school diploma or the equivalent, or the effective date of final regulations, whichever was later. Under the bill, the Secretary of Homeland Security or the Attorney General could not have removed an alien with a pending application who established prima facie eligibility for relief. In addition, the Attorney General would have stayed the removal proceedings of an alien who was at least age five, met all the eligibility requirements except high school graduation, and was enrolled in primary or secondary school. Aliens granted cancellation of removal under S. 952 would have been adjusted initially to conditional permanent resident status. Such conditional status would have been valid for six years and would have been subject to termination. To have the condition removed and become a full-fledged LPR, an alien would have had to submit an application during a specified period and meet additional requirements. Among these requirements, the alien would have needed to have demonstrated good moral character during the period of conditional permanent residence; could not have abandoned his or her U.S. residence; and would have needed either to have earned a degree from an institution of higher education (or to have completed at least two years in a bachelor's or higher degree program) in the United States or to have served in the uniformed services for at least two years. Other requirements for removal of the condition would have included satisfaction of the English language and civics requirements for naturalization, submission of biometric and biographic data, and completion of background checks. S. 952 would have placed restrictions on the eligibility of aliens who had conditional LPR status under the bill for federal student financial aid under Title IV of the Higher Education Act of 1965, as amended (see " Higher Education Benefits and Immigration Status "). Aliens with conditional LPR status would have been eligible only for student loans, federal work-study programs, and services (such as counseling, tutorial services, and mentoring), subject to the applicable requirements. They would have been ineligible for federal Pell Grants or federal supplemental educational opportunity grants. The time an alien spent as a conditional LPR would have counted for naturalization purposes under S. 952 . (Typically, an alien must be in LPR status for five years before he or she can naturalize.) Under S. 952 , however, the condition on the LPR status would have had to have been removed before an alien could apply for naturalization. H.R. 1842 , the DREAM Act of 2011, was introduced by Representative Howard Berman with bipartisan cosponsorship. It was similar in many respects to S. 952 , but different in some areas. Like the Senate bill, it would have repealed IIRIRA Section 505 and thereby eliminated this restriction on state provision of postsecondary educational benefits to unlawfully present aliens. It also would have enabled eligible unauthorized students to adjust to LPR status in the United States through cancellation of removal. Unlike S. 952 , it would not have provided for adjustment to LPR status for aliens in temporary protected status. Like S. 952 , it would have enabled aliens to affirmatively apply for cancellation of removal without first being placed in removal proceedings, and it would have placed no limit on the number of aliens who could be granted cancellation of removal/adjustment of status. H.R. 1842 included many of the same requirements as S. 952 for cancellation of removal/ adjustment of status. Under the House bill, as under the Senate bill, an alien would have needed to demonstrate that he or she had been continuously physically present in the United States for not less than five years immediately preceding the date of enactment of the act; was age 15 or younger at the time of initial entry; had been a person of good moral character since the time of initial entry; and had been admitted to an institution of higher education in the United States or had earned a high school diploma or the equivalent in the United States. Under H.R. 1842 , the alien would have needed to demonstrate that he or she was age 32 or younger on the date of enactment, compared to age 35 or younger under the Senate bill. With respect to the INA grounds of inadmissibility, an alien applying for relief under H.R. 1842 , as under S. 952 , would have had to show that he or she was not inadmissible on INA criminal, security, smuggling, student visa abuse, citizenship ineligibility, polygamy, international child abduction, or unlawful voting grounds. An additional ground of inadmissibility—the public charge ground (i.e., indigence)—would have applied under the House bill. As under S. 952 , applicants for relief under H.R. 1842 would have had to submit biometric and biographic data, which would have been used to conduct background checks, and they would have needed to register under the Military Selective Service Act, if applicable. They would not have been subject to requirements like those in S. 952 related to convictions for offenses under federal or state law. The provisions in H.R. 1842 concerning the application process and protection from removal for potential beneficiaries were very similar to those in S. 952 . Like S. 952 , the House bill would have required that applications be filed not later than one year after the date the alien earned a high school diploma or the equivalent, or the effective date of final regulations, whichever was later. Under the House bill, the Secretary of Homeland Security or the Attorney General could not have removed an alien with a pending application who established prima facie eligibility for relief. In addition, the Attorney General would have stayed the removal proceedings of an alien who was at least age 12 (compared to the age five cutoff in S. 952 ), met all the eligibility requirements except high school graduation, and was enrolled in primary or secondary school. Aliens granted cancellation of removal under H.R. 1842 , as under S. 952 , would have been adjusted initially to conditional permanent resident status. Such conditional status would have been valid for six years and would have been subject to termination. To have the condition removed and become a full-fledged LPR, an alien would have had to submit an application during a specified period and meet additional requirements. Among these requirements, the alien would have needed to have demonstrated good moral character during the period of conditional permanent residence; could not have abandoned his or her U.S. residence; and would have needed either to have earned a degree from an institution of higher education (or to have completed at least two years in a bachelor's or higher degree program) in the United States or to have served in the uniformed services for at least two years. Other requirements for removal of the condition would have included satisfaction of the English language and civics requirements for naturalization, submission of biometric and biographic data, and completion of background checks. The time an alien spent as a conditional LPR would have counted for naturalization purposes under H.R. 1842 , but the condition on the LPR status would have had to be removed before an alien could apply for naturalization. H.R. 1842 would have placed temporary restrictions on the eligibility of aliens who adjusted to LPR status under its provisions for federal student financial aid under Title IV of the Higher Education Act of 1965, as amended. Aliens adjusting status under the bill who were in conditional permanent resident status would have been eligible for student loans, federal work-study programs, and services, but they would not have been eligible for federal Pell Grants and federal supplemental educational opportunity grants. H.R. 3823 , the Adjusted Residency for Military Service (ARMS) Act, was introduced by Representative David Rivera. It was similar in many respects to the DREAM Act language approved by the House as part of H.R. 5281 in the 111 th Congress, and it was significantly different than S. 952 and H.R. 1842 . Unlike S. 952 and H.R. 1842 , H.R. 3823 would not have repealed IIRIRA Section 505 and thus would not have eliminated this statutory restriction on state provision of postsecondary educational benefits to unlawfully present aliens. Unlike S. 952 , H.R. 1842 , and the House-approved measure in the 111 th Congress, H.R. 3823 would have required unauthorized alien students to perform military service in order to obtain LPR status. Under H.R. 3823 , as under the House-approved DREAM Act language in the 111 th Congress, an eligible alien could have gone through the cancellation of removal procedure and been granted conditional nonimmigrant status. Unlike under S. 952 , H.R. 1842 , and most other DREAM Act bills introduced in past Congresses, the alien's status would not have been adjusted to that of a conditional LPR. Like most other DREAM Act bills, H.R. 3823 would have enabled an alien to affirmatively apply for cancellation of removal without first being placed in removal proceedings; would have established a deadline for submitting initial cancellation of removal applications; and would have prohibited the Secretary of Homeland Security from removing an alien with a pending application who established prima facie eligibility for relief. Unlike other DREAM Act bills, H.R. 3823 did not include provisions about staying the removal proceedings of alien children who were enrolled in primary or secondary school and who met all the eligibility requirements for initial conditional status except high school graduation. To be eligible for cancellation of removal/conditional nonimmigrant status under H.R. 3823 , an alien would have needed to demonstrate that he or she: had been physically present in the United States for a continuous period of not less than five years immediately preceding the date of enactment of the legislation; had not yet reached age 16 at the time of initial entry; had been a person of good moral character since the date of initial entry; and was younger than age 30 on the date of enactment. These requirements were the same as in S. 952 and H.R. 1842 , except for the maximum age limitation on the date of enactment. Under H.R. 3823 , the alien also would have had to demonstrate that he or she had been admitted to an institution of higher education in the United States, or had earned a high school diploma or the equivalent in the United States, as under both S. 952 and H.R. 1842 , and that he or she had never been under a final administrative or judicial order of exclusion, deportation, or removal, with some exceptions. H.R. 3823 specified the grounds of inadmissibility and deportability that would have applied to aliens seeking relief. An alien applying for cancellation of removal/conditional nonimmigrant status under the bill would have had to show that he or she was not inadmissible on INA health-related, criminal, security, public charge, smuggling, student visa abuse, citizenship ineligibility, polygamy, international child abduction, or unlawful voting grounds, and was not deportable on INA criminal, security, smuggling, marriage fraud, public charge, or unlawful voting grounds. Applicants also would have needed to satisfy requirements concerning convictions for offenses under federal or state law. In addition, they would have had to submit biometric and biographic data, which would have been used to conduct background checks, and they would have needed to register under the Military Selective Service Act, if applicable. As noted above, an alien whose removal was cancelled under H.R. 3823 would have been granted conditional nonimmigrant status, as opposed to conditional LPR status under S. 952 and H.R. 1842 . Such conditional nonimmigrant status would have been valid for an initial period of five years and would have been subject to termination. Among the grounds for termination would have been failure to successfully enlist in the Armed Forces within nine months after being granted conditional status. Under H.R. 3823 , an alien's conditional nonimmigrant status would have been extended for a second five-year period (for a total conditional period of 10 years) if the alien met the following requirements: demonstration of good moral character as a conditional nonimmigrant; compliance with the bill's inadmissibility and deportability provisions discussed above; no abandonment of U.S. residence; and service in the Armed Forces on active duty for at least two years or service in a reserve component of the Armed Forces in active status for at least four years. By comparison, under the House-approved measure in the 111 th Congress, there also would have been two five-year conditional nonimmigrant status periods and beneficiaries would have had to meet a set of requirements to have their status extended for the second five-year period. With respect to the requirements for extension, however, the House-approved measure included different military service requirements than H.R. 3823 and, unlike H.R. 3823 , would have given beneficiaries the option of completing two years of higher education instead of serving in the Armed Forces. Another similarity to the DREAM Act language approved in the 111 th Congress, and a difference from S. 952 , H.R. 1842 , and other DREAM Act bills, was that H.R. 3823 would have established surcharges on applications for relief. There would have been a surcharge of $525 on each application for cancellation of removal/conditional nonimmigrant status, and a surcharge of $2,000 on each application for an extension of conditional nonimmigrant status. At the end of the second period of conditional nonimmigrant status, as specified, the alien could have applied for adjustment to LPR status. Among the requirements for adjustment of status, the alien would have needed to have demonstrated good moral character during the period of conditional nonimmigrant status; would have needed to be in compliance with the bill's inadmissibility and deportability provisions; and could not have abandoned his or her U.S. residence. In addition, applicants for adjustment of status under H.R. 3823 , as under the House-approved version of the DREAM Act in the 111 th Congress, would have needed to satisfy the English language and civic requirements for naturalization, satisfy any applicable federal tax liability, submit biometric and biographic data, and complete background checks. There would have been no limitation on the number of individuals eligible for adjustment of status. Under H.R. 3823 , aliens who adjusted status and met other requirements would have been eligible for naturalization after three years in LPR status. Unlike under S. 952 and H.R. 1842 , the time spent in conditional status under H.R. 3823 (during which the aliens would have been conditional nonimmigrants) would not have counted for naturalization purposes. H.R. 3823 also contained provisions on the treatment for other purposes of aliens who were granted conditional nonimmigrant status or LPR status under the bill. Like the version of the DREAM Act approved by the 111 th Congress, H.R. 3823 would have directed that conditional nonimmigrants be considered lawfully present for all purposes except for provisions in the Patient Protection and Affordable Care Act (PPACA), as enacted by the 111 th Congress, concerning premium tax credits and cost sharing subsidies. It also would have directed that aliens who adjusted to LPR status under the bill be deemed to have completed the five-year period required for LPR eligibility for certain types of federal public assistance, as established by the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996. H.R. 3823 contained no provisions on the eligibility of aliens who were granted relief under its provisions for federal student financial aid. H.R. 5869 , the Studying Towards Adjusted Residency Status (STARS) Act, was also introduced by Representative Rivera. It was a counterpart bill to H.R. 3823 (discussed above) in that it would have provided a pathway to LPR status through higher education, while H.R. 3823 would have provided a pathway through military service. H.R. 5869 , like H.R. 3823 , was similar in many respects to the DREAM Act language approved by the House as part of H.R. 5281 in the 111 th Congress, and it was significantly different than S. 952 and H.R. 1842 . Like H.R. 3823 and the DREAM Act language approved by the House in the 111 th Congress, H.R. 5869 would not have repealed IIRIRA Section 505 and thus would not have eliminated this statutory restriction on state provision of postsecondary educational benefits to unlawfully present aliens. Under H.R. 5869 , as under H.R. 3823 and the House-approved DREAM Act language in the 111 th Congress, an eligible alien could have gone through the cancellation of removal procedure and been granted conditional nonimmigrant status. Unlike under S. 952 , H.R. 1842 , and most other DREAM Act bills introduced in past Congresses, the alien's status would not have been adjusted to that of a conditional LPR. Like most other DREAM Act bills, H.R. 5869 would have enabled an alien to affirmatively apply for cancellation of removal without first being placed in removal proceedings and would have prohibited the Secretary of Homeland Security from removing an alien with a pending application who established prima facie eligibility for relief. Unlike some other DREAM Act bills, H.R. 5869 did not include provisions about staying the removal proceedings of alien children who were enrolled in primary or secondary school and who met all the eligibility requirements for initial conditional status except high school graduation. To be eligible for cancellation of removal/conditional nonimmigrant status under H.R. 5869 , an alien would have had to demonstrate that he or she: had been physically present in the United States for a continuous period of not less than five years immediately preceding the date of enactment of the legislation; had not yet reached age 16 at the time of initial entry; and had been a person of good moral character since the date of initial entry. These requirements were the same as in S. 952 and H.R. 1842 . Unlike these bills, H.R. 5869 also would have required an alien to demonstrate that he or she was younger than age 19 at the time of submitting the application, except as specified. In addition, as under H.R. 3823 , the alien would have had to demonstrate that he or she had never been under a final administrative or judicial order of exclusion, deportation, or removal, with some exceptions. The educational requirements for conditional status in H.R. 5869 were different than in S. 952 and H.R. 1842 and in other traditional DREAM Act bills. Under H.R. 5869 , the applicant would have had to demonstrate that he or she had earned a high school diploma or the equivalent in the United States, and had been admitted to an accredited four-year institution of higher education in the United States. H.R. 5869 specified the grounds of inadmissibility and deportability that would have applied to aliens seeking relief. They were the same grounds as under H.R. 3823 . An alien applying for cancellation of removal/conditional nonimmigrant status under H.R. 5869 would have to show that he or she was not inadmissible on INA health-related, criminal, security, public charge, smuggling, student visa abuse, citizenship ineligibility, polygamy, international child abduction, or unlawful voting grounds, and was not deportable on INA criminal, security, smuggling, marriage fraud, public charge, or unlawful voting grounds. Applicants also would have needed to satisfy requirements concerning convictions for offenses under federal or state law. In addition, they would have had to submit biometric and biographic data, which would have been used to conduct background checks, and they would have needed to register under the Military Selective Service Act, if applicable. An alien whose removal was cancelled under H.R. 5869 would have been granted conditional nonimmigrant status, as opposed to conditional LPR status under traditional DREAM Act bills. Such conditional nonimmigrant status would have been valid for an initial period of five years and would have been subject to termination. Among the grounds for termination would have been failure to enroll in an accredited four-year institution within one year after being granted conditional status or failure to remain enrolled in such an institution. Under H.R. 5869 , an alien's conditional nonimmigrant status would have been extended for a second five-year period (for a total conditional period of 10 years) if the alien met the following requirements: demonstration of good moral character as a conditional nonimmigrant; compliance with the bill's inadmissibility and deportability provisions discussed above; no abandonment of U.S. residence; and graduation from an accredited four-year institution of higher education in the United States. Like H.R. 3823 , H.R. 5869 would have established surcharges on applications for relief. There would have been a surcharge of $525 on each application for cancellation of removal/conditional nonimmigrant status, and a surcharge of $2,000 on each application for an extension of conditional nonimmigrant status. At the end of the second period of conditional nonimmigrant status, as specified, the alien could have applied for adjustment to LPR status. Among the requirements for adjustment of status were demonstration of good moral character during the period of conditional nonimmigrant status, compliance with the bill's inadmissibility and deportability provisions, and no abandonment of the alien's U.S. residence. In addition, applicants for adjustment of status under H.R. 5869 would have needed to satisfy the English language and civic requirements for naturalization, satisfy any applicable federal tax liability, submit biometric and biographic data, and complete background checks. There would have been no limitation on the number of individuals eligible for adjustment of status. Aliens who adjusted status and met other requirements would have been eligible for naturalization after five years in LPR status. H.R. 5869 also contained provisions on the treatment for other purposes of aliens granted conditional nonimmigrant status or LPR status under the bill. Like the version of the DREAM Act approved by the House in the 111 th Congress and H.R. 3823 , H.R. 5869 would have provided that conditional nonimmigrants were to be considered lawfully present for all purposes except for provisions in the Patient Protection and Affordable Care Act concerning premium tax credits and cost sharing subsidies. It also would have directed that aliens who adjusted to LPR status under the bill be deemed to have completed the five-year period required for LPR eligibility for certain types of federal public assistance, as established by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. Unlike other DREAM Act bills that offered a higher education route to LPR status, H.R. 5869 contained no provisions on the eligibility of aliens who were granted relief under its provisions for federal student financial aid. In the 113 th Congress, DREAM Act provisions were incorporated into larger comprehensive immigration reform bills. Both the Border Security, Economic Opportunity, and Immigration Modernization Act ( S. 744 ), as passed by the Senate, and a related House bill of the same name ( H.R. 15 ), as introduced in the House, included the same DREAM Act language. S. 744 and H.R. 15 proposed to establish a general legalization program for unauthorized aliens in the United States, with a special "DREAM Act" pathway to LPR status for certain aliens who entered the country as children. Both bills would have established a new multi-step, multi-year process for eligible unauthorized aliens to transition into a provisional legal status and ultimately to lawful permanent residence. They would have added a new section (245B) to the INA, providing for adjustment to a newly created registered provisional immigrant (RPI) status. The Secretary of Homeland Security would have been authorized to grant RPI status to a foreign national who met the specified eligibility requirements, submitted an application in the specified period, and paid a fee and a penalty, if applicable. Under S. 744 and H.R. 15 , the initial period of RPI status would have been six years, which could have been extended if the alien remained eligible for RPI status and met specified requirements. The RPI eligibility requirements in S. 744 and H.R. 15 stated that the alien: must be physically present in the United States on the date of submitting the RPI application; must have been physically present in the United States on or before December 31, 2011; and must have maintained continuous physical presence in the United States from December 31, 2011, until the date the alien is granted RPI status. Dependent spouses and children could have been classified as RPI dependents if they were physically present in the United States on or before December 31, 2012; had maintained continuous physical presence in the United States from that date until the date the principal alien was granted RPI status; and met the other RPI eligibility requirements. Under S. 744 and H.R. 15 , a foreign national would have been ineligible for RPI status: if he or she had a conviction for specified criminal offenses or for unlawful voting; if the Secretary of Homeland Security knew or had reasonable grounds to believe that the alien had engaged in, or was likely to engage in, terrorist activity; or if the alien was inadmissible under specified INA grounds, including health-related, criminal, security, smuggling, citizenship ineligibility, polygamy, international child abduction, unlawful voting, and renunciation of U.S. citizenship to avoid taxation grounds. Aliens with LPR, refugee, asylum, or (with specified exceptions) legal nonimmigrant status on the date S. 744 was introduced also would have been ineligible. Aliens seeking RPI status under S. 744 or H.R. 15 would have been required to pay both a processing fee and a penalty, but the penalty fee would not have applied to individuals who met the DREAM Act criteria described below. The bills also would have required aliens to satisfy any applicable federal tax liability prior to filing an RPI application, and to submit biometric and biographic data and clear national security and law enforcement background checks as part of the application process. An RPI applicant could have been subject to additional security screening at the discretion of the DHS Secretary. An alien granted RPI status or who appeared prima facie eligible for RPI status would have been provided with specified protections from removal under S. 744 and H.R. 15 . S. 744 and H.R. 15 would have amended the INA to establish a special pathway to LPR status for RPIs who entered the United States as children and satisfied a set of requirements similar to those traditionally included in DREAM Act bills. Under these provisions, the DHS Secretary could have adjusted the status of an RPI to that of an LPR if the alien demonstrated that he or she: had been an RPI for at least five years; was under age 16 at the time of initial entry into the United States; had earned a high school diploma, general education development (GED) certificate, or the equivalent in the United States; and had earned a degree from an institution of higher education or completed at least two years in good standing in a bachelor's or higher degree program in the United States, or had served in the uniformed services for at least four years. Such aliens would have been subject to English language and civics requirements and to national security and law enforcement screening. RPIs adjusting to LPR status under the DREAM Act provisions, however, would have been exempt from the $1,000 penalty applicable to RPIs adjusting status under other provisions. There would have been no limit on the number of aliens who could adjust status under the DREAM Act provisions in S. 744 and H.R. 15 . S. 744 and H.R. 15 included language on federal student assistance under Title IV of the Higher Education Act (see " Higher Education Benefits and Immigration Status ") for RPIs who initially entered the United States before age 16. The bills specified that these aliens would only be eligible for student loans, federal work-study programs, and services. In addition, S. 744 and H.R. 15 would have repealed Section 505 of IIRIRA, which places certain restrictions on state provision of postsecondary educational benefits to unlawfully present aliens (see " 1996 Provision "). With respect to naturalization, an alien granted LPR status under the DREAM Act provisions in S. 744 and H.R. 15 would have been considered to have been lawfully admitted for permanent residence and to have been in the United States as an LPR (and therefore accumulating time toward the residency requirement for naturalization) during the period the alien was an RPI. With some exceptions, however, an alien could not have applied for naturalization while in RPI status. Those who favor DREAM Act proposals to repeal Section 505 and grant LPR status to unauthorized alien students offer a variety of arguments. They maintain that it is both fair and in the U.S. national interest to enable unauthorized alien students who graduate from high school to continue their education. And they emphasize that large numbers will be unable to do so unless they are eligible for in-state tuition rates at colleges in their states of residence. Advocates for unauthorized alien students argue that many of them were brought into the United States at a very young age and should not be held responsible for the decision to enter the country illegally. According to these advocates, many of the students have spent most of their lives in the United States and have few, if any, ties to their countries of origin. They argue that these special circumstances demand that the students be granted humanitarian relief in the form of LPR status. They further maintain that enacting the DREAM Act would have economic benefits for the United States by adding hundreds of billions of dollars to the economy and promoting new job creation. Those who oppose making unauthorized alien students eligible for in-state tuition or legal status emphasize that the students and their families are in the United States illegally and should be removed from the country. They object to using U.S. taxpayer money to subsidize the education of individuals (through the granting of in-state tuition rates) who are in the United States in violation of the law. They maintain that funding the education of these students should be the responsibility of their parents or their home countries. They also argue that it is unfair to charge unauthorized alien students in-state tuition while charging some U.S. citizens higher out-of-state rates. More broadly, these opponents argue that granting benefits to unauthorized alien students rewards lawbreakers and thereby undermines the U.S. immigration system and the rule of law. Taking issue with the economic benefit argument made by DREAM Act supporters, critics maintain that the legislation would cost money and would take jobs and college spots away from legal residents and give them to people who entered the United States illegally. In their view, the availability of benefits, especially LPR status, would encourage more unlawful immigration into the country. Senator Durbin and Representative Berman introduced DREAM Act bills in the 111 th Congress. Senator Durbin introduced the Development, Relief, and Education for Alien Minors (DREAM) Act of 2009 ( S. 729 ) and four versions of the Development, Relief, and Education for Alien Minors (DREAM) Act of 2010 ( S. 3827 , S. 3962 , S. 3963 , S. 3992 ). Representative Berman introduced the American Dream Act ( H.R. 1751 ) and the Development, Relief, and Education for Alien Minors (DREAM) Act of 2010 ( H.R. 6497 ). Representative Charles Djou introduced a related bill, the Citizenship and Service Act of 2010 ( H.R. 6327 ). On December 8, 2010, the House approved DREAM Act language as part of an unrelated bill, the Removal Clarification Act of 2010 ( H.R. 5281 ). On December 18, 2010, the Senate failed to invoke cloture on a motion to agree to the House-passed DREAM Act amendment. The vote on the cloture motion was 55 to 41. House-Approved DREAM Act Language and H.R. 6497 The DREAM Act language approved by the House as part of H.R. 5281 was the same as the text of the DREAM Act of 2010 ( H.R. 6497 ), as introduced by Representative Berman, and was similar to the DREAM Act of 2010 ( S. 3992 ), as introduced by Senator Durbin. Like other DREAM Act bills in the 111 th Congress, the House-approved DREAM Act amendment to H.R. 5281 would have enabled eligible unauthorized students to adjust to LPR status in the United States, although it would have established a different pathway than most of the other bills. Unlike some other DREAM Act bills introduced in the 111 th Congress, the House-approved DREAM Act language would not have repealed IIRIRA Section 505 and thus would not have eliminated this statutory restriction on state provision of postsecondary educational benefits to unlawfully present aliens (see " 1996 Provision "). Under the House-approved DREAM Act amendment to H.R. 5281 , an eligible alien could have gone through the cancellation of removal procedure and been granted conditional nonimmigrant status. Unlike under most other DREAM Act bills in the 111 th Congress, as discussed below, the alien's status would not have been adjusted to that of a conditional LPR. The House-approved version of the DREAM Act would have enabled an alien to affirmatively apply for cancellation of removal without first being placed in removal proceedings and also would have established a deadline for submitting initial cancellation of removal applications. To be eligible for cancellation of removal/conditional nonimmigrant status under the House-approved DREAM Act amendment to H.R. 5281 , an alien would have needed to demonstrate that he or she: had been physically present in the United States for a continuous period of not less than five years immediately preceding the date of enactment of the legislation; had not yet reached age 16 at the time of initial entry; had been a person of good moral character since the date of initial entry; and was younger than age 30 on the date of enactment. The alien also would have had to demonstrate that he or she had been admitted to an institution of higher education in the United States or had earned a high school diploma or the equivalent in the United States; and that he or she had never been under a final administrative or judicial order of exclusion, deportation, or removal, with some exceptions. The House-approved version of the DREAM Act specified the grounds of inadmissibility and deportability that would have applied to aliens seeking relief. An alien applying for cancellation of removal/conditional nonimmigrant status under the House-passed measure would have had to show that he or she was not inadmissible on INA health-related, criminal, security, public charge, smuggling, student visa abuse, citizenship ineligibility, polygamy, international child abduction, or unlawful voting grounds, and was not deportable on INA criminal, security, smuggling, marriage fraud, public charge, or unlawful voting grounds. Applicants also would have needed to satisfy requirements concerning convictions for offenses under federal or state law. In addition, they would have had to submit biometric and biographic data, which would have been used to conduct background checks, and would have needed to register under the Military Selective Service Act, if applicable. Aliens whose removal was cancelled under the House-approved DREAM Act amendment to H.R. 5281 would have been granted conditional nonimmigrant status. Such conditional status would have been valid for an initial period of five years and would have been subject to termination. An alien's conditional nonimmigrant status would have been extended for a second five-year period if the alien met the following requirements: demonstration of good moral character as a conditional nonimmigrant; compliance with the bill's inadmissibility and deportability provisions; no abandonment of U.S. residence; and either acquisition of a degree from an institution of higher education (or completion of at least two years in a bachelor's or higher degree program) in the United States, or service in the Armed Forces for at least two years. Unlike other DREAM Act bills in the 111 th Congress, the House-approved DREAM Act amendment to H.R. 5281 would have established surcharges on applications for relief. There would have been a surcharge of $525 on each application for cancellation of removal/conditional nonimmigrant status, and a surcharge of $2,000 on each application for an extension of conditional nonimmigrant status. At the end of the second period of conditional nonimmigrant status, as specified, the alien could have applied for adjustment to LPR status. Among the requirements for adjustment of status, the alien would have needed to have demonstrated good moral character during the period of conditional nonimmigrant status; would have had to be in compliance with the bill's inadmissibility and deportability provisions; and could not have abandoned his or her U.S. residence. In addition, applicants for adjustment of status under the House-approved version of the DREAM Act would have needed to satisfy the English language and civic requirements for naturalization, satisfy any applicable federal tax liability, submit biometric and biographic data, and complete background checks. There would have been no limitation on the number of individuals eligible for adjustment of status. Aliens who adjusted status and met other requirements would have been eligible for naturalization after three years in LPR status. Unlike under DREAM Act bills in the 111 th Congress that would have granted conditional LPR status, the time spent in conditional status under the House-approved DREAM Act language (during which the aliens would have been conditional nonimmigrants) would not have counted for naturalization purposes. Like other DREAM Act bills in the 111 th Congress, the House-approved DREAM Act amendment to H.R. 5281 would have placed restrictions on the eligibility of aliens who adjusted status under its provisions for federal student financial aid under Title IV of the Higher Education Act of 1965, as amended (see " Higher Education Benefits and Immigration Status "). Aliens granted conditional nonimmigrant status or LPR status would have been eligible for student loans, federal work-study programs, and services (such as counseling, tutorial services, and mentoring), subject to the applicable requirements. Unlike other LPRs, they would not have been eligible for federal Pell Grants or federal supplemental educational opportunity grants. The House-approved version of the DREAM Act also contained provisions on the treatment for other purposes of aliens who were granted conditional nonimmigrant status or LPR status under the bill. It provided that conditional nonimmigrants would have been considered lawfully present for all purposes except for provisions in the Patient Protection and Affordable Care Act concerning premium tax credits and cost sharing subsidies. It also provided that aliens who adjusted to LPR status under the bill would have been deemed to have completed the five-year period required for LPR eligibility for certain types of federal public assistance, as established by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. H.R. 1751 The American Dream Act ( H.R. 1751 ), as introduced by Representative Berman, would have repealed IIRIRA Section 505 and thereby eliminated this restriction on state provision of postsecondary educational benefits to unlawfully present aliens. It likewise would have enabled eligible unauthorized students to adjust to LPR status in the United States through the cancellation of removal procedure. Under H.R. 1751 , aliens could have applied for cancellation of removal without first being placed in removal proceedings, and there would have been no limit on the number of aliens who could be granted cancellation of removal/adjustment of status. To be eligible for cancellation of removal/adjustment of status under H.R. 1751 , an alien would have had to demonstrate that he or she: had been physically present in the United States for a continuous period of not less than five years immediately preceding the date of enactment; had not yet reached age 16 at the time of initial entry; had been a person of good moral character since the time of application; and was not inadmissible or deportable on INA criminal, security, or smuggling grounds. The bill also would have required the alien to demonstrate that he or she had been admitted to an institution of higher education in the United States, or had earned a high school diploma or the equivalent in the United States. Unlike under most other DREAM Act bills in the 111 th Congress, however, H.R. 1751 would not have required the alien to show that he or she was under a particular age on the date of enactment. H.R. 1751 also provided for expedited processing of applications without an additional fee. Aliens granted cancellation of removal under H.R. 1751 would have been adjusted initially to conditional permanent resident status. Such conditional status would have been valid for six years and would have been subject to termination. The time an alien spent as a conditional LPR would have counted for naturalization purposes. Under H.R. 1751 , however, the condition on the LPR status would have needed to be removed before the alien could apply for naturalization. To have the condition removed and become a full-fledged LPR, an alien would have had to apply during a specified period and meet additional requirements. Among these requirements, the alien would have had to demonstrate good moral character during the period of conditional permanent residence; could not have abandoned his or her U.S. residence; and would have needed either to have earned a degree from an institution of higher education (or to have completed at least two years in a bachelor's or higher degree program) in the United States, or to have served in the uniformed services for at least two years. H.R. 1751 would have placed temporary restrictions on the eligibility of aliens who adjusted to LPR status under its provisions for federal student financial aid under Title IV of the Higher Education Act of 1965, as amended. Aliens adjusting status under the bill would have been eligible for student loans, federal work-study programs, and services, but they would not have been eligible for federal Pell Grants and federal supplemental educational opportunity grants while in conditional permanent resident status. Once the conditional basis was removed and they became full-fledged LPRs, these restrictions would no longer have applied and they would have been eligible for grants. By contrast, under the House-approved version of the DREAM Act and the various Senate bills, aliens who obtained full-fledged LPR status would have remained ineligible for grants. H.R. 6327 The Citizenship and Service Act of 2010 ( H.R. 6327 ), introduced by Representative Charles Djou, was similar to H.R. 1751 in many respects but noticeably different than that bill in others. Like some other DREAM Act bills but unlike H.R. 1751 , H.R. 6327 would not have repealed IIRIRA Section 505. In addition, unlike all the other DREAM Act bills in the 111 th Congress discussed here, H.R. 6327 would have required eligible aliens to serve in the uniformed services for at least two years in order to become full-fledged LPRs. Higher education would not have been an alternative to this service requirement under H.R. 6327 . Like H.R. 1751 , H.R. 6327 would have enabled eligible unauthorized students to adjust to LPR status in the United States through the cancellation of removal procedure. Aliens could have applied for cancellation of removal without first being placed in removal proceedings, and there would have been no limit on the number of aliens who could be granted cancellation of removal/ adjustment of status. To be eligible for cancellation of removal/adjustment of status under H.R. 6327 , an alien would have had to demonstrate that he or she had been physically present in the United States for a continuous period of not less than five years immediately preceding the date of enactment, had not yet reached age 16 at the time of initial entry, and had been a person of good moral character since the time of application. The alien also would have had to demonstrate that he or she had been admitted to an institution of higher education in the United States, or had earned a high school diploma or the equivalent in the United States. As under H.R. 1751 , an alien applying for cancellation of removal/adjustment of status under H.R. 6327 would have had to demonstrate that he or she was not inadmissible or deportable on INA criminal, security, or smuggling grounds. Also like H.R. 1751 , H.R. 6327 provided for expedited processing of applications without an additional fee. Aliens granted cancellation of removal under H.R. 6327 , as under H.R. 1751 , would have been adjusted initially to conditional permanent resident status. Such conditional status would have been valid for six years and would have been subject to termination. The time an alien spent as a conditional LPR would have counted for naturalization purposes, but the conditional basis would have had to be removed before the alien could apply to naturalize. To have the condition removed and become a full-fledged LPR, an alien would have had to apply during a specified period and meet additional requirements. Among these requirements, the alien would have had to have demonstrated good moral character during the period of conditional permanent residence; could not have abandoned his or her U.S. residence; and would have needed to have served in the uniformed services for at least two years. Unlike the other DREAM Act bills in the 111 th Congress, H.R. 6327 would not have offered conditional residents the option of completing at least two years of higher education as an alternative to serving in the uniformed services. H.R. 6327 , like H.R. 1751 , would have placed temporary restrictions on the eligibility of aliens who adjusted to LPR status under its provisions for federal student financial aid under Title IV of the Higher Education Act of 1965, as amended. Aliens adjusting status under the bill would have been ineligible for federal Pell Grants and federal supplemental educational opportunity grants while in conditional permanent resident status. Once the conditional basis was removed and they became full-fledged LPRs, these restrictions would no longer have applied. S. 729 and S. 3827 S. 729 , the DREAM Act of 2009, and S. 3827 , the DREAM Act of 2010, were highly similar bills introduced by Senator Durbin. Differences between S. 729 and S. 3827 , as discussed below, concerned the applicable grounds of inadmissibility and the application process under the bills. Both S. 729 and S. 3827 would have repealed IIRIRA Section 505 and thereby eliminated this restriction on state provision of postsecondary educational benefits to unlawfully present aliens. These bills also would have enabled eligible unauthorized students to adjust to LPR status in the United States through cancellation of removal. S. 729 and S. 3827 would have enabled aliens to affirmatively apply for cancellation of removal without first being placed in removal proceedings, and they would have placed no limit on the number of aliens who could be granted cancellation of removal/adjustment of status. To be eligible for cancellation of removal/adjustment of status under S. 729 and S. 3827 , an alien would have had to demonstrate that he or she had been physically present in the United States for a continuous period of not less than five years immediately preceding the date of enactment of the act; had not yet reached age 16 at the time of initial entry; had been a person of good moral character since the time of application; and had not yet reached age 35 on the date of enactment. The alien also would have had to demonstrate that he or she had been admitted to an institution of higher education in the United States, or had earned a high school diploma or the equivalent in the United States. Under both bills, the alien could not have been inadmissible on INA criminal, security, smuggling, or international child abduction grounds and could not have been deportable on INA criminal, security, or smuggling grounds; S. 3827 also would have made applicable the INA ground of inadmissibility barring practicing polygamists. In addition, under both bills, the alien would have had to show that he or she had never been under a final administrative or judicial order of exclusion, deportation, or removal, with some exceptions. S. 729 and S. 3827 included some different language concerning the application process. S. 729 included a provision, not included in S. 3827 , to consider applications on an expedited basis without charging an additional fee. S. 3827 included a provision, not included in S. 729 , establishing a deadline for submitting initial cancellation of removal/adjustment of status applications. Aliens granted cancellation of removal under S. 729 or S. 3827 would have been adjusted initially to conditional permanent resident status. Such conditional status would have been valid for six years and would have been subject to termination. To have the condition removed and become a full-fledged LPR, an alien would have had to submit an application during a specified period and meet additional requirements. Among these requirements, the alien would have needed to have demonstrated good moral character during the period of conditional permanent residence; could not have abandoned his or her U.S. residence; and would have needed either to have earned a degree from an institution of higher education (or to have completed at least two years in a bachelor's or higher degree program) in the United States, or to have served in the uniformed services for at least two years. The time an alien spent as a conditional LPR would have counted for naturalization purposes under S. 729 and S. 3827 . Under both bills, however, the condition on the LPR status would have to have been removed before an alien could apply for naturalization. S. 729 and S. 3827 would have placed restrictions on the eligibility of aliens who adjusted to LPR status under their provisions for federal student financial aid under Title IV of the Higher Education Act of 1965, as amended. Aliens adjusting status under S. 729 or S. 3827 would have been eligible only for student loans, federal work-study programs, and services (such as counseling, tutorial services, and mentoring), subject to the applicable requirements. Unlike other LPRs, they would have been ineligible for federal Pell Grants or federal supplemental educational opportunity grants. S. 3962 and S. 3963 S. 3962 and S. 3963 were two highly similar bills introduced by Senator Durbin, both entitled the DREAM Act of 2010. They differed from one another with respect to the cutoff age for eligibility for cancellation of removal/adjustment of status. S. 3962 and S. 3963 were also similar to S. 3827 , another version of the DREAM Act of 2010, discussed in the preceding section. The main difference between S. 3962 and S. 3963 on the one hand and S. 3827 on the other was that the former bills would not have repealed IIRIRA Section 505 and thus would not have eliminated this statutory restriction on state provision of postsecondary educational benefits to unlawfully present aliens. S. 3962 and S. 3963 would have enabled eligible unauthorized students to adjust to LPR status in the United States through cancellation of removal. Both bills would have enabled aliens to affirmatively apply for cancellation of removal without first being placed in removal proceedings, and they would have placed no limit on the number of aliens who could be granted cancellation of removal/adjustment of status. There would have been a deadline for submitting initial cancellation of removal/adjustment of status applications. To be eligible for cancellation of removal/adjustment of status under S. 3962 and S. 3963 , an alien would have had to demonstrate that he or she had been physically present in the United States for a continuous period of not less than five years immediately preceding the date of enactment of the act, had not yet reached age 16 at the time of initial entry, and had been a person of good moral character since the time of application. Both bills also included an eligibility requirement concerning the age of the alien on the date of enactment of the legislation. Under S. 3962 , the alien would have had to demonstrate that he or she had not yet reached age 35 on the date of enactment. Under S. 3963 , the alien would have had to demonstrate that he or she had not yet reached age 30 on the date of enactment. Under both bills, the alien also would have had to demonstrate that he or she had been admitted to an institution of higher education in the United States, or had earned a high school diploma or the equivalent in the United States. As under S. 3827 , an alien applying for relief under S. 3962 and S. 3963 would have had to show that he or she was not inadmissible on INA criminal, security, smuggling, polygamy, or international child abduction grounds, and was not deportable on INA criminal, security, or smuggling grounds. The alien also would have had to show that he or she had never been under a final administrative or judicial order of exclusion, deportation, or removal, with some exceptions. Aliens granted cancellation of removal under S. 3962 or S. 3963 would have been adjusted initially to conditional permanent resident status. Such conditional status would have been valid for six years and would have been subject to termination. The time an alien spent as a conditional LPR would have counted for naturalization purposes, but the conditional basis would have had to be removed before the alien could apply to naturalize. To have the condition removed and become a full-fledged LPR, an alien would have had to submit an application during a specified period and meet additional requirements. Among these requirements, the alien would have needed to have demonstrated good moral character during the period of conditional permanent residence; could not have abandoned his or her U.S. residence; and would have needed either to have earned a degree from an institution of higher education (or to have completed at least two years in a bachelor's or higher degree program) in the United States, or to have served in the uniformed services for at least two years. S. 3962 and S. 3963 would have placed restrictions on the eligibility of aliens who adjusted to LPR status under their provisions for federal student financial aid under Title IV of the Higher Education Act of 1965, as amended. Aliens adjusting status under S. 3962 or S. 3963 would have been eligible only for student loans, federal work-study programs, and services (such as counseling, tutorial services, and mentoring), subject to the applicable requirements. Unlike other LPRs, they would not have been eligible for federal Pell Grants or federal supplemental educational opportunity grants. S. 3992 S. 3992 , another version of the DREAM Act of 2010 introduced by Senator Durbin, would, like the other DREAM Act bills in the 111 th Congress, have enabled eligible unauthorized students to adjust to LPR status in the United States. Its legalization provisions were similar to those in the House-approved DREAM Act amendment to H.R. 5281 , although there were some differences between the measures. Also like the House-approved amendment, S. 3992 would not have repealed IIRIRA Section 505 and thus would not have eliminated this statutory restriction on state provision of postsecondary educational benefits to unlawfully present aliens. Under S. 3992 , as under the House-approved DREAM Act amendment to H.R. 5281 , an eligible alien could have gone through the cancellation of removal procedure and been granted conditional nonimmigrant status. An alien could have affirmatively applied for cancellation of removal without first being placed in removal proceedings, and there would have been a deadline for submitting initial cancellation of removal applications. There would have been no limit on the number of aliens who could be granted cancellation of removal under S. 3992 . To be eligible for cancellation of removal/conditional nonimmigrant status under S. 3992 , an alien would have had to meet requirements similar to those in the House-approved version of the DREAM Act. The alien would have had to demonstrate that he or she had been physically present in the United States for a continuous period of not less than five years immediately preceding the date of enactment of the legislation, had not yet reached age 16 at the time of initial entry, had been a person of good moral character since the date of initial entry, and was younger than age 30 on the date of enactment. The alien also would have had to demonstrate that he or she had been admitted to an institution of higher education in the United States, or had earned a high school diploma or the equivalent in the United States, and that he or she had never been under a final administrative or judicial order of exclusion, deportation, or removal, with some exceptions. Unlike under the House-approved DREAM Act amendment to H.R. 5281 , there would have been no surcharges on applications under S. 3992 . The same grounds of inadmissibility and deportability would have applied under S. 3992 as under the House-approved DREAM Act language. An alien applying for relief under this bill would have had to show that he or she was not inadmissible on INA health-related, criminal, security, public charge, smuggling, student visa abuse, citizenship ineligibility, polygamy, international child abduction, or unlawful voting grounds, and was not deportable on INA criminal, security, smuggling, marriage fraud, public charge, or unlawful voting grounds. Applicants would further have needed to: satisfy requirements concerning convictions for offenses under federal or state law; submit biometric and biographic data, which would have been used to conduct background checks; and register under the Military Selective Service Act, if applicable. Aliens whose removal was cancelled under S. 3992 would have been granted conditional nonimmigrant status. Such conditional status would have been valid for 10 years (compared to H.R. 5281 's initial period of five years, which could have been extended for a second five-year period) and would have been subject to termination. For adjustment to LPR status, the conditional nonimmigrant would have had to submit an application during a specified period and meet requirements similar to those in other DREAM Act bills. Among these requirements, the alien would have needed to have demonstrated good moral character during the period of conditional nonimmigrant status; could not have abandoned his or her U.S. residence; and would have needed either to have earned a degree from an institution of higher education (or to have completed at least two years in a bachelor's or higher degree program) in the United States, or to have served in the Armed Forces for at least two years. Other requirements included satisfaction of the English language and civic requirements for naturalization, payment of federal taxes, submission of biometric and biographic data, and completion of background checks. There would have been no limitation on the number of individuals eligible for adjustment of status under S. 3992 . Aliens who adjusted status under S. 3992 and met other requirements would have been eligible for naturalization after three years in LPR status. The time spent in conditional status under S. 3992 , as under the House-approved DREAM Act amendment to H.R. 5281 (during which the aliens would have been conditional nonimmigrants, as opposed to conditional LPRs under the other DREAM Act bills), would not have counted for naturalization purposes. Like the House-approved DREAM Act amendment to H.R. 5281 , S. 3992 would have placed restrictions on the eligibility of aliens who adjusted status under its provisions for federal student financial aid under Title IV of the Higher Education Act of 1965, as amended. Aliens granted conditional nonimmigrant status or LPR status under S. 3992 would have been eligible for student loans, federal work-study programs, and services (such as counseling, tutorial services, and mentoring), subject to the applicable requirements. Unlike other LPRs, they would not have been eligible for federal Pell Grants or federal supplemental educational opportunity grants. S. 3992 also contained provisions like those in the House-approved DREAM Act amendment to H.R. 5281 on the treatment for other purposes of aliens who were granted conditional nonimmigrant status or LPR status under the bill. It provided that conditional nonimmigrants would have been considered lawfully present for all purposes except for provisions in the Patient Protection and Affordable Care Act concerning premium tax credits and cost sharing subsidies. It also provided that aliens who adjusted to LPR status under the bill would have been deemed to have completed the five-year period required for LPR eligibility for certain types of federal public assistance, as established by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. | Immigration reform has been hotly debated in recent years. Broadly construed, it encompasses a range of issues, including the highly controversial question of legalizing large numbers of unauthorized immigrants in the United States. A historically less controversial, more targeted legalization proposal has been included in "DREAM Act" legislation, which seeks to enable certain unauthorized aliens who entered the United States as children to obtain legal immigration status. The name DREAM Act derives from the bill title, Development, Relief, and Education for Alien Minors Act, but it refers more broadly to a class of measures to provide immigration relief to unauthorized students, whether or not particular bills carry that name. Unauthorized aliens in the United States are able to receive free public education through high school. They may experience difficulty obtaining higher education, however, for several reasons. Among these reasons is a provision enacted in 1996 that places restrictions on state provision of certain postsecondary educational benefits on the basis of state residence to aliens who are unlawfully present in the United States, unless equal benefits are made available to all U.S. citizens. This language is commonly understood to apply to the granting of "in-state" residency status for tuition purposes. In addition, unauthorized alien students are not eligible for federal student financial aid. More broadly, as unauthorized aliens, they typically are not legally allowed to work and are subject to being removed from the country. Multiple DREAM Act bills have been introduced in recent Congresses to address the unauthorized student population. Most have proposed a two-prong approach of repealing the 1996 provision and enabling some unauthorized alien students to become U.S. lawful permanent residents (LPRs) through an immigration procedure known as cancellation of removal. While there are other options for dealing with this population, this report deals exclusively with the DREAM Act approach in light of the considerable congressional interest in it. In the 111th Congress, the House approved DREAM Act language as part of an unrelated bill, the Removal Clarification Act of 2010 (H.R. 5281). The Senate, however, failed to invoke cloture on a motion to agree to the House-passed DREAM Act amendment, and the bill died at the end of the Congress. The House-approved language differed in key respects from earlier versions of the DREAM Act. Bills to legalize the status of unauthorized alien students were again introduced in the 112th Congress. In 2012, in the absence of congressional action on DREAM Act legislation, the Obama Administration announced that certain individuals who entered the United States as children and meet other criteria would be considered for relief from removal. Under a Department of Homeland Security (DHS) memorandum, these individuals can apply for consideration of deferred action for childhood arrivals (or DACA, as the program is known) and for employment authorization. DREAM Act language was considered in the 113th Congress as part of comprehensive immigration reform legislation. The Senate-passed Border Security, Economic Opportunity, and Immigration Modernization Act (S. 744) included DREAM Act provisions. The same DREAM Act language was included in a related bill with the same name introduced in the House (H.R. 15). The DREAM Act provisions were integrated with the broader legalization provisions in these bills. As of this writing, no DREAM Act bills have been introduced in the 114th Congress. |
Interest in the Eastern Mediterranean as a natural gas resource base has been growing since Israel made its first large-scale natural gas discovery in 2009. (See Figure 1 .) The Tamar Field off the Israeli coast was the first of a series of large-scale natural gas discoveries in the region. Significant subsequent discoveries have been made in Israel (Leviathan), Cyprus (Aphrodite), and Egypt (Zohr), while Lebanon has been actively trying to assess its resources. In 2010, the United States Geological Survey (USGS) estimated that there could be up to an additional 122 trillion cubic feet of undiscovered natural gas resources in the Levant Basin, which underlays a large portion of the Eastern Mediterranean Sea. The USGS report also indicated that there could be up to 1.7 billion barrels of recoverable oil in the Levant Basin, making future oil discovery possible. However, the downturn in global oil and natural gas prices, starting in mid-2014, has constrained the development of resources and made markets more competitive. Projects that are deemed costly, difficult, or problematic have been put on hold in many circumstances. Many companies no longer have the financial resources or motivation to develop resources in challenging environments. For the Eastern Mediterranean, this has meant a slowdown in developing some of the natural gas that has been discovered, delaying the exploration for new discoveries, and requiring greater effort to find markets for the region's natural gas. Europe, given its proximity to the Eastern Mediterranean, is the most logical market for Eastern Mediterranean natural gas production. In the aggregate, though, European natural gas consumption has generally been in decline since 2010, offsetting some of the decline in European production. Imports to Europe rose by more than 10% in 2015, negating the drop in imports from 2011 to 2014. Should Eastern Mediterranean natural gas enter the European natural gas market, it will face strong competition from Europe's traditional suppliers—Russia, Norway, and Algeria—as well as from U.S. liquefied natural gas (LNG) exports, which started in 2016. For the most part, the Eastern Mediterranean countries either do not use natural gas as a fuel (i.e., Cyprus and Lebanon ) or are essentially self-sufficient in natural gas (i.e., Israel and Syria) (see Figure 2 and Table 1 ), except for Greece and Turkey, which are heavily dependent upon imports. Egypt, which has large natural gas resources, started importing natural gas in 2015 to meet its subsidized demand ( Table 1 data is from 2014 and shows Egypt as a net exporter of natural gas). Egypt's situation may change in the medium term if it can curb its subsidies for natural gas or change its policies to promote more natural gas development. Development of the region's natural gas resources could meet the potential growing needs of most of the countries in Table 1 , and add some diversification of supply for Turkey. For this to occur, many geopolitical hurdles would need to be overcome and new infrastructure would have to be built. Although the relatively recent discoveries are large for the region, they represent only a small amount globally. The natural gas reserves of the countries represented in Table 1 are less than 1.5% of the world's reserves. Regional production in 2014 was under 2% of global production, while consumption was over 3%. Cyprus is politically and territorially divided between the Greek Cypriot Republic of Cyprus and Turkish Cypriot administered area of northern Cyprus. Efforts by the Republic of Cyprus and other Eastern Mediterranean countries—most notably Israel—to agree on a division of offshore energy drilling rights without a plan for unification of the island have been opposed by Turkey and Turkish Cypriots. The Republic of Cyprus appears to anticipate considerable future export revenue from drilling in the Aphrodite Field, a natural gas field off Cyprus's southern coast. However, contention on this issue appears to have been deemphasized in negotiations between Greek and Turkish Cypriots, which have resumed via U.N. mediation following the election of Mustafa Akinci as Turkish Cypriot leader in April 2015. Cyprus is heavily dependent on foreign oil imports to meet its energy needs (see Figure 3 ). Most electricity in Cyprus is generated by oil-fired power plants. Domestically using gas from the Aphrodite Field could help relieve some of this dependence and natural gas could supplant oil as the primary fuel for power generation. However, using natural gas for power generation would require new infrastructure to be built, especially natural gas-fired fueled power plants. Relieving dependence on oil imports for power generation could help Cyprus reduce carbon emissions. Noble Energy discovered the Aphrodite Field offshore of Cyprus in 2011. The field was estimated to hold between 5 and 8 trillion cubic feet (tcf) of natural gas reserves. Cyprus has announced its intention to develop the field and begin exporting gas by 2019. Cyprus currently has no natural gas infrastructure. The lack of natural gas infrastructure on the island makes it difficult and potentially costly for Cyprus to utilize gas from the Aphrodite Field domestically. Doing so would require the construction of both overland pipelines in Cyprus to deliver the gas and power plants or industrial facilities that could use the gas. Cyprus could either build an LNG export terminal to send gas to Europe or route the gas through LNG terminals in neighboring countries. Constructing a pipeline connecting Aphrodite to Egyptian LNG export terminals would be far less expensive than constructing an LNG facility in Cyprus. Exporting gas from Aphrodite through Egypt would take advantage of Egypt's underutilized Idku terminal, which is currently operating at 10% of its 2013 capacity because of subsidized domestic demand. Cyprus concluded its third licensing round for offshore exploration in July 2016. This latest round includes blocks adjacent to the Egyptian Zohr supergiant field and has attracted the interest of a small number of international companies. Exploration rights for this round of licensing are expected to be awarded in early 2017. The Republic of Cyprus is globally recognized as the legitimate government of Cyprus and is a member of the European Union. Turkey refuses to recognize the Republic of Cyprus and instead recognizes the Turkish Republic of Northern Cyprus. Turkey maintains up to 40,000 troops in Northern Cyprus. Negotiations to unify the island under one equally administered federation between Turkish Cyprus and the Republic of Cyprus accelerated in 2015. While some commenters are optimistic about potential agreements, no resolution has yet been reached. Although Turkey has not specifically contested ownership of the Aphrodite Field, Turkey strongly opposes the development of Cypriot natural gas resources unless the Turkish Cypriots will share in the financial benefits or until a resolution of the "Cyprus problem" is found. Since its recent reconciliation with Israel, Turkey has stepped up interest in importing Israeli natural gas via a pipeline that would run through the Cypriot economic zone. Cyprus has maintained, and again stated in early July, that it would not allow any gas pipeline connecting Israel and Turkey to be constructed in its exclusive economic zone until a Cyprus solution is found. A Cyprus government spokesperson characterized Cyprus as "a state under occupation" and reiterated the belief of the Greek Cypriot government that it would be unreasonable to approve a pipeline going to "an occupying power." This development has stalled further progress on a potential pipeline connecting Israel and Turkey. The Egyptian government's attempt to spark economic growth in order to stave off public unrest has had mixed results. In 2015, Egypt's economy grew at its fastest rate (4.2%) since 2010. On the other hand, Egypt's government is facing a shortage of dollar-denominated currency, which is affecting its ability to import food and fuel. Additionally, tourism receipts in 2015 have declined because of terrorism fears, as have revenues from transit fees from the Suez Canal, a major source of foreign exchange. Although Egypt is a large producer of natural gas, it became a net importer in 2015, primarily because of government policies subsidizing domestic consumption. The country's budget outlays have benefitted by the drop in prices for its imports of natural gas and oil. Natural gas is the largest source of energy in Egypt, accounting for just under half of primary energy consumption (see Figure 4 ). In addition, natural gas fueled 77% of Egypt's electricity generation in 2013. Oil is also a major component of Egypt's domestic energy mix. Egypt is a major producer of both natural gas and oil, and has yet to begin utilizing large quantities of renewable energy. Formerly a net exporter of natural gas, Egypt is currently facing a natural gas shortage. This is primarily caused by the government subsidizing the cost of fuel consumption and creating more demand. Additionally, domestic policies that force natural gas producers to sell a percentage of their production domestically at lower than international prices have, in the past, curbed interest in developing new natural gas resources. Egyptian natural gas production peaked at 6.1 bcf/d in 2009 and dropped 27% to 4.4 bcf/d between 2009 and 2015. Decreases in production have been largely due to decreasing offshore resources, political unrest, and domestic policies. The political uprising against then-President Hosni Mubarak in 2011 also decreased investment in discovering new sources of gas. The resulting shortage caused disruptions to industrial production and power outages. Demand for gas from the industrial and power sectors, which account for 85% of gas use in Egypt, is set to rise 22% by 2021. Egypt stopped regular LNG exports in 2014 and is actively seeking new sources of natural gas. Egypt currently imports between 1.0 and 1.1 bcf/d of natural gas, but is projected to increase to 2.0 bcf/d. In the spring of 2016, Egypt exported two cargoes of LNG from the Idku LNG facility. These shipments are not likely part of a trend towards greater LNG exports, and Egypt expects to be an LNG importer until at least 2022. Including the Zohr Field, Egypt is developing 12 natural gas projects, with a total investment of $33 billion. The supergiant Zohr Field was discovered in August 2015 by Eni SPA, an Italian company. The Zohr Field, which holds up to 30 tcf and is valued at over $100 billion, is the largest discovery to date in the Eastern Mediterranean. It is also one of the largest natural gas discoveries in the world in recent years. Driven by high domestic demand for natural gas, Egypt has begun efforts to bring the Zohr Field online quickly and believes that developing the field will help it reduce gas imports. Gas produced at the Zohr site could reach domestic markets in Egypt by 2017. Egypt does not have any plans to export gas from the Zohr project. Rivalries in the wider Middle East region have exacerbated recurring challenges for Lebanon, which have contributed to a divided government and a weakened business environment. A politically and communally diverse cabinet, led by Prime Minister Tammam Salam since early 2014, has not made major steps toward development of Lebanon's energy resources. Lebanon is almost entirely dependent on oil imports for its energy consumption (see Figure 5 ). Lebanon does not currently consume any natural gas. Repeated attacks on the Arab Gas pipeline from Egypt, which has supplied Lebanon with gas in the past, have made it infeasible for Lebanon to import natural gas. By one industry estimate, Lebanon could have up to 15 tcf of recoverable offshore gas resources. Lebanon has not yet authorized any companies to begin exploratory work to discover possible resources, nor have state agencies confirmed possible gas deposits. In 2013, Lebanon began screening companies for pre-qualification to bid on exploration rights in the Mediterranean. While 46 companies pre-qualified, political gridlock prevented Lebanon from awarding exploration rights. Lebanon still must issue decrees defining both a taxation policy and which blocks are to be opened for exploration. There are a number of factors in Lebanon that could potentially inhibit future progress on the exploration and development of possible gas resources. First, more than one million refugees displaced by the Syrian civil war have entered Lebanon. The state has had to divert substantial resources to address the refugee crisis, and persistent Syria-related domestic security challenges may distract from efforts to develop gas in the Mediterranean. Second, the Lebanese parliament has remained gridlocked and has failed to elect a new president over two dozen times since 2014. Until a political compromise is reached, the gridlocked parliament may have trouble moving forward with an agreement to grant exploration rights. Lebanon and Israel are currently locked in a dispute over maritime boundaries. The 1949 Israel-Lebanon armistice line serves as the de facto land border between the two countries, and Lebanon claims roughly 330 square miles of waters that overlap with areas claimed by Israel based in part on differences in interpretation of relative points on the armistice line. Lebanon has threatened to use its military to defend its claims and has called on foreign powers to help resolve the dispute. To date, there has been no violence. Neither the Tamar Field nor the planned development of the Leviathan Field is located within the disputed area. Lebanon has cited its boundary dispute with Israel as a primary obstacle to the exploration and development of its gas resources. Development of Israel's natural gas resources has not been delayed by Lebanese claims. It is possible that the disputed area could be the cause of additional tension between Israel and Lebanon as Israel continues to develop its gas reserves. Critics of the Lebanese government allege that mismanagement, not disputes with Israel, is the primary reason why Lebanon has lagged behind Israel in natural gas exploration and development. U.S. officials are working with Lebanese and Israeli leaders to resolve the dispute. Lebanon objects to a 2010 Israel-Cyprus agreement that draws a specific maritime border delineation point relative to the 1949 armistice line. In seeking to help Israel and Lebanon resolve their differences on this question, the United States appears to be interested in facilitating a more hospitable commercial environment for all parties involved (including U.S. energy companies), and in preventing the dispute from exacerbating long-standing animosities between the two countries. It is unclear to what extent U.S. diplomacy on this issue can facilitate changes in the current Israeli and Lebanese stances. Israeli officials routinely express optimism that the economic promise of Israel's energy resources can attract the industrial help it needs to be realized, and this optimism may prove justified. However, given that Israel does not have a significant offshore exploration and production (E&P) sector, it relies on the expertise of international companies. The obstacles posed by antitrust deliberations, along with other energy industry concerns about Israel's regulatory regime pertaining to domestic consumption requirements and possible price ceilings could create difficulties for future development. Israel has 6.4 tcf of proven reserves, which are the second largest in the Eastern Mediterranean region behind Egypt. After making significant natural gas discoveries in 2009 and 2010, Israel began to focus its future energy needs on natural gas, including discussions on exporting natural gas regionally and globally. Israel has begun to integrate natural gas into its energy mix, comprising almost 30% of its 2015 primary fuel needs. Oil makes up the largest component of Israel's energy mix, primarily from imports, while domestic natural gas is the fastest growing fuel (see Figure 6 ). Israel did not consume natural gas in large quantities before 2003. Natural gas consumption grew steadily from 2003 to 2009, and doubled between 2009 and 2015. The discovery of the Tamar, Dalit, and Leviathan fields by U.S.-based Noble Energy in 2009 and 2010 created the potential for Israel to become a net exporter of natural gas. Israel's natural gas reserves—natural gas that has been discovered and can be expected to be economically produced—prior to the Noble Energy discoveries were estimated at 1.5 tcf or about 16-years' worth at pre-2011 production levels. Production from the Tamar Field has spurred a dramatic increase in Israeli natural gas use. Natural gas now accounts for almost 30% of all Israeli fuel consumption (up from 11% in 2008) and over half of the country's electricity production. Production at the Tamar Field began in 2013, and production of the Leviathan Field is now scheduled to begin within the next four years. Producing at expected capacity, the Leviathan and Tamar fields, along with Israel's other existing natural gas fields, hold up to almost 22 years' worth of gas. Development of the Leviathan F ield could increase Israel's energy security in the short term. Currently, all of Israel's domestically consumed gas comes from a single pipeline in the Tamar F ield. Development of the Leviathan F ield would add diversity to Israel's domestic supply and provide enough resources to meet Israel's natural gas needs on its own. It could also increase Israel's energy security in the long term by creating the potential for Israel to become a net exporter of natural gas. Noble Energy has already signed an agreement to export gas from the Leviathan F ield to Egypt. Israel's use of natural gas for electric power generation has increased from 33% in 2009, when the Tamar Field was discovered, to 42% when the Tamar Field went into production in 2013. As of 2016, it is estimated that natural gas comprises more than half of Israel's electricity needs. In late May of 2016, the Leviathan partners signed an 18-year agreement worth $3 billion to provide up to 459 bcf of natural gas to a new privately operated power plant in central Israel. The Leviathan partners also signed a $1.3 billion deal with Edeltech, Israel's largest private power producer, in January for 212 bcf to be delivered over 18 years. Fulfilling both domestic agreements could be achieved through Leviathan's projected initial daily production. Continued integration of natural gas into Israel's electrical sector and overall energy mix would allow the country to increase the domestic share of energy production. Israel imports all of its coal and most of its oil. Conversion to natural gas from coal for power generation would also likely decrease Israel's greenhouse gas and other emissions. However, this would require major investment and take many years to achieve. Israel has also expressed interest in exporting gas, but this has been delayed by a number of factors. Israel's antitrust regulator initially held up Leviathan's development because of concerns regarding monopolistic effects on Israel's energy market. After the government reached new terms with the stakeholders in Tamar and Leviathan, it overrode the antitrust regulator's action. In March 2016, Israel's Supreme Court invalidated the development agreement because it ruled that the agreement did not give future governments sufficient flexibility to change pricing or other key terms. The energy companies and the Israeli government negotiated a second agreement in late May 2016, and Israel is expected to start exporting gas by 2019. Exports from the Leviathan Field have the potential to generate billions of dollars of revenue over the next several decades. There are a number of possible destinations in the region for Israeli natural gas exports, which may have geopolitical benefits. However, questions exist regarding Israel's ability to create and sustain energy ties with Arab and other Muslim-majority neighbors whose relations with Israel are marked by ongoing or intermittent political disputes and/or sensitivities based on strong, long-standing anti-Israel public sentiment. It is unclear to what extent political difficulties with neighbors might be mitigated by the potential material benefits of energy cooperation or by other considerations, and how satisfactory logistical and transportation frameworks and security measures might be implemented. Israel might calculate that a prominent role for Noble Energy, a U.S. company, in projects linked with export deals might make the deals less vulnerable to anti-Israel populism. Rapidly rising domestic demand forced Egypt to halt LNG exports in 2014. Egyptian natural gas supply has been further hampered relative to demand due to numerous attacks and service disruptions on the Arab Gas Pipeline. Egypt is seeking additional sources of gas, and the Tamar consortium, which includes U.S. Noble Energy, has already signed an agreement with a private Egyptian firm promising to provide Egypt with natural gas via an undersea pipeline. Although Israeli gas imports are politically unpopular in Egypt, Cairo has indicated that it will not intervene in private agreements to import Israeli gas. However, domestic disputes could complicate the construction of the pipeline, which needs legal approval from the government. Attacks on the Arab Gas Pipeline from Egypt have caused shortfalls of natural gas supply in Jordan. That, coupled with growing demand, has led Jordan to look to import natural gas as LNG. In May 2015, Jordan began importing LNG through a floating storage and regasification unit (FSRU). Noble Energy signed two agreements worth $500 million with private Jordanian mineral companies and reached a preliminary $15 billion agreement with Jordan's National Electric Power Co. Israel has approved the construction of pipelines connecting Israel and Jordan to supply the gas. The approval of the pipelines is an indication that exporting gas to Jordan enjoys significant political support from within Israel. The Palestinian Authority (PA) and the Leviathan consortium led by Noble Energy reached agreement in January 2014 on a 20-year supply of gas to a proposed power plant in the West Bank city of Jenin when Leviathan comes online. Analysts have speculated on the possibility for Israeli gas or gas from the PA-administered Marine (sometimes known as "Marine A") field to supply the Gaza Strip's energy-starved power plant. Political and security concerns, particularly Hamas's presence in Gaza, have complicated this issue. Depending on a number of variables, potentially reunified PA rule over the West Bank and Gaza might either present opportunities to make energy arrangements for the Gaza plant, or lead to further obstacles. Uncertainty regarding Israeli-Palestinian relations and the PA's future could affect Israeli control over offshore resources and the shipment of gas from these resources to the West Bank and Gaza. In June 2016, Israel and Turkey agreed to fully normalize diplomatic relations that had worsened in 2010. For more information, see CRS Report R44000, Turkey: Background and U.S. Relations In Brief , by Jim Zanotti. Reportedly, prospects of a natural gas pipeline between Israel and Turkey partly contributed to the improvement in relations, though discussions remain in preliminary stages and any project would likely take years to complete. Exporting gas to Turkey via pipeline could allow Israeli gas to reach the European market and supply markets in Turkey. However, as referenced above, the development of a pipeline connecting Leviathan to Turkey could be hindered by the ongoing conflict in Cyprus. Any pipeline constructed would likely have to pass through the exclusive economic zone of Cyprus, giving it the ability to veto potential projects. Israel is a signatory to the Paris Accords and has pledged to reduce greenhouse gas emissions to 26% below 2005 levels by 2030. Shifting remaining coal power production would nearly achieve this goal. Natural gas fired power plants typically emit only 58% as much CO 2 per kWh generated as coal fired plants. Converting all coal capacity to natural gas would reduce CO 2 emissions by about 13.95 million tons per year, or about 24.4% of Israel's 2005 level of emissions. Actual emissions reductions will probably be lower than this figure because it is unlikely that Israel will completely abandon coal power. Although the United States is essentially independent in its natural gas resources, it has expressed interest in the Eastern Mediterranean natural gas resources, particularly in the development of Israel's resources. Congress and the Obama Administration have undertaken a variety of efforts in regard to the region's natural gas. In May 2016, Senators Murkowski and Cantwell sent a letter to the Secretary of Energy, Ernest Moniz, regarding the establishment of the U.S.-Israel Energy Center. The creation of the center was included in the U.S.-Israel Strategic Partnership Act of 2014 ( P.L. 113-296 ). In addition to the creation of the center, the act stated, " ... United States-Israel energy cooperation and the development of natural resources by Israel are in the strategic interest of the United States." Both the United States and Israel, albeit on a different scale, have undergone major transformations in their energy sectors, especially in natural gas development. The new law (in Section 12) highlights these changes and encourages closer ties in the energy sector between the two countries. Additionally, H.R. 5066 was introduced during the 114 th Congress, which would authorize the President to provide assistance to Israel in protecting its offshore natural gas fields. In May 2016, the State Department's U.S. Special Envoy and Coordinator for International Energy Affairs, Amos Hochstein, delivered the keynote address at Lebanon's Third Forum on Oil and Gas. According to press accounts, Hochstein encouraged Lebanese officials to take advantage of their country's hydrocarbon potential. The State Department has been actively engaged in mediating the maritime dispute between Lebanon and Israel. Additionally, Hochstein visited Cyprus in November 2014 to discuss energy development, including Cyprus' Exclusive Economic Zone (EEZ) and issues it is having with Turkey. | Since 2009, a series of large natural gas discoveries in the Levant Basin have altered the dynamics of the Eastern Mediterranean region. Israel's discovery of the Tamar Field and subsequent discovery of the larger Leviathan Field created the potential for the country to become a regional player in the natural gas market. Since the initial Israeli discoveries, Cyprus and Egypt have also found new gas deposits in the Mediterranean. The Aphrodite Field was discovered by U.S. firm Noble Energy in Cypriot waters in late 2011 and the massive Zohr Field was found in Egyptian waters by Italian firm Eni in 2015.These discoveries create the potential for Cyprus to export gas and for Egypt to meet more of its domestic gas needs. Lebanon has not yet discovered recoverable gas reserves, but geologic data indicates that there is the potential for Lebanon to possess significant gas resources. Israeli gas discoveries have been contested by Lebanon, which disputes an area of about 300 square miles along the countries' unsettled maritime border. The Administration has sought to mediate the maritime dispute between Israel and Lebanon. New gas reserves could change how energy is used in the region. Since the Tamar find, Israel's electricity energy mix has begun to shift from oil to natural gas-fired power plants. Gas-fired plants emit less carbon than oil-fired plants, and continuing to convert oil plants could help Israel meet long-term carbon emissions goals. The development of gas infrastructure in Cyprus could also help the country transition from oil to gas-fired power generation. A similar shift could also occur in Lebanon should gas be discovered and related infrastructure developed. Lebanon currently uses no natural gas. Israel now has the potential to become a gas exporter. There are a number of potential buyers for Israeli gas. Egypt, currently facing an energy crisis, will need to import gas to cover domestic demand in the near future. While Israeli gas imports are politically unpopular in Egypt, private Egyptian firms have already begun to negotiate agreements with Noble Energy to import Israeli gas. Jordan is another possible destination for Israeli gas. Repeated attacks on Egypt's Arab Gas Pipeline have decreased Jordan's energy security and increased the need for it to find alternate, reliable sources of gas. Finally, recent progress on improving diplomatic relations has opened the possibility of Israeli gas exports to Turkey. These exports could either be shipped by the construction of a direct pipeline or by liquefied natural gas (LNG) tankers crossing the Mediterranean. Although the United States is essentially independent in its natural gas resources, it has expressed interest in the Eastern Mediterranean natural gas resources, particularly in the development of Israel's resources. Congress and the Obama Administration have undertaken a variety of efforts in regard to the region's natural gas. Legislation has been introduced in both Houses of Congress, and has become law, during the last couple of sessions that address the region's natural gas resources. |
The Congress enacted major legislation concerning the employment of people with disabilities as early as the 1930s through the establishment of wage rates for such individuals below the federal minimum wage. This and subsequent laws share a focus on individuals with disabilities as current or potential workers. Learning whether public policy is on the right track is particularly important at the current time because of the positive relationship between age and disability. As the incidence of disabling health conditions rises with age (e.g., hearing impairments, arthritis, and limitations on activities due to heart disease) and as the large baby-boom generation has been entering the mid-to-late working years, disability is likely to become increasingly common and, potentially, increasingly costly to society (e.g., increased utilization of medical and rehabilitative services as well as decreased receipt of income and payroll taxes from forgone individual earnings). Moreover, new advances in medicine have allowed people to live with previously life-threatening impairments. And, among students—who typically are expected to go from school into the workplace—those served by the Individuals with Disabilities Education Act (IDEA), Part B have increased over time. This report begins with a summary of federal actions taken during the 20 th century related to the employment of people with disabilities. It then describes in detail the existing data sources of government agencies that cover disability and employment status as well as reviews the activities of the Presidential Task Force on Employment of Adults with Disabilities aimed at remedying statistical shortcomings. The report closes with an examination of the limited trend statistics on the employment situation of working-age adults with disabilities to determine how they fared in recent decades and mentions policies that have been suggested. The National Industrial Recovery Act (NIRA) of 1933-1935 addressed the employment disadvantages of disabled individuals by establishing a productivity-based sub-minimum wage arranged through a system of certificates. With time, these individuals came to be identified in one of three classifications: employees of sheltered workshops where the wage floor was set by a charitable institution, employees in the private for-profit sector where the wage floor could not be "less than 75 percent of the minimum wage" in the industry, and employees who by virtue of disability were employed in industrial homework. The NIRA was declared unconstitutional in May 1935, and the above requirements were no longer operative. In 1938, the Congress passed the Fair Labor Standards Act (FLSA). Section 14 of the act established a reduced wage for the employment of individuals, under special certificates issued by the U.S. Department of Labor's Wage and Hour Administrator, whose earning capacity was impaired by age or physical or mental deficiency or injury. No statutory floor was established, but the wage floor for disabled workers at private for-profit firms was administratively set at not less than 75% of the standard federal minimum wage. Workers in sheltered workshops run by a charitable organization were to be paid on the basis of their earning capacity. Under the 1966 FLSA amendments, the wage rate for persons with disabilities was statutorily set at not less than 50% of the basic FLSA minimum for both competitive industry and sheltered workshops, with an exception for work activity centers (P.L 89-601). In 1986, section 14(c) was again amended, removing the distinction between workshops and work activity centers and eliminating the statutory minimum wage for the disabled ( P.L. 99-486 ). Instead, the wage rate was to be "commensurate with those paid to nonhandicapped workers, employed in the vicinity ... for essentially the same type, quality, and quantity of work," and that was "related to the individual's productivity." The Americans with Disabilities Act of 1990 (ADA, P.L. 101-336 ) bans discrimination in the workplace and elsewhere (e.g., in public accommodations and services operated by private entities, transportation, and in telecommunications) on the basis of disability. Title I primarily is intended to equalize access to employment opportunities for otherwise qualified workers with disabilities by requiring employers of 15 or more employees to make reasonable accommodations that would not cause undue hardship to their operations. (The provisions banning employment discrimination by employers with at least 25 employees went into effect in July 1992. The ban's extension to firms with 15 to 25 employees became effective in July 1994.) In addition, the Civil Rights Act of 1991 (CRA, P.L. 102-166 ) allows people bringing employment discrimination suits to seek compensatory and punitive damages under the ADA and the Rehabilitation Act of 1973 ( P.L. 93-112 ). The FLSA makes disabled individuals more attractive to hire by creating a lower wage rate for them. The ADA and CRA regard private and public employers who fail to hire, retain, and promote members of the population with disabilities, at rates comparable to other equally qualified workers, as contributors to the group's poor employment and earnings outcomes. Some believe that the success of the laws' employment provisions is best determined by whether the employment rate of working-age adults with disabilities increases, because lack of job opportunities appears to be an even bigger problem than wage discrimination for this protected class. Yet, it is no easy matter to separate the impact of legislation from a host of other factors that are operating simultaneously (e.g., changes in economic conditions, in private sector provision of health benefits, and in job requirements away from manual labor and toward higher levels of educational attainment as well as toward team-oriented workplaces). Toward the close of the decade, the Congress turned its attention to the supply side of the labor market in the Ticket to Work and Work Incentives Improvement Act of 1999. Among other things, P.L. 106-170 is intended to encourage persons with severely limiting health conditions or impairments to increase their work effort by alleviating a dilemma of Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) beneficiaries, namely, choosing between a job which may not have employer-provided health benefits and continuation of government-provided health care coverage through Medicare or Medicaid. These provisions became effective in October 2000. The legislation also creates a voucher program, to be phased in over a three-year period beginning in 2001, that allows SSDI and SSI beneficiaries to obtain employment, rehabilitation and other services from providers of their own choice to assist them to get jobs or increase their earnings. Recent Administrations also have undertaken various initiatives that focus on the poor labor market outcomes of individuals with disabilities. Executive Order 13078, issued by President Clinton on March 13, 1998, created the Presidential Task Force on Employment of Adults with Disabilities. It was charged with seeking ways to increase the share of the adult population with disabilities that has a job, among other things. That same year, the U.S. Department of Education's National Institute on Disability and Rehabilitation Research (NIDRR) announced funding, under the Rehabilitation Act of 1973, for six new Rehabilitation Research and Training Centers to develop information that addresses the employment-related issues of persons with disabilities. In 2000, the U.S. Department of Labor (DOL) requested applications for work incentive grants to assist states creating their One-Stop delivery systems under the Workforce Investment Act of 1998 ( P.L. 105-220 ) to provide comprehensive employment and training services to people with disabilities. And, the following year, the Office on Disability Policy was established within the DOL. The relatively recent implementation of these policies and programs makes it difficult to gauge how successful they have been at enhancing the employment prospects of persons with disabilities. The varying definitions of disability contained in programs and surveys compound the problem. Perhaps most importantly, so, too, does the lack of accurate statistics on individuals with disabilities derived from surveys that have asked consistent questions over time. The National Council on Disability noted in 1996 that despite considerable discussion in the last decade about the limitations of ... databases and the need for a database specifically designed to answer policy-relevant questions about people with disabilities ... little improvement ... has been evident... In 2004, the Council effectively concluded that the situation had not much changed. One of the charges of E.O. 13078 recognized the data shortcomings related to the labor force status of persons with disabilities. It required the Presidential Task Force on Employment of Adults with Disabilities to design and implement a statistically reliable and accurate method to measure the employment rate of adults with disabilities as soon as possible, but no later than the date of termination of the Task Force [30 days after submitting its final report on July 26, 2002, the 10 th anniversary of initial implementation of the ADA's employment provisions]. Data derived from this methodology shall be published on as frequent a basis as possible. The Bureau of Labor Statistics and Census Bureau, in cooperation with the Departments of Education and Health and Human Services, the National Council on Disability, and the President's Committee on Employment of People with Disabilities, have been among the numerous organizations working toward this end. The accomplishment of this charge has been complicated by the fact that: (1) a universally agreed-upon definition of disability does not exist, and (2) a data source is lacking that incorporates both labor force and disability questions which have undergone testing to determine whether people understand what is being asked (i.e., validity) and to which people respond in a consistent manner over time (i.e., reliability). At the present time, the U.S. Bureau of the Census collects self-reported information from individuals on the disability and labor force status of household members through the decennial census, American Community Survey, Current Population Survey, Survey of Income and Program Participation, and National Health Interview Survey. Disability typically is not the primary focus of these surveys. Disability questions are included on the long-form of the decennial census of population. The number and nature of disability questions have differed over time. The 1970 form asked about work disability; the 1980 form, about work disability and the ability to use public transportation; and the 1990 form, about work disability, the ability to go outside the home alone to shop or visit a doctor's office, and about self-care (e.g., bathing or dressing without assistance). The work disability questions were fairly consistent from 1970 through 1990 (i.e., having a physical, mental or other health condition that prevents an individual from working, or that limits the amount/kind of work an individual can do). The disability questions were substantially revised on the 2000 long-form based on the judgment of a panel of experts and follow-up testing. Households that received the revised questionnaire were asked whether a physical, mental or an emotional condition of at least six months duration creates difficulty in working at a job or business; going outside the home alone to shop or visit a doctor's office; dressing, bathing, or getting around inside the home; or learning, remembering, or concentrating. In addition, a question was included on whether respondents have long-lasting sensory impairments (e.g., blindness) or substantial limitations on physical activities (e.g., reaching or climbing stairs). The Census Bureau intends that the long-form of the decennial census be replaced by the more frequently administered, comparatively new ACS. The disability questions in the 1999-2002 ACS were changed from their original (1996-1998) version to agree with those on the 2000 long-form. The ACS questionnaire was changed in 2003 to address the seeming over-reporting of disability in the 2000 census and in earlier surveys by moving the questions' location and altering instructions to reduce misinterpretation. It appears that these changes have reduced the presumed over-reporting. In addition, the Census Bureau will be conducting a national content test in 2006 which, among many other things, will determine whether new disability questions will be introduced in the 2008 ACS. Thus, at present, neither the decennial census nor the ACS can provide data suitable for analyzing changes over time in the employment status of persons with disabilities. The purpose of the CPS is to enable the U.S. Bureau of Labor Statistics (BLS) to provide timely information on the labor force status (i.e., employed, unemployed, or not in the labor force) and characteristics (e.g., demographic and occupational) of the population. Rather than replying yes or no to the question about whether they had worked in the preceding week, respondents to the monthly (basic) CPS sometimes say they are disabled. If, based on additional questions, it is determined that an individual who said they are disabled meets the criteria for being employed or unemployed, the response "disabled" is deleted from the record. "Because of this, researchers have no information on the disability status of employed and unemployed persons from the basic CPS." In March, the CPS includes supplementary questions about income. Respondents have been asked annually since March 1980 whether a health problem or disability prevents them from working or limits the kind or amount of work they can do. It is much like the work disability question that appeared on the 1970-1990 census long-form. Those who say they have a work disability are then asked whether they receive income based on the disability (e.g., workers' compensation, the SSDI and SSI programs, and the Black Lung program). Some researchers cross tabulate the work limitation response from the March supplement with the labor force status question in the basic CPS to develop employment rates for persons with disabilities. Because the basic and March supplement questions were not designed for this purpose, testing to determine whether they provide a valid and reliable estimate of the number of people with work disabilities has never been undertaken. The BLS therefore considers use of the current version of the CPS for this purpose to be inappropriate. While acknowledging that "work limitation-based questions are not the ideal way to identify the size of the working-age population with disabilities," some analysts nonetheless "argue that nationally representative employment-focused data sets like the CPS can be used to monitor trends in the employment outcomes of the working-age population with disabilities." (Emphasis added.) The survey gathers demographic and economic data by asking a core set of questions that is periodically supplemented with questions on different subjects (e.g., the health and disability topical module). The two principal ways that have been used to define disability in surveys are in terms of (1) limitations on sensory, physical or mental functioning and (2) limitations on activities (e.g., paid employment) due to chronic health conditions or impairments. By and large, the SIPP relies on the former approach and the National Health Interview Survey (described below), on the latter. Some observers believe that a definition based on functional limitations is superior to one based on activity limitations. Both approaches generally rely on the medical model of disability that focuses on individuals rather than on environmental factors which not only can affect people's actual performance but also how those with equally disabling conditions reply to survey questions. Respondents to the SIPP are considered to have a disability if they indicate that they experience difficulty performing certain sensory or physical functions (e.g., seeing words in newspapers or lifting an object weighing 10 pounds); activities of daily living, ADLs (e.g., eating or getting around inside the home); or instrumental activities of daily living, IADLs (e.g., going outside the home or keeping track of bills). People who indicate that they have a physical, mental or other health condition that prevents them from or restricts the kind/amount of work they can perform around the house or at a job also are deemed to have a disability. In addition, respondents who state that they use assistive devices (e.g., wheelchairs or canes), have specific conditions (e.g., developmental disorders or Alzheimer's disease), or are under age 65 and covered by certain benefit programs (e.g., SSI) are considered to have a disability. Over the years, there has been some cognitive pre-testing of the SIPP disability questions to ascertain their validity. It has long been argued, however, that asking people whether they are limited in the kind/amount of work they can do lacks "face validity" because their responses would depend upon environmental conditions (e.g., the presence of workplace accommodations). For this reason, a question was added to allow respondents to indicate whether they have a condition which makes finding a job or remaining employed difficult without stating that they are "limited" regardless of environmental considerations. The SIPP's disability module and core questionnaire have been fairly consistent since 1990, but as just discussed, questions were added to try to better capture the meaning of disability. The Presidential Task Force on Employment of Adults with Disabilities found that the SIPP produced sizeable fluctuations in the disability status of individuals within just a year's time, which suggests that at least some of its disability estimates lack reliability. As individuals in the SIPP are interviewed at four-month intervals over two or more years, the longitudinal survey is subject to attrition and to time-in-sample bias, both of which can adversely affect the quality of estimates derived from one period to the next. Moreover, a change in administration of the work disability question to the 1996 panel as opposed to earlier panels of respondents has yielded noncomparable estimates over time. These observations led a Census Bureau analyst to conclude in 2000 "that there is currently no satisfactory vehicle for producing" a measure "over time of the employment status of individuals with disabilities." Other analysts dispute this contention. They have shown "that certain questions from select [comparable] interviews can be used in trend analyses." That is to say, the problem may reside less with the questions themselves than with the way analysts have utilized the SIPP. The purpose of the National Center for Health Statistics' annual survey is to provide information on chronic health conditions, health status, health care utilization, and disability. In addition, several federal agencies and a private foundation funded a two-part disability supplement that was conducted along with the 1994 and 1995 NHIS. As the most comprehensive survey on disability since 1978, it contains a plethora of information that allows construction of a variety of definitions for disability. The supplement's questionnaire was widely reviewed by interested parties in the disability community, voluntarily tested by persons with disabilities in the National Center's cognitive questionnaire lab, and pretested by some 250 households. The annual NHIS is ongoing. It asked consistent disability and labor force questions between 1982 and 1996. Although the survey underwent a major revision in 1997, some of the earlier disability questions were carried forward. Results from the annual NHIS, like those from the disability supplement, typically are made available for tabulation and analysis by members of the research community rather than regularly being released in Center publications. In the annual NHIS prior to 1997, individuals were considered to have disabilities if they reported a chronic condition or an impairment that prevented them from or limited their ability to perform age-dependent major life activities (e.g., attending school in the case of children age 5-17 or taking care of oneself in the case of someone at least 70 years old), or limited their ability in any way to perform any other activities (e.g., social or family pursuits). Respondents aged 18-69 who reported that an impairment or health problem completely prevented them from working or restricted the kind/amount of work they could perform were deemed to have work limitations. The NHIS also asked people if they needed assistance in performing ADLs or IADLs. As in the SIPP, respondents with limitations who needed assistance did not necessarily indicate that they had conditions or impairments that restricted their ability to work. In those instances where individuals identified an activity limitation, they were asked about the specific health condition that led to the limitation and how long it lasted. Beginning with the redesigned 1997 NHIS questionnaire, some changes were made to the above-described items. For example, the questions which determine work limitation were reworded to ascertain if a physical, mental, or emotional problem prevents or restricts the kind/amount of work a person can perform; to eliminate an upper age limit; and to allow acute in addition to chronic conditions as causes of work disability. Questions similar to those in the SIPP were added to ascertain the presence of functional limitations in a context that is not activity specific (e.g., the degree of difficulty walking or lifting). The questions are asked only for one randomly chosen adult per family included in the survey. The timeliness of results differ. The population census is conducted once every 10 years and statistics derived from it are released with a considerable lag, a shortcoming that the ACS was developed in part to overcome. Information from the annual NHIS and the SIPP are available with a fairly lengthy lag as well. In contrast, results from the March CPS supplement are released about six months after it is conducted, and selected labor force data from the monthly CPS are published the month after it is conducted. The composition of the samples also differs. The labor force questions in the redesigned NHIS are administered only to those respondents age 18 or older; in the decennial census, ACS, and SIPP, to those age 15 or older; and in the CPS, to persons age 16 or older. Moreover, unlike the NHIS and CPS, both of which cover the civilian noninstitutional population, the SIPP includes members of the civilian and military resident population (excluding Armed Forces personnel living in military barracks). These three surveys exclude the institutionalized population, which is covered by the decennial census and is expected to be covered by the ACS. The questions in the surveys also have reference periods of varying length which can affect an individual's labor force status. SIPP respondents are asked about their activities over a four-month reference period during which lengthy interval a person could very well have been employed and unemployed. Before the 1997 revision, NHIS respondents were asked about their labor force activity during the two-week period preceding the interview. The reference period subsequently was changed to the week before the interview is held. In the CPS, an individual is counted as employed if he/she worked for pay or profit for one hour or, in the case of a family business, for 15 hours on an unpaid basis, during the one-week reference period that precedes the survey week; or as unemployed, if he/she was available for work and "actively" sought a job during the four weeks preceding the survey week. As neither the SIPP nor the NHIS has the same precision as the CPS in determining labor force activity, an individual who is deemed "out of the labor force" in the CPS could be counted as an unemployed worker in the two other surveys. Although these various factors can impact the quality of survey estimates, perhaps the most important factor that affects efforts to collect quantitative information on persons with disabilities is one of definition. Some observers have concluded that: work disability is a multidimensional, complex concept that investigators do not know how to define well. ... Disability or limitations in participation are a result of a complex interaction among an individual and his or her attributes, the physical and social environment, and the accommodations and barriers to participation. The measurement of disability is further confounded by the fact that all characteristics, whether intrinsic individual characteristics or characteristics of the environment, change with time. The Presidential Task Force established the Employment Rate Measurement Methodology Work Group (ERMM), which is composed of some 15 federal agencies. The ERMM has been working on implementing E.O. 13078's charge concerning the development of timely, accurate, and reliable labor force data for persons with disabilities. The ERMM's long-term goal has been incorporation of questions in the CPS that would enable the release of labor force estimates for people with disabilities as is done for other population groups (e.g., women and racial/ethnic minorities). Toward that end, after they had undergone extensive testing, numerous questions on disability and labor force status were asked as part of the National Comorbidity Survey (NCS) in 2001 and 2002. The hope was that a small subset would perform as well as the full battery of questions in order to minimize the burden that would be placed on respondents were disability questions integrated in the basic CPS. Analysis of the questions was conducted by outside experts, and the best seven questions were selected. This set of questions underwent further testing before BLS presented it and the related research to the ERMM. The ERMM raised some concerns that were addressed through further testing. All testing outside the context of the CPS was completed in 2004. The final test is inclusion of the question set in the February 2006 supplement to the CPS. After the supplement receives clearance from the Office of Management and Budget and if it subsequently is determined that the questions perform well without too adversely affecting the response rate to the survey, they could be added to the monthly CPS. This might occur in 2007, at the earliest. As just discussed, all of the available federal surveys that collect data both on persons with disabilities and on labor force status suffer from various shortcomings. In an effort to mitigate the data limitations, researchers sometimes have taken the approach of utilizing multiple surveys to determine whether they are telling the same story. Generally speaking, they are. As shown in Table 1 , the proportion of the population with disabilities that was in the labor force (i.e., employed or unemployed) dropped by 4.5% during the recession of the early 1980s. At the same time, the labor force participation rate of the population without disabilities declined by a lesser degree (1.0%). Similarly, during the recession of the early 1990s, the labor force participation rate of the working-age population with disabilities fell to a greater degree relative to the rate among people without disabilities (4.1% and 0.8%, respectively). Conversely, over the 1983-1990 period when the economy was expanding, the labor force activity of individuals with disabilities rose much more than activity among individuals without disabilities (14.0% and 8.8%, respectively). One might conclude, based upon these data, that the labor force status of persons with disabilities is more sensitive to the business cycle than that of persons without disabilities. In other words, persons with disabilities appear to be harmed more by downswings in the economy and helped more by economic upswings. As discussed in the following section, however, this relationship seemingly did not hold up during the strong and lengthy economic expansion that followed the 1990-1991 recession. The 1990s could have been among the best of times for the working-age population with disabilities because of (in no particular order) enactment of the previously mentioned legislation, advances in assistive technologies, and the existence of an extremely tight labor market. Not only would robust economic conditions be expected to encourage people who might have given up looking for jobs to reenter the labor force, but also a dwindling supply of workers would be expected to make firms more willing to hire and, if necessary, train persons whom they previously might not have considered or might have avoided. The timing of employers' clamoring for workers could have been particularly fortuitous for the large minority of adult beneficiaries with disabilities in the Temporary Assistance to Needy Families (TANF) program who face time-limited cash assistance under the Personal Responsibility and Work Opportunity Reconciliation Act ( P.L. 104-193 ). As shown in Table 2 , this does not appear to have been the case. The employed share of 18-64 year olds with disabilities, broadly defined, did not change significantly through 1996, according to data from the NHIS. (See column 3.) CPS data on work disability reveal the same lack of improvement from the mid-1990s through the remainder of the decade as the labor market tightened further. Additionally, based upon a variety of definitions of disability available in the SIPP, the employment status of 25-61 year olds with disabilities was found to have deteriorated over the 1990-1996 period. In contrast, the proportion of the working-age population without disabilities who had jobs rose substantially according to data from all three surveys. Defying expectations, then, the employment situation of persons with disabilities vis-à-vis persons without disabilities seemingly worsened during the economic expansion of the 1990s. A much different picture of the decade emerges based upon unemployment data. Both NHIS and CPS data suggest that the decrease in unemployment among labor force participants was significant and steeper for persons with than without disabilities. The explanation for this seeming paradox is that the employment rate is a population-based measure, and some individuals in the population are uninterested in working (e.g., retirees) or consider themselves unable to work (e.g., due to poor health). In contrast, the unemployment rate is based upon a more narrowly defined group of people—those who already have or are actively seeking jobs, that is to say, those who want to and who consider themselves able to work. An alternative employment rate of people with disabilities who report they are willing and able to work shows statistically significant increases during the 1990s expansion. (See column 4 in Table 2 .) Using this alternative measure as the standard, the employment gap between persons with and without disabilities shrank substantially during the 1990s expansion. One explanation that has been posited for the poor labor market performance of the aggregate population with disabilities during the last decade is a change over time in its composition—specifically, a shift toward people who report they are unable to work. The increase in inability to work seems evident among both men and women, and across the age spectrum (except for youth age 18-29). These self-reports appear to be supported by less subjective measures that show an increased prevalence of poor health status, more severe functional limitations, and greater need for personal assistance with ADLs and IADLs among persons with disabilities. The increased self-reporting of inability to work among the population with disabilities may thus be "a legitimate and accurate reflection of a real worsening in the degree of work limitation." Assuming that the share of persons with severe work disabilities remains elevated, it could prove difficult to narrow the wide gap between the employment rates of people with and without disabilities. This finding also raises a fundamental question about whether all adults with disabilities—including those with very work-limiting impairments—are likely to be able to participate in the labor force and to succeed at finding and keeping jobs. The 106 th Congress responded affirmatively to this question when it passed the Ticket to Work and Work Incentives Improvement Act of 1999, as its intent is increasing work activity among a portion of the adult population with severe disabilities, namely, SSDI and SSI beneficiaries who have medically demonstrated physical or mental impairments of long duration that impede their participation in the labor force. Policy analysts have examined other explanations for the comparatively poor labor market performance of the population with disabilities during the 1990s. They include expansion of the SSDI and SSI programs, unintended consequences associated with enactment and implementation of the ADA, increased health care costs, and changes in the makeup of the population (e.g., educational attainment). The results of this research have prompted some to suggest that improvement in the employment outcomes of persons with disabilities might be attained by, on the demand side, subsidizing the cost of employer accommodations and by, on the supply side, assisting already employed persons with disabilities retain their current jobs, among other things. | Congress has enacted major legislation related to the employment of individuals with disabilities. In 1938, the Congress passed the Fair Labor Standards Act (FLSA), which, among other provisions, established a reduced wage for the employment of individuals whose earning capacity was impaired by age or physical or mental deficiency or injury (Section 14). The Americans with Disabilities Act (ADA) of 1990 banned discrimination in the workplace and elsewhere on the basis of disability, and the Civil Rights Act (CRA) of 1991 allowed people bringing employment discrimination suits to seek compensatory and punitive damages under the ADA and the Rehabilitation Act of 1973. In 1999, Congress turned its attention to the supply side of the labor market in the Ticket to Work and Work Incentives Improvement Act by encouraging people with severely limiting health conditions or impairments to increase their work effort without loss of government-provided health care coverage. Learning whether public policy is on the right track is especially important today because of the direct relationship between age and disability. As the incidence of disabling health conditions rises with age and as the large baby-boom generation has been entering middle-age, disability is likely to become increasingly common and (potentially) costly to society. Changing economic conditions and the varying definitions of disability in programs and surveys make it difficult to gauge the success of the legislation in enhancing the employment prospects of people with disabilities. So, too, does the lack of accurate, consistent statistics over time on the labor force status of individuals with disabilities. Despite the charge of the Presidential Task Force on Employment of Adults with Disabilities (1998-2002) to develop a valid, reliable measure of the employment rate of working-age adults with disabilities, progress toward that end has been very slow. To mitigate the data shortcomings with regard to conducting trend analysis, researchers have utilized multiple databases to determine if they are telling the same story. In general, they are. Despite the strong state of the economy through 2000, full implementation of the ADA's employment provisions in the mid-1990s, and the employment rate of all working-age persons with disabilities failed to improve in recent decades. Analysts have examined a variety of explanations for the lagging employment opportunities of people with disabilities, including the seemingly increased share of adults with disabilities so severe that they report being unable to work; expansion of the Social Security Disability and Supplemental Security Income programs; and enactment and implementation of the ADA. The results of this research have prompted some to suggest that enhancing the employment prospects of all members of the population with disabilities might involve subsidizing the cost of employer accommodations and helping those already employed retain their jobs, among other things. This report will be updated as warranted. |
The Florida Everglades is a unique network of subtropical wetlands that is currently half its historical size. The federal government has a long history of involvement in the Everglades, beginning in the 1940s with the U.S. Army Corps of Engineers (the Corps) constructing flood control projects that shunted water flowing south into the Everglades to make way for agricultural and urban development. Other factors, including major nonfederal development efforts, also have contributed to shrinking and altering the Everglades ecosystem. In recognition of the unique nature of the Everglades, federal and state agencies began ecosystem restoration activities in the Everglades in the early 1990s, and many of these activities are ongoing. However, it was not until 2000 that federal and state restoration activities were coordinated under an integrated plan. In the Water Resources Development Act of 2000 (WRDA 2000; P.L. 106-541 ), Congress approved the Comprehensive Everglades Restoration Plan (CERP) as a framework for Everglades restoration. In addition to the CERP framework and related processes, the WRDA 2000 authorized an initial round of projects with federal participation by the Corps and the Department of the Interior (DOI). The plan envisioned 50 major projects to restore the quantity, quality, and timing of water deliveries in south Florida to historical conditions. According to the process established under CERP, Everglades restoration projects are to be studied and presented to Congress for authorization as their planning is completed (presumably in water resources development acts, typically referred to as WRDAs). Since passage of CERP, nine non-pilot CERP projects have been authorized. Other projects are ongoing in the study phase (including projects that have completed the study phase and are awaiting congressional authorization). Most observers agree that, although progress has been made on Everglades restoration, much more time and funding would be required to achieve restoration as currently contemplated. Previously, some have highlighted what they consider to be the "slow" pace of restoration as an argument for increased and expedited financial support. Conversely, others have argued that restoration activities in the Everglades receive too much funding relative to other priorities, and that the level of support provided for these activities is not appropriate given larger fiscal concerns and the uncertainty of results. At issue for Congress is oversight and implementation of efforts to restore the Everglades, including the ongoing federal funding commitment and the priority of Everglades restoration relative to other federal commitments. Stakeholders involved with planning other large-scale restoration initiatives (e.g., Great Lakes, Chesapeake Bay) look to the Everglades as a model and a test case. The achievements realized and challenges faced in Everglades restoration efforts may provide additional information on the possibilities and limitations inherent to all large-scale ecosystem restoration efforts. This report provides information on Everglades restoration, with a focus on the federal role in funding this restoration and related issues for Congress. The report discusses background, trends, and major accomplishments and challenges to date in federal efforts to restore the Everglades. Federal efforts to restore the Everglades are often divided into two broad categories: CERP and non-CERP (or "Foundation" projects). CERP efforts refer to projects and programs authorized in the Comprehensive Everglades Restoration Plan, enacted in WRDA 2000. Non-CERP refers to the subset of federal Everglades restoration activities that were not enacted in CERP (many of these efforts predate CERP). CERP considered and assumed implementation of a number of non-CERP projects; thus, both efforts are considered to be complementary. Federal CERP funding was first authorized in WRDA 2000, with a focus on increasing storage and treatment of excess water in the rainy season to provide more water during the dry season for the Everglades ecosystem and for urban and agricultural users. In the original documents presented to Congress in 1999, CERP was expected to consist of 50 projects and was estimated to cost $8.2 billion (in 1999 dollars) to complete. Over time, the reported funding requirement to complete the projects has increased, although some of this increase has been due to inflation (see Table 1 , below). As of 2014 (when the total cost estimate was last updated), the Corps estimated that completing construction of CERP projects would take more than 50 years and would cost $16.4 billion. Approximately 60% of $8.2 billion (rounded) in cost increases from 1999 to 2014 were attributed to inflationary increases, and the remainder has been attributed to other factors. Pursuant to CERP, project construction costs are shared 50/50: the federal government is required to pay half of project costs, and an array of state, tribal, and local agencies (i.e., nonfederal sponsors) must pay the other half. The same cost share applies to all project operation and maintenance costs. WRDA 2000 included initial projects (including pilots), established the aforementioned cost-sharing ratios and created a process for additional projects to be authorized as part of the CERP framework. Subsequent legislation has built on this: WRDA 2007 authorized three additional CERP projects; four other projects completed the study phase between 2007 and 2014 and were thus authorized for construction in the Water Resources Reform and Development Act of 2014 (WRRDA 2014; P.L. 113-121 ); and two other CERP projects were authorized in the Water Infrastructure Improvements for the Nation Act (WIIN Act; P.L. 114-322 ), enacted on December 16, 2016. The status of these projects is discussed later in this report. Federal Everglades restoration activities not authorized under CERP are often referred to as "non-CERP" or "Foundation" activities. Most (but not all) of the authorities for this funding predate the enactment of CERP in 2000. For example, this category includes funding for the Modified Water Deliveries Project that originally was authorized under the Everglades National Park Protection and Expansion Act of 1989 ( P.L. 101-229 ). Depending on how broadly the non-CERP category is defined, it can encompass a wide variety of Everglades restoration activities undertaken by multiple agencies. Similar to CERP funding, non-CERP activities of the Department of the Interior and the Corps typically receive much attention and are often the focal point of congressional consideration. Unlike for CERP, there is no statutorily required cost-share split for non-CERP projects. Federal funding for Everglades restoration is largely provided through DOI and the Corps and is concentrated in two annual appropriations bills—the Interior and Environment appropriations bill (which provides funds for much of DOI) and the Energy and Water Development appropriations bill (which funds the Corps). Additional funding in other appropriations bills is sometimes noted as contributing to Everglades restoration, but is not formally tracked under the Administration's non-CERP totals. Although the Administration's budget request typically identifies restoration funding totals for CERP and non-CERP for both DOI and the Corps, appropriations laws and conference reports typically do not tabulate and specify their recommended appropriations levels for Everglades restoration activities (for either CERP or non-CERP totals). Rather, these totals are embedded within project and account-level totals of the Corps and DOI. A summary of funding for DOI and Corps CERP and non-CERP activities in recent years is shown in Table 2 . Everglades restoration funding within the Department of the Interior, Environment, and Related Agencies Appropriations bill is generally allotted to four agencies within DOI: the National Park Service (NPS), the Fish and Wildlife Service (FWS), the U.S. Geological Survey (USGS), and the Bureau of Indian Affairs (BIA). Within these agencies, two types of Everglades funding are often highlighted in appropriations debates: funding for CERP and funding for the Modified Water Deliveries Project for Everglades National Park (also known as the Mod Waters project). Mod Waters is a non-CERP project that has received significant attention from Congress. It aims to improve water deliveries to Everglades National Park by removing barriers in and around the Tamiami Trail. Although Mod Waters is technically a non-CERP project, it is widely considered to be a keystone project for Everglades restoration, with an important nexus to CERP. DOI's CERP funding largely goes to NPS and FWS to carry out CERP project activities related to NPS and FWS units (e.g., national parks, wildlife refuges) and authorities that fall under CERP. Non-CERP DOI Everglades restoration funding provides for a number of different activities in addition to the Mod Waters project. These activities include management of national parks and national wildlife refuges in the Everglades, research and monitoring, implementation of relevant laws in the Everglades such as the Endangered Species Act (16 U.S.C. §§1531-1544) and the Migratory Bird Treaty Act (16 U.S.C. §§703-712), and BIA funding for the Seminole and Miccosukee to carry out water- and ecosystem-related planning and studies. Non-CERP DOI funding also includes operations of the South Florida Ecosystem Restoration Task Force, which supports DOI, the Corps, and the state of Florida in carrying out Everglades restoration. The FY2018 Trump Administration request for DOI bureaus receiving Everglades restoration funds was $54 million. That included $8 million for CERP projects and $46 million for non-CERP projects. Corps funding is directed toward planning and construction of projects authorized under CERP and other authorities. Within Corps totals, the amount allocated to CERP projects (i.e., CERP projects that have been authorized for construction) is widely considered a key benchmark for Everglades restoration commitment and progress. Corps non-CERP restoration projects include those projects for which authorization predates CERP. The most prominent recent example is the ongoing construction of the Kissimmee River Restoration Project, as well as operations and maintenance of other non-CERP projects. Funding for Corps Everglades restoration projects in the Energy and Water Development appropriations bill is listed under South Florida Ecosystem Restoration within the Corps Construction and Operations and Maintenance accounts. The FY2018 requested level for Corps Everglades restoration funds was $76 million, including $75 million for CERP activities and $1 million for non-CERP activities. Previous drops in funding have been attributed to a number of factors, including the availability of unobligated funds from prior years and the drawdown of funding for authorized, ongoing construction projects. The federal government has provided funding for restoration of the Everglades since the early 1990s. Overall, from FY1993 to FY2016, the total federal investment in Everglades restoration (including agencies other than the Corps and DOI) is estimated to have exceeded $5 billion. From FY1993 through FY2000 (i.e., prior to the enactment of CERP), federal appropriations for Everglades restoration activities totaled more than $1.2 billion. More recently, since the enactment of CERP in WRDA 2000 through FY2015, total federal funding from all agencies has exceeded $4 billion, with Corps and DOI accounting for approximately 75% of that total, or approximately $3 billion. CERP projects accounted for approximately $1.1 billion of this funding. As previously noted, Everglades funding for the Corps and DOI typically receives much attention from Congress. Table 2 , above, shows the split of CERP and non-CERP totals between the two agencies since 2010. Although overall funding for Everglades restoration by the Corps and DOI has ranged between roughly $125 million and $250 million in most years since the enactment of CERP, the distribution between CERP and non-CERP funding has changed over time ( Figure 1 ). CERP projects gradually increased from FY2001 to FY2010, including significant increases under P.L. 111-5 (the American Recovery and Reinvestment Act). Over the same period, funding for non-CERP projects (such as Mod Waters) decreased from earlier levels. In recent years, overall appropriations in both categories have decreased. In most enacted appropriations bills since passage of CERP, Congress has agreed to the Administration's funding request for the Everglades. The fluctuations in funding levels over time can be attributed to a number of factors. For instance, after authorization in FY2007, federal funding for "Generation 1" CERP projects (i.e., projects authorized in WRDA 2007) increased as project construction commenced after years of study and pilot projects; these funding levels began to decline in FY2012 as Generation 1 project construction activities wound down and "Generation 2" projects (i.e., projects with completed project-implementation reports that were proposed and eventually authorized in WRRDA 2014) were awaiting construction authorization. For non-CERP funding trends, more recent decreases in funding can be attributed in part to the completion of the initial phases of construction on the Mod Waters project. Many Everglades restoration supporters view the status and amount of federal CERP funding relative to nonfederal funding for restoration activities under CERP as an important indicator of the federal government's commitment to Everglades restoration. While there is widespread agreement that the state has invested more funding in CERP than has the federal government, comparisons between federal and state funding levels for Everglades restoration are complicated for a number of reasons. CERP project costs must be shared equally between the federal government and project sponsors. Further, pursuant to general Corps policies under Section 101 of WRDA 1986 ( P.L. 99-662 ), all local project sponsors must fund the costs for project lands, easements, relocations, right-of-way, and disposal sites. As a result, a considerable amount of nonfederal funding for Everglades restoration has been expended by the state of Florida for land acquisition related to the expected "footprint" of future CERP projects. Although nonfederal CERP funding is widely acknowledged to be considerable (and by most accounts exceeds federal funding), it has in some cases anticipated details of future projects that have yet to be federally approved and designed in detail by the Corps. Although some estimates reference large nonfederal contributions toward CERP, estimates of expenditures that have been formally credited toward CERP's nonfederal share are typically smaller. For instance, in 2015 the state of Florida estimated that it had spent $2 billion toward implementing CERP. At the same time, actual credited nonfederal expenditures through 2014 were reported to be $1.05 billion in the 2015 CERP Report to Congress. Although some amount of nonfederal expenditures that have yet to be credited to CERP are expected to be counted eventually, it is possible that not all of these funds may be credited toward CERP cost shares. In recent years, the state of Florida's funding of CERP has decreased due to a number of factors, including a decline in state tax revenues and a focus on other aspects of Everglades restoration. For instance, the state has increased its funding for projects under its Restoration Strategies Regional Water Quality Plan, which is intended to address EPA narrative and numeric nutrient criteria in the Everglades imposed under the Clean Water Act (33 U.S.C. §§1251 et seq.). It is unclear whether state funding for CERP will return to previous levels at some point in the future. Previous estimates indicated that approximately $584 million in previous state expenditures would become "available" for crediting when "Generation 2" projects were authorized by Congress (as occurred in June 2014). Assuming no major influx of new funding by the state of Florida in the near future, the status of federal authorizing legislation for subsequent Everglades restoration projects (in particular those subject to prior spending by the state) may receive added attention. Congress has mandated multiple reports to regularly evaluate Everglades restoration. Independent review of Everglades restoration was required in WRDA 2000. As a result, the National Academies of Sciences, Engineering, and Medicine's Committee on Independent Scientific Review of Everglades Restoration Progress (CISRERP) was formed in 2004. Since this time, the committee has published biennial reviews of Everglades restoration (including both CERP and non-CERP projects). The most recent report was released in 2016. Separately, WRDA 2000 also required a report, authored jointly by the Corps and DOI, which focuses specifically on CERP implementation and is published every five years. The most recent of these reports was completed in 2015. Both reports outline accomplishments and challenges related to CERP and non-CERP projects. Finally, a report by the South Florida Ecosystem Restoration Task Force (a joint state/federal/tribal governance entity established in WRDA 1996) publishes a biennial strategy and report on restoration accomplishments. Progress has been made on Everglades restoration for both CERP and non-CERP projects. For CERP activities, significant accomplishments have included the construction of a number of pilot projects, the completion of studies, and the initiation of multiple construction projects. Table 3 , below, shows the status of recent major CERP projects. Additionally, some non-CERP projects are complete or nearing completion, whereas others are ongoing. In addition to progress on the construction of projects, baseline information and processes also have been established and the scientific understanding of many of the issues associated with Everglades restoration has improved significantly since initial enactment of CERP. For the most part, significant ecosystem benefits as a result of Everglades restoration construction projects have yet to be achieved. However, some preliminary effects have been noted. According to recent reporting, documented ecosystem benefits of projects have included increased water levels and vegetation response, a reduction in seepage loss (i.e., increased water remaining in the natural system), and improved water quality in some areas. Observers expect that most benefits will lag several years behind project construction and restoration of hydrologic conditions. Maximizing these benefits is expected to require extensive monitoring and adaptive management, which would further confirm and refine approaches to restoration. Selected CERP and non-CERP accomplishments as of June 2017 are discussed below. As noted above, Everglades restoration has achieved several milestones. Major achievements included accomplishment of several of the early steps that will be critical to the eventual completion of larger restoration projects. This includes the purchase by nonfederal project sponsors of most of the land expected to be required for CERP projects (a necessary first step in project construction). As discussed previously, many of these projects are expected to be credited toward the nonfederal cost share for individual projects. Early pilot projects that will influence the eventual prioritization and construction of larger CERP projects also have been completed. Specifically, design and installation of six pilot projects authorized in the Water Resources Development Act of 1999 ( P.L. 106-53 ) as well as under CERP in WRDA 2000 have taken place in recent years. For example, a pilot groundwater seepage barrier to the southeast of the Mod Waters project was completed and has been found to be successful in blocking subsurface migration of groundwater. Many non-CERP projects predate CERP and are therefore more established and in some cases closer to completion than CERP projects. Some non-CERP accomplishments include the completion of the Florida Keys Water Quality Improvement Project, as well as the NPS-constructed 1-mile bridge component of the Modified Water Deliveries project, which may be expanded in the future. Another major restoration project that predated CERP, the Kissimmee River Project (authorized in 1992 and initiated in 1999), is nearing completion. Some outside observers have noted that this project has already resulted in significant ecosystem benefits that demonstrate the potential for planned CERP projects. Among the Generation 1 CERP projects authorized in WRDA 2000 and WRDA 2007 (Picayune Strand Restoration, Site 1 Impoundment, Indian River Lagoon-South or IRL-South, and the programmatic authority for Melaleuca Eradication that was authorized by Congress in WRDA 2000), one project, Melaleuca Eradication, is considered complete. As of early 2017, the three remaining projects were all under construction, with some phases completed and others yet to begin. The 2016 NRC Biennial Review has noted preliminary ecosystem benefits associated with several of these projects. As previously noted, WRRDA 2014 ( P.L. 113-121 ) authorized four Generation 2 CERP projects, with total estimated costs of $1.9 billion: the C-111 Spreader Canal, Biscayne Bay Coastal Wetlands, C-43 West Basin Storage Reservoir, and Broward County Water Preserve Areas (WPAs). Two of these (C-43 Reservoir and Broward County WPAs) were new projects, whereas the two others (the C-111 Spreader Canal and Biscayne Bay Coastal Wetlands) were previously initiated by the state but required congressional authorization for federal participation. As of early FY2017, construction had been initiated or planned for initiation for all four projects. One Generation 3 CERP project, the Central Everglades Planning Project (CEPP), was authorized for federal construction in the WIIN Act. CEPP, which is made up of a suite of individual projects from the original CERP, is widely considered to be a high-priority project for Everglades restoration, and its status has received considerable attention. CEPP was initiated due to a perceived need to prioritize restoration projects in the central portion of the Everglades ecosystem and to enhance the prospects for Everglades restoration overall. Before CEPP, most restoration projects in the Everglades had focused on the periphery of the Everglades, rather than flows to Lake Okeechobee and the Central Everglades, as CEPP does. The preliminary estimated cost of CEPP is $1.9 billion. CEPP has yet to be requested by the Corps as a new construction start, and was not included in the President's FY2018 budget request. Three CERP projects (Loxahatchee River Watershed, Lake Okeechobee Watershed, and Western Everglades) were beginning or entering the planning phase as of publication of the NRC review in late 2016. Numerous other original CERP projects had yet to initiate planning. An internal Corps effort to reduce the time and cost of Corps studies was enacted on a permanent basis in WRRDA 2014. This program aims to limit the time and review of future Corps studies, including those for Everglades restoration projects. Despite the achievement of some milestones, outside reviewers have noted some challenges associated with Everglades restoration. These observers have pointed out that while there has been some progress toward restoring the Everglades, project implementation has been slower than expected due to a number of factors, such as appropriations levels and delayed project authorizations. As previously noted, increasing project costs are another challenge, as the total estimated cost of restoring the Everglades has gone up significantly over time. Finally, as the understanding of the ecosystem and local geology and hydrology has improved, other challenges have become apparent (for example, see box below, "Harmful Algal Blooms in Florida"). If the full benefits of restoration are to be realized, these challenges will need to be addressed. One widely noted challenge is the overall slow pace of Everglades restoration to date. Taken both individually and as a group, CERP projects have been implemented more slowly than initially anticipated. Although some projects are nearing completion, the project schedules envisioned in earlier program documents have for the most part not been maintained; a fraction of the project implementation reports originally envisioned under CERP have been finalized. Funding for projects is a related challenge for Everglades restoration, and one that could continue or even grow in coming years. Recently authorized Generation 2 and Generation 3 CERP projects may in some cases compete with ongoing Generation 1 and non-CERP projects for funding, and all of these projects must compete with other water resource projects and appropriations priorities. Even if funding were to be maintained at current levels, project implementation could slow if funding were spread out among multiple projects as they are authorized. In light of decreased funding by the state of Florida and its shift toward other restoration priorities in recent years, attaining new state funding where required for project cost shares also may be challenging. Changing information also poses issues for Everglades restoration. Recent studies have shown that the Everglades ecosystem was historically wetter than previously assumed; thus, more water than initially thought may be required to restore the system. At the same time, more than 1 million acre-feet in planned CERP water storage (much of this in the form of aquifer storage projects) has been shown to be infeasible by additional study. Finally, increasing potential for saltwater encroachment under various scenarios of sea-level rise adds further uncertainty to previous plans. The significance of potential new water needs for ecosystem health and for South Florida's people and industry, the effects of lost storage, and the resulting need (and feasibility) for revisions to old projects and/or construction of new projects has yet to be fully explored. Other challenges to Everglades restoration that may be of interest to Congress have been widely noted. These challenges include ongoing issues associated with water quality in central and southern Florida and the adequacy (and feasibility) of some restoration efforts in recreating historical hydrologic conditions; and ongoing degradation of species and ecosystems in south Florida due to invasive species and other factors (which in some cases appears to have accelerated in recent years). The interaction of these factors has the potential to impact the status and effectiveness of other Everglades restoration projects. Completion of project construction represents only one hurdle for Everglades restoration, with operations and monitoring of performance representing challenges in their own right. While preliminary benefits in the early stages of project operations are possible, many observers note that it will take time for projects to individually and collectively refine their operations and demonstrate significant long-term positive effects on Everglades-dependent species and the environment. | The Everglades is a unique network of subtropical wetlands in South Florida that is approximately half of its historical size, due in part to degradation from federal water projects built by the U.S. Army Corps of Engineers (the Corps). In 2000, Congress authorized a plan, termed the Comprehensive Everglades Restoration Plan (CERP), as a comprehensive framework for the restoration of the Everglades ecosystem in southern Florida. When originally authorized, it was estimated that CERP would cost a total of $8.2 billion and take approximately 30 years to complete. More recent estimates indicate that the plan will cost $16.4 billion and will take approximately 50 years to implement. At issue for Congress is oversight and implementation of this commitment. Under CERP, the federal government (through the Corps and various bureaus within the Department of the Interior) is required to fund half of the costs for restoration, with an array of state, tribal, and local agencies paying the other half. In addition to activities under CERP, a number of ongoing federal and state efforts that predate CERP (known collectively as "non-CERP" or "Foundation" activities) also factor into Everglades restoration. Although non-CERP efforts technically are not part of CERP, the two sets of activities are widely viewed as complementary. Since passage of CERP in 2000, the federal investment in Everglades restoration has increased. As of the end of FY2016, the federal government had provided in excess of $1.2 billion in funding for CERP, with the state providing matching funds for CERP projects, as well as advanced funding for land acquisition and construction for expected future CERP projects. Federal funding for non-CERP activities has also continued over this period. Together with CERP, all federal Everglades restoration efforts are estimated to have totaled in excess of $5 billion from FY1993 to FY2016. While estimates of nonfederal funding contributions to CERP vary depending on what methodology and assumptions are used, observers agree that to date, the state of Florida has spent more on Everglades restoration than has the federal government. Although overall progress has fallen short of initial timelines, progress has been made on a number of Everglades restoration projects. The majority of the land necessary for restoration projects under CERP has been acquired, and significant progress has been made on non-CERP activities (including improved water deliveries to Everglades National Park). Of the nine CERP projects that had been authorized by the end of 2016 (not including pilot projects), construction was ongoing or complete at eight projects and studies were completed or under way for a number of other projects. Despite this progress, some projects have seen setbacks in the form of schedule delays and cost escalations. Assuming that the plan does not change significantly and most of the 50 projects included in the original CERP plan are eventually required to complete the effort, many new authorizations and significant additional funding would be necessary. Reviewers of the restoration program have pointed out that at current rates of project authorization and funding, additional delays would be likely. Reductions to state funding and the enactment of new CERP project authorizations in 2014 and 2016 legislation have brought renewed attention to Everglades restoration. Restoration of the Everglades is one of the largest and most mature efforts of its kind; thus, debate and resolution of Everglades restoration issues has implications not only for South Florida but also for large-scale restoration initiatives elsewhere. This report provides an overview of the federal role in Everglades restoration. It discusses background, funding history, and major accomplishments and challenges to date in federal efforts to restore the Everglades. |
Successive U.S. Administrations have viewed Morocco as an important regional partner on security, trade, and development. Historically warm ties expanded after the terrorist attacks of September 11, 2001, when President George W. Bush sought the cooperation of moderate Arab governments in countering terrorism. His Administration designated Morocco a Major Non-NATO Ally in 2004 and concluded a bilateral Free Trade Agreement the same year (authorized by Congress under P.L. 108-302 ). The United States has continued to build strong relations with the kingdom under Presidents Obama and Trump, notwithstanding occasional friction over U.S. human rights criticism and the issue of Western Sahara, a disputed territory that Morocco claims and largely administers. High-level visits regularly occur, and the two countries recently agreed to restart a U.S.-Morocco Bilateral Strategic Dialogue (see " U.S. Relations "). Morocco's stability has taken on greater prominence amid conflicts in Libya and the Sahel region of West Africa. It is the only country in North Africa not to have experienced a terrorist attack since 2012; authorities regularly report the disruption of internal and transnational threats. King Mohammed VI weathered large urban protests during the 2011 regional wave of unrest known as the "Arab Spring," to which he responded with a new constitution devolving some executive powers to elected officials. The moderate Islamist Party for Justice and Development (PJD) has led the government since then, although the palace has increasingly moved to check its influence over policymaking in recent years. Amazigh (Berber) cultural rights, women's rights, administrative decentralization, and judicial independence have expanded under the 2011 constitution, even as these stated objectives remain works in progress. Some observers question whether Morocco can remain stable absent deeper changes. Since 2016, protests have surged in the historically marginalized north and east, apparently reflecting grievances over the economy, governance, and police brutality. Anger at perceived high-level cronyism and corruption has also fueled a boycott movement in 2018 targeting, in part, firms led by individuals seen as close to the palace and influential in both business and politics. Economic growth has been strong in recent years but has not always outpaced population growth. Unemployment and regional economic disparities remain salient challenges and drive high rates of emigration. Morocco's role in enforcing European efforts to curtail illicit migration across the Mediterranean has also sparked some domestic controversy. The king has undertaken several human rights initiatives that have drawn international praise in recent years, for example ending military trials for civilian suspects and affording legal registration to a handful of critical civil society organizations in Western Sahara. At the same time, activists and journalists probing sensitive issues such as transparency, human rights abuses, and protests in the restive northern Rif region have faced harassment and criminal prosecution. The ongoing crackdown on protests in the north and east has reportedly featured serious abuses, including excessive use of force and torture of detainees. The ongoing push and pull in Morocco over political power, economic opportunity, and freedom of expression is playing out amid a shifting regional and international context. Western efforts to encourage political reforms in the region have arguably waned since the 2013 leadership change in Egypt and the rise of the Islamic State in 2014. As elsewhere in the region, Moroccan citizens have continued to seek new ways to influence official decision-making, while state actors have toggled between a responsiveness to public demands and more hardline approaches. Morocco's foreign relations are focused on its Western partners (including the United States along with France, Spain, and the European Union); the Arab Gulf states; and friendly countries in sub-Saharan Africa. Since the "Arab Spring," Morocco has drawn closer to the Gulf Cooperation Council (GCC) countries, which have provided aid and investment. In 2015, Morocco temporarily redeployed its F-16 jets from counter-Islamic State operations to participate in the Saudi-led coalition in Yemen, where one F-16 crashed. The UAE, Saudi Arabia, and Qatar were respectively the second-, third-, and fourth-largest sources of foreign investment in Morocco as of 2016 (France was the top source), which may help explain why Morocco has strived to remain neutral in the rift between Qatar and other GCC countries. In mid-2018, Morocco cut ties with Iran for the second time in a decade, after accusing it of providing weaponry to the Polisario via Hezbollah, a U.S.-designated terrorist network. Morocco supports a two-state solution to the Israeli-Palestinian conflict, and King Mohammed VI chairs the Al Quds (Jerusalem) Committee of the Organization of the Islamic Conference, which seeks to bolster Muslim claims to the city. Morocco closed Israel's liaison bureau in Morocco and Morocco's office in Tel Aviv during the Palestinian intifada (uprising) in 2001. Links between the two countries nevertheless remain, as some 600,000 Israelis are of Moroccan origin and many travel there regularly. The king criticized the Trump Administration's December 2017 decision to recognize Jerusalem as the capital of Israel, stating that it would "negatively impact the prospects for a just and comprehensive solution to the Palestinian-Israeli conflict." Thousands of Moroccans joined street protests against the U.S. Embassy's move to Jerusalem in May 2018. Tensions between Morocco and Algeria—a regional rival and the Polisario's primary backer—have long stymied security and economic cooperation in North Africa. Partly in response, the king has launched various economic, trade, and exchange initiatives in sub-Saharan Africa, and Moroccan private sector investment in that region has accordingly increased since the 2000s. In 2016, in a sign of its increased outreach to Africa, Morocco joined the African Union (AU), having previously chosen to remain outside the organization due to the AU's recognition of the SADR as a member state. The shift suggested that Morocco would seek to counter the SADR's influence within AU institutions, but no longer viewed the SADR's expulsion as a prerequisite for its own participation. Morocco has also requested to join the Economic Community of West African States (ECOWAS), although it is not geographically contiguous with the bloc. The 2011 constitution requires the king to appoint a prime minister/head of government from the largest party in the directly-elected Chamber of Representatives. The king remains the arbiter of national political decision-making, the head of the military, and (as "Commander of the Faithful") the country's highest religious authority. In practice, King Mohammed VI continues to exercise significant policy influence and has regularly dismissed or reshuffled cabinet ministers. In early 2018, the king spent several months abroad after undergoing surgery in France, raising concerns among some observers about his health and ability to shape policymaking at home. Morocco's main Islamist political party, the Party for Justice and Democracy (PJD, also known as Al Misbah or "the lamp"), holds a plurality of seats in the Chamber of Representatives and has led a series of coalition governments since 2011. The PJD spent its first two decades of existence as an opposition party before its first electoral victory in the immediate aftermath of the 2011 protests and constitutional revision. The party again won a plurality of seats in the last legislative elections, held in 2016. In recent years, however, the palace and its political allies have taken steps to curtail the PJD's influence over policymaking. Then-Prime Minister and PJD leader Abdelilah Benkirane was unable to form a majority coalition in 2016 after the RNI party (National Rally of Independents, after its French acronym), widely seen as close to the palace, refused to join unless Benkirane agreed to exclude the PJD's coalition partner of choice (the Istiqlal or "independence" party) while including smaller parties at odds with the PJD's policy agenda. After months of stalled negotiations, the king dismissed Benkirane in early 2017 in favor of the PJD's then-deputy leader, former Foreign Minister Saad Eddine al Othmani—who quickly announced a coalition with the very parties to which Benkirane had objected. These included the Socialist Union of Popular Forces (USFP after its French acronym), a secularist opposition party that shares few policy priorities with the PJD and whose electoral strength has declined in recent cycles. A trend toward diminished PJD political influence was also visible in the aftermath of regional and municipal elections in 2015. The PJD won a plurality of seats and votes, but the pro-palace Party for Authenticity and Modernity (PAM)—founded by top royal advisor Fouad Ali el Himma—secured control of more regional councils. The PJD has generally refrained from pressing for deep political changes, preferring to reassure the palace of its ability to function within the established order. The party has nonetheless long espoused an anti-corruption message that can be understood as a critique of the status quo. This message appears to be popular, but the PJD's influence has been constrained by Morocco's political system and electoral rules. As the large protests of 2011 fade into the past, the palace and its allies may also feel more emboldened to intervene directly in politics and check the PJD. A perceived shift in Western donor attention away from democratic reforms and toward counterterrorism may also be a factor. The PJD itself may be responding to these trends. In its 2017 party convention, PJD members voted against a bid by Benkirane to remain party leader for a third term, replacing him with Al Othmani, who has arguably pursued a less populist tack and greater accommodation with the palace. The palace and government leaders have struggled to respond to unrest since 2016 in the northern mountainous Rif region, where ethnic Amazigh (Berbers) predominate. Protests have also surged in parts of the east, reflecting similar grievances over economic marginalization as well as a "deep distrust…in the formal political process." Human rights groups have decried lengthy prison sentences against Rif protest leaders as well as evidence of security force abuses and forced confessions. In October 2017, the king dismissed four cabinet ministers, two each from the leftist Party for Progress and Socialism (PPS) and the centrist Popular Movement (MP), after a judicial auditing report identified severe problems with the implementation of a Rif development project that the king had launched. The reshuffle appeared to be part of a wider effort to frame unresolved tensions as failures of the political class, despite a long history of conflict between Rif populations and the monarchy. Prosecutors have also secured lengthy prison sentences for Rif protest leaders. Morocco is a lower middle-income country; poverty and illiteracy remain widespread, despite sophisticated urban centers in Casablanca and Rabat. The economy is diverse: key sectors include agriculture, tourism, mining, and textiles and apparel. Remittances from Moroccans living in Europe are a source of foreign exchange and a social safety net. Through domestic and Western Sahara mines, Morocco controls nearly 75% of global reserves of phosphates, used in fertilizers. Annual economic growth has ranged from 1% to 5% over the past decade, according to the International Monetary Fund (IMF)—in line with regional averages, but not consistently outpacing population growth. The unemployment rate is officially 10% but unemployment is reportedly twice as high among youth. Socioeconomic hardships drive emigration and periodic unrest. Some view the palace's extensive role in the economy and political system as enabling corruption and conflicts of interest. Such sentiments, along with anger at high prices, have spurred the aforementioned boycott protest movement in 2018. Heavily reliant on fossil fuel imports to meet its domestic electricity needs, Morocco has sought investment in renewable energy, including large-scale solar and wind power infrastructure. Because the domestic cost of fuel and electricity are politically sensitive, Morocco historically subsidized these and other key commodities, a policy that the World Bank criticized in 2014 as "costly, inefficient, and… putting the medium-term sustainability of public finances at risk." Leveraging declines in global oil prices at the time, Morocco ended most fuel subsidies in 2015, with the notable exception of butane gas, used for cooking. Although the move did not set off major unrest, it has prompted public scrutiny over whether politically-connected gas distribution companies have benefitted disproportionately. Subsequent fuel price increases may also have contributed to frustrations over the high cost of living. The American Chamber of Commerce in Morocco lists 300 members, including large American firms such as 3M, Chevron, Citibank, Colgate Palmolive, Johnson & Johnson, and Microsoft. The State Department's 2018 Investment Climate Statement reports that Morocco "is actively encouraging and facilitating foreign investment, particularly in export sectors, through macro-economic policies, trade liberalization, investment incentives, and structural reforms." The report identifies a "lack of skilled labor, weak intellectual property rights protection, inefficient government bureaucracy, and the slow pace of regulatory reform" as key challenges. Morocco is the only country in North Africa not to have suffered a major terrorist attack since 2012, although it experienced large Al Qaeda-linked bombings in Casablanca in 2003 and an isolated attack on a tourist-friendly café in Marrakesh in 2011. Numerous small domestic Islamist extremist cells have long posed a security threat. In recent years, authorities also have repeatedly claimed to disrupt multiple terrorist cells and plots tied to Al Qaeda or the Islamic State. In 2017 alone, Moroccan authorities announced that they had arrested 186 terrorism suspects and broken up nine cells planning to attack a range of targets, including public buildings and tourist sites. The State Department has praised Morocco's "comprehensive counterterrorism strategy," noting that it includes "vigilant security measures, regional and international cooperation, and counter-radicalization policies." Al Qaeda in the Islamic Maghreb (AQIM), a regional network and U.S.-designated Foreign Terrorist Organization, has carried out attacks in other North African countries—as have several of its splinter factions and affiliated groups—but not in Morocco to date. In 2014, a State Department official stated in congressional testimony that Morocco's "holistic counterterrorism strategy" had made it "difficult for AQIM to effectively establish a foothold." At the height of the Islamic State's territorial control in Syria and Iraq (2014-2015), an estimated 1,500 Moroccans traveled to those countries as "foreign fighters," placing Morocco among the top global sources of Islamist foreign combatants there. Hundreds reportedly joined the Islamic State organization, while others—including three former Guantánamo detainees who had been repatriated to Morocco under the George W. Bush Administration—joined or formed Al Qaeda-linked groups. The above figures do not include various individuals of Moroccan descent who have been implicated in terrorist plots in Europe and the United States. The head of Morocco's Central Bureau of Judicial Investigations stated to the press in mid-2018 that the country had prosecuted and convicted more than 200 returning fighters. He also cited Moroccan legislation allowing police to arrest returnees upon arrival before processing charges against them. The four-decade dispute between Morocco and the independence-seeking Polisario Front over the former Spanish colony known as the Western Sahara remains unresolved. A sand "berm" constructed by Morocco marks the effective line of control as of a 1991 ceasefire ( Figure 1 ). Morocco administers the western part of the territory, roughly 80%, which it considers its southern provinces or the "Moroccan Sahara." The remainder to the east of the berm, which the Polisario refers to as "liberated areas," comprises largely uninhabited desert with some small settlements. Algeria hosts and backs the Polisario, but contends that it is not a party to the conflict. A small U.N. peacekeeping operation known as MINURSO, originally conceived to oversee a referendum on the final status of the region, monitors the ceasefire. Morocco asserts that it will accept only a solution that guarantees its sovereignty over the territory and will negotiate only on that basis—while the Polisario says it will accept only an outcome involving a referendum with independence as an option. In 2007, King Mohammed VI submitted to the U.N. a proposal to grant Western Sahara "autonomy" under Moroccan sovereignty, and he has pursued policies of political decentralization that he says are intended to empower residents of his "Saharan provinces." Since 2007, the U.N. Security Council has called for Morocco and the Polisario to engage in "negotiations without preconditions" to pursue a "mutually acceptable political solution" to the situation. The two sides have not held talks since early 2012, however. Neither side has shown an interest in compromise. U.N. Secretary-General António Guterres has named former German President Horst Köhler as his Personal Envoy charged with facilitating talks, replacing U.S. diplomat Christopher Ross, who held the post since 2009. (Moroccan officials criticized Ross as biased, particularly after a U.N. report in 2012 suggested that Morocco may have spied on MINURSO. ) U.N. Security Council Resolution 2351 (2017), which renewed MINURSO's mandate until April 2018, called on the parties (i.e., Morocco and the Polisario) to "resume negotiations... without preconditions and in good faith." In April 2018, U.S. diplomats proposed and secured a six-month renewal of MINURSO's mandate (instead of the usual yearlong extension), which some observers interpreted as an effort to pressure the parties to come to the table. Köhler has invited the Polisario and Morocco, along with Algeria and Mauritania, to meet in Geneva in December. Tensions within the territory and between Morocco and U.N. officials have often heightened during U.N. deliberations over MINURSO's mandate. In the lead-up to the mandate renewal in April 2018, Morocco accused the Polisario of violating the ceasefire with Algerian backing. Soon after, Morocco cut ties with Iran after accusing it of arming the Polisario via Hezbollah, although it did not publicly release evidence for this accusation. (Iran and Hezbollah denied the allegations. ) In 2016, Morocco expelled MINURSO civilian staff in response to remarks by then-U.N. Secretary General Ban Ki-moon referring to Morocco's "occupation" of the territory. Some MINURSO civilian staff began to return to headquarters in the city of Laayoune in 2017, but some positions were consolidated or relocated to other locations. Military tensions also escalated in the territory in 2016 and 2017 as Moroccan and Polisario forces reportedly entered the demilitarized "buffer zone" in an area near the Mauritanian border known as Guerguerate. With few sources of international leverage, the Polisario has sought to challenge Morocco's ability to conclude trade and natural resource extraction agreements pertaining to goods sourced in Western Sahara. The Court of Justice of the European Union has ruled in favor of the Polisario's stance, finding that goods produced in the Western Sahara should not benefit from an EU-Morocco tariff agreement, and that an EU-Morocco fisheries agreement does not apply to the Western Sahara coastline. The United States and Morocco have long-running, warm relations; Morocco was one of the first foreign powers to recognize the United States, by opening its ports to American ships by decree of Sultan Mohammed III in 1777. Longstanding U.S. goals in Morocco include promoting regional stability, countering terrorism, strengthening trade and investment ties, and supporting Morocco's development and reform efforts. The Trump Administration has characterized the U.S.-Morocco relationship as "a strategic partnership as we work together to advance our shared vision of a secure, stable, and prosperous North Africa and Middle East." High-level bilateral meetings occur regularly. In September 2018, Secretary of State Michael Pompeo and Moroccan Foreign Minister Nasser Bourita met in Washington DC and announced their intent to reconvene a Bilateral Strategic Dialogue in 2019, to be the first such session since 2015. (President Obama and King Mohammed VI initiated the Dialogue in 2012, and King Mohammed VI undertook an official state visit to Washington DC in 2013.) Bourita subsequently met with President Trump on the sidelines of the U.N. General Assembly in New York. These meetings followed a visit to Morocco by Deputy Secretary of State John Sullivan in June 2018, during which discussions were held on "a wide range of political, economic, and security issues, including advancing regional stability, expanding bilateral trade opportunities, and promoting ongoing initiatives on religious tolerance." Morocco and the United States have built strong military-to-military ties through regular training engagements, a large annual exercise known as African Lion (hosted by Morocco), and Moroccan acquisitions of significant U.S.-origin materiel, including F-16 jets and M1A1 tanks. Morocco's Major Non-NATO Ally status grants it priority in the delivery of U.S. excess defense articles (EDA; 22 U.S. Code §2321j)—among other potential implications for bilateral security ties—and it is a major global EDA recipient. A growing U.S. interest in countering Islamist extremist ideology (often referred to as Countering Violent Extremism or CVE) has coincided with Morocco's efforts to train domestic and regional imams in its traditions of religious moderation. In November 2017, the United States and Morocco launched a "global initiative to address homegrown terrorism" under the multilateral Global Counterterrorism Forum. The U.S.-Morocco partnership extends into regional initiatives. Morocco is a member of the U.S.-led Global Coalition to Defeat the Islamic State. A senior State Department official testified before the Senate in late 2017 that, "Morocco continues to distinguish itself as a capable security partner and regional leader, particularly with respect to countering violent extremism and radicalization on the African continent." In recent years, African Lion has expanded to include participants from other militaries in North and West Africa along with Europe. In 2017, Morocco arrested a U.S.-designated Hezbollah financier who was apparently en route from Guinea to Lebanon, later transferring him to U.S. custody to face trial. Morocco also hosted Libyan political talks that culminated in the 2015 agreement calling for a Libyan Government of National Accord (GNA), which the United States supports. With regard to Western Sahara, the Trump Administration has continued a policy of supporting U.N.-led diplomatic initiatives to achieve a negotiated solution. It has also used the same language as the Obama Administration to characterize Morocco's autonomy proposal, calling it "serious, realistic, and credible" and a "potential approach that could satisfy the aspirations of the people in the Western Sahara to run their own affairs in peace and dignity." In 2013 and 2016, brief diplomatic crises erupted over perceived Obama Administration pressure on Morocco in the United Nations over Western Sahara. U.S. bilateral aid, totaling $38.6 million in FY2017, aims to help Morocco improve its education system, local governance, and livelihood opportunities. In doing so, U.S. aid programs seek to "address the drivers of instability, such as social and economic marginalization, especially of youth, and the unmet expectations of government reforms." Morocco additionally began implementing a $450 million, five-year U.S. Millennium Challenge Corporation (MCC) compact in 2017, the country's second such program. The current compact seeks to address "two Moroccan Government priorities that have posed binding constraints to economic growth and investment: youth employability and land productivity." In line with its proposals to cut U.S. foreign aid globally, the Trump Administration proposed to decrease bilateral State Department- and USAID-administered aid to Morocco in both FY2018 and FY2019, although this would not directly affect MCC or Department of Defense activities. In enacting the FY2018 Consolidated Appropriations Act ( P.L. 115-141 ), Congress did not follow the Administration's FY2018 proposals for aid to Morocco, maintaining bilateral aid at FY2017 levels (see Table 2 below). It has been the policy of successive Administrations that funds appropriated for bilateral aid to Morocco may not be implemented in Western Sahara, as such use could be interpreted as a tacit endorsement of Moroccan sovereignty and therefore as a shift in U.S. diplomatic recognition policy. The House Appropriations Committee-reported FY2019 foreign aid appropriations bill ( H.R. 6385 ) would provide that funds "made available for assistance for Morocco shall also be made available for assistance for any region or territory administered by Morocco, including the Western Sahara." The bill reported in the Senate ( S. 3108 ) does not contain such a provision. In recent years, such measures have passed the House, but final enacted bills have contained modified language, providing that funds appropriated for global bilateral economic assistance "shall be made available for assistance for the Western Sahara." This is the case for the FY2018 Consolidated Appropriations Act (§7041[g] of Division K, P.L. 115-141 ). In response to similar provisions in previous appropriations measures, the Obama Administration initiated a program to strengthen civil society organizations based in the territory, drawing on Economic Support Fund (ESF) funding under the regional Middle East Partnership Initiative (MEPI). The House Appropriations Committee report on the FY2018 appropriations act ( H.Rept. 115-253 ) stated that "The Committee expects funds to support democratic reforms and economic development" in Western Sahara. | Morocco is a constitutional monarchy with an elected parliament and local government entities. King Mohammed VI, who inherited the throne in 1999, maintains overarching political authority but has taken some liberalizing steps. In 2011, amid domestic and regional protests, the king introduced a new constitution providing more power to elected officials and expanding individual rights. The monarch nonetheless remains the arbiter of national political decision-making, the head of the military, and—as "Commander of the Faithful"—the country's highest religious authority. The king's seizure of the initiative in 2011 and quick response to protests arguably helped the monarchy retain its popular legitimacy and stability. In recent years, officials have struggled to respond to resurgent protests and other forms of activism that apparently reflect ongoing grievances over economic challenges, corruption, and police brutality. Successive U.S. Administrations have viewed Morocco as an important regional security, trade, and development partner. Morocco is a designated Major Non-NATO Ally, and bilateral trade and investment have expanded since a U.S.-Morocco Free Trade Agreement was signed in 2004. The United States allocated $38.6 million in bilateral aid in FY2017; Morocco is also implementing a five-year $450 million U.S. Millennium Challenge Corporation (MCC) compact, its second such program. Security cooperation has also expanded amid instability in Libya and the Sahel region of West Africa. Morocco is a purchaser of U.S. defense materiel (including F-16 jets), hosts an annual military exercise in which some 1,000 U.S. personnel participate, and is a member of the U.S.-led Global Coalition to Defeat the Islamic State. In 2017, the United States and Morocco launched an "Initiative to Address Homegrown Violent Extremists" under the auspices of the multilateral Global Counterterrorism Forum (GCTF). In September 2018, Secretary of State Michael Pompeo and Moroccan Foreign Minister Nasser Bourita pledged to reconvene a high-level U.S.-Morocco Strategic Dialogue, last held in 2015. With regard to the disputed territory of Western Sahara, the United States has recognized neither Morocco's claim of sovereignty, nor the self-declared Sahrawi Arab Democratic Republic (SADR), led by the independence-seeking Polisario Front from exile in Algeria. The United States has provided funding and diplomatic backing for a U.N. peacekeeping operation, known as MINURSO, which was conceived to organize a referendum on the territory's final status but currently observes a 1991 ceasefire between Morocco and the Polisario. The U.N. Security Council—including the United States, a veto-capable permanent member—has called for Morocco and the Polisario to negotiate a "mutually acceptable political solution." U.S. officials have praised Morocco's proposal to grant the territory autonomy under Moroccan sovereignty, while maintaining support for the U.N.-led diplomatic process. U.S.-Morocco tensions temporarily erupted in 2013 and 2016 over perceived Obama Administration support for greater pressure on Morocco in the United Nations. (See CRS Report RS20962, Western Sahara, for background.) Congressional interest in the Western Sahara issue and the scope of U.S. aid has been reflected in recent appropriations legislation—most recently, §7041(g) of Division K, P.L. 115-141 and the accompanying Explanatory Statement—among other channels. Relevant bills and resolutions pending in the 115th Congress include the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2019 (H.R. 6385 and S. 3108, respectively), as well as H.Res. 1101 (Affirming the historical relationship between the United States and the Kingdom of Morocco […]). Morocco's foreign policy focuses on its Western partners (including the United States along with France, Spain, and the European Union); the Arab Gulf states; and sub-Saharan Africa. Since the 2011 "Arab Spring," Morocco has drawn closer to the Gulf Cooperation Council (GCC) countries, which have provided aid and investment; it has remained officially neutral in the current rift between Qatar and other GCC countries. In mid-2018, Morocco cut ties with Iran for the second time in the past decade, accusing it of providing military support to the Polisario via Hezbollah, a U.S.-designated terrorist network. Tensions between Morocco and neighboring Algeria—a regional rival and the Polisario's primary backer—have long stymied security and economic cooperation within North Africa. The king has instead launched various economic, trade, and exchange initiatives in sub-Saharan African countries, and in 2016, Morocco joined the African Union (AU), having previously refused to do so due to the organization's recognition of the SADR as a member state. |
During the last few decades, consumers in the United States have shown a significant interest in purchasing consumer products and packaging that appear to be beneficial—or at least not harmful—to the natural environment. In response to consumers' willingness to pay a premium for these products, manufacturers and others have increasingly touted the positive environmental attributes of their products in marketing materials, such as in advertising or on product labels. These environmental marketing claims may be self-declared by manufacturers or made by a government or third party through a certified "seal of approval" or "environmental label" awarded to products that meet certain environmental criteria. Some Members of Congress and commentators have argued that consumers may have difficulty verifying claims made about the environmental attributes of a particular product, and thus that environmental marketing messages have the potential to deceive consumers. According to these arguments, misleading claims may lead consumers to purchase products that lack the advertised environmental benefits or cause consumers to become indifferent to the claims. In addition, some commentators have argued that the prevalence of misleading claims in the marketplace could potentially discourage companies from competing to produce more environmentally beneficial products. This report examines the Federal Trade Commission's (FTC's) role in regulating environmental marketing claims under the Federal Trade Commission Act (FTC Act) and other federal laws. It begins with an overview of the FTC's enforcement powers under the FTC Act, including their potential extraterritorial application to unfair or deceptive claims made by foreign entities outside of the United States' territorial jurisdiction (e.g., labels on products that are imported into the United States). It then examines how the FTC has exercised its powers under the act and other laws in the environmental marketing context. The report concludes by considering legal issues potentially implicated by regulating environmental marketing claims, including questions involving the First Amendment, international trade law, and federal preemption of state law. This report does not examine the role that other federal agencies may play in regulating or monitoring the use of environmental marketing claims. It also does not consider the possible use of the Lanham Act to bring a private cause of action against an entity that makes a false or deceptive environmental marketing claim. Finally, it does not address "private industry self-regulation" of claims by the National Advertising Division (NAD) administered by the Council of Better Business Bureaus, which issues nonbinding decisions in alternative dispute resolution proceedings regarding advertising claims. The FTC derives its general consumer protection powers from Section 5 of the FTC Act. That section declares it unlawful for certain "persons, partnerships, or corporations" to engage in "unfair or deceptive acts or practices in or affecting commerce." The FTC Act's definition of "commerce" encompasses both domestic commerce among the states, U.S. territories, and the District of Columbia, as well as commerce with foreign nations. Under the FTC Act, the commission has authority to promulgate or issue trade regulation rules, interpretive rules, and policy statements, and to investigate certain trade practices. The FTC may enforce the act using administrative or judicial processes. There is no private right of action in the FTC Act. The commission's powers under the FTC Act are summarized below. Although a rule addressing a particular unfair or deceptive act or practice does not have to exist in order for the FTC to bring an enforcement action under Section 5 of the FTC Act, Section 18 of the act authorizes the commission to promulgate trade regulation rules, interpretive rules, and policy statements addressing unfair or deceptive acts or practices in or affecting commerce. When the commission promulgates a trade regulation rule under the FTC Act, the agency must follow the procedures outlined in the FTC Act and the Administrative Procedure Act (APA) (5 U.S.C. §553). In addition, promulgation (and in certain cases, amendment) of trade regulation rules requires the commission to publish a regulatory analysis. Trade regulation rules are subject to judicial review, and entities may petition the FTC for exemptions from them. In addition to granting the FTC general rulemaking powers, the FTC Act authorizes the commission to investigate certain trade practices, including foreign practices. The FTC may require persons to submit reports or answers to questions; make the submitted information publicly available (except for confidential or privileged information); and share the obtained information with federal, state, and foreign law enforcement agencies under certain conditions. This section discusses the general administrative and judicial processes that the FTC may use to enforce the FTC Act. The commission may bring an administrative complaint against an entity subject to its jurisdiction when the agency has "reason to believe" that the entity has violated the act. After notice and an opportunity for a hearing, the commission may issue an order instructing the entity to cease and desist from acts or practices that violate the act. If the entity subsequently violates an order that is in effect after it has become final, the United States may seek civil penalties (generally, up to $16,000 per violation), injunctions, and other equitable relief in federal district court. Often, however, respondents opt to settle with the FTC, and the parties enter into an agreement containing a consent order in which the respondent does not admit liability; waives judicial review of the order; and agrees not to engage in the allegedly unfair or deceptive acts or practices in the future. Depending on the circumstances, the FTC Act may provide one or more avenues for the FTC or Attorney General to seek judicial relief when an entity subject to FTC jurisdiction has violated, or is about to violate, the FTC Act. As described below, potential forms of relief include injunctive relief, civil penalties, and consumer redress (e.g., refunds). However, the FTC and defendants often settle these cases prior to trial. Section 13(b) of the FTC Act authorizes the commission to seek preliminary and permanent prohibitive injunctive relief in the proper federal district court in cases in which the commission has "reason to believe" that an entity subject to its jurisdiction is violating or is about to violate a provision of law enforced by the FTC, provided that such relief would be in the public interest. Several federal courts of appeals have held that Section 13(b)'s authorization of injunctive relief allows a federal court to exercise the full scope of its inherent equitable powers, permitting the court to order other equitable relief such as monetary consumer redress. The FTC may also bring a complaint in federal district court seeking imposition of a civil penalty (generally, up to $16,000 per violation) against an entity that knowingly violates a rule (not an interpretive rule) under the FTC Act respecting unfair or deceptive acts or practices. Moreover, the commission may bring an action seeking a civil penalty against an entity subject to FTC jurisdiction under the FTC Act that engages in an unfair or deceptive act or practice that was the subject of a prior final cease and desist order (not a consent order), regardless of whether that entity was originally subject to the order and provided that the entity had actual knowledge that its conduct was unlawful under Section 5(a)(1) of the FTC Act. Under Section 19 of the FTC Act, the commission may seek redress for consumers and others in state or federal court when an entity subject to its jurisdiction has violated (1) a trade regulation rule or (2) a final cease and desist order that applies to the entity, provided that a reasonable person would have known that the entity's violation was "dishonest or fraudulent." Available relief under this section includes "rescission or reformation of contracts, the refund of money or return of property, the payment of damages, and public notification" of the rule violation or unfair or deceptive act or practice, but Section 19(b) does not authorize "the imposition of any exemplary or punitive damages." The FTC frequently receives complaints from consumers about cross-border fraud, including allegations that a foreign business located outside of U.S. territory has engaged in unfair or deceptive acts or practices causing injury to consumers in the United States. It is possible that a foreign entity in a foreign country could make false or misleading environmental marketing claims that injure U.S. consumers. For example, a foreign manufacturer might affix deceptive labels to its products prior to their import into the United States. Partly in order to address cross-border fraud, Congress amended the FTC Act in 2006 to expand and clarify further the FTC's international enforcement authorities, allowing greater cooperation between the agency and foreign countries and specifically allowing extraterritorial application of the FTC Act by U.S. courts to certain conduct by foreign entities located in foreign countries. However, despite these amendments, the FTC may face several procedural hurdles in litigating cases against a foreign defendant who lacks a legal presence in the United States, including the challenges involved in serving process on foreign defendants in a foreign country; overcoming defendants' motions to dismiss for lack of personal jurisdiction or forum non conveniens ; engaging in discovery abroad; and obtaining recognition and enforcement of U.S. judgments by foreign courts. In addition to the commission's general investigative powers described above, the FTC may also assist certain foreign law enforcement agencies with investigations and enforcement actions involving potential violations of foreign consumer protection laws upon written request of the foreign agencies. The FTC may, with State Department approval, negotiate and enter into international agreements with foreign law enforcement agencies in certain circumstances for the purposes of receiving information and enforcement assistance from the agencies. Provisions of the FTC Act state that commission attorneys may assist the Attorney General in foreign litigation in which the FTC has an interest—and that the FTC may use appropriated funds to reimburse the Attorney General for retaining foreign counsel—with approval of the Attorney General. Complaints about cross-border fraud committed by foreign companies in foreign countries that injures U.S. consumers in the United States have raised questions about the extraterritorial application of the FTC Act to this conduct by U.S. courts. As noted above, the FTC Act defines "commerce" to include trade between the United States and foreign nations. Although federal courts of appeals had previously disagreed about whether the FTC Act could apply to activity outside of the territorial boundaries of the United States, Congress explicitly addressed the issue in legislation in 2006. Amendments to the FTC Act in the Undertaking Spam, Spyware, and Fraud Enforcement with Enforcers Beyond Borders Act of 2006 (U.S. SAFE WEB Act) provide that the FTC may use its enforcement powers to seek remedies for unfair or deceptive acts or practices that "(i) cause or are likely to cause reasonably foreseeable injury within the United States; or (ii) involve material conduct occurring within the United States." This amendment appears to demonstrate Congress's intent that the FTC Act apply to conduct by foreign companies that occurs outside of the United States but has (or is likely to have) certain effects on U.S. consumers, overcoming the statutory canon of construction applied by U.S. courts that there is a general presumption against extraterritoriality. Even prior to the U.S. SAFE WEB Act amendments, the FTC had brought enforcement actions in federal district court against foreign defendants whose conduct in a foreign country allegedly caused injury to consumers in the United States. However, the FTC may face procedural challenges that make civil litigation in a U.S. court against foreign entities with no legal presence in the United States time-consuming, expensive, or impossible, including challenges involved in serving process on foreign defendants in a foreign country; overcoming defendants' motions to dismiss for lack of personal jurisdiction or forum non conveniens ; engaging in discovery abroad; and obtaining recognition and enforcement of U.S. judgments by foreign courts. The FTC's enforcement of Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices in or affecting commerce, is central to the agency's role in regulating environmental marketing claims. To explain to businesses and the public how the FTC interprets Section 5 in determining which environmental marketing claims are unfair or deceptive, the agency has issued nonbinding Guides for the Use of Environmental Marketing Claims. Because these "Green Guides" are administrative interpretations of law, the FTC cannot bring an enforcement action alleging a violation of them per se , but must find that the practice at issue is unlawful under Section 5 of the FTC Act or other applicable law. In addition to enforcement efforts directly under Section 5 of the FTC Act, the FTC also enforces various other laws passed by Congress aimed at assisting consumers in making meaningful comparisons regarding products' environmental attributes. Most of these laws state that violators are subject to FTC enforcement actions under Section 5 of the FTC Act. As noted above, Section 5 of the FTC Act prohibits unfair or deceptive acts or practices in or affecting commerce. The FTC's Guides for the Use of Environmental Marketing Claims seek to assist businesses and the public in making lawful environmental marketing claims. The "Green Guides" explain how the FTC believes a consumer would interpret certain terms or symbols that appear in claims made about products, packaging, or services. Building upon existing agency policy statements, such as those regarding deception and advertising substantiation, the guides provide general principles for environmental marketing regarding claim qualification; overstatement of environmental attributes or benefits; substantiation of comparisons between products; and unqualified general environmental benefit claims. The guides frequently use examples to illustrate these principles. The Green Guides also provide guidance to entities making specific environmental marketing claims. New claims addressed by the guides in the 2012 revision include those pertaining to carbon offsets; certifications and seals of approval by independent third parties; "free-of" and "non-toxic" claims; and claims that a product is made with renewable energy or materials. Other claims addressed in the guides include compostable claims; degradable claims; ozone-safe and ozone-friendly claims; recyclable claims; recycled content claims; refillable claims; and source reduction claims. The guides do not include specific guidance for "organic," "natural," or "sustainable" claims. The Green Guides are not legally binding FTC rules. They appear to be administrative interpretations of law that inform businesses and the public of how the FTC interprets Section 5 of the FTC Act in the context of environmental marketing claims. Thus, the FTC cannot bring an enforcement action alleging a violation of the Green Guides per se , but must find that the practice at issue is unfair or deceptive under Section 5 of the FTC Act or other applicable law. Furthermore, the Green Guides do not preempt state laws, and compliance with state laws is not a safe harbor from FTC enforcement action. In addition to its general enforcement powers under Section 5, the FTC also enforces trade regulation rules it has promulgated under the FTC Act. These include rules regarding the labeling and advertising of home insulation and advertising of fuel economy for new automobiles. In addition to its enforcement efforts under Section 5 of the FTC Act, the FTC also enforces various other laws passed by Congress aimed at assisting consumers in making meaningful comparisons of the environmental attributes of different products. These laws, which could be construed as regulating environmental marketing claims, include the following: The Energy Policy and Conservation Act of 1975 (EPCA), as amended, which directed the FTC to promulgate labeling rules concerning the energy and water use of certain covered consumer products in consultation with the Department of Energy (DOE). EnergyGuide labels generally must show, among other things, the "estimated annual operating cost of such product," as well as the "range of estimated annual operating costs for covered products [of the type] to which the rule applies." EPCA also directed the FTC to promulgate rules regarding the testing and labeling of recycled oil. The Dolphin Protection Consumer Information Act of 1990 (DPCIA), which, among other things, makes it a violation of Section 5 of the FTC Act for any producer, importer, exporter, distributor, or seller of any "tuna product" that is "exported from or offered for sale in the United States" to misrepresent that the product is "dolphin safe" or otherwise falsely suggest that the tuna in the product "were harvested using a method of fishing that is not harmful to dolphins" if the tuna were harvested in a certain manner outlined in the statute. The Energy Policy Act of 1992, which directed the FTC, in consultation with other federal agencies, to establish "uniform labeling requirements" that provide the costs and benefits of alternative fuels and alternative-fueled vehicles to assist consumers in their purchasing decisions. The Petroleum Marketing Practices Act (PMPA), as amended by the Energy Policy Act of 1992, which, among other things, regulates the determination, certification, disclosure, and display by various parties in the fuel supply chain of the "automotive fuel rating" (e.g., "octane rating") of motor vehicle fuels, and requires manufacturers to represent properly the automotive fuel rating requirements of new motor vehicles. The Energy Independence and Security Act of 2007, which includes provisions regarding the labeling of retail diesel fuel pumps with, in general, "the percent of biomass-based diesel or biodiesel that is contained in the biomass-based diesel blend or biodiesel blend that is offered for sale." To enforce Section 5 of the FTC Act and trade regulation rules promulgated thereunder in the environmental marketing context, the FTC (or Attorney General) has brought administrative or judicial complaints against entities subject to its jurisdiction. These complaints generally allege that the entity has violated the act, a regulation, or a prior commission order by engaging in unfair or deceptive environmental marketing practices. As described below, such allegations include that an entity, in connection with advertising or selling a product, has made express or implied misrepresentations; failed to substantiate claims; or made deceptive omissions of material fact. Examples of environmental marketing claims alleged to violate Section 5 of the FTC Act include claims that a product or its packaging is made of or contains post-consumer recycled content; recyclable by "a substantial majority of consumers or communities where the item is sold"; degradable, biodegradable, or photodegradable; free of volatile organic compounds or chemicals; certified by an independent third party as environmentally beneficial according to objective standards; manufactured using an environmentally friendly process; likely to result in a certain amount of energy savings; generally beneficial to the environment; free of chlorofluorocarbons; or "ozone friendly." The commission has also brought enforcement actions in which it has alleged a violation of Section 5 more specifically tied to a particular product. These include allegations that an entity has misrepresented the light output and lifetime of LED lamps; that fuel or motor oil additives will increase fuel economy and lower toxic emissions; that pesticides are "practically nontoxic"; or that coffee filters are manufactured without chlorine. In some cases, the FTC or Attorney General has alleged that respondents violated trade regulation rules enforced by the commission. For example, it has been alleged that respondents violated the Textile Fiber Products Identification Act and its implementing regulations by misrepresenting that its textile products contain "bamboo"; or the rule concerning the Labeling and Advertising of Home Insulation ("R-value Rule") by misrepresenting home insulation's resistance to heat flow. In many cases, an entity and the FTC have agreed voluntarily to a consent order or stipulated court order settling a case. These settlements typically require an entity to refrain from making (or providing others with the means of making) future express or implied misrepresentations that a product or its packaging provides a specific or general environmental benefit, at least not without proper qualification. The entity must also generally rely on "competent and reliable evidence" in order to substantiate any representations that it makes. The orders typically contain language stating that the respondent does not admit liability but will comply with certain record-keeping requirements; disseminate the order to current and future personnel; notify the commission when major events affecting the entity (e.g. the dissolution of a corporation) might affect its compliance obligations; and submit a compliance report. A consent order may contain language providing that it will terminate on a future date. Some commentators have suggested that certain environmental marketing messages have the potential to deceive consumers, and that the prevalence of such messages in the marketplace may discourage companies from competing to create more environmentally beneficial products. Environmental marketing claims may be self-declared by manufacturers in advertising or on product labels, or made by a government or third party through a certified "seal of approval" or "environmental label" awarded to a product that meets certain environmental criteria. These claims may concern a single environmental attribute or relate to the environmental impacts of a product during all or part of its life cycle, such as the effect on the environment of the product's manufacture, distribution, use, or disposal. Currently, federal regulation of environmental marketing claims consists primarily of the FTC's case-by-case enforcement approach under Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices in commerce. Through the Green Guides, the commission has provided nonbinding guidelines explaining how it might enforce Section 5 in the environmental marketing context. The FTC and other federal agencies also enforce federal laws and regulations that address specific types of environmental claims such as "dolphin-safe" or "organic" claims. The federal government has also established voluntary labeling programs such as Energy Star that allow manufacturers to affix a label to a product if a third party certifies that the product has met environmental criteria set by federal agencies. Finally, in some contexts, the federal government has required manufacturers to disclose certain information about their products in marketing materials, including on labels. While the FTC's Green Guides and private voluntary standards, such as the International Organization for Standardization (ISO) 14020 series of standards for environmental labels and declarations, to protect consumers currently shape many environmental marketing claims, environmental marketing claims may also be regulated by, among other things: (1) enacting a government standard to set a floor for regulation and allowing private voluntary standards to provide stricter requirements or (2) codifying a private voluntary labeling and marketing standard into law or using such a standard as a basis for a law. For instance, Congress could compel manufacturers to disclose certain environmental attributes of a product or its packaging, as it has done with the EnergyGuide label. In addition, an existing voluntary environmental labeling program, such as the Energy Star program, could be expanded to cover more product categories and attributes. Under the Energy Star program, the federal government sets specifications that products must meet to qualify for a government-owned label; licenses third parties that determine whether products conform with these specifications; and monitors use of the label to ensure it remains meaningful to consumers. This section examines legal issues potentially implicated by these various approaches to federal regulation of environmental marketing claims, including issues involving the First Amendment, international trade law, and preemption of state law. Challenges related to the First Amendment right to free speech may arise from environmental marketing standards. The First Amendment restricts the government's ability to constrain speech; however, some types of speech may be restricted to a greater extent than others. This section discusses the tests a reviewing court may apply in a First Amendment challenge to different hypothetical legislative schemes regulating environmental claims in advertisements and on product labels. Such legislation could regulate how manufacturers or sellers make certain claims about their products in advertisements or on labels. For example, standards governing the use of terms such as "recyclable" or "biodegradable" may raise questions about the constitutional limits of regulating commercial speech. Requiring manufacturers to disclose certain information relating to the environmental characteristics of their products in advertisements and labels may raise questions about the constitutionality of legislation that compels speech. The Supreme Court has held that the Constitution affords less protection to commercial speech than other constitutionally safeguarded forms of expression. Commercial speech is "speech that proposes a commercial transaction." The Court has further noted that the combination of speech in an advertising format, that references a specific product, and for which the speaker has an underlying economic motivation is "strong support" for characterizing such speech as commercial speech. Commercial speech is subject to a more relaxed level of scrutiny, often described as intermediate scrutiny, than other forms of protected speech. Central Hudson Gas and Electric Corporation v. Public Service Commission of New York provides the four-part test used to analyze whether a regulation of commercial speech is permissible under the First Amendment. The first prong of the test examines whether the speech at issue is protected. For commercial speech to be protected, it must at least concern a lawful activity and not be misleading. The government has authority to ban commercial messages which are "more likely to deceive the public than to inform it" without running afoul of the First Amendment. Second, there must be a substantial government interest behind the regulation. Third, the regulation must "directly advance" that substantial interest. The Court has noted that "in the commercial context, the speech-restrictive means chosen [must] provide more than 'ineffective or remote support' for a legitimate governmental policy goal." Finally, the restriction must be no more extensive than necessary to further the government interest. This fourth prong was further clarified by the Court in a case decided nine years after Central Hudson . The Court explained in Board of Trustees of the State University of New York v. Fox that the fourth prong did not amount to a least restrictive means requirement, but rather necessitated a less rigorous test. The fit between the regulation and the interest need not be perfect, but simply reasonable. While restrictions on commercial speech are subject to intermediate scrutiny, if a restriction applies where commercial and noncommercial speech are inseparable, strict scrutiny analysis is required. How is this commercial speech test applied in the context of restrictions on speech relating to environmental marketing? A 1994 decision from the U.S. Court of Appeals for the Ninth Circuit provides a sample case for a First Amendment challenge to environmental marketing restrictions imposed at the state level. In 1990, California adopted a law prohibiting a manufacturer or distributor of consumer goods from representing their products as "ozone friendly," "biodegradable," "photodegradable," "recyclable," or "recycled" unless the products satisfied the statutory definition of each term. The law was enacted following the efforts of an interstate task force, which found that there were disparities in the way these terms were used, and was concerned that the resulting confusion "creat[ed] a fertile ground for abusive business practices." In Association of National Advertisers, et al. v. Lungren , several trade associations challenged the law as impermissibly restricting commercial and noncommercial speech. The court began by addressing the plaintiffs' claim that the law regulated not just commercial speech but also noncommercial speech. The court rejected this argument, concluding that by the statute's own terms, the only speech being restricted were claims about specific consumer goods in advertisements and product labels. Therefore, the speech met the three criteria used by the Supreme Court to find evidence of commercial speech: it was in an advertising format, it referenced a specific product, and the speaker had an underlying economic motive. Additionally, the plaintiffs failed to provide any examples in which "political, editorial, or otherwise non-commercial representation[s]" would fall within the scope of the statute's restrictions. Since the court determined that the restriction applied to commercial speech, it was appropriate to analyze its constitutionality under the intermediate scrutiny test articulated in Central Hudson . First, the court determined that the speech at issue should be afforded First Amendment protection because it concerned a lawful activity and was not outright misleading. Instead, the court concluded that the use of terms like "recyclable" and "biodegradable" was only potentially misleading because whether a specific product bought by a specific consumer could be recycled or would biodegrade depends on factors such as access to recycling facilities and composting techniques in local landfills. The parties agreed that California satisfied the second prong of the Central Hudson test since it had a substantial interest in "ensuring truthful environmental advertising and encouraging recycling." Moving to the third prong of the Central Hudson test, the court determined that the statute directly advanced California's interests. The case's record had "abundant support" for the idea that environmental marketing increased consumer demand for environmentally friendly products. Without standardized terms, such marketing could present "potentially specious claims or ecological puffery[,]" leading to an increase in sales of "products with minimal environmental attributes." Therefore, it was reasonable to believe that uniform standards for environmental marketing terms would promote the state's interest in truthful advertising and consumer protection. Finally, the court addressed the fourth prong, which is described as "a more deferential 'far-less-restrictive means test' for commercial speech." The court determined that there were no less restrictive and more precise alternatives available that achieved California's stated interests. The two alternatives offered by the plaintiffs were rejected because they were less precise than the existing statute, and required more speech by forcing manufacturers to qualify or explain their use of nonconforming terms, respectively. Restrictions on commercial speech must withstand Central Hudson 's intermediate scrutiny in order to be upheld when faced with a First Amendment challenge. In accordance with this test, regulation of environmental marketing claims in advertisements and labels must be consistent with the government's interest in regulating such commercial speech, and must directly advance that interest. Legislation that compels commercial speech, such as requiring the disclosure of environmental characteristics on product advertisements and labels, may be subject to a different standard of review based on how a reviewing court interprets the nature of the compelled speech. In general, the required disclosure of "accurate, factual, commercial information does not offend the core First Amendment values of promoting efficient exchange of information or protecting individual liberty interests." Therefore, compelled commercial speech will be subject to a more relaxed level of scrutiny than the Central Hudson test if it satisfies the criteria established in a 1985 Supreme Court case, Zauderer v. Office of Disciplinary Counsel . First, the compelled disclosure must concern "purely factual and uncontroversial information." Second, the disclosure must be "reasonably related" to a legitimate government interest. While Zauderer addressed a disclosure requirement that was aimed at preventing deception to customers, later circuit courts have applied its reasoning to other governmental interests. Lastly, the disclosure requirement must not be "unjustified or unduly burdensome" such that it chills protected commercial speech. Consequently, environmental marketing requirements mandating the disclosure of purely factual and uncontroversial information would be governed by the "reasonable relationship" standard articulated in Zauderer . However, a heightened standard of scrutiny is likely to apply to laws that require manufacturers to espouse a particular opinion; perform ideological speech; or disclose nonpurely factual statements, which may for instance be designed to evoke a particular emotional response. Laws regulating environmental marketing claims made on product labels could potentially raise issues concerning the United States' trade obligations under the World Trade Organization agreements, specifically the General Agreement on Tariffs and Trade 1994 (GATT) and the Agreement on Technical Barriers to Trade (TBT Agreement). The GATT generally prohibits WTO Members from enacting measures that discriminate against imported products in favor of like domestic products or like products from other countries unless an exception applies. However, WTO jurisprudence concerning labeling measures has focused on the TBT Agreement, which seeks to ensure that standards-related measures, including labeling requirements or standards, do not create unnecessary obstacles to international trade while at the same time allowing WTO Members to take actions necessary, for example, to protect human health and the environment. As a WTO Member, the United States has an obligation to comply with the disciplines of the TBT Agreement. If a WTO Member believes that an environmental labeling measure promulgated by the United States, one of its state or local governments, or a nongovernmental body within U.S. territory is not in compliance with the disciplines of the TBT Agreement, the Member may challenge the measure using procedures in the WTO agreements. Consultations and dispute settlement under the TBT Agreement are governed by the dispute settlement rules of the GATT and the Dispute Settlement Understanding. WTO Members have challenged one of the environmental marketing laws enforced by the FTC as inconsistent with U.S. obligations under the WTO agreements. As noted above, the Dolphin Protection Consumer Information Act of 1990 (DPCIA) regulates representations that a tuna product exported from, or offered for sale in, the United States is harvested in a manner that does not harm dolphins. In 2008, various WTO Members requested consultations with the United States with respect to the DPCIA, its implementing regulations, and a related federal court of appeals decision. In 2012, the Appellate Body found that the U.S. "dolphin-safe" labeling measure violated the TBT Agreement by discriminating against tuna products imported from Mexico. Subsequently, the United States modified its regulations implementing the DPCIA in an effort to bring them into conformity with the Appellate Body's ruling. However, in November 2013, Mexico requested the establishment of a compliance panel to determine whether the United States' changes to its regulations brought them into conformity with the United States' WTO obligations. According to the WTO's website, a compliance panel has been established but has not yet issued its final report to the parties. This section examines the United States' trade obligations under the TBT Agreement potentially implicated by a law or standard governing environmental marketing claims made on product labels. It analyzes when such a law would fall within the coverage of the TBT Agreement, and discusses potentially relevant trade obligations under the agreement pertaining to the preparation, adoption, and application of an environmental labeling measure that qualifies as a "technical regulation." If a WTO Member challenged a U.S. environmental labeling measure for consumer products as inconsistent with the TBT Agreement, an initial question that might arise is whether the labeling measure is a "technical regulation" or "standard" covered by the TBT Agreement. If a WTO panel were to find that a measure promulgated by the United States federal government meets one of these definitions, then the United States would have to comply with several trade obligations with respect to that measure, including obligations concerning nondiscrimination; trade-restrictiveness; transparency; and reliance on international standards as a basis for regulation. In addition, if a private standardizing body or state or local government within United States territory were to promulgate a labeling measure that qualified as a "standard," the United States would generally have to take reasonable measures to ensure that this entity complied with the Code of Good Practice for the Preparation, Adoption and Application of Standards in Annex 3 of the TBT Agreement. Because WTO jurisprudence under the TBT Agreement has focused almost exclusively on obligations related to "technical regulations," this section examines when an environmental labeling measure would potentially qualify as a "technical regulation," and discusses the obligations that the United States would have with respect to such a measure under the TBT Agreement. Criteria for marking or labeling products may fall within the definition of a "technical regulation" under Annex 1.1 to the TBT Agreement. According to the Appellate Body's interpretation of Annex 1.1, a technical regulation is a measure (1) that is applicable to an identifiable product or group of products, although the measure does not have to identify these products expressly; (2) that lays down product characteristics, including packaging, marking, or labeling requirements, in either positive or negative form "or their related processes and production methods"; and (3) with which compliance is mandatory. An environmental labeling measure seems likely to satisfy factor (1) because it would arguably apply to a group of products that share a particular characteristic regulated by the measure, such as "consumer products that claim to be biodegradable." Under factors (2) and (3), a measure stating that products must be labeled with certain information would appear to lay down mandatory product characteristics within the meaning of the TBT Agreement. In addition, WTO case law suggests that a measure permitting a product to carry a certain label only if the product possesses certain characteristics is a "technical regulation" that lays down mandatory product characteristics. In United States—Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products , the Appellate Body held that a U.S. law, the Dolphin Protection Consumer Information Act (DPCIA), laid down product characteristics when the law provided that an entity would violate Section 5 of the FTC Act if the entity voluntarily labeled a tuna product as "dolphin-safe" when the product's harvesting methods failed to meet certain dolphin safety criteria. The Appellate Body emphasized that the DPCIA provided penalties for the voluntary use of the government-designed "dolphin-safe" label, as well as any other "dolphin safety" label or statement on a product when the product's harvesting methods did not meet certain criteria. Thus, when a measure subjects a company to government enforcement proceedings or penalties for voluntarily using a label on a product that possesses or lacks certain characteristics, the labeling measure could potentially constitute a "technical regulation" under the TBT Agreement. Some environmental labeling measures might regulate claims made on labels concerning product characteristics that are not physical characteristics. For example, some labeling measures might regulate claims addressing the environmental impacts of a product during all or part of its life cycle, such as the effect on the environment of the product's manufacture, distribution, use, or disposal. These characteristics of a product may be considered non-product-related processes and production methods (NPR PPMs). NPR PPMs are those processes and production methods that do not leave a trace in the final product. An example of an environmental labeling measure based on NPR PPMs is a law stating that a piece of furniture may carry a certain label only if it is made with "sustainably managed wood." It remains unclear whether the TBT Agreement applies to a measure that requires a product label to provide information regarding the product's NPR PPMs, or permits a product to carry a label concerning NPR PPMs only if the product's PPMs meet certain criteria. In a recent case not involving a labeling measure, the Appellate Body confirmed that the TBT Agreement may cover product-related PPMs, but declined to address the extent of the relationship that the PPM must have with the product in order for the TBT Agreement to apply. Commentators have noted that because of lingering ambiguity in the text of the TBT Agreement, it is unclear whether the agreement covers labeling of NPR PPMs. If outside the scope of the TBT Agreement, a U.S. labeling measure might be subject to the GATT, including Article I:1, which sets forth most-favored nation treatment obligations, or Article III:4, which contains national treatment obligations pertaining to a WTO Member's internal regulations, if there is sufficient government involvement in its formulation, adoption, or application. However, it is unclear whether these GATT provisions allow a WTO Member to treat an imported product less favorably than a domestic product (or product from another country) solely because the imported product's NPR PPMs differ from those of the domestic product in a way that the regulating Member deems undesirable. If a WTO panel were to determine that a labeling measure was inconsistent with the GATT, then the United States might raise defenses under one or more of the exceptions in GATT Article XX pertaining to protection of "human, animal, or plant life or health" or "conservation of exhaustible natural resources." It is important to note, however, that it is unclear to what extent the United States may assert these exceptions when the measure at issue seeks to protect solely those persons or resources outside of U.S. territory. If a WTO panel were to find that an environmental labeling measure was a "technical regulation" under the TBT Agreement, the United States would have WTO obligations pertaining to the preparation, adoption, and application of the measure, including obligations concerning nondiscrimination; trade-restrictiveness; transparency; and reliance on international standards as a basis for regulation. Under TBT Agreement Article 2.1, the United States has an obligation to ensure that a labeling measure that is a "technical regulation" does not treat imported products less favorably than like domestic products or like products imported from other countries. To decide whether products are "like," a panel generally seeks to determine whether a competitive relationship exists between the products by considering several factors. In the past, the Appellate Body has suggested that a product which presents greater health concerns might not be "like" a substitute safer product, at least insofar as these concerns "have an impact on the competitive relationship between and among the products" at issue. It is possible that a panel would extend this reasoning to imported products that present greater environmental concerns. Thus, it is possible that a U.S. environmental labeling measure could treat an imported WTO Member product less favorably than a domestic product or product from another country based on the fact that the domestic product (or product of another country) was better for the environment or health when compared to the imported WTO Member product that possessed the same physical characteristics. If a measure applies to "like products," then a panel would probably next consider whether the measure discriminates against the imported products by granting these products less favorable treatment than the like domestic products or products of another country. The Appellate Body has held that a measure grants an imported product less favorable treatment when it (1) modifies the conditions of competition to the detriment of the imported product as compared to the like domestic product or like product of another WTO Member; and (2) this detrimental impact "reflects discrimination" against the imported product. Because access to an environmental label may provide an advantage to a product in the marketplace, a WTO panel might determine that the de jure or de facto denial of access to the label for like imported products treats these products less favorably. For a complainant to establish a violation, it must demonstrate a genuine relationship between the labeling measure and the detrimental impact on competitive opportunities for the imported products. Such a relationship may exist, for example, when the government creates "incentives for market participants to behave in certain ways, and thereby treat[s] imported products less favorably." For instance, less favorable treatment may result from a labeling measure that "entails higher costs" for handling imported products than domestic products. A measure that is discriminatory may be consistent with the TBT if the discrimination stems from a legitimate regulatory distinction. To stem from such a distinction and avoid violating TBT Agreement Article 2.1, a labeling measure that appears to discriminate de facto against like imported products must be "even-handed." One example of a lack of evenhandedness is when "informational requirements imposed on upstream producers under [a measure] are disproportionate as compared to the level of information communicated to consumers through mandatory retail labels." Under Article 2.4 of the TBT Agreement, a WTO Member must use relevant international standards or parts thereof as a basis for their technical regulations except when the standards would not effectively or appropriately assist the Member in fulfilling its legitimate objectives. One international standard that could potentially serve as the basis for an environmental labeling measure is the International Organization for Standardization (ISO) 14020 series of standards for environmental labels and declarations. This standard would appear to meet the definition of "standard" in Annex 1.2 of the TBT Agreement, and the ISO would appear to qualify as an "international body" under Annex 1.4. For the United States to have an obligation to use a standard as a basis for regulation, the standard must be "relevant," which means that it deals with the same product as the domestic regulation and covers similar characteristics of that product, or at least regulates the same subject matter. Thus, a WTO panel's determination of relevance would likely involve a comparison between the U.S. labeling measure and the potentially relevant international standard. For an international standard to be "used as a basis" for a U.S. labeling measure, the measure need not conform to the standard in all respects; rather, the standard or its relevant parts must serve as the "principal constituent or fundamental principle" of the measure. In addition, the measure and standard cannot be contradictory. Notably, the United States would not have to use a relevant international standard as a basis for a labeling measure when that standard would not effectively or appropriately assist it in fulfilling the United States' legitimate objectives. WTO panels have suggested that an international standard may be ineffective or inappropriate at fulfilling the objective of providing consumers with information when the standard does not allow the Member to convey to consumers all of the critical information that the Member wants to provide. In order to ensure that technical regulations do not create unnecessary obstacles to international trade, Article 2.2 of the TBT Agreement states that technical regulations must not be "more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create." Objectives identified in the TBT Agreement or by the Appellate Body as "legitimate" that could be cited in support of an environmental labeling measure include "providing accurate and reliable information [to] protect consumers from being misled or misinformed," as well as the "protection of human health or safety, animal or plant life or health, or the environment." A panel evaluating whether a labeling measure is more trade-restrictive than necessary to fulfill such an objective would likely engage in a fact-specific examination of, among several other things, the degree to which the technical regulation as written and applied "actually contributes to the legitimate objective pursued by the Member." The Appellate Body has indicated that a measure may satisfy Article 2.2 even if it does not completely fulfill its legitimate objective. The TBT Agreement also contains provisions intended to increase the transparency of central government bodies' promulgation of mandatory technical regulations. If Congress (or a federal agency like the FTC) proposes a technical regulation that may have a significant effect on the trade of other Members in the absence of, or in deviation from, a relevant international standard, the agreement obligates the United States to notify interested parties in other Member countries and allow them to comment on the proposal. WTO Members must make adopted technical regulations available to interested parties in other Member countries. The TBT Agreement contains several additional obligations with respect to the preparation, adoption, and application of technical regulations by central government bodies. For example, Members have an ongoing obligation to reassess their technical regulations to ensure that circumstances or objectives still require them and that they are the least trade-restrictive means of addressing such circumstances or objectives. The agreement also states that Members should specify technical regulations based on product requirements in terms of performance rather than design or descriptive characteristics wherever appropriate. The agreement contains rules governing procedures for the assessment of conformity with standards and technical regulations by central government, local government, and nongovernmental bodies. It also addresses the provision of technical assistance and special and differential treatment to developing country WTO Members. The degree to which federal laws and regulations governing environmental marketing claims should expressly preempt state laws is unclear. Some states have laws that specifically regulate environmental marketing claims. For example, California requires any person who makes an environmental marketing claim in advertising, on a product's label, or on a product's container to maintain written records supporting the claim. The entity making the claim must furnish this information to the public upon request. California's law provides that conformance with the FTC's Green Guides may be used as a safe harbor from liability in a lawsuit or complaint. Other laws, such as Indiana's, provide a statutory list of definitions for terms such as "biodegradable" that are to be used in conjunction with the definitions found in the Green Guides. Scholars disagree about the extent to which a binding federal law on environmental marketing claims should preempt state laws. On the one hand, commentators argue, federal preemption could bring uniformity to varying state standards, making it less costly for manufacturers to market their products throughout the United States and making it easier for consumers to evaluate environmental claims. Such preemption could take various forms including federal preemption that allows states to retain "an active role in defining and enforcing" federal law on environmental marketing; permits states to make laws that exceed federally created minimum standards; or allows a federal agency to grant states waivers from preemption on a case-by-case basis. On the other hand, commentators note that courts have traditionally considered consumer protection to fall within the states' police powers. States could arguably tailor environmental marketing regulations to fit local conditions and concerns. In addition, without the assistance of states, the federal government may lack sufficient resources for vigorous enforcement efforts against entities making deceptive environmental marketing claims. State laws could supplement federal enforcement efforts. Some commentators have suggested that certain environmental marketing messages have the potential to deceive consumers, and that the prevalence of such messages in the marketplace may discourage companies from competing to create more environmentally beneficial products. Currently, federal regulation of environmental marketing claims consists primarily of the FTC's case-by-case enforcement approach under Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices in commerce. The commission has provided nonbinding guidelines explaining how it might enforce Section 5 in the environmental marketing context. Federal regulation of environmental marketing claims potentially raises legal issues involving the First Amendment, international trade law, and preemption of state law. Legislation that regulates how manufacturers or sellers make certain claims about their products in advertisements or on labels may raise questions about the constitutional limits of regulating commercial speech. Requiring manufacturers to disclose certain information relating to the environmental characteristics of their products in advertisements and on labels may raise questions about the constitutionality of legislation that compels speech. In addition, a law regulating environmental marketing claims that appear on product labels could potentially raise issues concerning the United States' obligations under international trade law. For example, such measures could potentially be subject to the WTO TBT Agreement, which generally requires WTO Members preparing, adopting, and applying a measure to adhere to obligations concerning nondiscrimination; trade-restrictiveness; transparency; and reliance on international standards as a basis for regulation. However, the extent to which the TBT Agreement applies to measures that regulate claims made on labels that address so-called "non-product-related processes and production methods" (e.g., the amount of carbon dioxide emitted during manufacture of a product) is unclear. Another issue is the degree to which federal laws and regulations governing environmental marketing claims should expressly preempt state laws. On the one hand, commentators argue, federal preemption could bring uniformity to varying state standards, making it less costly for manufacturers to market their products throughout the United States and making it easier for consumers to evaluate environmental marketing claims. On the other hand, commentators note that courts have traditionally considered consumer protection to fall within the states' police powers. States could arguably tailor environmental marketing regulations to fit local conditions and concerns, and state laws could potentially supplement federal enforcement efforts. | During the last few decades, consumers in the United States have shown a significant interest in purchasing consumer products and packaging that appear to be beneficial—or at least not harmful—to the natural environment. In response to consumers' willingness to pay a premium for these products, manufacturers and others have increasingly touted the positive environmental attributes of their products in marketing materials, such as in advertising or on product labels. These environmental marketing claims may concern a single environmental attribute or relate to the environmental impacts of a product during all or part of its life cycle, such as the effect on the environment of the product's manufacture, distribution, use, or disposal. Some commentators have suggested that certain environmental marketing messages have the potential to deceive consumers, and that the prevalence of such messages in the marketplace may discourage companies from competing to create more environmentally beneficial products. Currently, federal regulation of environmental marketing claims consists primarily of the Federal Trade Commission's (FTC's) case-by-case enforcement approach under Section 5 of the Federal Trade Commission Act (FTC Act), which prohibits unfair or deceptive acts or practices in commerce. The commission has issued nonbinding guidelines that explain how it might enforce Section 5 in the environmental marketing context. The FTC and other federal agencies also enforce federal laws and regulations that address specific types of environmental claims such as "dolphin-safe" or "organic" claims. Finally, in some cases, the federal government has required manufacturers to disclose certain information about the environmental attributes of their products. The EnergyGuide labeling program administered by the FTC and Department of Energy (DOE) serves as one example. Federal regulation of environmental marketing claims raises certain legal issues including questions involving the First Amendment, international trade law, and federal preemption of state law. For example, legislation that regulates how manufacturers or sellers make certain claims about their products in advertisements or on labels may raise questions about the constitutional limits of regulating commercial speech. Requiring manufacturers to disclose certain information relating to the environmental characteristics of their products in advertisements and on labels may raise questions about the constitutionality of legislation that compels speech. In addition, laws regulating environmental marketing claims that appear on product labels could potentially raise issues concerning the United States' obligations under international trade law. For example, such measures could potentially be subject to the World Trade Organization (WTO) Agreement on Technical Barriers to Trade (TBT Agreement), which generally requires WTO Members preparing, adopting, and applying a measure to adhere to obligations concerning nondiscrimination; trade-restrictiveness; transparency; and reliance on international standards as a basis for regulation. However, the extent to which the TBT Agreement applies to measures that regulate claims made on labels that address so-called "non-product-related processes and production methods" (e.g., the amount of carbon dioxide emitted during manufacture of a product) is unclear. Another issue that might arise is the degree to which federal laws and regulations governing environmental marketing claims should expressly preempt state laws. |
The term "services" refers to a broad and widening range of economic activities such as accounting and legal services, banking, transportation, tourism, and telecommunications. Services are a significant sector of the U.S. economy, accounting for almost 70% of U.S. gross domestic product (GDP) and for over 80% of U.S. civilian employment. Services are becoming an important element of U.S. foreign trade and of global trade in general, although their intangibility and other characteristics along with other barriers have limited foreign trade in services. Because services are fundamentally different from goods, trade in services generates a unique set of trade policy issues. In addition, advances in technology continue to broaden the range of available services and the means to deliver services, making the policy challenges very dynamic. The increasing importance of services in U.S. and global trade has placed them on the U.S. agenda for bilateral and regional trade agreements, and services trade occupies a prominent place on the agenda of the United States and the other 152 members of the World Trade Organization (WTO) in the Doha Development Agenda round of multilateral negotiations. U.S. suppliers of services are among the most competitive in the world. The United States has taken the lead in encouraging foreign trade partners to reduce barriers to trade in services through bilateral, regional, and multilateral negotiations. Congress has a significant role to play in these efforts. In fulfilling its responsibilities for oversight of U.S. trade policymaking and implementation, the Congress monitors trade negotiations and the implementation of any agreements reached as a result of the negotiations. More directly, the Congress must pass any agreements requiring changes in U.S. law before they can go into effect. Free trade agreements that include provisions on services are pending congressional consideration, while negotiations in the WTO continue. This report provides background information and analysis on U.S. foreign trade in services. It includes an examination of definitions and examples of services to indicate their nature and scope; a review of the importance of services to the U.S. economy including U.S. foreign trade; and an analysis of the policy challenges that confront the United States, especially the challenge of negotiating a set of international rules on trade in services and the challenge of resolving disputes over trade in services with trading partners. This report will be updated as events warrant. "Services" encompass a very broad and widening range of economic activities. According to one definition, services are "... a diverse group of economic activities not directly associated with the manufacture of goods, mining or agriculture. They typically involve the provision of human value-added in the form of labor, advice, managerial skill, entertainment, training intermediation, and the like." Services differ from manufactured goods primarily in that they are intangible, so they cannot be stored and must be consumed at the point of production (trips to the doctor, enjoying a meal at the restaurant). However, rapid changes in technology are reducing even these restrictions on services (computer software that can be stored online, on disks, tape, etc.). Illustrative examples of services include wholesale and retail trade; transportation and warehousing; information; finance and insurance; professional, scientific, and technical services; education; arts and entertainment; health care and social assistance; food and accommodation services; construction; communication; and public administration. Services are an increasingly significant sector of the U.S. economy. In 1977, they accounted for 55% of U.S. GDP. In 2007 they accounted for 69% of U.S. GDP. In 2008, workers in the services sector accounted for 85% of the total civilian workforce. The significance of services to a national economy and to the global economy go beyond what can be measured by data. Many services not only have intrinsic value but are also critical to running other parts of large economies. For example, financial services (banking, investment, insurance) are the means by which capital flows throughout an economy from those who have it (savers, investors) to those who need it (borrowers). Financial services are often called the lifeblood of an economy. There is a symbiotic relationship between many services providers and manufacturers—demand for one creates demand for the other. Many manufacturers are dependent on transportation, communication and distribution services networks to ensure that inputs are available for the production of goods and to deliver final goods to consumers. For example, car manufacturers depend on transportation services (trucking, rail, etc.) to make sure that component parts are available for assembly and that completed cars are delivered to dealers. At the same time, demand for services creates demand for manufactures. For example, the production of communication services leads to demand for telephones, radios, computers and other communications apparatuses. U.S. trade in services, as narrowly measured, plays an important role in overall U.S. trade, albeit a much smaller role than domestic services play in the overall U.S. economy. And the relative importance of trade in services has remained quite constant. Between 1986 and 2001, for example, the share of services in overall U.S. exports in goods and services remained at around 28%, although it increased to 30% by 2003 where it has remained. From 1986 to 2008, the share of U.S. imports of goods and services accounted for by services has been 16%-18%. These data are presented in Table 1 . These shares are substantially lower than one might expect from a sector that dominates the domestic economy. Table 1 also shows that the United States continually realizes surpluses in services trade which have partially offset large trade deficits in goods trade in the U.S. current account. These figures only measure trade in services that take place across borders as presented in the U.S. official balance of payments data. Because most services require direct contact between supplier and consumer, many service providers prefer to establish or must establish a presence in the country of the consumer. For example, hotel and restaurant services by their very nature require a presence in the country of the consumer. Providers of legal, accounting, and construction services prefer a direct presence because they need access to expert knowledge of the laws and regulations of the country in which they are doing business and they require proximity to clients. Thus, cross-border services trade data do not capture all of the trade in services. Data on sales of services by foreign affiliates of U.S.-owned companies and by U.S. affiliates of foreign-owned firms help to provide a more accurate, albeit still incomplete, measurement of trade in services. In 2006 (the latest year for which published data are available), U.S. firms sold $806billion in services to foreigners through their majority-owned foreign affiliates. In 2006, foreign firms sold to U.S. residents, $616 billion in services through their majority-owned foreign affiliates located in the United States. The data for cross-border trade and for sales by majority-owned affiliates are not directly compatible; therefore, it is difficult to derive an accurate overall measure of services trade. Even these two sets of figures do not capture the total value of trade in services. Two other modes of services delivery are through the temporary movement of consumers to the location of the provider and the temporary movement of the provider to the location of the consumer. U.S. data on the sales of services via these two modes of delivery are not readily available. (See text box.) The United States conducts trade in services (both via cross border trade and foreign direct investments) with many different regions of the world. However, the graphs contained above in Figure 1 and Figure 2 show that much of the U.S. cross-border trade in services in 2008 occurred with EU-member countries. Figure 1 indicates that more than one-third of U.S. services exports were to the European Union and Figure 2 indicates that more than one third of U.S. imports of services were from the European Union. In contrast, Canada accounted for 9% and 6% of U.S. services exports and imports, respectively. The EU's dominance in U.S. services trade is even more apparent when taking into account services that are provided through multinational corporations (MNCs). Figure 3 shows shares by region of sales of services in 2006 (the latest data available) by U.S. majority-owned companies to foreign persons, a measurement comparable to U.S. exports. Figure 4 shows shares by region of sales in 2006 to U.S. persons by foreign majority-owned MNCs, a measurement comparable to U.S. imports. The figures indicate that Europe accounted for 57% of sales to foreign persons and 62% of sales to U.S. persons services through MNCs. Canada accounted for 11% and 9% of the total sales. Figure 5 and Figure 6 show the shares of U.S. services exports and imports accounted for by types of services in 2007 (latest available data) . Travel and related services dominate U.S. cross-border services trade, accounting for 20% and 22% of U.S. services exports and imports, respectively, in 2007. Passenger fares accounted for another 5% and 8% and other transportation services accounted for an additional 11% and 20% of U.S. services exports and imports. The dominance of these services is not altogether surprising, given the relative ease with which they can be traded across borders. As U.S. service providers strive to increase foreign trade, U.S. policymakers are faced with a number of challenges in constructing an international environment that is conducive to increased trade in services. One challenge is identifying the foreign government laws, regulations, and policies that impede trade flows and prevent the international system of trade in services from operating efficiently. While some of these barriers are similar to those that exist in goods trade, many are different and more complex and, therefore, sometimes difficult to identify. A second challenge derives from the first—working with trading partners to build and administer "rules of the road" to facilitate trade in services. The current rules, the General Agreement on Trade in Services (GATS), are a recent phenomenon and are at an early stage of development. A third challenge is managing disputes that arise when trading partners do not agree on how trade in services should be conducted. Because of the fundamental differences between goods and services, the barriers that foreign service providers face are different from those faced by goods suppliers. Many barriers in goods trade—tariffs and quotas for example—are at the border. Restrictions on services trade occur largely within the borders of the "importing" country and are in the form of government regulations. The right of governments to regulate some services industries is widely recognized as prudent and necessary to protect consumers from dangerous or unqualified providers. For example, doctors and other medical personnel must be licensed by government-appointed boards; lawyers, financial services providers, and many other professional service providers must be also certified in some manner. Governments regulate to protect the economy from sudden and potentially harmful shocks. For example, controls on foreign currency transactions are designed to protect the economy from "panic" capital flight and to maintain stable exchange rates. The question in foreign trade is whether these regulations are applied in a discriminating and unnecessarily restrictive manner. Because services transactions more often require direct contact between consumer and provider than is the case with goods trade, many of the "trade barriers" that foreign companies face pertain to the establishment of a commercial presence in the consumers' country in the form of direct investment or to the temporary movement of people (Mode 4)—sellers and consumers—across borders. Some trade barriers are evident across services industries. In most cases the restrictions are ostensibly legitimate but may have unintentional adverse affects on foreign services trade. Examples of such barriers include restrictions on international payments, including repatriation of profits, mandatory currency conversions, and restrictions on current account transactions; restrictions on the movement of personnel, including visa, work permit, and immigration restrictions; requirements that foreign professionals pass certification exams or obtain extra training that is not required by local nationals; permission for entry and provision of services contingent on local labor supply requirements; restrictions on information transfer imposed to protect data and maintain privacy; "buy national" requirements in government procurement; lack of national treatment in taxation policy or protection from double taxation; government-owned monopoly service providers and requirements by foreign service providers to use a monopoly's network access or communications connection provider; government subsidization of domestic service suppliers; limitations on foreign direct investment, such as equity ceilings; local employment and sourcing requirements; restrictions on the form of investment, that is, a branch, subsidiary, joint venture, etc.; "net national benefit" requirements; quotas imposed on number of foreign service suppliers; requirements that the chief executive officer or other high level company officials be local nationals or that a certain proportion of a company's directors be local nationals; and licensing requirements to market and sell services. In most cases, a service industry confronts barriers that are largely specific to that industry. The following examples of major service industries and the barriers they confront are illustrative. This category includes firms that are involved in the construction of both residential and commercial buildings; firms that are involved in the construction of transportation infrastructures, such as roads, bridges airports, tunnels, and similar structures; firms that install prefabricated structures; and firms that provide finishing work to structures. It is a category of services in which U.S. firms have proved highly competitive in the global market. Construction and related engineering services is very labor intensive work, combining low and highly specialized-skilled labor. Firms that provide services in foreign markets usually require a presence in the country either temporarily or through foreign direct investment often in the form of a partnership with a local firm that has knowledge of local laws and other requirements. Because these firms compete by offering specialized skills, they frequently must be able to move highly skilled workers across borders. In most countries, the construction and related services industry is tightly regulated. For quality control and safety reasons, governments require construction firms to meet technical standards and may also require developers to adhere to land use and environmental controls. Some restrictions might be applied ostensibly on a non-discriminatory basis but may be a greater burden to foreign suppliers, e.g., a requirement that a certain percentage of labor be locally sourced. In a number of countries, local or regional trade associations have the authority to rule on applications of construction firms for required permits, thereby, creating a conflict of interest as association members would have an interest in limiting competition. Some countries employ "buy national" policies that favor domestic construction firms in bidding on government projects. In addition, some governments tolerate private company collusive practices. For example, in Japan local construction companies have practiced bid-rigging called dango. Under this practice a small group of Japanese construction firms agree which of them would submit the lowest bid and therefore get the contract. They rotate the "winning bidder" among them from project to project. The practice would guarantee work among the participants but would keep foreign and other domestic competitors out. Travel and tourism is a multifaceted industry. It encompasses lodging and restaurants (including catering), travel agencies and tour operators, and tourist guide services. It ranks among the top five service industries in more than 75% of the countries, and is among the top sectors in U.S. cross-border services trade. For many smaller countries, it is the primary means of earning foreign exchange. Travel and tourism is a labor-intensive industry that is highly dependent on other service sectors—transportation; construction (to insure that sufficient and appropriate lodging and other facilities are available to tourists); advertising; telecommunications and distribution services, among others. It is an industry that is undergoing major changes as the use of the Internet and the introduction of other technologies change how tourism and travel services are delivered. The industry faces few direct trade barriers but is indirectly affected by regulations pertaining to the movement of people (immigration, visas); transportation (for example, the distribution of slots to foreign airlines at major airports); movement of money (for example, foreign exchange requirements); and construction standards (for example, the quality of hotels and other tourist necessities). Banking and financial services cover a wide range of economic activities: maintaining deposits; lending money; brokering of securities (stocks and bonds); brokering of many types of insurance (health, life, auto, home, and specialized insurance); managing pension funds and other assets; financial planning; and more. It is also an industry in which American firms have proved to be highly competitive and have a growing global presence. In addition, among the industries that comprise the services sector, it is perhaps the most complex not only because of its scope of activities but also because of its importance. A viable financial sector is critical to an economy. It functions primarily to protect the financial assets of residents and to facilitate the flow of capital from savers and investors to borrowers. The sector has undergone rapid changes recently. Technology, especially the emergence of the Internet, has facilitated sales of insurance, the transmission of deposits, and the purchase and sale of securities across international borders. Furthermore, many countries have liberalized regulation of financial industries allowing for increased foreign ownership and the reduction of "firewalls" between financial industries. At the same time, because of their importance to the maintenance of economic stability, financial services are a heavily regulated sector. Many regulations are applied to protect investors and depositors and to ensure the viability of the sector. These regulations, such as deposit insurance, reserve requirements, capitalization requirements, and the like are considered prudent to maintaining a healthy financial system. However, a fine line exists at times between prudent requirements and requirements that are used to protect the domestic industry from foreign competition. For example, governments often require insurance brokers and other financial agents to be licensed to protect customers from unqualified or otherwise questionable providers. But licensing can also be used to restrict competition and protect favored companies. Foreign banks frequently face restrictions on the type of direct investment they can make in a country, the types of services they can provide, or the number of facilities they can establish in the country or in a region of the country. Foreign-owned insurance companies may confront restrictions on the type of insurance they can sell; for example, some countries prohibit foreign companies from selling life insurance or auto insurance. The United States is working with trading partners to develop and implement rules on trade in services on several fronts. The broadest and most challenging are the multilateral rules contained in the General Agreement on Tariffs and Trade (GATS) that is administered by the World Trade Organization (WTO). Rules on trade in services are also part of the North American Free Trade Agreement (NAFTA) and other regional and bilateral free trade agreements. Furthermore, they will likely be an aspect of free trade agreements (FTAs) now under negotiation or discussion. The seeds for multilateral negotiations in services trade were planted more than a quarter century ago. In the Trade Act of 1974, the Congress instructed the Administration to push for an agreement on trade in services under the General Agreement on Tariffs and Trade (GATT) during the Tokyo Round negotiations. While the Tokyo Round concluded in 1979 without a services agreement, the industrialized countries, led by the United States, continued to press for its inclusion in later negotiations. Developing countries, whose service sectors are less advanced than those of the industrialized countries, were reluctant to have services included. Eventually services were included as part of the Uruguay Round negotiations launched in 1986. At the end of the round, countries agreed to a new set of rules for services, the GATS, and a new agency, the WTO, to administer the GATS and other agreements reached. The GATS provides the first and only multilateral framework of principles and rules for government policies and regulations affecting trade in services among more than 100 countries representing many levels of economic development. The GATS remains a work in progress, and its expansion is a part of the new round of WTO negotiations launched in November 2001 in Doha, Qatar. The GATS agreement, most of which was completed by December 1993, is divided into six parts. Part I (Article I) defines the scope of the GATS. It provides that the GATS applies— to all services, except those supplied in the routine exercise of government authority; to all government barriers to trade in services at all levels of government—national, regional, and local; and to all four modes of delivery of services. Part II (Articles II-XV) presents the "principles and obligations," some of which mirror those for trade in goods while others are specific to services. These principles and obligations include unconditional most-favored-nation (MFN) non-discriminatory treatment ; that is, services imported from one member country cannot be treated any less favorably than the services imported from another member country; transparency , that is, governments must publish rules and regulations; reasonable, impartial and objective administration of government rules and regulations that apply to covered services; monopoly suppliers must act consistently with obligations under the GATS in covered services; a member incurring balance of payments difficulties may temporarily restrict trade in services covered by the agreement; and a member may circumvent GATS obligations for national security purposes . Part III (Articles XVI-XVIII) of the GATS establishes market access and national treatment obligations for members. The GATS— binds each member to its commitments once it has made them, that is, a member country may not impose less favorable treatment than what it has committed to; prohibits member-country governments from placing limits on suppliers of services from other member countries regarding: the number of foreign service suppliers; the total value of service transactions or assets; the number of transactions or value of output; the type of legal entity or joint venture through which services may be supplied; and the share of foreign capital or total value of foreign direct investment; requires that member governments accord service suppliers from other member countries national treatment , that is, a foreign service or service provider may not be treated any less favorably than a domestic provider of the service; and allows members to negotiate further reductions in barriers to trade in services. Importantly , unlike MFN treatment and the other principles listed in Part II, which apply to all service providers more or less unconditionally, the obligations under Part III are restricted. They apply only to those services and modes of delivery listed in each member's schedule of commitments. Thus, unless a member country has specifically committed to open up its market to service suppliers in a particular service that is provided via one or more of the four modes of delivery, the national treatment and market access obligations do not apply. This is often referred to as the positive list approach to trade commitments. Each member country's schedule of commitments is contained in an annex to the GATS. The schedules of commitments are, in essence, the core of the GATS. Parts IV-VI (Articles XIX-XXIX) are technical but important elements of the agreement. Among other things, they include the requirement that, no later than 2000, the GATS members start new negotiations (which they have done) to expand coverage of the agreement and establish the requirement that conflicts between members involving implementation of the GATS be handled in the WTO's dispute settlement mechanism. The GATS also includes eight annexes, including one on MFN exemptions. Another annex provides a "prudential carve out," that is, a recognition that governments take "prudent" actions to protect investors or otherwise maintain the integrity of the national financial system. These prudent actions are allowed even if they conflict with obligations under the GATS. Evaluations of the GATS in its first seven years range from those who view the "glass as half empty" to those who see "the glass as half full." The more pessimistic school argues that not much has been accomplished in GATS, that, at best members committed themselves to maintain the status quo before the GATS went into effect. These critics argue that some countries actually made commitments that were more restrictive than their current practices. Furthermore, critics question the value of the so-called positive list approach to members' commitments which can lead to slower and more tedious trade liberalization negotiations. The more optimistic school considers the mere establishment of the GATS to be an important accomplishment considering that many countries strongly resisted even negotiating on services at the beginning of the Uruguay Round. In addition, even though the initial commitments may have only locked members in at the status quo, they are bound by those commitments from sliding back into more protectionism and may actually open up their services sectors as negotiations proceed. Article XIX of the GATS required WTO members to begin a new set of negotiations on services in 2000 as part of the so-called WTO "built-in agenda." In so doing, it guaranteed that WTO members will pursue negotiations on services even if they are not able to begin a new full round. Article XIX stipulates that participants work to resolve some conceptual and procedural issues, for example, how to give negotiating credit to governments that had unilaterally liberalized their services sectors since the conclusion of the first set of negotiations and whether to provide special treatment to least developed countries. The new set of GATS negotiations began in February 2000, and during the remainder of that year, the members reviewed the status of commitments already made and developed a set of guidelines. In addition to the issues mandated by Article XIX, the guidelines stipulate that negotiators will continue to use the service-specific, mode-specific (positive list) approach. WTO members successfully launched the Doha Development Agenda (DDA) round in November 2001. The Ministerial Declaration that announced the mandates for the round folded the services negotiation into the agenda of the DDA round. By most accounts, the participants in the DDA services negotiations have made little progress. At the December 2005 biennial Ministerial meeting in Hong Kong WTO negotiators were supposed to have a good indication of what final agreements will look like if the Doha round is to be completed by the end of 2006. Participants have expressed widespread disappointment with the offers that have been made. The prospects of the negotiations were set back even further when WTO Director-General Pascal Lamy suspended the DDA, including the services negotiations on July 24, 2006, after a meeting of the G-6 WTO members, consisting of the United States, the European Union, Japan, Australia, Brazil, and India, failed to agree on the basic conditions or modalities, for conducting the agriculture and NAMA negotiations. Although the negotiations resumed in 2007, progress on the services negotiations remains stagnant at best. Several possible reasons can be cited for the lack of progress. One is the division between developed countries that have advanced services sectors employing highly-skilled labor and the developing countries with less-developed services industries. The former group seeks market opportunities for its services providers and is more willing to open its markets to competition. The latter group is more protective of its domestic services providers. The halting progress in the agriculture and non-agriculture market access (NAMA) negotiations in the DDA has also affected the services negotiations. Some developing countries have asserted that they will not improve their offers until the United States and the European Union commit to reduce their agriculture subsidies. A third reason could be the complexity of the agenda of the services negotiations and the number of players involved. "Services" includes a broad range of economic activities many with few characteristics in common except that they are not goods. The trade barriers exporters face differ across services sectors making the formulation of trade rules a significant challenge. Furthermore, services negotiations include many participants. In addition to trade ministers, they include representatives of regulatory agencies many of whom do not consider trade liberalization a primary part of their mission. The prospects for the negotiations are difficult to evaluate at this point. It is not unusual for negotiations to lag as participants wait to place their best negotiating positions on the table until just before crucial deadlines are reached. Several factors will determine if and when the services negotiations will be completed. One factor is the political will the WTO members can muster to overcome the obstacles that plague the negotiations. Another factor is the extent to which the various participants are willing to compromise on goals to reach agreements. And a third factor is how quickly the issues in agriculture and non-agriculture market access are resolved; the sooner they are resolved the sooner negotiators can devote their full attention to the services negotiations. The prospects for the negotiations are difficult to evaluate at this point. It is not unusual for negotiations to lag as participants wait to place their best negotiating positions on the table until just before crucial deadlines are reached. On July 24, 2006, WTO Director-General Pascal Lamy suspended the DDA negotiations, including the services negotiations because major WTO members could not agree on the terms or modalities for negotiations in agriculture and non-agriculture market access. He resumed the negotiations in 2007 and into 2008. Negotiators from major groups of developed and developing countries worked to nail down the basic elements of a draft text; however, they failed so far to reach a consensus on the basic negotiating objectives. The United States has in place several bilateral and regional free trade agreements and is conducting negotiations on others. This section provides a brief overview of the treatment of services in these agreements and negotiations. NAFTA, which went into effect on January 1, 1994, is the largest free trade agreement in which the United States participates. NAFTA's coverage of services trade is very broad reflecting the comprehensive integration of the three participating economies. Chapter 12 contains NAFTA's coverage of most "cross-border"services trade (defined as all services trade except that requires a commercial presence). The exceptions are financial services (which are covered in chapter 14) services purchased by state enterprises or governments (which are covered in chapter 10) and international air transportation and related services, which are not covered at all. Services trade related to the commercial presence of the provider in the country of the consumer is covered in Chapter 11 on foreign direct investment. Chapter 12 of NAFTA requires Canada, the United States, and Mexico to provide national treatment and most-favored-nation treatment to one another's services and service providers and prohibits the participating governments from requiring services providers to establish a local presence in order to sell their services. The three countries may exercise exceptions to these principles: where restrictions are already in place and listed in Annex I of NAFTA; in certain services sectors and subsectors listed in Annex II; and certain non-discriminatory quotas listed in Annex V. In Annex VI, the three parties list their specific commitments to liberalize cross-border trade in services. A major controversy erupted over trucking services. As part of NAFTA, the United States made a commitment to permit Mexican truckers to transport goods to the southern U.S. border states beginning in 1995 and to the entire United States by January 2000. However, in 1995 the Clinton Administration banned Mexican truckers access beyond the border regions because of concerns raised by the U.S. trucking industry and others over the safety of Mexican trucks. The issue became a source of tension between the two NAFTA partners. On February 6, 2001, in response to a complaint filed by Mexico against the U.S. ban, an arbitration panel formed under NAFTA determined that the United States was violating its obligations but also ruled that the United States could impose requirements on Mexican trucks entering the United States to guarantee safety since U.S. and Mexican regulations were different. Provisions contained in the FY2002 transportation appropriations bill required a system of certifying the safety of Mexican trucks before they would be allowed access to the rest of the United States. On June 27, 2002, Secretary of Transportation Norman Mineta indicated that the system was almost complete and that certification of Mexican trucking companies would probably begin before the end of the summer of 2002. The Department of Transportation launched a pilot program in September 6, 2007, that allows some Mexican trucks to deliver goods in the United States. The program has been opposed by the Teamsters' Union and some Members of Congress. The U.S.-Israeli FTA, the first in which the United States has participated, went into effect in August 1985. Because services are a small component of U.S.-Israeli trade, they are not a significant part of the agreement. In the agreement, the United States and Israel committed themselves to provide national treatment to each other's services and to make their laws and regulations affecting services transparent. The U.S.-Jordan FTA entered into force on December 17, 2001. U.S.-Jordan trade is small and services are not a significant part of that trade but are nevertheless covered in Article 3 of the agreement. Article 3 essentially requires the two countries to make commitments to open up trade in services that are no less liberal than the commitments each has made under the GATS. The United States has 8 other FTAs in force with 12 other countries. FTAs with Colombia, Panama, and South Korea have been signed but have not been considered by Congress. Most of these FTAs contain provisions dealing with services trade. The background information and analysis presented here indicate that services are a significant component of the U.S. economy, accounting for a major portion of U.S. employment. It is also a component in which U.S. firms have proved to be globally competitive. The services sector is also very broad and encompasses an ever expanding range of economic activities of varying types. The broad scope of the services sector presents policy challenges to U.S. policymakers, including the Congress, as the United States works with trading partners to build regimes under which they will conduct trade in services. The number and variety of negotiations planned or already underway suggests that Congress will have a number of trade agreements to consider and that services will be an important part of the deliberations. An overview of barriers, of the disputes in services trade and of the rapidly changing characteristics of the services sector, all suggest that the negotiations and the agreements they produce will become increasingly complex. The United States presses its trading partners to liberalize their services sector as much as possible, because U.S. services providers are very competitive in world markets. However, to accomplish its objectives, the United States is pressed by its partners to make concessions that adversely affect "import-sensitive" industries in the United States. U.S. negotiators and, ultimately, Congress will have to judge whether the agreements strike an appropriate balance for U.S. interests. | The term "services" refers to a broad and widening range of economic activities such as accounting and legal services, banking, transportation, tourism, and telecommunications. Services are a significant sector of the U.S. economy, accounting for almost 70% of U.S. gross domestic product (GDP) and for over 80% of U.S. civilian employment. Services have become an important element of U.S. foreign trade, consistently generating surpluses. The European Union is by far the most important U.S. trade partner in services, accounting for more than 50% of U.S. trade in services. The increasing importance of services in domestic and global trade have placed them on the U.S. agenda for bilateral and regional trade agreements, and services trade occupies a prominent place on the agenda of the United States and the other 152 members of the World Trade Organization (WTO) in the Doha Development Agenda round of multilateral negotiations. Furthermore, disputes related to trade in services have arisen increasingly between the United States and the European Union, Japan, Canada, and other major trading partners. Congress will have a number of trade agreements to consider, and services will be an important part of the deliberations. An overview of barriers, of the disputes in services trade and of the rapidly changing characteristics of the services sector, suggest that the negotiations and the agreements they produce will become increasingly complex. The United States presses its trading partners to liberalize their services sector as much as possible, because U.S. services providers are very competitive in world markets. However, to accomplish its objectives, the United States is pressed by its partners to make concessions that might adversely affect "import-sensitive" industries in the United States. U.S. negotiators and, ultimately, Congress will have to judge whether the agreements strike an appropriate balance for U.S. interests. This report will be updated as events warrant. |
Decisions to tighten or ease fiscal or monetary policy rely heavily on the economy's positionrelative to a concept of "full employment," or how much of the economy's labor and capital resourcesare employed compared to potential resources. Central to determining full employment is theconcept of a natural rate of unemployment. When actual unemployment is below (above) the naturalrate, it suggests that the economy is operating above (below) full employment and policy should betightened (eased) to prevent inflation from accelerating (decelerating). Thus, a reliable estimate ofthe natural rate plays an important role in macroeconomic stabilization policy decisions. This reportdiscusses problems in estimating the natural rate. In the 1960s, economists Milton Friedman and Edmund Phelps independently developed theconcept of a "natural rate" of unemployment or "full employment" rate of unemployment or NAIRU(non-accelerating inflation rate of unemployment.) (1) They posited that there was an equilibrium, market-clearing rateof unemployment determined by labor market characteristics, policy, and conditions. This naturalrate will be greater than zero since, at any given point of time, there will always be some people inthe process of moving from one job to another, and some people who are in the wrong place at thewrong time for the jobs available. Although expansionary fiscal or monetary policy may be able to temporarily pushunemployment below the natural rate in exchange for higher inflation, eventually actualunemployment would rise back to the natural rate without inflation falling. This concept isconsistent with the view that monetary policy has no long-run effect on real variables such aseconomic growth or unemployment, and affects only prices in the long run. If unemployment didnot return to a natural rate, it would imply that monetary policy could permanently affectunemployment, and workers suffered from "money illusion" (their wage demands were influencedby nominal instead of real price changes). (2) In recessions or periods of sluggish growth, unemployment rises above the natural rate andinflation is expected to fall. Thus, estimating the natural rate requires stripping out cyclical factors,including both the increase in unemployment that occurs in recessions and the decrease that occurswhen the economy has been temporarily pushed beyond full employment. A cursory look at the U.S. experience over the past 55 years seems to belie the existence ofa natural rate of unemployment, as seen in Table 1 . Over long periods of time, business cycle effectsshould cancel out and the average unemployment rate should be close to the natural rate. Yet theaverage unemployment rate by decade has varied significantly, ranging from a low of 4.5% in the1950s to a high of 7.3% in the 1980s. Regressions for the period 1960-2000 yield a constant naturalrate of unemployment of 6.1%, which seems unrealistically high for both the 1990s and the1950s-1960s. (3) Inparticular, the experience in the late 1970s (rising inflation although unemployment was abovenatural rate estimates) and the late 1990s (falling inflation although unemployment was belownatural rate estimates) seem at odds with the natural rate concept. Table 1. Annual Unemployment Rates,1950-2005 (percent) Source: Bureau of Labor Statistics Skeptics take the variance in actual unemployment over time as evidence that the natural rateconcept is incorrect. But mainstream economy theory suggests a more subtle view -- that there isa natural rate, but it varies over time. The natural rate is determined by labor market conditions;economists reason that since labor market conditions change over time, so could the naturalrate. (4) If this were thecase, the unemployment rate would always return to the natural rate, as the original theory suggests,but at any given point in time, unemployment would be reverting to a unique natural rate. Forexample, a natural rate concept underlies the Congressional Budget Office's economic projections,and a new natural rate estimate is calculated each year. CBO's changing estimate of the natural rateis plotted in Figure 1 . The figure illustrates that even with a changing natural rate estimate, actualunemployment is still rarely equal to the natural rate. Figure 1. Actual Unemployment and CBO's Estimate of the Natural Rate,1950-2002 Source: Congressional Budget Office From the mainstream perspective, the 1970s and 1980s were a period of a rising natural rate,and the 1990s were a period of a falling natural rate. The 1990s decline caught most economists bysurprise. (5) What couldhave caused the natural rate to fall in the 1990s? A number of theories have been advanced: (6) "Unit labor costs" is a measurement that compares the value of output to the cost of laborinput. By definition, whenever productivity increases more rapidly than wages, unit labor costs fall. Lower unit labor costs increase the firm's profitability, thereby typically increasing the firm's demandfor labor. In the late 1990s, there was a sudden and unexpected rise in the labor productivity growthrate, from 1.4% in 1974-1995 to 2.5% in 1996-2000. It has been hypothesized that because workerscannot easily or instantaneously identify changes in their productivity, they may have been slow toadjust their wage demands to reflect higher productivity growth rates. If this was the case,unemployment and the natural rate would have temporarily fallen in the late 1990s as unit labor costsfell. A similar story can be told about long-term wage contracts, under which wages would notadjust to the change in productivity until a new contract was negotiated. Notice that this decline inthe NAIRU would only be temporary: once workers became aware of the increase in theirproductivity growth rates, other things being equal, they would adjust their wage demands and unitlabor costs would rise back to an equilibrium level, removing the incentive for firms to take on moreworkers. (7) If this scenario occurred in the late 1990s, labor productivity should have grown more rapidlythan real worker compensation. As can be seen in Figure 2 , this has been the case. In only two ofthe past 13 years, 1998 and 2000, has real compensation grown more quickly than productivity,suggesting that workers did not fully incorporate actual productivity growth into their compensationdemands in the short term. Compensation has still not caught up to more rapid productivity gainsthat began several years ago. Also supportive of this theory is the experience of the 1970s and 1980s. Just as increasesin productivity growth may temporarily reduce the NAIRU, decreases in productivity growth maytemporarily increase the NAIRU. And indeed, the apparent increase in the natural rate in the 1970sand 1980s coincided with a slowdown in productivity growth. From 1949 to 1973, laborproductivity grew at an average of 2.9% a year; it then slowed to an average of 1.4% from 1974 to1995. The unemployment rate at the trough of the 1973-1975 recession was higher than the past,and it remained higher relative to comparable points in past business cycles during the next twoexpansions and recoveries. This theory does not seem consistent with the experience during the 2001 recession andsubsequent "jobless recovery," however. (8) In this period, productivity growth also rose unexpectedly rapidly,yet employment fell for 20 months after the recession had ended, and fell 2.6 million from peak totrough. This occurred even though productivity has continued to grow more rapidly than realcompensation since 2001. It seems that several years after the productivity spurt had first begun,workers had still not completely adjusted their wage demands to take the productivity spurt intoaccount. The comparison is not straightforward, however, because weakness in the labor marketsince 2001 has held down compensation growth. Since mid-2003, employment has begun to riseagain, but real compensation growth is still relatively modest, despite continued rapid gains inproductivity. Figure 2. Labor Productivity and Real Worker Compensation Source: Bureau of Labor Statistics Note: Data are for non-farm business sector. Labor Market Policy Changes Some policymakers point to changes in labor market policy in the1990s as a potential cause of the decline in the NAIRU. For example, if welfare reform increasedthe incentives to seek work, it could have expanded the pool of labor available to employers andlowered the unemployment rate consistent with stable inflation. (9) Whether or not policy changes have affected the NAIRU, it would be difficult to measure therelationship empirically. Policy changes cannot be easily quantified and are not conducive toeconometric analysis. Time series analysis is problematic because a one-time policy change givesthe statistician only one data observation, while cross-section analysis is difficult because theindividuals affected by the policy change are likely to be systematically different from the rest of thepopulation in ways that cannot be easily controlled for. Therefore, it is difficult to say with anydegree of confidence that evidence exists proving or denying the hypothesis that policy changes havehad a significant influence on the natural rate. (10) It has been noted that younger workers consistently have higher unemployment rates thanolder workers. This could be because older workers have more experience, more "human capital,"and different preferences for employment stability. This suggests that demographic shifts toward anolder workforce could lower the overall unemployment rate since the proportion of older,low-unemployment workers in the labor force is greater. There is some evidence of this, as the babyboomers were young workers in the high natural rate decades of the 1970s and 1980s, but have nowreached a low unemployment age. The percentage of workers 16-24 years of age, the group with thehighest unemployment rate, had fallen from 25% in 1978 to about 16% in 2000. (11) Economist Robert Murphyrecalculated the 1998 unemployment rate based on a population demographically similar to the 1979population. This raised the unemployment rate by 0.6 percentage points -- not likely enough toaccount for the entire change in the natural rate, which may have fallen 0.5-2.0 percentage pointsover those years. (12) Katz and Krueger estimate that demographic change can account for one quarter of the decline inthe NAIRU. (13) Higher incarceration rates are another demographic factor that could affect the natural rate. Katz and Krueger have also suggested that many young, low-skill individuals who would have beenunemployed in the past are now in prison instead and not counted as part of the labor force. Between1990 and 1999, the incarcerated population grew at an average rate of 5.7% annually, resulting ina doubling of the prison population over that time. (14) As a result, they estimate the NAIRU fell by 0.17 percentagepoints since the mid-1980s. Rising disability claimant rates offer another explanation for why the natural rate has fallen. If the disabled are more likely to be unemployed than the rest of the population, more workersclaiming disability could push the natural rate down. The percentage of the non-elderly populationclaiming disability rose from 3.1% in 1984 to 5.3% in 2000. Autor and Duggan found that thischange explained 0.64 percentage points of the recent fall in unemployment. (15) Unlike some other factors driving the natural rate, demographics are easily quantified andempirical correlation can be easily measured. Murphy points out that the timing of theseexplanations does not quite correspond to the fall in unemployment. The demographic shift and therising incarceration rate were both well underway in the late 1980s, before there was a noticeabledecline in the NAIRU. Economists often think of unemployment as part of a matching process, whereunemployment lasts until the right worker finds the right job. In this view, the duration ofunemployment depends on how quickly workers can be matched with jobs that well suit their skillsand desires. It has been suggested that recent developments in the labor market could have improvedthe matching process, thereby reducing the duration of unemployment, and in turn, the natural rateof unemployment. These factors include the expansion of temporary employment, greater regionalmobility, the expanding role of the internet in job seeking, and a generally more flexible attitudetoward job switching. (16) While these factors may play an important role in determining the natural rate, they are, to varyingdegrees, unquantifiable and therefore difficult to properly take into account in empirical estimatesof the natural rate. The most quantifiable factor, temporary employment, has been estimated to havea modest effect on the natural rate. A Federal Reserve study found that temporary unemploymentcould explain 0.28 percentage points of the fall in the NAIRU from 1979 to 1993, and Katz andKrueger estimated that it lowered the NAIRU by 0.39 percentage points in the 1990s. (17) Unemployment rates seen in the late 1990s were similar to the average unemployment ratein the 1950s and 1960s. This suggests that the natural rate today may also be similar to thosedecades. Then-Federal Reserve Chairman Alan Greenspan made this point in a 2004 hearing: Well, [full employment] varied over time. Rememberin the early part of the post-World War II period, the general view was that, indeed, 4% was theunemployment rate which was consistent with price stability. It then altered very significantly duringthe 1970s and the 1980s and it has since come probably almost all the way back down to where itwas in the early part of the post-World War II period. (18) Is this a coincidence or do these eras share something in common? An older population and highproductivity growth rates suggest some commonality -- the proportion of workers age 16-24 was17% in 1960, compared with 16% in 2000. Some would argue that welfare reform was a reversalof the expansion of the social safety net that began with the Great Society programs of the late 1960s. On the other hand, other factors, such as the growing role of temporary employment and the Internetin our labor market or rising incarceration and disability rates, suggest that any similarity to the1950s and 1960s is merely coincidental. Employment fell for an unprecedented 20 months after the 2001 recession had ended. Onepossible reason why is that the natural rate was rising during this time. During a period when thenatural rate was rising, a prolonged sluggish labor market could result regardless of the state of thebusiness cycle. But because the natural rate is a long-run concept, it is difficult to believe the naturalrate could have changed significantly over the past 2½ years. There has not been any major changein labor market policy during that time, and demographic changes are incremental. If the natural ratehas changed, it would be part of a longer trend that will not be identifiable in the near term. There is another reason why the unemployment rate might have continued to rise for so longrecently related to the natural rate concept. Even if the natural rate had not changed over the past2½ years, it is possible that when unemployment reached 3.9% in December 2000, it was furtherbelow the natural rate than suspected. Just as the unemployment rate can temporarily rise above itsnatural rate when growth is too slow, unemployment can temporarily fall below the natural rate whengrowth is unsustainably fast. In these circumstances, one would expect to see a rising inflation rateas wages are pushed above productivity because too many jobs are chasing too few workers. Feweconomists believed the natural rate had reached as low as 3.9% in 2000, but many assumed that3.9% was not too far from the natural rate because there was no significant upward pressure oninflation at that time. In hindsight, if the natural rate has been higher than suspected in recent years,say 6.0% vs. 5.0%, then the prolonged increase in the unemployment rate over the 2½ years couldpartly be attributable to the long-term adjustment back towards the natural rate from an unsustainablylow level. In this case, one would expect the unemployment rate to fall once the recovery becamemore robust, but it would fall less than expected. Those who argue that the natural rate wasunderestimated in the late 1990s point to the fact that the natural rate averaged 6%-6.5% in the 1970sand 1980s. To put that figure in perspective, consider that the unemployment rate following the2001 recession would have been considered to be full employment, only attainable near the peak ofthe business cycle, 20 years ago. Because the natural rate is a long-run concept, it is too soon to determine which portion, ifany, of the recent increase in the unemployment rate is supply-side driven, and which portion isdemand-driven. But the inflation rate is one piece of evidence to determine whether inadequatedemand or a change in the natural rate is currently driving the rise in unemployment. If the economywas suffering from insufficient demand, the inflation rate should have been falling; if theunemployment rate was being driven by changes in the labor market, inflation should be unaffected. The core inflation rate, which strips out volatile food and energy prices, fell from 2.6% in 2001 to2.4% in 2002 to 1.4% in 2003. This indicates that insufficient demand was likely to be at least partof the story behind the rise in the unemployment rate. Since 2003, the unemployment rate has fallen to 5.1% in 2005 and below 5% in 2006. It stillhas not reached the lowest point of the 1990s expansion, however. Over the same period, inflationrose to 3.4% in 2005, while core inflation rose to 2.2%. This suggests that actual unemploymentmay be lower than the NAIRU again. Although the natural rate (which changes over time) hypothesis is the mainstream view ineconomics, the hypothesis is not without its critics. At least four alternative explanations have beenoffered. The mainstream position that monetary policy has no long-term effects on real variables, suchas unemployment, does not specify how long it takes to get to the long term. One view, whichessentially harkens back to pre-NAIRU macroeconomics, argues that the effects of monetary policyare long enough lasting that policymakers can essentially exploit the unemployment-inflationtradeoff (known as the "Phillips Curve") indefinitely. (19) This view has a number of shortcomings. First, while it may be true that a higher and higherinflation rate could be traded off with a lower unemployment rate for long periods of time, it is notclear why this would be a desirable policy outcome (since people dislike high inflation), particularlysince larger and larger increases in inflation would be needed to achieve a given reduction inunemployment as unemployment fell. Second, it has trouble explaining the 1970s, when inflationand unemployment rose simultaneously. Third, the Phillips Curve can only be exploited indefinitelyif the inflationary expectations of individuals do not change over time. That is, it assumes thatincreases in the money supply can continually pump up the economy without individuals everlearning to predict it. Experience from abroad suggests that monetary stimulus ceases to have anyeffect on the real economy during hyperinflation because expectations do adjust. Another challenge to the natural rate hypothesis comes from the opposite perspective: thatany change in monetary policy that is expected or predicted will have no effect on the economy orthe unemployment rate. Part of the "rational expectations" movement in the economics professionin the 1970s, this conclusion is reached by assuming that individuals are always rational and wellinformed, so that changes in the money supply instantly lead to changes in the inflation rate. In thisview, rising inflation would not be associated with an unemployment rate below the NAIRU (sincethe monetary change had no real effect), and falling inflation would not be associated with anunemployment rate above the NAIRU. However, the concept that the unemployment rate wouldalways be at the natural rate (unless unexpected monetary changes occurred) would be consistentwith this view. (20) While this view had a revolutionary effect on academic economics, its empirical relevance-- in its purest form -- has been limited. There is overwhelming evidence that monetary changesalways have affected -- and still do affect -- real economic variables in the short run, in directcontradiction to the rational expectations theory. The natural rate is defined in terms of a relationship between unemployment and inflation. Some economists defending the natural rate concept have argued that recent deviations from it havebeen caused by inflation-related developments rather than changes in the labor market that havecaused the natural rate to change. For example, Robert Gordon has argued that a series of temporaryfactors held the inflation rate down in the mid-1990s, including low energy, medical, computer, andcommodity prices, despite the fall in unemployment below the natural rate. (21) However, most of theseprices have risen since. Besides, the shortcoming of this argument is that there will always be someprice increases below the increase in the general price level, and some above. It is unlikely that theprices of goods that are falling will not be offset by those that are rising. As the unemployment ratestayed below the estimated NAIRU for at least four years in the late 1990s, the temporary factorsargument became less and less convincing. There was a slight increase in inflation toward the endof the last expansion, but not nearly as much as models based on a constant natural rate would havepredicted. Others have argued that low inflation can be explained by a new unwillingness by workersto demand compensation increases because of globalization (e.g., greater foreign competition) andother factors that have made markets more competitive. This argument is hard to prove or disproveempirically, since there is no conclusive way to measure the competitiveness of markets over time. Globalization's influence on wages is thought to be limited since imports are still small relative toGDP, and have increased only gradually. (22) If globalization did reduce the relative wages of affectedworkers, it would only reduce overall inflation if it were accommodated by the Federal Reserve,which is unlikely given that one of the Fed's primary goals is price stability. In any case, the datado not support the argument throughout the period -- Figure 2 shows that compensation increaseswere small in the early 1990s, but healthy from 1998 to 2000, suggesting this factor was notimportant in the later stages of the expansion. The natural rate hypothesis suggests that because unemployment always returns to the naturalrate, recessions should have no permanent effect on unemployment (or the natural rate). This viewwas challenged by a group of economists in the 1980s, who argued that serious recessions could raisethe natural rate, meaning that the business cycle could have permanent effects onunemployment. (23) Thisview, called "hysteresis," sprung from empirical evidence, particularly in parts of Western Europe,where the natural rate seemed to jump dramatically following the deep recessions of the 1970s and1980s. (24) A numberof explanations was devised to give it theoretical underpinnings, such as the theory that sustainedperiods of unemployment (which increased in deep recessions) led to a deterioration in workers'skills that made them less employable. The empirical evidence in the United States is not as strongas Western Europe; nonetheless, it is striking that the rise in the NAIRU coincided with the twodeepest recessions (1973-1975 and 1980-1982) of the post-war period. The hysteresis view can be seen more as a complement to the natural rate theory than analternative. With hysteresis, there is still a natural rate at any given time, and inflation will rise (fall)if unemployment is below (above) it. Hysteresis stipulates that the business cycle is another factorthat can change the natural rate. In the purest sense, however, hysteresis does contradict the naturalrate view that monetary policy (through its effect on the business cycle) has no permanent effect onthe unemployment rate. How the natural rate is theoretically conceptualized and how it is empirically estimated arequite different. Most empirical estimates do not use the conceptual approach discussed in this report:they do not define the natural rate in terms of labor market conditions and then try to estimate howmuch each condition contributes to changes in the natural rate over time. As discussed above, onereason why this approach would not be fruitful is that many of the factors cannot be easily quantified. One approach to estimating the natural rate, taken by CBO, for example, is based on theapproach described above of explaining changes in the inflation rate econometrically, and ignoringthe labor market factors that would change the natural rate. (25) Besides unemployment,CBO lets the inflation rate be influenced by past inflation, productivity growth, food and energyprices, and price controls (for the early 1970s). (26) The notion is that the unemployment-inflation relationship willnot hold in the presence of a supply shock, but if shocks are controlled for, a stableunemployment-inflation relationship can be identified. Unfortunately, supply shocks are not alwaysreadily identifiable, but productivity and energy prices are two obvious candidates. Changes inmonetary policy are not determinants of inflation in this equation. Using past inflation as adeterminant of current inflation implies that individuals assume inflation will be the same as in thepast, which may not be consistent with rational expectations. Similar models by other authors baseexpected inflation on survey results, instead of assuming expectations are based on the past. CBO's model produces a constant NAIRU for married men; it then estimates an overallNAIRU which varies over time because of demographic changes. Although CBO's estimate has ahigh goodness of fit by measures like the R-squared and t-statistic, a constant NAIRU will divergefrom actual experience over short periods of time. For example, it does a poor job explaining whyinflation did not rise when unemployment was a percentage point below the CBO NAIRU estimatein the late 1990s. (27) Gordon uses a similar estimation method and similar control variables to CBO, but allowshis estimate of the NAIRU to vary from year to year, unlike CBO's NAIRU for married men. (28) After estimating the causesof inflation, a natural rate can be backed out of the equation in any given year by holding otherfactors constant. The estimate of the natural rate varies from year to year because it includes theequation's error term. Gordon then limits how much the natural rate can vary to smooth the annualfluctuations out. It should be stressed that Gordon's NAIRU varies only because the actual data varyin ways that Gordon does not attempt to explain. The smoothness of the changes in the NAIRU isimposed by Gordon's model -- it is not derived from the data. A critic of the NAIRU concept couldargue that rather than proving that there is a varying NAIRU, Gordon has demonstrated that actualunemployment changes unexpectedly to such an extent that the NAIRU concept is not useful. (29) Barnes and Olivei hypothesize that unemployment is only an important determinant ofinflation when unemployment is unusually high or low. They use an approach similar to CBO, withthe modification that observations where unemployment is outside of their interval of 4%-7.5% areseparated from observations within the interval. Their results show that the effect of unemploymenton inflation is much larger and statistically significant when unemployment is outside the interval. The drawback to this method is that the observations outside the interval are not randomlydistributed across the sample: they are mostly limited to the mid 1960s, mid 1970s, and early 1980s. Thus, their method still leaves unanswered the question of why the unemployment-inflation tradeoffonly broke down at certain times within the interval, notably the late 1970s and late 1990s. Anarrower band would have reduced this problem. (30) Grant's estimate of the natural rate is fundamentally different than the other three modelsdiscussed here, because his natural rate estimate is not based on the empirical relationship betweenunemployment and inflation. This avoids the problem of controlling for inflation induced by supplyshocks, but somewhat changes the meaning of the natural rate. He first estimates output gaps bycalculating the difference between actual GDP and trend GDP, which he constructs using variousstatistical techniques. He then calculates a natural rate of unemployment by regressingunemployment on his output gap measure, and allows the natural rate to vary over time. LikeGordon, this approach can be criticized on the grounds that it does not offer any theoreticalexplanation for why the natural rate would be changing over time; it only changes because ofvariation in the actual data. Some of his results are questionable because they show the NAIRUlowest in the 1970s and highest in the 1990s. (31) The natural rate concept is often accompanied with enough qualifiers that, on the one hand,it becomes difficult to refute empirically, and on the other hand, may arguably limit its practicalvalue. The qualifiers include (1) because of business cycle fluctuations, actual unemployment willrarely if ever equal the natural rate; (2) the natural rate can change unpredictably over time; and (3)the relationship between the natural rate and inflation will not hold when other factors that alsoinfluence inflation are present. The third qualifier is more problematic than it may first appear whenone considers that the natural rate is defined in terms of its relationship to inflation. Empirically,these qualifiers mean that there is no straightforward test to compare the merits of the argument "anatural rate of unemployment does not exist" to the argument "a natural rate of unemployment exists,but because it changes unpredictably, it cannot be identified until after the fact." The methods for estimating the NAIRU described above are essentially backward-looking. Because they by and large do not identify the fundamental labor market sources of changes in thenatural rate, they cannot predict how the NAIRU will change in the future. This was the case withthe apparent fall in the natural rate in the late 1990s, which took most economists by surprise. Thisis problematic for policymakers: it implies that at any given point, they cannot distinguish whethera movement in unemployment is caused by the business cycle (and should be counteracted withstabilization policy) or by a change in the natural rate (and should not be counteracted with policy). If the Fed had relied heavily on NAIRU estimates of the time, it could have unnecessarily tightenedmonetary policy in the 1990s, cutting short an expansion that never resulted in significantly risinginflation. Likewise, Orphanides and Williams blame much of the stagflation of the 1970s on theFed's failure to recognize the natural rate had risen, which led it to keep policy too loose. (32) On the other hand, attempts to systematically identify changing labor market characteristicsin order to predict changes in the natural rate beforehand are likely to prove frustrating since, asdiscussed above, many of the characteristics thought to be important change infrequently (resultingin a dearth of observations for statistical analysis) and are difficult to quantify. For that reason,explanations based on this approach are open to the criticism of post hoc ergo propter hoc rationalization (deducing causation by identifying correlation after the fact), and may therefore alsofail to forecast changes in the NAIRU accurately. Staiger, Stock, and Watson argue that while a statistically significant NAIRU can beestimated, the margin of error is too broad for the concept to be of much practical use topolicymakers. (33) Forexample, in the first quarter of 1994, they estimate a NAIRU of 5.9% using the consumer price index(CPI), with a 95% confidence interval of 3.9% to 7.6%. (34) For policymaking, their findings suggest that the Fed, forexample, could be certain that policy should tightened only when unemployment was below 3.9%(controlling for the other factors in the estimation) and eased when unemployment was above7.6%. (35) By way ofcomparison, unemployment never exceeded 6.3% in the recent recession; if the Fed had based itspolicy decisions on the criteria of statistical significance, no monetary easing would have beenundertaken to counteract the recession (assuming the NAIRU had not greatly changed since 1994). If the core CPI is used, the confidence interval narrows a little, to a range of 4.5% to 6.9%, but theinterval is arguably still too wide for meaningful policymaking. Despite its shortcomings, the natural rate of unemployment is arguably a concept so deeplyingrained in economic policymaking that it would be difficult to imagine how to formulatepolicymaking without it. Decisions to tighten or ease monetary policy are fundamentally based onthe notion that the economy is above or below full employment, respectively. Full employment, inturn, is primarily determined by comparing the actual unemployment rate to an estimate of thenatural rate. As Mankiw and Ball argue, Few economists would deny that shifts in aggregatedemand, such as those driven by monetary policy, push inflation and unemployment in oppositedirections, at least in the short run. That is all one needs to believe to accept the NAIRUconcept. (36) The alternative to giving pre-eminence to the natural rate in policymaking decisions wouldbe to demote the natural rate to one among many economic variables in attempting to predict thepresent and future course of economic activity. (37) Rather than target the (unknown) natural rate of unemployment,policymakers can target sustainable economic growth, using an estimate of the natural rate as onevariable to help determine sustainability. Even for strict inflation targeters, who subordinateeconomic stabilization to price stability, a natural rate would be useful if it (as one of manyvariables) can help predict the future course of inflation. (38) Based on past experience, it can be argued that other indicators(such as the capacity utilization rate) do a better job predicting future economic activity than thenatural rate, particularly since changes in the natural rate are not easily identified. (39) Nevertheless, some ofthese better predictors are not as comprehensively or well grounded in economic theory as the naturalrate, increasing the likelihood that their past predictive capabilities were simply coincidental. Evenif the natural rate is relegated to one of many indicators of a fully employed economy, without theconcept of the economy moving above or below full employment, it does not seem clear howdecisions to change macroeconomic stabilization policy could be made. | A concept that is fundamental to understanding the economy is that there is an equilibrium,market-clearing rate of unemployment determined by labor market characteristics, policy, andconditions. This rate of unemployment is referred to as the "natural rate" or "full employment rate"of unemployment or the NAIRU (non-accelerating inflation rate of unemployment). Althoughexpansionary fiscal or monetary policy might be able to temporarily push unemployment below thenatural rate in exchange for higher inflation, eventually actual unemployment would rise back to thenatural rate without inflation falling. This concept is consistent with the view that monetary policyhas no long-run effect on real variables such as economic growth or unemployment, and affects onlyprices in the long run. If unemployment did not return to a natural rate, it would imply that monetarypolicy could permanently affect unemployment. There are periods of U.S. history when a constant natural rate concept cannot explain thebehavior of unemployment and inflation. For example, in the 1970s, inflation rose althoughunemployment was above estimates of the natural rate, and in the 1990s, inflation fell althoughunemployment was below estimates of the natural rate. A more sophisticated theory is needed toexplain these periods. Since the natural rate is determined by the characteristics of the labor market,it is possible that changes in the labor market lead to changes in the natural rate over time. Forexample, an aging workforce, unexpectedly rapid productivity growth, policy changes, and a growingtemporary workforce are some of the factors that could have led to a decline in the natural rate in the1990s. In this view, at any given moment, there is some natural rate of unemployment, below(above) which inflation will rise (fall), but that rate may be different from the natural rate in the pastor future because of labor market changes. It is estimated that the natural rate rose during the 1970sand 1980s, and fell back to earlier levels in the 1990s. Although there is no theoretical drawback to the concept of a changing natural rate,economists have been unsuccessful in empirically predicting when changes would take place. Thisleaves the theory open to the criticism that, rather than offering a meaningful explanation of theempirical record, it does little more than offer post hoc rationalization for contradictory results. Anynatural rate estimate must be accompanied by a wide range of uncertainty -- some research suggestsa natural rate of 5.9%, with a 95% confidence interval of 3.9% to 7.6%. Yet alternative theories tothe natural rate have done a little better at explaining or predicting economic outcomes. Theunpredictability of a changing natural rate suggests that excessive weight should not be placed onthe gap between actual unemployment and natural rate estimates in fiscal and monetary policydecisions. The natural rate is probably most useful to policymakers as one of many economicindicators that can predict changes in inflation or the business cycle. Although changes in the naturalrate have not been successfully predicted, it would be difficult to make systematic policy decisionswithout some notion of full employment. |
Health savings accounts (HSAs) were first authorized in the Medicare Prescription Drug, Improvement, and Modernizati on Act of 2003 ( P.L. 108-173 ). HSAs are one type of health-related tax-advantaged account that individuals can use to pay for unreimbursed medical expenses (e.g., deductibles, co-payments, coinsurance, and services not covered by insurance). Generally, individuals are eligible to establish and contribute to an HSA if they have coverage solely under an HSA-qualified high-deductible health plan (HDHP). The HSA is tied to the individual, and account holders retain access to their HSAs if they change employers, insurers, or subsequently obtain coverage under a non-HSA qualified plan. Eligible individuals may make direct contributions to their HSAs, and employers, family members, and other individuals may make contributions to an individual's HSA on the individual's behalf. Unused balances may accumulate without limit, be invested, and carry over from year to year. Individuals do not need to be enrolled in an HSA-eligible HDHP to make withdrawals from the account; however, any withdrawals that are not spent on qualified medical expenses for the account holder, the account holder's spouse, or the account holder's dependents are subject to a penalty tax, with some exceptions. HSAs have several tax advantages: individual contributions are tax deductible unless made through a pretax salary reduction agreement (see " Allowable Contributors "); employer contributions (and pretax salary reductions) are excluded from taxable income and from Social Security, Medicare, and unemployment insurance taxes; withdrawals are not taxed if used for qualified medical expenses; and account earnings are tax exempt. This report summarizes the principal rules governing HSAs, covering such matters as eligibility, qualifying health insurance, contributions, withdrawals, and tax advantages. It concludes with a discussion of HSA data limitations and recent research findings on HDHP enrollment and HSA utilization trends. Individuals are eligible to establish and contribute to an HSA if they have coverage under an HSA-qualified HDHP, do not have disqualifying coverage (disqualifying coverage is discussed in the section, " Disqualifying Coverage "), and cannot be claimed as a dependent on another person's tax return. Whether someone qualifies for an HSA is determined as of the first of each month; thus, a person might be eligible to contribute to an HSA in some months but not in others. For example, if someone first enrolled in an HDHP on September 15, his or her HSA eligibility period would begin on October 1 of that year. Individuals may keep their HSAs and withdraw funds if they become ineligible but cannot make contributions until they become eligible once again. All eligible individuals have the flexibility to establish an HSA with an institution other than their insurer, if at all. Accounts may be established with banks, insurance companies, or other entities approved by the Internal Revenue Service (IRS) to hold individual retirement accounts (IRAs) or Archer medical savings accounts (Archer MSAs). Additional nonbank entities may become an HSA trustee or custodian but first must request approval from the IRS. To be HSA qualified, a health plan must meet several tests: it must have a deductible above a certain minimum level, it must limit out-of-pocket expenditures for covered benefits to no more than a certain maximum level, and it can cover only preventive care services before the deductible is met. (See Table 1 for the minimum deductibles and out-of-pocket limits for 2018.) In addition, the plan's coverage cannot be limited to a narrow set of services, such as coverage for a particular disease (e.g., cancer-only coverage) or vision-only coverage. This rule is designed to prevent individuals from establishing and making HSA contributions when the only insurance they have is coverage for a narrow class of benefits. To be HSA qualified, a health plan's annual deductible in 2018 must be at least $1,350 for self-only coverage; for family coverage, it must be at least $2,700. These amounts are adjusted for inflation (rounded to the nearest $50) annually. In addition, a health plan is required to take into account only usual, customary, and reasonable charges for covered benefits that are provided in network when determining whether deductibles are met. Premiums cannot be included in meeting the deductible. If a health plan has deductible (and co-payment) requirements for prescription drugs that are different than requirements for other benefits, in order for the plan to be HSA qualified, the prescription drug deductible still must meet the same minimum requirements. If an enrollee uses a prescription or other discount card that reduces the amount that the enrollee pays out of pocket for certain items or services, then an HSA-qualified plan nonetheless must count the full amount (what the enrollee paid out of pocket plus the amount of the discount) toward meeting the plan's deductible. To be HSA qualified, a health plan's annual limit on out-of-pocket expenditures for covered benefits must not exceed $6,650 in 2018 for self-only coverage. For family policies, the limit must not exceed $13,300. These amounts are adjusted for inflation (rounded to the nearest $50) annually. All enrollee cost sharing—deductibles, co-payments, and coinsurance—for in-network coverage provided under the HSA-qualified HDHP is taken into account in determining whether the out-of-pocket limits are exceeded. However, these limits should not be interpreted as ceilings on all out-of-pocket expenditures for health care. Enrollee payments to providers for benefits provided out of network or not covered by the HSA-qualified HDHP do not count toward the out-of-pocket limit, nor do premiums for the HSA-qualified HDHP and any other insurance. Even for covered benefits provided in network, the limits apply only to payments for usual, customary, and reasonable charges , as defined in the previous section. Health plans that otherwise meet the requirements to be HSA qualified are not disqualified if they do not have a deductible for preventive care services, as defined in the Internal Revenue Code and IRS-issued guidance, or if they have a deductible less than the aforementioned minimum annual deductible for those services. IRS guidance provides that preventive care includes, but is not limited to, periodic health evaluations (including tests and diagnostic procedures ordered in connection with routine examinations), routine prenatal and well-child care, immunizations, tobacco cessation programs, obesity weight-loss programs, and various screening services. Drugs and medications can be considered preventive care when taken by a person who has developed risk factors for a disease or is preventing its recurrence. In general, preventive care does not include services or benefits intended to treat existing illnesses, injuries, or conditions, although an exception is allowed when the treatment is incidental to a preventive care service and it would be unreasonable or impracticable to perform another service for treatment. Additionally, HSA-qualified HDHPs are required to comply with the federal requirement in Section 2713 of the Public Health Service Act to provide specified preventive care services without imposing cost sharing. For this requirement, preventive care includes evidenced-based services that have in effect a rating of "A" or "B" in the current recommendations of the United States Preventive Services Task Force, routine immunizations, and other evidence-based preventive care and screenings for women and children. Because this requirement provides that health plans, including HSA-qualified HDHPs, cannot impose any cost sharing for the specified preventive services, all such services must be covered by HSA-qualified HDHPs before the plan's deductible is met. There are a number of ways in which an individual could be disqualified from establishing and contributing to an HSA, even if the individual has coverage under an HSA-qualified HDHP. Individuals generally must not have any other health coverage that is not an HSA-qualified HDHP or that provides coverage for any benefit that is covered under their HSA-qualified HDHP. For example, individuals with an HSA-qualified HDHP are not eligible to establish or contribute to an HSA if they also are covered under a spouse's policy that is not an HSA-qualified HDHP for the same benefits. Individuals are not allowed to establish or contribute to an HSA if they are enrolled in Medicare, which generally first occurs at the age of 65. Some types of health coverage are not considered disqualifying for purposes of being eligible to establish and contribute to an HSA. Coverage for any benefit provided under permitted insurance, and coverage (through insurance or otherwise) for accidents, disability, vision care, dental care, or long-term care, is not considered disqualifying health coverage. HSA-qualified HDHP enrollees who do not have disqualifying coverage still are considered HSA eligible even if they have access to and coverage under an employee assistance program, disease management program, or wellness program, provided the program does not provide "significant benefits in the nature of medical care or treatment." HSA-qualified HDHP enrollees who receive treatment under the Veterans Health Administration, within the Department of Veterans Affairs, for service-connected disabilities also are still HSA-eligible. HSA-eligible individuals generally may not have employer-established flexible spending accounts and health reimbursement accounts, which are two other types of health-related tax-advantaged accounts, unless these accounts (1) are for limited purposes (for example, dental services or preventive care), (2) provide reimbursement for services covered by the HSA-qualified HDHP only after the qualifying deductible is met, or (3) are used in retirement. HSAs have annual contribution limits. In 2018, the annual contribution limit is $3,450 for self-only coverage and $6,900 for family coverage. The applicable annual limits apply to total contributions to the HSA from all sources (e.g., from individuals and employers). These amounts are adjusted for inflation (rounded to the nearest $50) annually. In addition to the annual limit, account holders who are at least 55 years of age may contribute an additional catch-up contribution of $1,000 each year, which is not annually indexed for inflation. Where applicable, these annual limits must be reduced by the amount of any contributions individuals make to their Archer MSAs during the same year or for any direct contributions from traditional or Roth IRAs, the latter of which is discussed further later in this section. Contributions to HSAs may be made at any time during a calendar year and until the federal income tax return filing date (without extensions), normally April 15 of the following year. Thus, contributions could occur over a 15½-month time span (e.g., from January 1, 2018, through April 15, 2019), provided they do not exceed the allowable annual limit. The annual limits are calculated on a monthly basis: for each month during the year when individuals are eligible, they may contribute (or others may contribute on their behalf) up to one-twelfth of the applicable annual limit. For example, an individual who is eligible from January through July could contribute seven-twelfths of the annual limit for that year. As an exception to this rule, individuals who are eligible during the last month of the year are treated as if they had been eligible for that entire year and thus are allowed to contribute up to the annual limit so long as the contribution is before the tax filing date of the following year (see below). Individuals who make contributions under this rule must maintain their HSA eligibility for the entire following year, the testing period , except in cases of disability or death. Otherwise, the additional contributions are included in gross income when determining federal income taxes for the year in which an individual fails to be a HSA eligible and, as shown in Table 2 , are subject to a 10% penalty tax. Any excess contributions to an HSA are not tax deductible and, if made by an employer, are treated as gross income for the tax year in which the contributions were earned. Excess contributions generally are subject to a 6% penalty tax, unless the excess amounts are withdrawn prior to the tax filing date of the year the excess contributions were made. If not withdrawn, this penalty tax would apply to each tax year the excess contributions remain in the account. Eligible individuals may make direct contributions to their HSAs, and employers, family members, and other individuals may make contributions to an individual's HSA on the individual's behalf. Contributions by one individual or entity do not preclude contributions by others, provided the total amount of contributions does not exceed annual contribution limits. Employed individuals may make HSA contributions through pretax salary reduction agreements —that is, benefit arrangements established by employers under which employees accept lower take-home pay in exchange for the difference being deposited in their benefit account. Because these types of individual contributions are excluded from gross income, they are not tax deductible. The IRS has determined that salary reduction agreements must allow employees to stop, increase, or decrease their HSA contributions throughout the year as long as the changes are effective prospectively; however, employers may place restrictions on HSA contribution elections under this type of arrangement if the restrictions apply to all employees. The IRS also has determined that these agreements allow employers to make an employee's annual expected HSA contribution available to the employee so that the employee may cover medical expenses that exceed his or her current HSA balances, provided the employee repays the accelerated contributions before the end of the year. HSA contributors cannot restrict how HSA funds are used. For example, employers may not limit HSAs to certain medical expenses (or medical expenses only), even for funds they contribute. Therefore, account owners may make withdrawals for any purpose, though nonqualified withdrawals are subject to taxation, as discussed in the section " Nonqualified Expenses ." Eligible individuals may use other tax-advantaged accounts to increase the amount of resources available in their HSAs. Specifically, individuals may make one rollover contribution to an HSA from an Archer MSA or another HSA during a one-year period. Individuals also may make a once-in-a-lifetime distribution from their traditional or Roth IRA and deposit it into an HSA, which is factored into the annual contribution limits described in the " Contribution Limits " section. These types of HSA contributions are subject to different tax rules than regular HSA contributions, as discussed in the " Tax Advantages of HSAs " section. An account holder may withdraw HSA funds at any time. Generally, withdrawals must be used for qualified medical expenses for the account holder, the account holder's spouse, or the account holder's dependents. Any withdrawals for nonqualified expenses must be included in the account holder's gross income when determining federal income taxes and are subject to an additional 20% penalty. Neither the account holder nor the account holder's spouse or dependents need to be covered under the same or separate HSA-qualified HDHPs for the account holder to withdraw funds. Likewise, having disqualifying coverage would not prohibit an account holder from withdrawing HSA funds. For example, an account holder who enrolls in Medicare Parts A and B becomes ineligible to establish or contribute to an HSA, but the account holder may continue to withdraw funds from a previously established HSA. As noted above, HSA withdrawals are exempt from federal income taxes if used to cover qualified medical expenses for the account holder, the account holder's spouse, or the account holder's dependents. HSA withdrawals remain exempt from federal income taxes even if these individuals are not covered under an HSA-qualified HDHP or have disqualifying coverage. For HSA purposes, q ualified medical expenses are considered most medical care described in 26 U.S.C. §213(d) and further explained in IRS publication 502, Medical and Dental Expenses. More specifically, qualified medical expenses are defined as including the following: the costs of diagnosis, cure, mitigation, treatment, or prevention of disease and the costs for treatments affecting any part of the body; the amounts paid for transportation to receive medical care; and qualified long-term care services. However, of the medical expenses mentioned in 26 U.S.C. §213(d), health insurance premiums and over-the-counter medicines (i.e., medicines available without a prescription) are not considered qualified medical expenses for HSA purposes. In general, HSAs cannot be used to pay health insurance premiums. However, premiums for four types of insurance are considered to be qualified HSA expenses: (1) long-term care insurance, (2) health insurance premiums during periods of continuation coverage required by federal law (e.g., Consolidated Omnibus Budget Reconciliation Act coverage, or COBRA), (3) health insurance premiums during periods in which the individual is receiving unemployment compensation, and (4) for individuals aged 65 years and older, any health insurance premiums (including Medicare Part B premiums) other than a Medicare supplemental policy. There is no time limit on when HSA withdrawals need to be made to pay for (or reimburse payments for) qualified medical expenses, provided adequate records are kept. However, HSAs may not be used to pay expenses incurred before the HSA was established. For example, an account holder may pay 2017 qualified medical expenses today using funds from an HSA established in 2016 but may not use the account to pay for qualified medical expenses incurred in 2015, since this was before the account was established. Withdrawals not used to pay for qualified medical expenses must be included in the account holder's gross income when determining federal income taxes and are subject to a 20% penalty, as shown in Table 2 . The penalty is waived in cases of disability or death and for individuals aged 65 and older; however, withdrawals for nonqualified expenses still may be treated as gross income. There is no requirement, as there is for qualified retirement plans, that individuals begin to spend down account balances at a certain age. HSAs often are referred to as having a triple tax advantage : (1) contributions reduce taxable income, (2) earnings on the account grow tax free, and (3) withdrawals for qualified medical expenses are not subject to taxation. Qualified individuals who contribute to their HSAs may claim a deduction on their federal income tax return and thus reduce their tax burden, as shown in Table 3 . The deduction is above the line ; that is, it is made in determining adjusted gross income and may be taken by taxpayers regardless of whether they claim the standard deduction or the itemized deduction. Individuals may claim the tax deduction for all amounts contributed to their HSAs that were made either by the individual or on behalf of the individual (not including employer amounts or contributions made through a pretax salary reduction agreement) over the course of the year through the subsequent tax filing deadline. For individuals claiming the deduction, the total tax effect of the eligible HSA contributions depends on an individual's marginal tax rate and the amount of nonemployer contributions to the individual's HSA. No deduction may be claimed for a once-in-a-lifetime contribution from an IRA (though the IRA distribution is not penalized, as it otherwise might be) or for Archer MSA or other HSA rollovers. These amounts do not count as gross income in determining income tax liability. An employer's contributions to an HSA cannot be deducted by employees as HSA contributions or as medical expense deductions; however, they are excluded from employees' gross income in determining their income tax liability. In addition, the employer's contributions are excluded from Social Security and Medicare taxes for both employers and employees and are excluded from federal unemployment insurance taxes. If an employee contributes to his or her HSA through a pretax salary reduction agreement, the contributions are considered to be made by the employer and are excluded from the employee's gross income in determining his or her income tax liability and are exempt from the three employment taxes (Social Security, Medicare, and unemployment insurance taxes). An employee cannot deduct amounts contributed to an HSA through a pretax salary reduction agreement. HSA balances can be invested similar to IRAs (e.g., annuities, stocks, mutual funds, bonds, etc.), and any associated earnings can accumulate tax free. State income taxes generally follow federal rules with respect to deductions and exclusions. However, some states may choose to provide different treatment. For example, California does not recognize HSAs as tax-advantaged accounts. Therefore, a California taxpayer who contributed to an HSA is required to increase his or her California adjusted gross income by an amount equal to the sum of the taxpayer's HSA deduction on his or her federal return, the interest earned on the HSA, and the contributions made by the taxpayer's employer. This increase results in a larger state tax burden (or a smaller state tax refund) for the taxpayer. Although it would be beneficial to study the entire HSA population, which is the population that is eligible to establish and contribute to an HSA (i.e., enrolled in an HSA-eligible HDHP) and the population that has an HSA, few available data sources provide a comprehensive understanding of the entire HSA population. The lack of available data stems in part from the fact that HSAs and HSA-qualified HDHPs are two separate products. Although these two product populations overlap, they are not entirely identical, since not all HSA-qualified HDHP enrollees have established an HSA and not all HSA holders currently are enrolled in an HSA-qualified HDHP. Furthermore, these products often can be administered by two separate institutions. Some individuals have their HSA established with their insurer, whereas others have their HSA administered by another type of institution, such as a bank. In the latter case, the insurer would not have any information regarding the individuals' HSAs (i.e., contributions, investments, or withdrawals). Inversely, the HSA holding institution likely would not be aware of the individuals' enrollment in or disenrollment from an HSA-qualified HDHP. As a result, HSA research tends to focus on one of two populations, HSA-qualified HDHP enrollees or HSA holders. In light of these and other methodological limitations, existing HSA studies that rely on surveys of insurers, businesses, or HSA administrators or aggregate IRS tax data can often produce discrepancies in findings and make direct data comparisons difficult. In addition, there may be no data sources to answer key questions of interest, for example, how many individuals eligible to open an HSA or eligible to make an HSA contribution do so. Although exact point estimates for the entire HSA/HSA-qualified HDHP population are difficult to determine, current research, when referenced collectively, can highlight various trends. The next section highlights selected findings related to enrollment and contributions from a variety of commonly cited data sources. Multiple different sources have demonstrated continued increases in HSA-qualified HDHP enrollment and HSAs since the mid-2000s. With respect to HSA-qualified HDHP enrollees, a report using survey data from insurers has shown a continued increase in enrollment in HSA-eligible HDHPs sold by commercial insurers in the individual and the small- and large-group markets from 2005 through 2017. A report using survey data from employers with three or more workers has shown an increase in the percentage of covered employees in HSA-eligible HDHPs between 2006 and 2017. This survey of employers also revealed that larger employers are more likely than smaller employers to offer HSA-eligible HDHPs to employees. Specifically, in 2017, employers with 200 or more workers were more likely than employers with 3 to 199 workers to offer HSA-eligible HDHPs to employees. Similar to HDHP enrollment, multiple sources have indicated an increase in the number of HSA accounts. IRS tax return filer data have shown an increase in the number of tax filers reporting HSA contributions or withdrawals from 2004 to 2012, and HSA account administrator data have shown an increase in the number of accounts from 2011 to 2016. With respect to HSA contributions, the aforementioned sample of HSA account administrator data reveals that around half of account holders individually contributed to their HSAs in 2016 and around half received an employer contribution. With respect to employer contributions, two studies using HSA account administrator data from 2016 showed that HDHP-enrolled employees (who made contributions to HSAs) made an average employee contribution equal to roughly twice the average amount made by employers (that made contributions). The study of IRS tax filings from 2004 to 2012 indicated that the likelihood of contributing to an HSA increased with tax filer's age from 20 to about 45. The study also showed that, across all ages, the likelihood of tax filers contributing to an HSA and the likelihood of tax filers with an HSA maximizing their contributions (both individual and employer) increased across each income quintile. Finally, the analysis of HSA administrator data revealed that very few HSAs (fewer than 4% in 2016) have investments other than cash within the account, with older accounts being more likely than newer accounts to have invested funds. | A health savings account (HSA) is a tax-advantaged account that individuals can use to pay for unreimbursed medical expenses (e.g., deductibles, co-payments, coinsurance, and services not covered by insurance). Individuals may establish and contribute to an HSA for each month that they are covered under an HSA-qualified high-deductible health plan (HDHP), do not have disqualifying coverage, and cannot be claimed as a dependent on another person's tax return. The account can be established with an insurer, bank, or other Internal Revenue Service (IRS)-approved trustee and is tied to the individual. Account holders retain access to their accounts if they change employers, insurers, or subsequently obtain coverage under a non-HSA qualified plan. To be considered an HSA-qualified HDHP, a health plan must meet several tests: it must have a deductible above a certain minimum level, it must limit total annual out-of-pocket expenditures for covered benefits to no more than a certain maximum level, and it can provide only preventive care services before the deductible is met. In 2018, HSA-qualified HDHPs must have a minimum deductible of $1,350 for self-only coverage and $2,700 for family coverage and an annual limit on out-of-pocket expenditures for covered benefits that does not exceed $6,650 and $13,300, respectively. These amounts are adjusted for inflation (rounded to the nearest $50) annually. HSAs have annual contribution limits, which in 2018 are $3,450 for individuals with self-only coverage and $6,900 for those with family coverage. Eligible individuals may make direct contributions to their HSAs, and employers, family members, and other individuals may make contributions to an individual's HSA on the individual's behalf. In addition to the annual limit, individuals who are at least 55 years of age but not yet enrolled in Medicare may contribute an additional annual catch-up contribution of $1,000. The annual contribution limit amounts are adjusted for inflation (rounded to the nearest $50) annually, but the catch-up contribution amount is fixed. Unused balances may accumulate without limit, be invested, and carry over from year to year. Individuals do not need to be enrolled in an HSA-eligible HDHP to make withdrawals from the account; however, any withdrawals that are not spent on qualified medical expenses for the account holder, the account holder's spouse, or the account holder's dependents generally are subject to a penalty tax. Qualified medical expenses include the costs of diagnosis, cure, mitigation, treatment, or prevention of disease and the costs for treatments affecting any part of the body; the amounts paid for transportation to receive medical care; and qualified long-term care services. In general, HSAs cannot be used to pay for health insurance premiums or over-the-counter medications. HSAs have several tax advantages: individual contributions are tax deductible unless made through a pretax salary reduction agreement; employer contributions (including individual contributions made through pretax salary reductions) are excluded from taxable income and from Social Security, Medicare, and unemployment insurance taxes; account earnings are tax exempt; and withdrawals are not taxed if used for qualified medical expenses. However, individuals generally are penalized for withdrawing funds for nonqualified medical expenses and for making contributions above the annual HSA limit. Although it would be beneficial to study the entire HSA population, which is the population that is eligible to establish and contribute to an HSA (i.e., enrolled in an HSA-eligible HDHP) and the population that has an HSA, few available data sources provide a comprehensive understanding of the entire HSA population. The lack of available data stems in part from the fact that HSAs and HSA-qualified HDHPs are two separate products that can be administered by two separate institutions. As a result, HSA research tends to focus on one of two populations, HSA-qualified HDHP enrollees or HSA holders. Although exact point estimates for the entire HSA/HSA-qualified HDHP population are difficult to determine, current research, when referenced collectively, can highlight various trends. Specifically, multiple different sources have demonstrated continued increases in HSA-qualified HDHP enrollment and HSAs since the mid-2000s. |
RS20258 -- Patient Protection and Mandatory External Review: Amending ERISA's Claims Procedure Updated January 19, 2001 The Patients' Bill of Rights Plus Act of 1999, S. 1344 , was introduced by Senator Trent Lott (R-MS) on July 8, 1999, and passed by the Senate onJuly 15, 1999. S. 1344 sought to amend ERISA to provide additional requirements for group health plansand health insurance issuers offeringcoverage in connection with group health plans. If enacted, S. 1344 would have required group health plans and health insurance issuers to develop written procedures for addressing grievances. Agrievance was defined by the bill as any complaint made by a participant or beneficiary that does not involve acoverage determination. Once a grievance wasaddressed, a resulting determination would not have been appealable. S. 1344 would have allowed participants and beneficiaries to appeal any adverse coverage determination to an internal review process. An adversecoverage determination was defined as any determination under the plan which results in a denial of coverage orreimbursement. A participant or beneficiaryseeking internal review would have been allowed at least 180 days after the date of the adverse coveragedetermination to make an appeal. Review would havebeen conducted by an individual with appropriate expertise who was not involved in the initial determination. Appeals involving issues of medical necessity orexperimental treatment would have been conducted by physicians with appropriate expertise. Internal review would have been completed within 30 working days of receiving the request for review. Where delay could jeopardize the life or health of theclaimant, S. 1344 would have required that review was completed no later than 72 hours after receiving therequest for review. A request forexpedited review would have to include documentation of a medical exigency by the treating health careprofessional. For routine determinations, notice of thedecision would have to be issued no later than 2 working days after the completion of review. For expediteddeterminations, notice would have to be issuedwithin the 72-hour review period. Failure to issue a timely decision would been treated as an adverse coveragedetermination for purposes of obtaining externalreview. If enacted, S. 1344 would have required all plans and issuers to have written procedures to permit access to an independent external review process. External review would have been available to selected adverse coverage determinations. Those determinationsincluded coverage decisions that (1) are based onmedical necessity and exceed a significant financial threshold; (2) are based on medical necessity and involve asignificant risk of placing the life or health of theparticipant in jeopardy; or (3) involve an experimental or investigational treatment. To obtain external review, aclaimant would have to complete the internalreview process and file a written request for review within 30 working days of receiving the internal reviewdecision. Within 5 working days after receiving the request for external review, the plan or issuer would have selected an external appeals entity. (13) This external appealsentity would have designated an external reviewer who would conduct the review. The external reviewer wouldhave to (1) be appropriately credentialed orlicensed to deliver health care; (2) not have any material, professional, familial, or financial affiliation with the caseunder review; (3) have expertise in thediagnosis or treatment under review and be a physician of the same specialty, when reasonably available; (4) receiveonly reasonable and customary compensationfrom the plan or issuer; and (5) not be held liable for decisions regarding medical determinations. The externalreviewer would have been required to consider allvalid, relevant, scientific, and clinical evidence to determine the medical necessity, appropriateness, or experimentalnature of the proposed treatment. Review would have been conducted in accordance with the medical exigencies of the case, but would have to be completed within 30 days of the date on whichthe reviewer was designated or all necessary information was received, whichever was later. For cases where delaycould jeopardize the life or health of theparticipant, review would have to be conducted within 72 hours of the date on which the reviewer was designatedor all necessary information was received,whichever was later. The determination of the external reviewer would have been binding upon the plan or issuer. The Bipartisan Consensus Managed Care Improvement Act of 1999, H.R. 2990 , combined two bills: the Quality Care for the Uninsured Act of 1999,originally H.R. 2990 , was introduced by Representatives James M. Talent (R-MO) and John B. Shadegg(R-AZ) on September 30, 1999, and theBipartisan Consensus Managed Care Improvement Act of 1999, originally H.R. 2723 , was introduced byRepresentatives Charlie Norwood (R-GA)and John D. Dingell (D-MI) on August 5, 1999. (14) The combined bill was passed by the House of Representatives on October 7, 1999. H.R. 2990 would not only have required group health plans and health insurance issuers to provide an external review processfor denied claims, but would have alsoestablished new deadlines for the internal review process and mandated the creation of a formal grievance system. Under H.R. 2990 , group health plans and health insurance issuers would have been required to maintain a system that addressed oral and writtengrievances. These grievances would have included any aspect of the plan's or issuer's services, but would notinclude a claim for benefits. Once resolved,grievances would not have been subject to appeal. If enacted, H.R. 2990 would have permitted a participant, beneficiary, or enrollee to request and obtain an internal review of his claim within 180days following a denial of a claim for benefits. Review would have been conducted by a named fiduciary if thedispute involved a claim for benefits under theplan. For disputes involving denied coverage, review would have been conducted by a named appropriate individual. If the case involved medical judgment,review would have been conducted by a physician. Internal review would have been completed in accordance with the medical exigencies of the case, but not later than 14 days after receiving the request for review. If additional information was needed, this deadline could be extended to 28 days. Where delay could seriouslyjeopardize the life or health of the claimant, reviewwould have to be completed within 72 hours after receiving a request for expedited review. This request could besubmitted orally or in writing by the claimant orprovider. H.R. 2990 would have required all plans and issuers to create an external review process. External review would have been available for benefitdenials that were either based on medical necessity or involved investigational or experimental treatment. Externalreview would have also been available when adecision as to whether a benefit is covered involved a medical judgment. H.R. 2990 would have allowed theSecretary of Labor to establishadditional standards for external review, including a filing deadline. The plan or issuer would have been permittedto condition external review on the exhaustionof the internal review process. In addition, the plan or issuer would have been able to charge a filing fee for externalreview. However, this fee could not exceed$25. External review would have been conducted by a certified external appeal entity. For group health plans, the entity would have to be certified either by theSecretary of Labor, under a process recognized or approved by the Secretary of Labor, or by a qualified privatestandard-setting organization. For state healthinsurance issuers, the entity would have to be certified by the applicable state authority or under a processrecognized or approved by such authority. If the statehad not established a certification process, the entity would have to be certified either by the Secretary of Health andHuman Services, under a process recognizedor approved by such Secretary, or by a qualified private standard-setting organization. The external appeal entitywould have to conduct its activities through apanel of not fewer than three clinical peers, and have sufficient medical, legal, and other expertise and sufficientstaffing to conduct its activities in a timelymanner. The determination of the external appeal entity would have been made in accordance with the medical exigencies of the case, but not later than 21 days afterreceiving the request for external review. Where delay could seriously jeopardize the life or health of the claimant,a determination would have to be made within72 hours after receiving the request for external review. The decision of the external appeal entity would have beenbinding on the plan and issuer involved in thedetermination. Please see the following CRS Issue Briefs and Reports for additional information. CRS Issue Brief IB98002, Medical Records Confidentiality . CRS Issue Brief IB98017, Patient Protection and Managed Care: Legislation in the 106thCongress . CRS Issue Brief IB98037, Tax Benefits for Health Insurance . CRS Report 97-643, Medical Savings Accounts . CRS Report 98-286 , ERISA's Impact on Medical Malpractice and Negligence Claims . CRS Report RL30077(pdf) , Managed Care: Recent Proposals for New Grievance and AppealsProcedures . CRS Report RL30144, Side by Side Comparison of Selected Patient Protection Bills in the106th Congress . CRS Report 97-482, The Use of Financial Incentives . CRS Report 97-913, A Primer . CRS Report 97-938, Federal and State Regulation . | This report discusses the existing claims procedure required by the Employee Retirement Income Security Act of 1974(ERISA), and legislative efforts in the 106th Congress to amend ERISA to provide for the mandatoryexternal review of denied benefits. Although most of thepatient protection bills introduced in the 106th Congress included provisions for external review andmore rigorous standards for the internal review of deniedbenefits, this report focuses on the Patients' Bill of Rights Plus Act of 1999, S. 1344, passed by the Senateon July 15, 1999, and the BipartisanConsensus Managed Care Improvement Act of 1999, H.R. 2990, passed by the House of Representatives onOctober 7, 1999. |
Climate change is generally viewed as a global issue, but proposed responses generallyrequire action at the national level. In 1992, the United States ratified the United Nations'Framework Convention on Climate Change (UNFCCC) which called on industrialized countries totake the lead in reducing the six primary greenhouse gases to 1990 levels by the year 2000. (1) Over the past decade, a varietyof voluntary and regulatory actions have been proposed or undertaken in the United States, includingmonitoring of power plant carbon dioxide emissions, improved appliance efficiency, and incentivesfor developing renewable energy sources. But carbon dioxide emissions have continued to increase. In 2001, President George W. Bush rejected the Kyoto Protocol, which called for legallybinding commitments by developed countries to reduce their greenhouse gas emissions. (2) He also rejected the conceptof mandatory emissions reductions. Since then, the Administration has focused U.S. climate changepolicy on voluntary initiatives to reduce the growth in greenhouse gas emissions. This focus isparticularly evident in the Administration's 2002 Climate Action Report (CAR) submitted under theprovisions of the UNFCCC. Of the over 50 programs summarized in the 2002 CAR, only six aredescribed as "regulatory." (3) These regulatory programs were generally implemented to achieve energy or environmental goalsother than the reduction of greenhouse gas emissions, but produced a concomitant greenhouse gasemissions reduction. In this sense, they could be considered the results of a "no regrets" (4) policy where climate changeeffects resulting from related air quality and energy policies are included in the decision-makingprocess on new or modified rules. A number of congressional proposals to advance programs designed to reduce greenhousegases have been introduced in the 109th Congress. These have generally followed one of three tracks. The first is to improve the monitoring of greenhouse gas emissions -- in order to provide a basis forresearch and development and for any potential future reduction scheme. The second is to enact amarket-oriented greenhouse gas reduction program along the lines of the trading provisions of thecurrent acid rain reduction program established by the 1990 Clean Air Act Amendments. The thirdis to enact energy and related programs that would also have the added effect of reducing greenhousegases; an example would be a requirement that electricity producers generate a portion of theirelectricity from renewable resources (a renewable portfolio standard). This report focuses on thesecond category of bills, specifically comparing the major provisions of two proposals that receivedattention during the Senate's debate on its version of H.R. 6 -- The Energy Policy Actof 2005. In February 2005, Senators McCain and Lieberman introduced S. 342 , theClimate Stewardship Act of 2005. (5) The primary focus of the proposed legislation is to reduce U.S.emissions of greenhouse gases through the use of flexible, market-based mechanisms. In May 2005,Senators McCain and Lieberman introduced S. 1151 , an expanded version of S.342 that includes a new title designed to encourage innovation and deployment of lesscarbon intensive technologies, sequester carbon emissions, or mitigate the effects of climate change.The bill's emission reduction provisions are very similar to S.Amdt. 2028 (to S. 139 ) of the 108th Congress, which the Senate debated in 2003. That amendment failedon a 43-55 vote. During the debate on the Energy Policy Act of 2005, S. 1151 wasintroduced as S.Amdt. 826 and defeated on a 38-60 vote. As summarized in Table 1 , S. 1151 would require mandatory andeconomy-wide emission reductions. Using a flexible, market-based implementation strategy, the billwould require economy-wide reductions, but permits participation in pre-certified internationaltrading systems and in carbon sequestration programs to achieve part of the reduction requirement. The bill excludes residential and agricultural sources of greenhouse gases, along with entities thatdo not own a single facility that emits more than 10,000 metric tons of carbon dioxide equivalentsannually. (6) A draft amendment, (7) announced by Senator Bingaman, is based on the report of theNational Commission on Energy Policy (NCEP) that called for a mandatory, economy-widetradeable permit program to begin limiting greenhouse gases. (8) The Climate and EconomyInsurance Act of 2005 (hereafter referred to as the "draft amendment") would mandate an acceleratedreduction in the greenhouse gas intensity of the country's economy. (9) Between 2010 and 2019, thedraft amendment would require a 2.4% annual reduction in greenhouse gas emissions per dollar ofprojected gross domestic product (GDP). After 2019, this reduction would increase to 2.8%annually. Implementation would be through a flexible, market-oriented allowance trading program. The total number of allowances each year would be calculated based on the mandated decline ingreenhouse gas intensity, and projected GDP growth. However, the draft amendment includes acost-limiting safety valve that allows covered entities to make a payment to DOE in lieu of reducingemissions. The initial price of such payments would be $7 a ton in 2010. (10) Thus, if a covered entitychooses, it may make payments to DOE at a specific price rather than make any necessary emissionsreductions. The most notable difference between the two proposals is their approach to controlling emissions of greenhouse gases. Both would cover the majority of U.S. greenhouse gas emissions. However, while S. 1151 would place an absolute cap on emissions from coveredentities, the draft amendment aims to reduce greenhouse gas intensity. Under S. 1151,while emissions from covered entities would be capped, uncovered emissions would be expected tocontinue to rise: ultimately, overall U.S. emissions would be expected to grow. Under the draftamendment, if it is assumed that all U.S. emissions are covered, economic growth would determinewhether total U.S. emissions grow or decline: if economic growth outpaces the scheduled reductionsin emissions intensity, or the proposal's safety valve is invoked, emissions could continue togrow. (11) A second key difference is the establishment of a cost-limiting "safety valve" in the draftamendment. Under this proposal, covered entities in need of extra tradeable allowances maypurchase them on an open market, or they can make a payment to DOE at a set price (i.e., the safetyvalve). (12) Under S. 1151 , there is no provision to limit the price per allowance that a covered entitywould be required to pay. In addition, the two proposals differ in other ways, as well, including which entities arecovered, which agency has primary responsibility for the program, how credits for early action andother activities can be generated, and how proceeds from the sale/auction of allowances will beutilized. Table 1 compares key topics covered by the two proposals. Table 1. Comparison of Key Topics Covered by S.1151 and the Draft Amendment As discussed in the next section, emission reduction estimates under both options involveat least some uncertainty, particularly for the draft amendment. Thus the estimates provided in Table2 should be considered "ballpark" in nature. In 2004, The Energy Information Administration (EIA) analyzed an earlier version of S. 1151 . (13) Under EIA's analysis, S. 1151 would achieve a 6.7% reduction in overall greenhouse gasemissions in 2010 compared with its projected business-as-usual scenario, but would not returngreenhouse gas emissions to their 2000 or 1990 levels. This result contrasts with CRS's estimate thatthe draft amendment would result in a 2.5% reduction in overall greenhouse gas emissions in 2010compared with EIA's business-as-usual scenario. (14) CRS did not estimate longer term reductions from either S. 1151 or the draftamendment because of the inherent uncertainty involved in such projections. Qualitatively, it canbe stated that emissions of greenhouse gases would likely continue to increase under both options,although somewhat more slowly than business-as-usual. In the case of S. 1151, thepercentage of greenhouse gases not covered by the bill would increase and would be uncontrolledby the reduction program. Thus, the initial reduction in emissions achieved in 2010 would be slowlyeaten up over time. In the case of the draft amendment, covered emissions would continue to growto the extent that projected economic growth outstripped the 2.4% annual reduction in carbonintensity (2.8% beginning in 2020), and to the extent that increased costs drove covered entities toinvoke the safety valve rather than further reduce emissions. In the longer term, emissions couldpotentially rise faster under the draft amendment than under S. 1151. Table 2. Projected Emissions Under S. 1151 and DraftAmendment (billions of metric tons of carbon dioxide equivalents) Sources: 1990 and 2000 data: U.S. submission to the United Nations Framework Convention onClimate Change, 2010 projections. For S.Amdt. 2028: Energy InformationAdministration, Analysis of Senate Amendment 2028, the Climate Stewardship Act of 2003 (May2004). S.Amdt. 2028 is very similar to S. 1151 and is used as a surrogate here. However, the number of covered entities may be more or less under S. 1151 then assumedhere, so the estimates may understate or overstate actual reductions that would be achieved underS. 1151. For the draft amendment, calculations by CRS are based on projected GDP andcarbon intensity improvements by Energy Information Administration, Annual Energy Outlook 2005 ,DOE/EIA-0383(2005), February 2005. See text for discussion of uncertainties surrounding the draftamendment's estimate. Estimates do not take into account the potential for carbon sequestration. The projected emission reductions under the draft amendment are more uncertain than under S. 1151 . The primary source of uncertainty for S. 1151 is the precise numberof covered entities that must meet the reduction requirements. In EIA's analysis of previous versionsof S. 1151, the assumed coverage is about 75%; supporters of the bill have suggested thecoverage is about 85%. The difference is significant as higher coverage means more reductions thanestimated by EIA and more certainty about their quantity; lower coverage means lower compliancecosts, but greater uncertainty about quantity. Table 3. Factors Potentially Affecting EmissionReductions As indicated in Table 3 , the draft amendment has several uncertainties with respect to emissions reductions. Unlike S. 1151 , which defines a historic emissions baselinewhich covered entities must achieve, the draft amendment calculates a future baseline fromprojections of 2009 GDP growth and carbon intensity improvement. Both of those variables areuncertain. In EIA's current projections, economic growth to 2010 is assumed under its threescenarios to range from 2.5% annually (low case) to 3.6% annually (high case) with its referencecase set at 3.1% annually. CRS calculations presented in Table 2 assume the reference caseassumption of 3.1% annual GDP growth. However, as indicated here, this estimate could be off by20%, or more. Likewise, the carbon intensity improvement projection is uncertain. Based on EIAprojections, CRS estimated a 2009 carbon intensity of 165 million metric tons carbon equivalent permillion dollars GDP (MMTCE/M$GDP) for its calculations. However, based on the President'sClimate Change Initiative, the targeted 2009 carbon intensity is in the range of 159MMTCE/M$GDP). (15) Likewise, improvement could be less than projected, as current intensity levels are considerablyhigher than those projected under the initiative. The 2002 estimate of carbon intensity is 183MMTCE/M$GDP. Like S. 1151 , the draft amendment raises some questions as to the exact extentof its coverage. The CRS estimate in Table 2 assumes 100% coverage. However, there arepotentially entities not covered under the draft amendment. The final uncertainty affecting emissions reductions achieved under the draft amendment isthe safety valve. All analysis done of previous versions of S. 1151 indicate that a $7per ton of carbon dioxide safety valve would be triggered immediately. (16) In contrast, the EnergyInformation Administration's analysis projects the safety valve would be triggered around the year2015. (17) As the degreeto which reductions could be achieved before the safety valve would be triggered is disputed, anotherlayer of uncertainty is added to the emission reductions achieved under the draft amendment,particularly in the longer term. The projected cost under S. 1151 is more uncertain than under the draftamendment. A major source of uncertainty for S. 1151 is future growth in greenhouse gasemissions by covered entities. Because S. 1151 establishes a firm cap on greenhouse gasemissions based on the year 2000, any increased emissions resulting from continuing economicgrowth would have to be offset. The more robust the economic growth, the greater potential formore emissions that would have to be offset to maintain the cap. In general, more emissionreductions probably means higher costs. If economic growth is less robust, fewer reductions wouldhave to be made and costs would be less. S. 1151 cost estimates are affected by several other uncertainties. In threestudies conducted on the cost of previous versions of S. 1151, two studies placed the potential permit price in 2010 at $9 a ton (2001$), and one at $15 a ton (2001$). The sources of thediffering estimates are different assumptions about the availability of the following: (1) cost effectiveenergy efficiency improvements, (2) cost-effective non-CO 2 greenhouse gas reductions, (3)cost-effective carbon sequestration and international credits, and (4) future natural gas supply. Witha program designed to achieve a least-cost solution through a market-based allowance tradingsystem, restricting the availability of options increases projected costs. The range between the twostudies indicating $9 a ton and the one indicating $15 a ton illustrates the sensitivity and uncertaintysurrounding S. 1151's potential costs. (18) The draft amendment's cost estimates are not as sensitive to the factors identified above. Partly this is by design, and partly this is because the draft amendment requires less emissionreductions than S. 1151 . Unlike S. 1151, the draft amendment incorporateseconomic growth into its emissions limitation target, permitting some increase in future emissionsif projected economic growth exceeds the mandated improvement in greenhouse gas intensity. Fewer offsets required translates into lower costs. Like S. 1151 , the draft amendment's projected cost is affected by the assumedavailability of cost-effective control measures, such as those noted above -- energy efficiencyimprovements, cost-effective carbon sequestration and non-CO 2 greenhouse gas reductions, alongwith assumed future natural gas supply. However, the draft amendment does not extend its flexiblemarket implementation program to international credits in the manner that S. 1151 does.Thus, no uncertainty (or possible lower costs) is introduced by the potential for international trading. The National Commission on Energy Policy placed the permit price of its proposal (on whichthe draft amendment is based) at $5 a ton in 2010 (2004$). Although there are uncertainties in thedraft amendment's potential costs, its safety valve puts a firm limit on its upside risk -- $7 a ton(nominal 2010$). Converting these estimates to 2001 dollars, the projected permit price for the draftamendment would be $4.8 - $5.9 a ton (2001$). (19) Besides putting a ceiling on upside cost, the draft amendment'ssafety valve narrows the band of potential costs substantially. The remaining cost uncertainty is withrespect to the lower bound of costs. The purpose of a safety valve is to bound the costs of any climate change control program(price) at the expense of reductions achieved (quantity). (20) In general, market-based mechanisms to reduce CO 2 emissionsfocus on specifying either the acceptable emissions level (quantity), or compliance costs (price), andallowing the marketplace to determine the economically efficient solution for the other variable. Forexample, a tradeable permit program sets the amount of emissions allowable under the program (i.e.,the number of permits available caps allowable emissions), while letting the marketplace determinewhat each permit will be worth. Likewise, a carbon tax (or the safety valve contained in the draftamendment) sets the maximum unit (per ton of CO 2 ) cost that one should pay for reducingemissions, while the marketplace determines how much actually gets reduced. In one sense,preference for a pure tradeable permit system or inclusion of a safety valve depends on how oneviews the uncertainty of costs involved and benefits to be received. For those confident that achieving a specific level of CO 2 reduction will yield significantbenefits -- enough so that even the potentially very high end of the marginal cost curve does notbother them -- a pure tradeable permit program may be most appropriate. CO 2 emissions would bereduced to a specific level, and in the case of a tradeable permit program, the cost involved wouldbe handled efficiently, though not controlled at a specific cost level. This efficiency occurs becausethrough the trading of permits, emission reduction efforts concentrate at sources at which controlscan be achieved at least cost. However, if one is more concerned about the potential downside risk of substantial controlcosts to the economy than of the benefits of a specific level of reduction, then including a safetyvalve may be most appropriate. In this approach, the level of the safety valve effectively caps themarginal cost of control that affected entities would pay under the reduction scheme, but the preciselevel of CO 2 achieved is less certain. Emitters of CO 2 would spend money controlling CO 2 emissions up to the level of the safety valve. However, since the marginal cost of control amongmillions of emitters is not well known, the overall emissions reductions for a given safety valve levelon CO 2 emissions cannot be accurately forecast. In essence, the safety valve on the draft amendmentcould be seen as a contingent carbon tax. Hence, a major policy question is whether one is more concerned about the possibleeconomic cost of the program and therefore willing to accept some uncertainty about the amount ofreduction received (i.e., a safety valve); or one is more concerned about achieving a specific emissionreduction level with costs handled efficiently, but not capped (i.e., pure tradeable permits). S. 1151 leans toward the quantity (total emissions) side of the equation; the draftamendment leans more toward the price side. The two proposals -- S. 1151 and the draft amendment -- would establishmarket-based systems to limit emissions of greenhouse gases. However, the proposals differ in howthose systems would work. S. 1151 would establish an absolute cap on emissions fromcovered entities, and would allow entities to trade emissions under that cap. The draft amendmentwould limit greenhouse gas emissions intensity and establish a cost-limiting safety valve to protectagainst high compliance costs. Under both proposals, short-term U.S. emissions would likely bebelow a business-as-usual scenario, although reductions under S. 1151 are likely to belarger and more certain. In contrast, the cost of the draft amendment is likely to be less and morepredictable. However, under both proposals, total U.S. emissions could be expected to continue theirupward trend, albeit at a slower rate than currently forecasted. | Climate change is generally viewed as a global issue, but proposed responses generallyrequire action at the national level. In 1992, the United States ratified the United Nations'Framework Convention on Climate Change (UNFCCC) which called on industrialized countries totake the lead in reducing greenhouse gases to 1990 levels by the year 2000. Over the past decade,a variety of voluntary and regulatory actions have been proposed or undertaken in the United States,but carbon dioxide emissions have continued to increase. Several proposals designed to address greenhouse gases have been introduced in the 109thCongress. Two proposals, S. 1151 , introduced by Senators McCain and Lieberman, anda draft alternative, announced by Senator Bingaman, received increased scrutiny in preparation forthe Senate's debate on comprehensive energy legislation. During that debate, S. 1151,introduced as S.Amdt. 826 , was defeated on a 38-60 vote. In contrast, the draftalternative remains a work-in-progress and has yet to be introduced. This report compares these twoproposals. Both proposals would establish market-based systems to limit emissions of greenhouse gases. However, the proposals differ in how those systems would work. S. 1151 wouldestablish an absolute cap on emissions from covered entities, and would allow entities to tradeemissions under that cap. The draft amendment would limit emissions intensity (greenhouse gasemissions per unit of GDP), and establish a cost-limiting safety valve to protect against highcompliance costs. Each would set up a tradeable permit program to begin addressing emissions bythe year 2010. In 2004, the Energy Information Administration analyzed an earlier version of S. 1151 . Under EIA's analysis, S. 1151 would achieve a 6.7% reduction in overallgreenhouse gas emissions in 2010 compared with its projected business-as-usual scenario, but wouldnot return emissions to their 2000 or 1990 levels. This contrasts with the CRS estimate that thedraft amendment would reduce overall greenhouse gas emissions 2.5% in 2010 compared with EIA'sbusiness-as-usual scenario. The two proposals represent different answers to the price-versus-quantity issue in reducinggreenhouse gases. In general, market-based mechanisms to reduce CO 2 emissions focus onspecifying either the acceptable emissions level (quantity) or compliance costs (price) and allowingthe marketplace to determine the economically efficient solution for the other variable. If one is moreconcerned about the possible economic cost (price) of the program, then use of a safety valve to limitcosts could appear to some more appropriate, even through it introduces some uncertainty about theamount of reduction achieved (quantity). In contrast, if one is more concerned about achieving aspecific emission reduction level (quantity), with costs handled efficiently, but not capped, atradeable permit program without a safety valve may be viewed as more appropriate. In the case ofthese alternatives, S. 1151 leans toward the quantity (total emissions) side of theequation; the draft amendment leans more toward the price side. This report will be updated asevents warrant. |
An estate tax is a tax levied on the assets left behind by a decedent. The federal government and many state governments levy estate taxes or some type of tax on the transfer of assets at death. Under current law, the estate tax is scheduled to revert to the pre-2001 structure on January 1, 2013, with a $1 million exemption and top rate of 55%. In contrast, the federal estate tax currently allows for a significantly higher exemption amount, $5.12 million, and a significantly lower top rate of 35%. With this as backdrop, it is believed that Congress is likely to act on the federal estate tax in the near term. How Congress chooses to act will impact state governments. The Administration's FY2013 budget proposes a middle ground between those options with a $3.5 million exemption and top rate of 45%. There is an important difference between these proposals: the 2012 law and the Administration's proposal each allow a deduction for state death taxes whereas the pre-2001 law provides a credit for those taxes. For example, when an estate files a federal return for a death occurring in 2012, state estate taxes paid are deducted from the value of the estate before calculating tax liability. In contrast, under the pre-2001 law, the estate would calculate the federal estate tax liability then reduce the federal tax payment dollar-for-dollar for any state estate taxes paid. Changes to the federal estate tax are in part responsible for a decline in state estate tax revenue from $9.07 billion in 2001 to $4.65 billion in 2009. If current law is extended or if the President's proposal enacted, then the recent trend of declining state estate tax revenues will likely continue (see Figure 1 ). The interaction between federal and state tax policy, if not the estate tax explicitly, has drawn the interest of Congress. A recent congressional hearing, couched in discussions of potential tax reform, hinted at bipartisan interest in encouraging greater tax coordination between the federal government and the states (and among the states). Senator Baucus, in his opening statement for the hearing, noted the following: We need to make sure our federal, state and local tax systems are working together. As part of tax reform, we should ask how we can help states collect taxes owed and how we can encourage standard rules to protect taxpayers from multiple taxes and needless complexity. Senator Hatch also acknowledged the potential impact of the tax interdependence between the different levels of government. His interest, however, was from a constitutional perspective: Issues involving the federal impact on state and local revenues impact both the Constitution's separation of powers between the federal and state governments and the separate identity of the sovereign states. The bipartisan recognition that state taxes are affected by changes to federal tax law does not imply that there is agreement on how to structure the federal estate tax in 2013 and beyond. In the 112 th Congress, S. 3412 , The Middle Class Tax Cut Act, would allow the estate tax law to revert to the pre-2001 law. Alternatively, The Tax Hike Prevention Act of 2012 ( S. 3413 ) and its companion, The Job Protection and Recession Prevention Act of 2012 ( H.R. 8 ), would extend the 2012 estate tax parameters through 2013. In general, the pre-2001 structure of the estate tax would tax significantly more estates than would the FY2013 budget proposal or extension of 2012 law. Reversion to the pre-2001 structure would result in an estimated significantly more taxable estates in 2013 compared to the number of taxable returns filed in 2009 ( Table 1 ). The President's FY2013 budget proposal would tax fewer estates in 2013 than in 2009. In absolute terms, the percentage of estates that are taxable under all proposals is relatively small, as roughly 2.4 million individuals over the age of 24 died in 2010. If Congress elects to maintain a federal estate tax, the impact on states will depend critically on the treatment of state death taxes. Most critically, the impact will depend on the choice of whether to allow the state death tax to "count" against federal estate taxes and, if so, how. Other components, such as the exclusion amount, the top rate, and the valuation of transferred assets, will also be important. These factors, however, are less important from an intergovernmental coordination perspective with the possible exception of the exclusion amount—many states use the federal exclusion amount as the threshold for filing a state return. This report provides an overview of the federal estate tax since 2001, highlighting recent trends in federal and state estate tax revenue. The report also analyzes the impact of the three policy options cited above, and presents an economic perspective of the policy options. The report will be updated as legislative events warrant. As noted above, the federal estate tax will likely be an issue for Congress in the near term. Three alternatives are examined for this report: (1) revert to the pre-2001 law, (2) extend the 2012 law, and (3) return to the 2009 law as proposed in the Administration's FY2013 budget proposal (see Table 1 for a summary of the proposals). Though there are many other options that could be considered, these three plans are receiving the most attention, and they broadly represent the trade-offs under current consideration. For example, the federal estate tax could be repealed. If the federal estate tax were repealed, repeal of state estate taxes would likely follow. This option would most likely be considered in the context of broader tax reform and is beyond the scope of this report. The following is an overview of the modifications to the estate tax since 2001. If the estate tax reverts to pre-2001 law in 2013 as scheduled, significantly more estates will be subject to tax. The pre-2001 law includes a $1 million exemption amount, a top rate of 55% (with a 5% surtax on estates valued between $10 million and $17.184 million), no spousal exemption portability, and a credit for state death taxes paid. The pre-2001 law would yield an estimated 52,500 taxable returns in 2013. As noted above, the federal estate tax is scheduled to revert to the pre-2001 structure absent congressional action. The changes are the result of the delayed sunset of the modifications originally implemented by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA, P.L. 107-16 ). Under that law, several important estate tax parameters were changed to reduce the burden of the federal estate tax and eventually repeal the tax in 2010. The changes in the years leading up to expiration included gradually increasing the exemption amount (technically the unified credit exemption equivalent amount) from $1 million to $3.5 million in 2009, decreasing the top rate from 55% to 45% by 2009, and changing the credit for state death taxes to a deduction. This final change fundamentally changed the relationship between state and federal estate taxes and led to a decline in both federal and state revenues generated by the estate tax. Following is an example of a hypothetical estate in Delaware valued at $7 million. This example will use 2012 law except for the treatment of state death taxes paid ("death" taxes because the credit could also be used for inheritance and succession taxes). In both scenarios, $92,640 in state death taxes are paid to Delaware. In scenario A, state death taxes paid to Delaware are credited dollar-for-dollar toward federal estate tax liability (pre-2001 law structure). In scenario B (current law), state death taxes paid to Delaware are allowed as a federal deduction. All other parameters are the same for each scenario and reflect 2012 law including the 35% top rate and $5.12 million exclusion. With scenario B, each dollar paid to Delaware reduces federal liability by $0.35, the marginal federal estate tax rate. In contrast, with scenario A, each dollar paid to Delaware reduces federal liability by one dollar (see Table 2 ). Under current 2012 law with a deduction for state estate taxes, the estate pays $60,216 more in federal taxes when compared to a credit method, but the state liability remains the same, $92,640. The liability is higher because only 35% of the estate tax paid to Delaware offsets federal liability. If the credit for state death taxes were to replace the deduction (scenario "A"), Delaware's estate tax would not change the total liability as long as the tax were structured to "pick-up" the federal credit. Thus, with the deduction structure, total estate taxes paid is greater than under the credit method. The changes implemented by EGTRRA have had and will have a significant impact on both federal and state tax revenues on transfers at death. Combined federal and state revenue from estate and inheritance taxes has declined from $31.0 billion in 2001 ($37.5 billion in 2009 dollars) to $25.3 billion in 2009 (see Figure 1 ). The decline, however, was much more significant for states: a 48% drop for state taxes compared to a 27% drop for the federal tax. Reversion to pre-2001 law would likely reverse this revenue change, increasing state estate tax revenue more rapidly than federal estate tax revenue. The impact of federal changes to the estate tax on the states arises for a variety of reasons. First, most state estate taxes are linked directly or indirectly to the federal estate tax law. So, for example, when the federal exemption increased the filing threshold, states that were coupled with the federal law as currently in place saw their filing thresholds increase automatically. States had the option of proactively changing their laws, such as decoupling from the federal law, to maintain their estate tax revenue. Most states, however, did not change their laws for administrative or political reasons. Second, EGTRRA changed the credit for state death taxes to a deduction beginning with the 2005 tax year. The impact on state estate tax revenue and structure was significant. The dollar-for-dollar federal credit for state death taxes meant that the state estate tax did not add any additional estate tax burden, as it offset some part of federal liability. The change to the deduction under EGTRRA meant that state estate taxes would impose an additional burden on decedent estates. This led to pressure, at the state level, to change state death taxes after passage of EGTRRA—something many states (26 states and the District of Columbia) have done. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRUIRJCA, P.L. 111-312 ; 124 Stat. 3296) reinstated the expired estate tax retroactively for 2010 and extended it through 2012. Under TRUIRJCA, the top rate is set at 35% (the top individual income tax rate) and the exemption set at $5 million (adjusted for inflation thereafter). TRUIRJCA also extended the deduction for state estate taxes through 2012 and continued the portability of any unused spousal exemption (effectively doubling the exemption for married decedents). Through the remainder of 2012, the exemption is set at $5.12 million. If Congress extends the 2012 law through 2013 (with the parameters indexed for inflation), an estimated 4,000 estates would be taxable in 2013. The President's FY2013 budget proposes returning the federal estate tax to the 2009 parameters on a permanent basis. Under the President's proposal, the top rate would be 45% and the exclusion amount $3.5 million for the federal estate tax. The portability of the spousal exclusion would also be made permanent. When measured against current law, this proposal would generate a revenue loss of $312.3 billion over the 10-year budget window when compared to current law (pre-2001 law). The President's proposal would yield an estimated 7,000 taxable returns in 2013. There are two related taxes the federal government levies at death: gift taxes and generation-skipping taxes. The estate tax is a tax on the wealth holdings of a decedent and is collected before assets are transferred to heirs. In contrast, gift taxes, which are often linked to an estate tax to stem tax avoidance strategies such as giving away assets at the end of life to skirt the estate tax, are not incurred at death. The federal gift tax has been "unified" with the estate tax in the past, meaning any taxable gifts during a lifetime were counted against any credits for federal estate taxes. The estate and gift taxes are not unified for the 2012 tax year and instead have separate exclusion amounts. Generation-skipping transfer taxes (GSTs) are also intended to blunt tax planning strategies designed to avoid taxes. Generally, a generation-skipping transfer is a transfer to a grandchild (or great-grandchild) usually through a trust (a fund or account where the grandchild is the beneficiary). The transfer is taxable for the gift-giver at the highest rate of the estate tax at the time of transfer. The estate tax exemption amount, however, can be used to offset any GST tax. These taxes are an administrative patch to the estate tax intended to prevent aggressive tax planning utilizing a more distant decedent. For the remainder of this report, GSTs will not be directly addressed. The tax on capital gains is another important element of the tax structure on assets transferred at death. Generally, capital gains are taxable when the gains are realized. Estates often have considerable unrealized capital gains included in the estate. Without an estate tax, a significant amount of income would escape taxation. The estate tax, in a sense, replaces capital gains taxes or is intended to capture these unrealized gains. Generally, once the asset is transferred, the value of the asset (or the basis) for the recipient is the market value on the date of the decedent's death ("stepped up" basis). Thus, any unrealized gains by the decedent are left untaxed. An alternative valuation method, the carry-over basis, has the heir assume the basis of the decedent (sometimes referred to as "stepping into the shoes" of the decedent). Any unrealized gain transferred to the heir would be taxable once the heir sold the asset. All of the proposals identified in this report follow the step-up in value of assets (the basis) transferred at death. The impact of the impending changes will vary across states. As of 2012, 22 states and DC imposed some type of tax on transfers at death (see Table 3 ). Two states, Delaware and Ohio, are scheduled to repeal their estate taxes in 2013: Delaware on January 1, 2013, and Ohio on July 1, 2013. A recent report by the Minnesota House Research Department identified 14 states (and DC) with an estate tax, 6 states with an inheritance tax, 2 states with both an estate tax and an inheritance tax, and 2 with a stand-alone gift tax. Generally, states with an estate tax use the now expired (but scheduled to return for the 2013 calendar year) rate schedule used to calculate the federal credit for state death taxes. The incorporation of the federal tax code can be automatic, meaning if the credit for state death taxes were to return in the federal tax code, the state estate tax would also return. Or, the link to the federal tax code can be as of a specific date, such as January 1, 2009. Three states, Connecticut, Ohio, and Washington, have completely independent estate taxes. For the "decoupled" state estate taxes, state legislative action may be required to reinstate an estate tax. The initial exemption amount varies among states, ranging from $338,333 in Ohio to $5 million in North Carolina. Seven states use a $1 million exemption. Fourteen states and the District of Columbia follow the federal state death tax credit with a graduated rate schedule that reaches 16% for estates valued over $10.1 million. Washington State levies a top rate of 19% and Ohio a much lower 7%. State inheritance taxes are less common than estate taxes. These taxes, levied on heirs rather than the estate, are more analogous to income taxes. Differential exemption amounts and tax rates based on relation to the decedent are common at the state level. Eight states levy a tax on heirs and four states allow a complete exemption for lineal heirs. The exemption amounts in the remaining states range from $3,500 (Pennsylvania) to $1 million (Tennessee). Tax policy economists commonly evaluate a tax on four criteria: (1) administrative simplicity and compliance cost, (2) equity, (3) economic efficiency, and (4) revenue sufficiency. Following is an analysis of the changes to the estate tax since 2001 using these four criteria. Consideration of these criteria may help Congress as deliberations over the estate tax and tax reform are likely to continue in the coming months. The administrative simplicity and compliance cost of a tax is important to revenue collectors and taxpayers. Revenue collectors prefer taxes that are easily administered and taxpayers prefer taxes where compliance is relatively easy. These factors are even more critical for taxes that are levied by different levels of government on a shared base like estate taxes. Intergovernmental coordination can improve both administrative simplicity and compliance costs. There are two directions of coordination for taxes on a common base: "vertical" coordination and "horizontal" coordination. Vertical coordination is between the federal government and the states and horizontal coordination is among the states. The level of vertical coordination between federal and state estate taxes has eroded significantly since the 2001 changes. As of 2012, many states have abandoned the estate tax completely while others have decoupled from the federal tax, levying a separate estate tax. The following is from the Center on Budget and Policy Priorities: Fifteen states that levied pick-up taxes prior to 2001 retained estate taxes. Of these, twelve states—Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Rhode Island, and Vermont—and the District of Columbia decoupled from the federal estate tax law and continue to levy an estate tax that is the same or very similar to the earlier pick-up tax. Three states—Connecticut, Oregon, and Washington—replaced their pick-up taxes with estate taxes that are not tied to the federal tax. Maintaining separate state and federal estate taxes is a significant divergence from past practice. When the modern version of the federal estate tax was first implemented in the early part of the 20 th century (1916), the federal estate tax was somewhat controversial for state tax authorities. Up until that time, the taxation (or lack of taxation) of estates was viewed as a decision that should be left to the states. A federal tax would, in theory, impinge on the states' capacity to raise revenue from a tax levied on wealth transfers at death. These "historical precedence" claims by state officials, however, may have been overstated. The federal government has imposed temporary levies on the transfer of assets at death several times in the past. The revenue from these temporary levies was used to help pay for wars or national defense. The Stamp Act of 1797 was imposed on wills offered for probate and was repealed in 1802; the Revenue Act of 1862 imposed a similar stamp tax and an inheritance tax. Both were repealed in 1872. The War Revenue Act of 1898 created a so-called "legacy tax," which was levied on the estate and was the "precursor to the present federal estate tax." Nevertheless, the federal government structured the initial federal estate tax such that any state tax would be credited dollar-for-dollar up to a specified tax rate on the estate. This provision created the equivalent of a revenue sharing arrangement between the federal government and the states as most states structured their taxes to match exactly the federal credit. The state taxes "sponged up" any available credit. This degree of voluntary vertical coordination was unique to the estate tax. This credit structure (pre-2001 law) had the advantage over the deduction structure (2012 law), from an economic and tax policy perspective, of virtually eliminating the incentive for states to "compete" among themselves to offer the lowest estate tax rates. If a state decided to levy an estate tax below the rates outlined for the federal credit, the decedent would simply pay more federal estate taxes. Thus, in addition to vertical coordination, horizontal coordination, as described earlier, would be strongly supported by this approach. As outlined above, the overall simplicity of the estate tax is diminished if states and the federal government do not coordinate. For example, taxpayers, or their estates, would need to establish the location and taxability of assets, and both the federal and state governments would need to verify these claims. With a patchwork of state estate taxes and rules governing asset location, this process would be complicated. Over time, taxpayers would likely develop tax minimization strategies, further increasing compliance costs and complicating administrative oversight of the estate tax. The equity (or "fairness") of a tax can be measured both vertically and horizontally. Vertical equity is evaluated by comparing the tax burden across individuals with different abilities to pay. Horizontal equity is evaluated by comparing the tax burden of individuals in otherwise similar economic circumstances. For an estate tax, a vertically equitable progressive estate tax would collect a larger share of the underlying estate as the value of the estate increases. A horizontally equitable estate tax would treat like-situated individuals (or decedents) in a like manner. The estate tax is considered highly progressive with the "top ten percent of income earners paying virtually all of the tax; over half is paid by the richest 1 in 1,000." State estate taxes are also progressive, though the burden is not as concentrated in the top wealth brackets. Most state estate taxes had lower exemption amounts, which means more taxable estates. State estate tax rates are lower than federal rates, thus there are more taxable estates at the state level, but the average state tax paid is less than the federal estate tax paid. Assessing the federal and state taxes together, the deduction for state estate taxes (2012 law), rather than the credit (pre-2001 law), has some impact on the vertical equity. The deduction treatment makes the tax slightly less progressive, as the deduction is worth more to estates in the higher marginal tax brackets. Reversion to the pre-2001 law and the return of the credit for state death taxes, however, would not make the estate tax more progressive when compared with the President's budget proposal or extension of the 2012 law. The reason is that the other parameters of the pre-2001 federal estate tax included a lower exemption amount, capturing many more smaller estates, and do not provide for spousal portability of the exemption. The higher top rate in pre-2001 law, set at 55%, would regain some progressivity, but overall, the pre-2001 law is less progressive than the President's budget proposal. Horizontal equity is achieved if taxpayers in equal positions are taxed in equal amounts. For an estate tax, estates of like size should be taxed in like manner. There is some debate concerning how to define "like" estates. Using only total value of assets may not be considered fair, as some estates have less liquid assets. These estates, usually with a significant share of business assets, may be constrained in their ability to pay the estate tax. Special provisions exist for farms and small businesses to allow them to pay the tax in installments over a maximum of 10 years. These special provisions add complexity while potentially reducing compliance costs for liquidity-constrained entities. Efficient taxes are those that have a minimal impact on the behavior of taxpayers. Estate taxes can be identified as an inefficient tax for two principle reasons. One, the estate tax influences the investment decisions of taxpayers. If investments are taxed at death, then taxpayers will, in theory, invest less. Alternatively, if taxpayers have in mind a targeted value of assets to transfer at death, a tax that reduces the value of assets would mean more would have to be saved to achieve that target value. Either outcome would generate a loss in economic efficiency as decisions are made based on tax consequences, not underlying economic merit. Taxpayers also devote considerable resources to minimizing estate tax liability. These costs are non-pecuniary, such as those distortions described above, as well as direct. The direct cost includes the fees paid to lawyers and accountants to plan any avoidance strategies. Of the three options explored here, the different tax rates and exemption levels would determine the size of the efficiency loss. The higher rates and lower exemption amounts that would accompany return to the pre-2001 law would likely generate the greatest changes in taxpayer behavior. Thus, return to pre-2001 law would generate the greatest economic efficiency loss (or deadweight loss). However, reinstating the credit for state death taxes instead of the deduction would mitigate this efficiency loss. In contrast, a deduction for state estate taxes, which would accompany both extension of the 2012 law and the Administration's budget proposal based on 2009 law, increases the tax burden and thus the economic efficiency loss arising from state estate taxes. The direct costs would also be greater with a deduction for state estate taxes because variation among states would present more avoidance opportunities and planning strategies. Some have suggested that state estate taxes influence retirement residency choices. In theory, a state with relatively low estate taxes (or taxes generally) would be more attractive to wealthy retirees seeking to avoid taxes. The perception that a state provides a more favorable tax environment for retirees (or those close to death) may be enough to induce relocations based only on tax effect. Moves induced by tax preferences alone generate inefficiencies. A tax credit for state estate taxes could virtually eliminate the incentive to move, as the state tax would not add an additional state tax burden. A final criteria is whether the tax raises enough revenue, or prevents the loss of revenue from other tax sources, to justify its imposition. This section presents data for federal and state estate taxes from two different sources, the Internal Revenue Service (IRS) and the U.S. Census Bureau (CB). The IRS data report federal estate and gift tax collections by state and the CB data report state estate, gift, and inheritance tax collections. The two sets of data are compared to exhibit how revenue from the estate tax for each level of government has changed from pre-EGTRRA laws (2001) to post-EGTRRA laws (2009) for each state. In 2001, estates generated significant revenue for both state and the federal governments. For 2001, just over $31 billion was collected, with the states collecting $7.5 billion and the federal government collecting $23.5 billion (see Table 4 ). By 2009, estate and gift tax collections had declined to $25.3 billion, with the federal government collecting $20.6 billion (a 12.3% decline) and state governments collecting a combined $4.7 billion (a 37.9% decline). The decline is even more severe if the 2001 data are adjusted for inflation. Converting the 2001 data into 2009 dollars yields total revenue of $37.5 billion with state collections at $9.1 billion and federal collections of $28.5 billion (see Figure 1 ). The decline has at least two possible sources, tax policy changes and the recession from December 2007 through June 2009. It is likely that almost all the 2009 federal estate tax filings were for deaths that occurred during the recession. However, the 2001 data likely include a significant number of deaths that occurred during the 2001 recession, which spanned from March through November of that year. Assets such as stock holdings, personal residences, and other real estate holdings accounted for 41.8% of taxable estate value in 2009. Those same assets accounted for more taxable estate value in 2001 (51.6%). The change in value can be explained almost entirely by the change in the value of stock in decedent portfolios, which dropped from 36.0% in 2001 to 25.4% in 2009. The drop in the value of stock as a portion of the decedent portfolio is also explained by the increased exemption amount eliminating estates at the lower end of the distribution. The average estate subject to federal estate taxes was larger in 2009, reflecting the elimination of the smaller estates. Stock holdings as a share of decedent portfolio rise with the size of the estate. Thus, if the average estate size is larger in 2009, then the concentration of publicly traded stock is more important. As noted earlier, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) phased out the credit in stages and replaced it with a deduction. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRUIRJCA) extended the deduction structure through 2012. In 2013, the credit along with higher rates and lower exemption amounts are set to return. Each of the proposals identified here offers a mixed bag of economic effects. Reverting to the pre-2001 law as scheduled would likely increase intergovernmental coordination and reduce compliance costs for medium to larger estates. The pre-2001 law, however, would capture more estates with the lower exemption amount of $1 million. These smaller estates would encounter compliance costs with reversion to pre-2001 law, as they would not be subject to estate taxes under the other two proposals. The added compliance costs of these smaller estates would counter the reduced compliance cost of the larger estates with the reintroduction of the credit for state death taxes. The equity and the efficiency of a tax often work against each other. Achieving greater equity often comes with the cost of reduced efficiency. Further complicating the analysis is the perception or definition of equity, which is somewhat subjective. Generally, reversion to pre-2001 law would reduce the progressivity (compared with the 2012 law and the FY2013 budget proposal) of the federal estate tax as more, smaller estates would be subject to the tax. The federal tax code more generally, however, would become more progressive, as tax burdens on the relatively wealthy would increase. There is not a clear measure to identify the more equitable policy. The estate tax impacts the economy more broadly as saving and capital investment become less attractive the higher the tax. In theory, lower estate tax burdens encourage more saving and investment. The higher exemption amounts and lower rates offered by the 2012 law and the FY2013 budget proposal would be preferred using this one-dimensional criteria. The lower tax burden, while theoretically encouraging more investment, necessarily reduces the revenue yield of the estate tax. Which course of action Congress will choose is uncertain and the impact on the states unclear. Coordination with states would likely reduce administrative and compliance costs of the estate tax, increase the progressivity of the code generally, and possibly increase the economic efficiency of state estate taxes. | An estate tax is a tax levied on the assets left behind by a decedent. The federal government and many state governments levy estate taxes or some type of tax on the transfer of assets at death. In 2012, the federal estate tax allows for a $5.12 million exclusion and a top rate of 35%. The federal estate tax is scheduled to revert to the pre-2001 structure on January 1, 2013, with a $1 million exclusion and top rate of 55%. The Administration's FY2013 budget proposes a federal estate tax with a $3.5 million exemption and top rate of 45% for 2013. Many states also levy estate or inheritance taxes (or both) that are linked to federal law. If the federal estate tax is allowed to revert to pre-2001 law, state and federal estate tax revenue will increase significantly by imposing a greater tax burden on estates than would an extension of 2012 law or the President's FY2013 budget proposal. The percentage increase in state estate tax revenue would likely be greater than the percentage increase in federal estate taxes under a return to pre-2001 law. The principal cause is the return of the federal credit for state death taxes when the tax changes originally enacted by the Economic Growth Tax Relief and Reconciliation Act in 2001 (EGTRRA, P.L. 107-16) expire. Before EGTRRA, all 50 states and the District of Columbia imposed an estate tax where state estate taxes were linked directly to the federal credit for state death taxes paid ("death" taxes because the credit could also be used for inheritance and succession taxes). The dollar-for-dollar credit meant that state taxes were not an additional burden, creating the equivalent of a revenue sharing arrangement between the federal government and the states as most states structured their taxes to match exactly the federal credit. EGTRRA gradually replaced the federal credit with a deduction. Because of this change to a deduction, state estate and inheritance taxes were no longer offset on a dollar-for-dollar basis and, as a result, imposed an additional burden on estates and heirs. States were then lobbied for relief from this additional estate tax burden. As a result, by 2012, just 16 states and the District of Columbia imposed an estate tax and 8 states imposed an inheritance tax (2 states levied both). As Congress considers the future of the federal estate tax, questions concerning the coordination of the tax with the states have arisen. This report examines the interaction of federal and state estate taxes under three policy alternatives: (1) extend the 2012 law, (2) revert to the pre-2001 law, and (3) return to the 2009 law as proposed in the Administration's FY2013 budget proposal. A fourth option, repeal of the federal estate tax, has also been proposed. If the federal estate tax were repealed, repeal of most remaining state estate taxes would likely follow. This option, however, would most likely be considered in the context of broader tax reform and is beyond the scope of this report. Which course of action Congress will choose is uncertain and the impact on the states is unclear. What is more certain is that coordination with states would likely reduce administrative and compliance costs of the estate tax, increase the progressivity of the code generally, and possibly increase the economic efficiency of state estate taxes. This report will be updated as legislative events warrant. |
Every year, Congress considers numerous pieces of legislation that would create or modify federal government programs and activities. In many instances, the scope, duration, and area of focus intended for a program are factors that may influence how it will be funded. The reverse can also be the case—that how Congress seeks to fund a program can inform how it is structured. Once a program is established, the way in which it is funded continues to be relevant to Congress for at least two reasons. First, how a program's funding is structured may lead the population that it serves, as well as other stakeholders, to make certain assumptions about how stable its level of benefits or services will be in future years. Second, how often—and in what type of legislation—funding decisions are made creates different opportunities for Congress to exercise its power of the purse. The legislative framework for establishing and funding the activities of the federal government is based on a fundamental distinction between two types of laws (and provisions within those laws)—"authorizations" and "appropriations." A uthorizations provide legal authority for the government to act, usually by establishing, continuing, or restricting a federal agency, program, policy, project, or activity. A ppropriations provide both the legal authority to obligate the government to make future payments from the Treasury, and also the ability to subsequently make those payments. Under the congressional budget process, a funding mechanism for a particular program or purpose generally can be distilled to two essential elements—the type of funding that is provided and the source of that funding. The funding type can be distinguished based on whether an authorization or appropriations act controls the level of spending. In the case of mandatory spending , an authorization act not only establishes the program but also requires certain payments to be made, and thus determines the level of funding for that program. For discretionary spending , in general, an authorization act establishes the program but the decision of how much to fund that program, if at all, is subsequently made by appropriations laws. The funding source for either mandatory or discretionary spending may be the General Fund of the Treasury, which is where revenue and other collections made by the federal government are generally deposited. In some cases, spending also may be funded through a dedicated revenue source or other types of collections that result from the business-like activities that the federal government undertakes (referred to for the purposes of this report as dedicated collections ). The funding source within a funding mechanism may be established through either authorization or appropriations laws. When seeking to understand how a particular program or activity is funded, the extent to which the funding mechanism involves an authorization act, an appropriations measure, or both is significant for a variety of reasons. For instance, appropriations acts are enacted annually, whereas authorizations may be enacted as needed, on a multiyear or permanent basis. In addition, Congress has chosen to vest control over authorizations and appropriations in separate committees, so that the House and the Senate appropriations committees have exclusive jurisdiction over annual appropriations acts, and the other legislative committees in each chamber have jurisdiction over authorizations. As a result, funding mechanisms (and the elements within them) that involve appropriations acts will generally be subject to a different schedule, committee process, and method of legislative review than funding mechanisms that involve authorization acts. The range of options that exists for funding government programs and activities has resulted in a variety of approaches across the federal budget. The purpose of this report is to discuss these approaches and illustrate them with examples of how they have been applied in practice. The first part of the report describes the two general funding types—discretionary and mandatory—based on the contrasting roles that authorizations and appropriations play for each type. It also discusses how both approaches might be used to fund a single purpose ("mixed approaches"). The second part of the report explains the various budget process options that exist for the source of funds. The report concludes by summarizing the general issues for Congress when it evaluates a funding mechanism, both those that are proposed and those that already exist. While this report describes general budget process principles as to how programs are funded, it is not exhaustive as to all possible variations that occur in practice. In addition, while it summarizes the implications of mandatory and discretionary funding mechanisms in terms of the general budget process framework that governs them, it does not describe the budget rules that enforce that framework. Though these budget enforcement rules are outside the scope of this report, they may play a significant role in the funding mechanism that Congress prefers for a particular program. Other issues that are also outside the scope of the report are types of budget authority, periods of availability for funding, and specific budget execution implications of each option (such as program operations when funding lapses). Under the congressional budget process, funding mechanisms are generally classified as either discretionary or mandatory spending. The distinction between these two approaches relates to what type of law controls the authority to obligate the federal government to make payments (as illustrated in Figure 1 ). The discretionary spending approach creates general or specific authority for an activity through an authorization law, but it leaves the decision as to how much that activity will actually be funded, if at all, to the annual appropriations process. In other words, the authorization law for a discretionary spending activity neither funds that activity nor requires that funding for that activity be provided in the future. Instead, appropriations laws are what control discretionary spending. In contrast, mandatory spending for an activity is controlled by an authorization act, usually because that activity is established and funded in the same law. Alternatively, a mandatory spending activity might be created in an authorization law that also contains provisions that legally require that funding be provided in the future. While appropriations that finance these types of funding requirements are provided in appropriations laws, they are not technically controlled by those laws. This alternative approach is often referred to as "appropriated mandatory" spending. The following section explains the contrasting roles of authorizations and appropriations in discretionary and mandatory funding mechanisms. This discussion includes a number of examples of funding mechanisms for various federal government programs to illustrate both basic principles and variation in practice. Because, in practice, certain programs are funded by more than one type of mechanism, this section also explains and illustrates mixed approaches. Finally, each discussion of the different funding types concludes with a general summary of their implications for budgetary decisionmaking within Congress, and how each navigates tradeoffs between frequent congressional review and funding predictability. Discretionary spending was roughly 31% of federal spending in FY2016. It funds numerous activities across the federal government, including many grants, purchases of equipment and other assets, and almost all spending on defense. This type of spending also is used for general government operations, including the vast majority of spending on federal wages and salaries. For programs funded via discretionary spending, congressional control over money and policy decisions is divided between the authorization and appropriations processes. While "policy" decisions may occur on an as-needed basis through the enactment of authorization laws, or on a periodic basis as expiring authorization provisions are renewed, "money" decisions generally occur each year through the enactment of appropriations laws. However, this separation between money and policy decisions is not always observed in practice. Moreover, the differing frequency with which authorization and appropriations decisions may occur makes discretionary funding mechanisms particularly complex and subject to variation from program to program. And while this approach tends to allow for a more regular congressional review of the use of funds, it also has a greater potential for year-to-year instability in the level of budgetary resources that are available for a given program or activity. Under the congressional budget process, the authority for a discretionary spending program or purpose is to be established before it is funded. This authority may be specific to that program or purpose, or may more generally encompass a class of authorized activities. For example, provisions in the National Apprenticeship Act, which was enacted in 1939, generally grant the Secretary of Labor the authority to oversee apprenticeships: The Secretary of Labor is authorized and directed to formulate and promote the furtherance of labor standards necessary to safeguard the welfare of apprentices, to extend the application of such standards by encouraging the inclusion thereof in contracts of apprenticeship, to bring together employers and labor for the formulation of programs of apprenticeship, to cooperate with State agencies engaged in the formulation and promotion of standards of apprenticeship, and to cooperate with the Secretary of Education in accordance with section 17 of title 20. [29 U.S.C. 50] Pursuant to this authority, the Office of Apprenticeship within the Department of Labor (DOL) registers employers' apprenticeship programs as being in compliance with federal standards, and engages in other related activities. Legislative review of this authority has occurred on an as-needed basis, with the most recent changes to that law being enacted in 1973. However, congressional decisionmaking with regard to how much to fund this program has occurred each fiscal year through the annual appropriations process. In FY2016, the appropriations provisions that provided funding for the program included the following: The following sums in this Act are appropriated, out of any money in the Treasury not otherwise appropriated, for the fiscal year ending September 30, 2016. [P.L. 114-113, Sec. 5] $90,000,000 to expand opportunities relating to apprenticeship programs registered under the National Apprenticeship Act, to be available to the Secretary to carry out activities through grants, cooperative agreements, contracts and other arrangements, with States and other appropriate entities. [P.L. 114-113, Division H, Title I] An appropriation may be provided for purposes that were generally authorized or for more specific purposes under the auspices of (or in addition to) that general authority. In the example above, appropriations for the activities generally authorized by the National Apprenticeship Act are also specifically made available to the Secretary to carry out those purposes through grants, cooperative agreements, contracts, and other arrangements. By themselves, authorization provisions that establish the authority for a program or purpose implicitly authorize future appropriations for that purpose. In other words, in such instances the authorization addresses the policy aspects of the program but does not include an indication of the funding level that might be necessary to carry out that program. The establishment of that program or purpose in law, however, authorizes Congress to take legislative action to fund the program or purpose at a later time. Besides the implicit authorization of appropriations that is provided by the National Apprenticeship Act (above), further examples of this type of arrangement include the DOL Wage and Hour Division and many of the departmental offices that were established at the inception of the Department of Homeland Security in 2002. In addition to provisions that establish the parameters of federal government activities, authorization laws may also include provisions that explicitly authorize future appropriations. While authorizations of appropriations do not actually provide funding, the specific dollar amounts that are authorized to be appropriated may be viewed as signifying the level of funding that was regarded as necessary or optimal for a particular purpose at the time of the authorization's enactment. The actual level of funding, however, is subsequently determined through an appropriations law. From the perspective of congressional rules, explicitly authorizing a specific dollar amount also has the effect of placing a procedural limit on the amount that may be appropriated, although Congress may later choose to set aside its rules and provide a greater amount. For example, the authorization for the Child Care and Development Block Grant (CCDBG) at Health and Human Service (HHS) includes provisions that explicitly authorize appropriations each fiscal year between FY2015-FY2020: There is authorized to be appropriated to carry out this subchapter $2,360,000,000 for fiscal year 2015, $2,478,000,000 for fiscal year 2016, $2,539,950,000 for fiscal year 2017, $2,603,448,750 for fiscal year 2018, $2,668,534,969 for fiscal year 2019, and $2,748,591,018 for fiscal year 2020. [42 U.S.C. 9858] Subsequent legislative action through the appropriations process each fiscal year determines the actual amount of funding that will be available to the CCDBG, which in practice may be higher or lower than the amount that was authorized to be appropriated. For instance, the FY2016 CCDBG appropriation was as follows: The following sums in this Act are appropriated, out of any money in the Treasury not otherwise appropriated, for the fiscal year ending September 30, 2016. [P.L. 114-113, Sec. 5] For carrying out the Child Care and Development Block Grant Act of 2014 (''CCDBG Act''), $2,761,000,000 shall be used to supplement, not supplant State general revenue funds for child care assistance for low-income families: Provided, That, in addition to the amounts required to be reserved by the States under section 658G of the CCDBG Act, $127,206,000 shall be for activities that improve the quality of infant and toddler care. [P.L. 114-113, Division H, Title II] In contrast to the example discussed above, sometimes the amount of funding that is explicitly authorized is indefinite . (Indefinite authorizations of appropriations can be either permanent or limited to specific fiscal years.) The Violence Against Women and Family Research and Evaluation program at the Department of Justice (DOJ) illustrates the typical form of such an authorization: There are authorized to be appropriated such sums as may be necessary to carry out this section. [P.L. 106-386, Division B, Title IV, Sec. 1404(b)] This language has the effect of asserting the role of authorizations in budgetary decisionmaking while preserving procedural flexibility for the appropriations process to determine the specific amount that should be appropriated. The appropriation for FY2016 was as follows: The following sums in this Act are appropriated, out of any money in the Treasury not otherwise appropriated, for the fiscal year ending September 30, 2016. [P.L. 114-113, Sec. 5] $5,000,000 is for the National Institute of Justice for research and evaluation of violence against women and related issues addressed by grant programs of the Office on Violence Against Women, which shall be transferred to `Research, Evaluation and Statistics' for administration by the Office of Justice Programs. [P.L. 114-113, Division B, Title II] As was mentioned previously, the statutory authority to administer a program or engage in an activity also provides an implicit authorization to appropriate funds for such a program or activity, even in the absence of an explicit authorization of appropriations. Furthermore, there is no constitutional or general statutory requirement that an appropriation must be preceded by a specific act that authorized it. If an explicit authorization of appropriations is present, however, it may expire even though the underlying authority to administer the program does not. If that explicit authorization of appropriations is not renewed, subsequent appropriations are often regarded for the purposes of congressional rules as being unauthorized. The expiration of an explicit authorization of appropriation usually does not affect the underlying legal authority for the federal government to engage in the programs and activities to which that authorization of appropriations relates. When appropriations are provided for programs with an expired authorization of appropriations, federal agencies usually have sufficient legal authority to implement and operate these programs. This is because an authorization of appropriations is "basically a directive to Congress itself, which Congress is free to follow or alter (up or down) in the subsequent appropriation act." Ultimately, it is through the appropriations acts themselves that Congress decides the level of funding that will be available for federal government programs. Congress divides the responsibility for discretionary spending programs between the authorization and appropriations processes, with each process having a different role in budgetary decisionmaking. Authorization laws, which are under the jurisdiction of the various legislative committees in each chamber, are responsible for establishing the parameters of the programs. Appropriations laws, which are under the exclusive jurisdiction of the House and the Senate appropriations committees, are responsible for deciding how much should be spent on each discretionary spending program. While the structure of a program and its schedule of review may have an indirect effect on spending decisions, it is ultimately through the appropriations process that the relative budgetary priority for that program is determined and discretionary funding for that program is provided. The congressional budget process does not establish a set schedule for authorization laws to be considered or enacted, and there is considerable variation in practice from program to program. The laws that control program authorities are usually enacted on a permanent basis and are only revised as needed. Congress may choose to include provisions in authorization laws that are temporary, whether they involve program authorities or an explicit authorization of appropriations, to provide an occasion for more regular legislative action with regard to that authorization. For instance, the provisions that authorize appropriations in the National Defense Authorization Act generally are for a single fiscal year, and congressional action to reauthorize those provisions and make needed changes to defense-related programs has occurred each fiscal year since 1962. In current practice, however, regular enactment of annual authorization laws occurs only in limited instances. In part because the expiration or absence of an explicit authorization of appropriations generally has no legal effect on the underlying authority for a program, Congress might not necessarily renew those provisions before they expire. For example, provisions that authorize appropriations for the Elementary and Secondary Education Act (ESEA) have tended to be renewed for roughly five-year intervals, and they have sometimes lapsed for a number of months or even years before being renewed due to extended congressional deliberations concerning K-12 education policy. In general, the programs and purposes authorized by the ESEA continued to receive funding through the appropriations process each fiscal year even after the authorizations of appropriations expired. The d ecisions made through the authorization process related to the nature of federal government pr ograms and the populations they serve have indirect implications for discretionary spending decision making. The mission and structure of an individual program may be such that various funding levels may be provided, or such that the program will not function properly below a certain level of funding . In addition, if a program has an explicit authorization of appropriations, the level of funding indicate d may inform congressional decisionmaking about that program but is not a guarantee that such funding will be provided . Ultimately, appropriations decisionmaking with regard to discretionary spending occurs within a "top-down" funding structure . The total level for such spending is decided first, and then programs compete against each other for budgetary resources within that limited amount of spending . It is through this process that the actual funding for each discretionary spending program is decided , in light of its authorized purposes and the extent to which Congress decides that those purposes should be prioritized within the current budgetary constraints. In practice, Congress may also regard appropriations decisionmaking as an opportunity to directly affect the parameters of federal government programs and activities in certain instances. This may be because the comparatively greater frequency of appropriations decisionmaking provides a convenient vehicle to make these policy changes. In such instances, policy provisions may be used to impose new requirement s on programs or curtail activities that otherwise might have occurred. For example, the FY201 4 appropriations law that funded the Department of Housing and Urban Development included a provision that changed how local public housing authorities must set flat rents in their public housing programs. Provisions in that same law redefined the term "extremely low-income," which is used for targeting federal rental assistance, to set a national floor based on the federal poverty guidelines. Using an annual decisionmaking process to establish funding levels , as is the case for discretionary spending, also has general implications for both the recipients of the funds and Congress' s legislative evaluation of those funds. The discretionary spending funding type may cause funding levels to be less predictable from year to year for funding recipients, as programs may be increased or decreased (or not funded at all) each fiscal year depending on a variety of factors mentioned above. However , Congress may decide that such an approach is appropriate for programs (or program elements) that can make adjustments to the scope of their activities based on the level of budgetary resources that are ultimately provided . For instance, much of the spending on federal government salaries and expenses is discretionary. If an agency's discretionary spending for salaries and expenses is less than the current program needs , that agency might choose to reduce its number of employees, forestall hiring , or shrink expenditures on travel and training. Moreover, if Congress opts for a discretionary spending approach in a par ticular instance, that would allow it to revisit an agency or program on a fr equent basis (each fiscal year) and respond to changing circumstances through the allocation of budgetary resources. Mandatory spending (also referred to as "direct spending") was projected to be roughly 63% of federal spending in FY2016. In contrast to discretionary spending, mandatory spending usually funds entitlement programs, such as Social Security, Medicare, Medicaid, Temporary Assistance for Needy Families, unemployment insurance, some veterans' benefits, federal military and civilian retirement and disability, and the Supplemental Nutrition Assistance Program. For programs funded by mandatory spending, both money and policy decisions are controlled by authorization acts. While the policy side of the law may be modified as needed, the appropriations to fund those policies each fiscal year may be provided on a variety of schedules, and for specified or indefinite amounts. Mandatory spending appropriations are usually provided in the authorization acts themselves. In some instances, however, the authorization incurs obligations for future mandatory spending, but the necessary appropriations to finance those obligations are enacted through the annual appropriations process. This multiplicity of potential approaches to mandatory spending has implications for the role of authorizations and appropriations for congressional budgetary decisions; these implications differ from those previously discussed for discretionary spending. In addition, while mandatory spending also navigates tradeoffs between the frequency of congressional review and the stability of the funding, how it does so in a particular instance depends on the characteristics of the funding structure. Mandatory spending authorizations are responsible for determining the parameters of entities, programs, or policies, and also for controlling the funding for those purposes. Typically, this funding control is accomplished by including the necessary appropriation to fund the program in the authorization act. Mandatory appropriations themselves vary with regard to how the amount of the appropriation is stated, and the number of fiscal years for which it is provided: The appropriation can be for a dollar amount that is specified or for an amount that is determined via a formula; and The appropriation can be provided only for a defined fiscal year (or period of fiscal years) or for each fiscal year into the future indefinitely. The State Children's Health Insurance Program (CHIP) at HHS is illustrative of one way that such spending may be provided in practice. CHIP is a means-tested program that provides health coverage to targeted low-income children and pregnant women in families that have annual income above Medicaid eligibility levels but no health insurance. The federal appropriation for CHIP allotments to states is provided by the Social Security Act through a set dollar amount tied to specific fiscal years: (a) For the purpose of providing allotments to States under this section, subject to subsection (d), there is appropriated, out of any money in the Treasury not otherwise appropriated— (19) for fiscal year 2016, $19,300,000,000; and (20) for fiscal year 2017, for purposes of making 2 semi-annual allotments— (A) $2,850,000,000 for the period beginning on October 1, 2016, and ending on March 31, 2017; and (B) $2,850,000,000 for the period beginning on April 1, 2017, and ending on September 30, 2017. [42 U.S.C. 1397dd] The lump sum amount for each fiscal year is divided amongst the states based on a formula established in the law. Because the CHIP authorization only contains appropriations for specific fiscal years, additional appropriations must be enacted if funding is to continue beyond the final year currently specified in the law (which ends on September 30, 2017). The other important aspect of this program's funding structure—that a specific amount is appropriated—means that if that amount does not ultimately align with the needs of the program for that fiscal year, altering the amount of that appropriation also would require the enactment of law. A further example of mandatory spending for a specific amount is the appropriation provided by the Social Security Act for the HHS Technical Assistance for Tribal Child Welfare Programs account: There is appropriated to the Secretary, out of any money in the Treasury of the United States not otherwise appropriated, $3,000,000 for fiscal year 2009 and each fiscal year thereafter to carry out this subsection. [42 U.S.C. 676] This amount is to be available to fund technical assistance and implementation services dedicated to improving the "services and permanency outcomes for Indian children and their families." Like the example above, in the event that $3 million each fiscal year is insufficient for the needs of the program, that amount could be altered only through the enactment of a new law; likewise, if the amount of spending for the program is to be reduced below $3 million, that also would require a change in the law. Because the appropriation is permanent, however, there is no need for Congress to periodically consider mandatory spending legislation that would renew it. In contrast to the definite amounts in the examples above, mandatory spending also might be provided for an indefinite amount that is based on a formula. This is often the case for mandatory spending that is to fund benefits where the total amount of benefits that must be paid each year and the number of individuals that are eligible for them are variable and difficult to precisely predict. By providing an appropriation that is based on the formula for those payments, there is no need for Congress to adjust the appropriation so that it is sufficient to make the payments. An example of this is the Social Security Disability Insurance (SSDI) program, which is funded by mandatory appropriations that are available to make payments to disabled workers who meet the eligibility requirements and their qualified dependents. The SSDI formula translates a worker's average earnings in Social Security-covered employment into benefit payments. Because the amount of the appropriation is open ended, the amount of SSDI spending each year depends on the level of benefits that need to be paid. For instance, the total spending on SSDI benefits was $141.3 billion in FY2014 and $142.9 billion in FY2015. If Congress wanted to change the amount of spending for future years, legislative action to change the mechanics of the benefit formula would be required. In the examples of mandatory funding mechanisms discussed above, the authorization law controls the amount of spending and also contains an appropriation to fund it. In contrast, for "appropriated mandatory" spending, which is sometimes referred to as "appropriated entitlement" spending, the authorization law controls the amount of spending but does not contain the necessary appropriation to fund it. Instead, such appropriations are provided through the annual appropriations process. The appropriated mandatory funding type is used for a number of federal programs, including the Supplemental Nutrition Assistance Program, Grants to States for Medicaid, the Trade Adjustment Assistance for Workers program, Special Benefits for Disabled Coal Miners, and veterans' disability compensation and pensions. Appropriated mandatory authorizations establish the program or activity but require that future funding be provided separately. This is because the authorization establishes an entitlement to payments or other funding requirement that such payments be made. The amount of the payments may be based on an eligibility criteria or payment formula (such as in the example of the SSDI program above) or may be an amount specified in the statute. This is discussed further below. However, that entitlement or other requirement is not accompanied by appropriations language that provides the means for financing those payments. This creates a need for the authority to be enacted in appropriations acts. While the funding for appropriated mandatory spending is provided in annual appropriations acts, those acts do not control the level of appropriations that are provided therein. This is because the level of appropriated mandatory spending, like other entitlements, is derived from authorization law, and the amount provided in appropriations acts is based on meeting this level. In other words, the authorizing statute for an appropriated entitlement establishes a legal obligation to make payments, and the funding in annual appropriations acts is provided as a means to fulfill that legal financial obligation. In some cases, the total amount of the appropriation for an appropriated mandatory spending program is specified in authorizing statute, as exemplified by the HHS Social Services Block Grant (SSBG). The broad purpose of the SSBG funding for states and territories is to encourage economic self-sufficiency and support among families; prevent or remedy neglect, abuse, and exploitation of children and adults; prevent or reduce inappropriate institutional care by supporting community- and home-based care; and secure referral or admission for institutional care when other forms of care are not appropriate. States and territories use SSBG funds to support a wide variety of social services, including child care, foster care, and special services for the disabled. The authorizing statue for the SSBG specifies the following with regard to the funding for the program: (a)(1) Each State shall be entitled to payment under this subtitle for each fiscal year in an amount equal to its allotment for such fiscal year, to be used by such State for services directed at the goals set forth in section 1397 of this title, subject to the requirements of this division. (b) The Secretary shall make payments in accordance with section 6503 of title 31, United States Code, to each State from its allotment for use under this division. [42 U.S.C. 1397a] The authorizing statute further specifies that the total amount of these payments to states and territories for FY2001 and each fiscal year thereafter shall be $1,700,000,000 (42 U.S.C. 1397b), but it does not provide an appropriation for that purpose. Instead, the SSBG appropriation is provided each fiscal year through the annual appropriations process, as was the case for FY2016: The following sums in this Act are appropriated, out of any money in the Treasury not otherwise appropriated, for the fiscal year ending September 30, 2016. [P.L. 114-113, Sec. 5] For making grants to States pursuant to section 2002 of the Social Security Act, $1,700,000,000. [P.L. 114-113, Division H, Title II] Because the authorization law controls the amount of the SSBG appropriation and specifies that amount in statute, the role of appropriations acts each fiscal year is to provide funding sufficient to satisfy that amount. For other appropriated mandatory programs for which the authorization provides a formula, determining the amount and structure of the appropriation can be more complicated. An example of appropriated mandatory spending based on a formula is the Supplemental Security Income (SSI) program, which provides a basic level of income support to needy aged, blind, or disabled individuals. Benefit levels and eligibility are based on an individual's citizenship or immigration status, age, income, and other criteria. The SSI authorization does not place an aggregate limit on benefits: For the purpose of establishing a national program to provide supplemental security income to individuals who have attained age 65 or are blind or disabled, there are authorized to be appropriated sums sufficient to carry out this title. [42 U.S.C. 1381] Because the total number of SSI beneficiaries and the level of payments to which they are entitled vary from year to year, the funding that is provided through the annual appropriations process is based on a projection of benefits for the relevant fiscal year. The appropriation for FY2016 was as follows: The following sums in this Act are appropriated, out of any money in the Treasury not otherwise appropriated, for the fiscal year ending September 30, 2016. [P.L. 114-113, Sec. 5] For carrying out titles XI and XVI of the Social Security Act, section 401 of Public Law 92-603, section 212 of Public Law 93-66, as amended, and section 405 of Public Law 95-216, including payment to the Social Security trust funds for administrative expenses incurred pursuant to section 201(g)(1) of the Social Security Act, $46,305,733,000, to remain available until expended... Provided further, That not more than $101,000,000 shall be available for research and demonstrations under sections 1110, 1115, and 1144 of the Social Security Act, and remain available through September 30, 2018. For making, after June 15 of the current fiscal year, benefit payments to individuals under title XVI of the Social Security Act, for unanticipated costs incurred for the current fiscal year, such sums as may be necessary. [P.L. 114-113, Division H, Title IV] The SSI appropriation is structured to include a definite amount for SSI benefits and administrative costs, and also an indefinite appropriation for any costs incurred for the current fiscal year after June 15. This second component allows the Social Security Administration (SSA) to continue to pay SSI benefits in the event that benefit obligations are greater than expected during the last months of the fiscal year. (In the event that the definite appropriation is greater than the amount that ultimately is needed for benefits, the excess amount of the appropriation would go unspent.) Unlike the role of authorizations for discretionary spending, mandatory spending authorizations control both the policy and spending aspects of decisionmaking. This approach has particular implications for congressional budgetary decisionmaking because both money and policy decisions generally occur within the same process. For most mandatory spending, the authorizing committees both control the program and directly provide the spending. However, for appropriated mandatory spending, although the appropriations committees do not control the level of spending, annual appropriations laws are used to provide the necessary appropriations to finance the obligations already incurred by authorization acts. The timing of authorization decisions for mandatory spending may be affected by the need to alter or extend the funding. For example, the Balanced Budget Act of 1997 ( P.L. 105-33 ) established special diabetes programs at the Indian Health Service and the National Institutes of Health and funded each of them with mandatory appropriations for FY1998-FY2002 (42 U.S.C. 254c-2 and c-3). In 2000, the amount of the initial appropriation was increased and further appropriations were provided for FY2003 ( P.L. 106-554 ). Next, appropriations were extended for five fiscal years, through FY2008 ( P.L. 107-360 ). Since that time, further appropriations extensions have been enacted for comparatively shorter time intervals—between one or two fiscal years at a time—necessitating congressional action to renew them on a more frequent basis. When mandatory spending is permanent, changes to the amount or duration of that spending may still occur but are typically enacted on an as-needed basis. For example, the Affordable Care Act ( P.L. 111-148 , as amended) established the Prevention and Public Health Fund at HHS as a permanent mandatory appropriation in 2010 (see 42 U.S.C. 300u-11). That permanent appropriation for the period of FY2013 through FY2021 was reduced less than two years later through enactment of the Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ). In practice, the annual enactment of appropriations may provide Congress an opportunity to further specify or make adjustments to the appropriated mandatory spending programs that are funded therein, as well as mandatory appropriations in authorization acts. In some instances, provisions are included in appropriations acts that impose additional program requirements (or waive existing ones), provide additional authorities, or set aside portions of the mandatory appropriation for certain purposes. In the SSI example above, the appropriations language includes a limit of $101 million for research and demonstrations, which is in addition to the program requirements in the authorization law. In general, mandatory spending decisionmaking is decentralized within Congress, and the total amount of spending each fiscal year that is a result of that decisionmaking depends on a number of factors. Unlike discretionary spending, which is entirely controlled by the House and the Senate appropriations committees, there is no one committee, lawmaking decision, or process that establishes an aggregate level of mandatory spending each year. Instead, the spending that occurs each fiscal year is due to an accumulation of mandatory funding decisions that were made as those authorization laws were enacted, sometimes a number of years in the past. In addition, while the exact dollar amount of funding for some mandatory spending programs is specified in the authorization laws, others are funded via a formula. For formulaic mandatory spending, factors outside the direct control of Congress might affect the number of beneficiaries who are eligible for the program in a given year and the level of payments that must be made. This also has an effect on the total amount of mandatory spending that occurs during that year. As mentioned previously, one inherent difference between discretionary and mandatory spending is that mandatory spending funding decisions tend to be made with a comparatively longer time horizon. This has implications for the tradeoff between stability in funding for beneficiaries and the legislative opportunity for Congress to reevaluate. Congress may choose to fund a program via mandatory spending if it wants the funding levels to be more predictable and to ensure that such funding will be provided in future fiscal years. This is especially important if programs involve an entitlement to benefits. For instance, in recent congressional debates over spending on Medicare many observers have stated that any changes to the spending that would have ramifications for the benefits should be phased in for future beneficiaries. Although the mandatory spending mechanism tends to involve budgetary decisions that are made on a longer time horizon than discretionary spending, there is variation in the degree to which this is the case. If a mandatory funding mechanism must be renewed periodically because it only provides appropriations for a set number of fiscal years at a time, this has the potential to create an opportunity for Congress to reevaluate both the program and the funding before the funding expires. The number of years for which funding is provided would usually correspond to the frequency with which budgetary decisions are expected to occur. The approach of providing appropriations for set fiscal years, however, also has the potential to make funding less predictable for the funding recipients, even if Congress intends that the funding will be extended before it lapses. At the other end of the spectrum, when mandatory funding is provided permanently there is no scheduled lapse in appropriations to encourage legislative action by a particular deadline, even though Congress can legislatively revisit the funding as frequently as it wants. While individual programs tend to be funded with either mandatory or discretionary spending, some programs (or closely related purposes) are funded with both types of spending. Mandatory and discretionary approaches may be used to fund identical purposes, closely related purposes within a program, or multiple programs with closely related missions. Examples of programs that are funded with a mixed approach include the Pell Grant program at the Department of Education (ED), as well as Promoting Safe and Stable Families and the various Teen Pregnancy Prevention programs at HHS. In addition, a number of entitlement programs are structured so that the benefits are mandatory spending but the administration of the benefits is funded through discretionary spending. Both budgetary and policy considerations may lead Congress to prefer a mixed approach to fund a particular program or purpose. In addition to the tradeoffs between funding predictability and legislative evaluation of the funding, the choice of a mixed approach has potential implications for both the authorization and appropriations processes, as each will have a role in determining how much funding will be provided. Both mandatory and discretionary funds may be provided for the same program or purpose, or for purposes that overlap with one another. Sometimes this occurs for reasons that are budgetary in nature. An example is the federal Health Center Program at HHS, which awards grants to support outpatient primary care facilities that provide care to primarily low-income individuals or individuals located in areas with few health care providers. Total funding for this program has increased over the past decade—from $1.7 billion in FY2005 to $5.1 billion in FY2016. This increase was initially due to growth in discretionary appropriations, which had historically been its only funding source. Starting in FY2011, however, the Affordable Care Act created the Community Health Center Fund (CHCF), which included a total of $9.5 billion in mandatory appropriations between FY2011 and FY2015 for health center operations. The purpose of this new mandatory funding was to assure that budgetary resources would be available for the program at levels that were increasingly higher than FY2008, even if discretionary appropriations ultimately were eliminated. Most recently, the Medicare Access and CHIP Reauthorization Act of 2015 ( P.L. 114-10 ) extended the CHCF through FY2017, providing a total of $7.2 billion to support health center operations. A mixed funding approach for a program also may be adopted for reasons that are more programmatic in nature. An example of this is the HHS Child Care and Development Fund (CCDF), which provides subsidies to assist low-income families in obtaining child care so that parents can work or participate in education or training activities. Prior to 1996, four separate federal programs specifically supported child care for low-income families. Three of these were associated with the cash welfare system and funded with mandatory spending. The fourth program was the Child Care and Development Block Grant (CCDBG, discussed above), which was funded with discretionary spending and designed to support child care for low-income families who were not connected to the cash welfare system. The 1996 welfare reform law repealed the three mandatory spending child care programs and created a new consolidated block of mandatory funding, the Child Care Entitlement to States. Like the three earlier programs, the new block grant was largely targeted toward families on, leaving, or at risk of receiving welfare (now Temporary Assistance for Needy Families). In addition, the 1996 law instructed that the new mandatory funding be transferred to each state's lead agency managing the discretionary CCDBG funding and be administered according to CCDBG rules. One of the purposes of the consolidation was to address concerns about the effectiveness and efficiency of child care programs. The four previous child care programs had different rules regarding eligibility, time limits on the receipt of assistance, and work requirements. The policy changes and new approach to funding were intended to streamline the federal role, reduce the number of federal programs and conflicting rules, and increase the flexibility provided to states. A portion of the spending for programs that receive a mixed funding approach is subject to the annual appropriations process, while the rest is subject to congressional review on a longer time horizon. This generally means that some of the funding for a program or purpose—the mandatory spending portion—will be more predictable than the discretionary spending portion. Combining these two approaches can provide some medium- or long-term predictability in budgetary resources for the mandatory spending purposes but allow annual reevaluation of the portion of the spending that is provided through the appropriations process. This is particularly the case for programs where mandatory spending funds the benefits but discretionary spending funds administration of the benefits. For example, the SSA's administrative costs associated with the OASI, SSDI, and SSI programs (among others) are funded through the Limitation on Administrative Expenses (LAE) discretionary account. As a consequence of this funding structure, Congress can use the opportunity provided by the annual appropriations process to provide instructions as to what administrative activities SSA should pursue or curtail. For instance, the House Appropriations Committee report language that accompanied the FY2016 LAE appropriation directed SSA to work with the National Institutes of Health to revise the agency's guidelines for evaluating Huntington's disease. One notable difference between mixed approaches and the others discussed in this report is that both the authorization and appropriations processes control aspects of the funding. When both types of spending fund the same purposes, what is available through mandatory spending can inform what is provided through the annual appropriations process to supplement that funding. For example, in the case of the federal Health Center Program the mandatory funding through the CHCF that was added in FY2011 assured a level of funding for that program that would continue to increase above the FY2008 level. Since that time, discretionary appropriations have slowly decreased from a high of $2.2 billion in FY2011 to $1.5 billion in FY2016. Alternatively, it is possible that the separate funding decisions made through the authorization and appropriations processes can reflect different congressional intentions or program priorities, especially because mandatory and discretionary spending are subject to different budget control mechanisms. In addition, if a mandatory spending funding stream is only provided for a certain number of fiscal years and not renewed after it lapses, this can create a sudden decline in budgetary resources for a program. For both of these reasons, the combination of mandatory and discretionary spending for a program has the potential to result in inconsistent funding outcomes from year to year. In general, funding mechanisms have two categories of funding sources (as illustrated by Figure 2 ). The first is the General Fund of the Treasury (GF), which is the default place where federal government collections are deposited and thereafter are available to be used by the Treasury to meet spending obligations. The second category is dedicated collections that fund specific programs or activities and are not deposited into the GF. Those collections may be authorized on a permanent basis or for a specified period of time. Both types of funding sources may be used to fund either mandatory or discretionary spending. In the case of dedicated collections, the authority to make the collections and the authority to expend them may be controlled by the same law or by different laws. This section explains the two types of funding sources and how they fit within the framework of discretionary and mandatory spending. Examples of each of these funding source types are included to illustrate the variety of options that exist across the federal government. Because a program may have more than one type of funding source, this section also includes a discussion of mixed sources. The general implications of each type of funding source for budgetary decisionmaking in Congress, and their tradeoffs between frequent congressional review and funding predictability, are also summarized. When funds are collected by an entity within the government, unless that entity has been given the legal authority to retain the funds, federal law generally requires that the funds be deposited into the GF. Once deposited, those funds are comingled within the GF and become budgetary resources that are available to meet obligations incurred pursuant to appropriations from that funding source. In essence, they are used to pay for spending out of the GF. The GF is a funding source for both discretionary and mandatory spending. In the case of discretionary spending, the GF is the default source of funding for all appropriations in appropriations measures, unless otherwise specified. An example of discretionary spending from the GF, as noted earlier in this report, is the appropriation for the National Apprenticeship Act (DOL): The following sums in this Act are appropriated, out of any money in the Treasury not otherwise appropriated, for the fiscal year ending September 30, 2016. [P.L. 114-113, Sec. 5] $90,000,000 to expand opportunities relating to apprenticeship programs registered under the National Apprenticeship Act, to be available to the Secretary to carry out activities through grants, cooperative agreements, contracts and other arrangements, with States and other appropriate entities. [P.L. 114-113, Division H, Title I] In this example, the provision in Section 5 (at the beginning of the appropriations act) provides that the appropriations in the act are of "any money in the Treasury not otherwise appropriated" (i.e., the GF). Because the appropriation for the National Apprenticeship Act that appears later in the text does not specify an alternative funding source, the source of the appropriation is the GF. The GF also may be the funding source of mandatory appropriations. An example of a program funded in this manner is the Maternal, Infant, and Early Childhood Home Visiting program (MIECHV) at HHS, which supports home visiting services for families with young children who reside in communities that have concentrations of poor child health and other risk indicators. The mandatory appropriation for this program in the Social Security Act is as follows: (1) Out of any funds in the Treasury not otherwise appropriated, there are appropriated to the Secretary to carry out this section ... (F) for fiscal year 2015, $400,000,000; (G) for fiscal year 2016, $400,000,000; and (H) for fiscal year 2017, $400,000,000. [42 U.S.C. 711(j)] Note that because the funding source for MIECHV also is the GF, the appropriations language for that program is similar to the language for the National Apprenticeship Act (above). While the revenues or other types of collections that are received by federal government entities are usually deposited in the GF by default, sometimes the law instead directs that they be dedicated to a specific purpose, which is referred to for the purposes of this report as "dedicated collections." (In some cases, the law may direct that these collections be made by the agency responsible for carrying out that purpose, or by the Department of the Treasury itself.) Such collections are usually credited to and expended from places in the Treasury other than the GF, such as a specific account. Accounts in the Treasury that are separate from the GF and contain funds that are specified in law for certain purposes are sometimes referred to as "special fund" or "trust fund" accounts. A funding source housed in one of these accounts may be used to fund either mandatory or discretionary spending. How a collection is structured and the type of law that controls it vary depending on whether the collection supports mandatory or discretionary spending. In general, if a mandatory spending program is funded by a dedicated collection, the authorization act provides three essential authorities: the authority to make the collection; the authority to retain the collection; and the authority to expend the collection for the purposes of that program. An example of a mandatory spending dedicated collection is the fees that are collected and expended by the United States Citizen and Immigration Service (USCIS) for its adjudication of immigration and naturalization petitions. The legal authority to collect fees associated with that purpose is provided by the Immigration and Nationality Act of 1952 (INA). Currently, the INA provides general authority to establish the level of such fees (subject to certain restrictions) and directs that all fees that are collected be deposited in a particular account (the "Immigration Examinations Fee Account"), and not the GF: Notwithstanding any other provisions of law, all adjudication fees as are designated by the Attorney General in regulations shall be deposited ... into a separate account entitled ''Immigration Examinations Fee Account'' in the Treasury of the United States, whether collected directly by the Attorney General or through clerks of courts. Provided further, that fees for providing adjudication and naturalization services may be set at a level that will ensure recovery of the full costs of providing all such services, including the costs of similar services provided without charge to asylum applicants or other immigrants. Such fees may also be set at a level that will recover any additional costs associated with the administration of the fees collected. [8 U.S.C. 1356(m)] In addition, the INA contains the authority to expend those fees for certain adjudication and naturalization-related activities. All deposits into the ''Immigration Examinations Fee Account'' shall remain available until expended to the Attorney General to reimburse any appropriation the amount paid out of such appropriation for expenses in providing immigration adjudication and naturalization services and the collection, safeguarding and accounting for fees deposited in and funds reimbursed from the ''Immigration Examinations Fee Account.'' [8 U.S.C. 1356(n)] Note that this mandatory appropriation is not explicitly limited as to the dollar amount that can be expended. Consequently, the amount ultimately expended in a fiscal year will depend on the total amount available in the account and how much of that amount USCIS decides to expend on the functions that are funded by those collections. In addition, while the authority to make and expend the collections is permanent, that authority could be altered through the enactment of law. Mandatory spending for benefits also may be funded through dedicated collections, as it is in the SSDI program (discussed earlier in this report). The Social Security Act provides that the primary funding source for SSDI—Federal Insurance Contributions Act taxes and Self-Employment Contributions Act taxes—be deposited in the Federal Disability Insurance (DI) Trust Fund. It also appropriates those amounts for the purposes of the program: There is hereby created on the books of the Treasury of the United States a trust fund to be known as the "Federal Disability Insurance Trust Fund". The Federal Disability Insurance Trust Fund shall consist of such gifts and bequests as may be made as provided in subsection (i)(1) of this section, and such amounts as may be appropriated to, or deposited in, such fund as provided in this section. There is hereby appropriated to the Federal Disability Insurance Trust Fund for the fiscal year ending June 30, 1957, and for each fiscal year thereafter, out of any moneys in the Treasury not otherwise appropriated, amounts equivalent to 100 per centum of ... (1)(S) [Federal Insurance Contributions Act taxes] 2.37 per centum of the wages (as so defined) paid after December 31, 2015, and before January 1, 2019, and so reported, and (T) 1.80 per centum of the wages (as so defined) paid after December 31, 2018, and so reported. (2)(S) [Self-Employment Contributions Act taxes] 2.37 per centum of the amount of self-employment income (as so defined) so reported for any taxable year beginning after December 31, 2015, and before January 1, 2019, and (T) 1.80 per centum of the amount of self-employment income (as so defined) so reported for any taxable year beginning after December 31, 2018. [42 U.S.C. 401(b)] As is the case for the Immigration Examinations Fee Account, the amount that is expended from the DI trust fund each fiscal year cannot exceed the total collections that are in the fund, and also will depend on how much is needed to pay the benefits that are funded through the collections. An important difference between the two examples, however, is that the formula for the DI trust fund collections is specified (e.g., 1.8% of wages and self-reported income after December 31, 2018) and not left up to the relevant agency to determine. If the formula does not yield a sufficient level of collections, legislative action would be required to alter it. Unlike dedicated collections that fund mandatory spending, the authority to expend dedicated collections that fund discretionary spending is provided in appropriations acts. The authority to make those collections, however, could be provided in either authorization or appropriations acts. In other words, discretionary spending that is funded through dedicated collections can be configured one of two ways: the authority to collect is provided by an authorization act on either a time-limited or permanent basis, but the authority to expend is provided each fiscal year in an appropriations act; or the authority to collect and expend is provided each fiscal year in an appropriations act. The Manufactured Housing Standards Program is an example of both types of configurations. The National Manufactured Housing Construction and Safety Standards Act of 1974 authorizes the Department of Housing and Urban Development (HUD) to receive dedicated collections (fees paid by manufacturers) to pay for the cost of monitoring and enforcement activities related to standards for manufactured housing: In carrying out inspections under this chapter, in developing standards and regulations pursuant to section 5403 of this title, and in facilitating the acceptance of the affordability and availability of manufactured housing within the Department, the Secretary may- (1) establish and collect from manufactured home manufacturers a reasonable fee, as may be necessary to offset the expenses incurred by the Secretary in connection with carrying out the responsibilities of the Secretary under this chapter. [42 U.S.C. 5419(a)]. The act also specifies allowable uses for the fees, which include conducting inspections and monitoring, providing funding to the states for the administration and implementation of approved state plans, and staffing for the program. Further, the act establishes the Manufactured Housing Fees Trust Fund, provides that fees collected under this act must be deposited into the fund, and makes their availability for expenditure subject to the annual appropriations process: There is established in the Treasury of the United States a fund to be known as the "Manufactured Housing Fees Trust Fund" for deposit of amounts from any fee collected under this section. Such amounts shall be held in trust for use only as provided in this chapter. Amounts from any fee collected under this section shall be available for expenditure only to the extent approved in advance in an annual appropriations Act. [42 U.S.C.5419(e)] Annual appropriations acts make a specific amount of the collections available for expenditure each fiscal year, as illustrated by the FY2016 appropriation: The following sums in this Act are appropriated, out of any money in the Treasury not otherwise appropriated, for the fiscal year ending September 30, 2016. [P.L. 114-113, Sec. 5] For necessary expenses as authorized by the National Manufactured Housing Construction and Safety Standards Act of 1974 (42 U.S.C. 5401 et seq.), up to $10,500,000, to remain available until expended, of which $10,500,000 is to be derived from the Manufactured Housing Fees Trust Fund [P.L. 114-113, Division L, Title II] Annual appropriations acts also provide HUD with authority to both collect and expend an additional fee for the program: Provided further, That for the dispute resolution and installation programs, the Secretary of Housing and Urban Development may assess and collect fees from any program participant: Provided further, That such collections shall be deposited into the Fund, and the Secretary, as provided herein, may use such collections, as well as fees collected under section 620, for necessary expenses of such Act. [P.L. 114-113, Division L, Title II] In sum, appropriations language provides HUD both the authority to expend the collections that are made and deposited into the fund pursuant to the National Manufactured Housing Construction and Safety Standards Act of 1974, and also the authority to collect and expend an additional fee that may be charged for the dispute resolution and installation programs. (All of those fees are to be deposited into the fund, are available for the same purposes as the rest of the collections in the fund, and are subject to the same overall cap on expenditures.) The collections that are authorized in appropriations acts each fiscal year as part of the Substance Abuse and Mental Health Services Administration (SAMHSA) Health Surveillance and Program Support account at HHS operate on a similar principle to the HUD manufactured housing dispute resolution and installation fees. This SAMHSA appropriations account generally funds many of the behavioral health data systems, national surveys, and surveillance activities that support work undertaken by agency grantees, the field, and the public. (These activities are funded with an appropriation from the GF.) Sometimes, however, SAMHSA is asked to undertake additional data runs or analysis of data collected in SAMHSA's usual surveillance activities, or to ship large orders of publications. To enable SAMHSA to engage in this additional work, the annual appropriations language for the Health Surveillance and Program Support account authorizes the agency to both collect and expend fees from entities that make these requests: Provided further, That, in addition, fees may be collected for the costs of publications, data, data tabulations, and data analysis completed under title V of the PHS Act and provided to a public or private entity upon request, which shall be credited to this appropriation and shall remain available until expended for such purposes. [P.L. 114-113, Division H, Title II] When the authority to make a dedicated collection is provided in an appropriations act, it is temporary in nature and only lasts for the duration of the act (one fiscal year), unless otherwise specified. Consequently, the authority to collect must be included in the relevant appropriations act each fiscal year in order for it to continue to be in effect. Like the Health Surveillance and Program Support account discussed above, some programs or purposes are funded by both the GF and dedicated collections. In many cases, the rationale for a mixed funding source is that the program undertakes two broad types of activities—those that are "general government" in nature, and also those that involve services or benefits that are more business-like in nature (and for which recipients may choose to opt in). In other cases, a program that serves a specific population might be structured so that collections cover only a portion of the costs, with the remainder of the costs effectively being subsidized by the GF. Such mixed funding sources may be used for either mandatory or discretionary spending, as illustrated below. An example of mandatory spending that is funded by both the GF and dedicated collections is the Medicare federal insurance program administered by the Centers for Medicare & Medicaid Services within HHS, which pays for covered health care services of qualified beneficiaries. The sources of the collections that fund each portion of Medicare, the purposes of the collections, and the extent to which they are supplemented by transfers from the GF differ for each part of the program, however, as illustrated by the following summaries of Parts A and B. Medicare Part A provides insurance for hospital services, skilled nursing facility services, home health visits, and hospice services. This insurance is primarily funded through dedicated collections (payroll taxes) that are credited to the Hospital Insurance (HI) trust fund. Generally, individuals are entitled to Part A benefits if they or their spouse paid Medicare payroll taxes for at least 40 quarters, are at least 65 years old or under 65 with a permanent disability, and are a citizen or permanent resident of the United States. Additional dedicated collections that are deposited in the HI trust fund are the premiums paid by voluntary enrollees who are not entitled to premium-free Part A coverage, and a portion of federal income taxes that individuals pay on their Social Security benefits. The collections for Part A are intended to be the sole funding source of the program. In the event that the amount of HI trust fund income (payroll taxes and other income) is insufficient to make the benefit payments required by law, legislative action would be required to change the amount or source of the collections so that full benefits could continue to be paid. Medicare Part B is an optional program that provides insurance for a broad range of medical services, including physician services, laboratory services, durable medical equipment, and outpatient hospital services. The funding source for Part B is a combination of collections (premiums paid by individuals that elect to enroll in Part B) and the GF, both of which are deposited in the Supplementary Medical Insurance (SMI) trust fund. Unlike Part A, dedicated collections are not intended to be the sole source of funding for Part B, and the funding is structured so that the SMI will have sufficient budgetary resources for the benefit formula indefinitely. This is because the law requires the HHS Secretary to set premiums at a rate that covers 25% of the estimated cost of the program each year, with the appropriation from the GF automatically covering the remaining cost. While legislative action to make changes to Part B could occur for a variety of policy or budgetary reasons, the need to address a funding shortfall to cover program benefits generally would not be one of them. For Part A and Part B, both the authority to collect and the authority to expend are provided on a permanent basis. However, the differing structure of the funding sources is such that while one could operate indefinitely as it is constituted in current law (Part B), the other might require future legislative action if its funding source becomes insufficient (Part A). The discretionary spending for the Food and Drug Administration (FDA) review of human drugs, human medical devices, and veterinary drugs is also an example of activities with a funding source that is a mixture of dedicated collections and the GF. Prior to the 1990s, the process of reviewing these drugs and devices was funded entirely through discretionary appropriations from the GF. Starting in 1992, however, the funding source for these activities was gradually transitioned to a mixed approach through a series of authorization laws that were enacted between 1992 and 2012. The first of these FDA activities to be funded by both dedicated collections and the GF was the review of human drug applications for prescription drugs. In the late 1980s, the median time for FDA to approve a new drug application was 29 months—an amount of time that industry, consumer groups, and the FDA agreed was unacceptably long. Patient advocates argued that a drug in review—and therefore not available for sale—could be the difference between life and death. Manufacturers argued that prolonged review times affected their ability to recoup the costs of research and development. On the other hand, the FDA argued that it had insufficient appropriations to hire additional scientists to review new and backlogged drug applications. Negotiations between interested parties led to the enactment of the Prescription Drug User Fee Act (PDUFA, P.L. 102-571 ) in 1992, which gave the FDA an additional funding source of dedicated collections (user fees paid by the pharmaceutical industry) that could be used to support "the process for the review of human drug applications." The PDUFA user fees are structured to supplement discretionary appropriations from the GF. This is ensured because the FDA is authorized to collect the fees only if the GF appropriations for the activities involved in the review of human drug applications (and for FDA activities overall) remain at a level at least equal (adjusted for inflation) to the pre-PDUFA budget for those activities. In addition, the FDA is required to negotiate with industry to establish certain performance goals, which set target completion times for various review processes. Finally, while the PDUFA sets up the legal framework that governs the FDA user fees, the necessary authority for the FDA to actually collect and expend them is provided each year through appropriations acts. The authority for user fees in the PDUFA is provided five years at a time. Each five-year authorization sets a total amount of fee revenue for the first year and provides a formula for annual adjustments based on inflation and workload changes. As a consequence, the PDUFA funding mechanism has two elements that encourage regular legislative review—the five-year reauthorization cycle, and the annual appropriations process. The initial PDUFA authority expired in 1997 and has been renewed four times, by PDUFA II (1997; P.L. 105-115 ), PDUFA III (2002; P.L. 107-188 ), PDUFA IV (2007; P.L. 110-85 ), and PDUFA V (2012; P.L. 112-144 ). This most recent reauthorization extends the authority to collect the user fees through September 30, 2017. Since the PDUFA, the FDA has been authorized to collect fees for additional activities related to the review of brand and generic human drugs, biologics, and medical devices, as well as brand and generic veterinary drugs: In 2002, the Medical Device User Fee and Modernization Act ( P.L. 107-250 ; MDUFMA) was enacted to provide the FDA the authority to collect user fees to support the approval of human medical devices, which are a wide range of products that are used to diagnose, treat, monitor, or prevent a disease or condition in a patient. In 2003, the Animal Drug User Fee Act (ADUFA I; P.L. 108-130 ) gave the FDA the initial authority to collect user fees from sponsors for the review of animal drug applications. That authority was expanded to include animal generic drugs in the subsequent ADUFA reauthorization ( P.L. 110-316 , Title II: Animal Generic Drug User Fee Act) in 2008. In 2009, the Biologics Price Competition and Innovation Act of 2009 (BPCIA; Title VII of P.L. 111-148 ) established a new regulatory authority within the FDA by creating a licensure pathway for biosimilar drugs. The associated FDA user fee program was fully implemented in the Biosimilar User Fee Act of 2012 ( P.L. 112-144 ). In 2012, the Generic Drug User Fee Amendments (GDUFA; P.L. 112-144 ) gave the FDA the authority to collect user fees for the approval of generic prescription drugs for humans. All of these dedicated collections are currently structured similarly to the PDUFA, in that they require a minimum level of GF appropriations as a trigger for the user fee authority, the user fees are authorized for a specific amount over a five-year period, and the authority to expend the user fees is provided in annual appropriations acts. The most recent authorization for these dedicated collections also was provided by various titles in the Food and Drug Administration Safety and Innovation Act ( P.L. 112-144 ), which authorizes the collections through September 30, 2017. The choice of whether to use the GF as the funding source for a program or set up a dedicated collection often is made based on a number of general considerations related to the nature or purpose of the program. The GF is usually the source for mandatory and discretionary spending that funds general government purposes. In contrast, a dedicated collection may be used to fund government activities that are more business-like in nature, or to enable a particular population to receive additional government services in exchange for paying a user fee. Alternatively, such a dedicated collection might be set up to enable the government to pursue activities that it otherwise would have lacked the budgetary resources to engage in if relying solely on the GF. And in some instances, when multiple such considerations are at work, a mixed approach might be chosen. The way that a dedicated collection is structured has implications with regard to the process that controls the funding source and the timing of budgetary decisionmaking. In particular, these implications include whether the authority to collect and expend is provided through one process or different processes, and whether the congressional decisionmaking for those authorities occurs on the same schedule or different schedules. In the case of mandatory collections, one or both of the authorities can be permanent or temporary. For instance, it is possible for the authority to collect to be permanent but the authority to expend to be provided for a set number of fiscal years and subject to periodic renewal. In addition, the formula or specific amount for the collection might need to be adjusted on occasion if it does not provide a sufficient level of budgetary resources for the purpose that it funds. For example, in 2015 it was estimated that the formula for the SSDI collections would stop generating enough budgetary resources to fully fund the program by the end of 2016. This was due to a number of causes, including the aging of the baby-boomer generation and changes in opportunities for work and compensation, which contributed to a rise in the number of SSDI beneficiaries. The Bipartisan Budget Act of 2015 ( P.L. 114-74 ) authorized a reallocation of the Social Security payroll tax to increase the SSDI's share of the collections temporarily to address the program's funding issues. This change was projected to extend the sufficiency of the SSDI funding source until 2023, at which time the formula for the collections (or the level of benefits funded by those collections) might need to be revisited. In the case of discretionary collections, while the timing of budgetary decisions with regard to the authority to collect and expend also can occur at the same time or different times, one or both of those authorities always involves the annual appropriations process. The authority to make collections that fund discretionary spending could be provided on a multiyear or permanent basis through authorization acts or each year through appropriations acts. Regardless, because the annual appropriations process provides the authority to expend the funding, this may also create an opportunity for Congress to simultaneously specify or restructure aspects of the funding source. For example, the appropriation of the dedicated collections for the Manufactured Housing Standard Program also contains provisions that modify the amount of the collections so that they will be sufficient to fund the amount that is appropriated each fiscal year. The structure of a funding source adds another layer of complexity to the inherent tradeoff within a funding mechanism between the frequency of congressional decisionmaking and the stability of the funding for the program. Because a mandatory funding source generally allows the spending of collections to occur automatically, this approach lends itself toward comparatively greater funding stability than discretionary spending collections. However, such mandatory funding sources can be structured so as to provide the opportunity for a greater degree of congressional control if the authorization law specifies or caps the amount of the collections or limits the authority to collect to a set time period. As for discretionary collections that are established through an authorization, the authority to collect also can be provided for a set number of fiscal years or for a set dollar amount. In addition, because the expenditure of all discretionary collections generally is controlled through the appropriations process, there is an annual opportunity to specify the amount that may be expended and place conditions on that spending. As discussed and illustrated throughout this report, how Congress chooses to structure a funding mechanism in a particular context may be based on a number of budget process and programmatic considerations. The congressional budget process considerations for funding mechanisms are generally related to the relative roles that authorizations and appropriations may assume in spending decisionmaking. Whether Congress prefers that control over spending be vested in one, the other, or both processes depends on a number of factors. For instance, what Congress views to be the optimal time interval for budgetary decisions—annual, multiyear, or as needed—may influence whether discretionary or mandatory funding is provided. Another issue is the budget process context in which spending should be decided—whether it should be in competition with other programs that are funded through the appropriations process, or whether it should be funded through a mandatory funding mechanism that is evaluated separately as part of the authorization process. Congress also may assess the potential funding sources for a program in light of budget process considerations. The use of the GF as a funding source indirectly associates that funding mechanism with broader budgetary decisions about the amount of general revenue that the government collects. In contrast, the decision to establish a dedicated funding source might have the effect of narrowing the context for budgetary decisionmaking so that it focuses more specifically on that program. In such instances, Congress must decide whether the authorization process or the appropriations process is better suited to control the dedicated funding source, and whether the timing of decisionmaking should match that of the spending with which it is associated. When selecting a funding mechanism, Congress also may take into account programmatic considerations, particularly the level of stability or predictability in funding that best supports how a program is intended to function. To some extent, this may depend on the purpose of the program, such as whether it directly or indirectly provides benefits to individuals, provides services to a specific population, or supports general government activities. Other considerations may include the extent to which program needs from year to year are expected to vary or be difficult to predict. Ultimately, Congress has a range of options, from structuring the funding mechanism so that it guarantees funding to meet whatever program needs arise to providing funding in such a way that the program is required to adapt to set funding levels that vary from year to year. Program needs also might be a factor in determining the most appropriate funding source for a program. In some cases, user fees or other dedicated collections to support a program might be an option. In others, Congress might seek to set up a special tax or revenue stream to provide a stable source of budgetary resources for the future. Or, Congress might prefer that the program be funded through the GF. For all of these options, the time interval for which the funding source is established also affects the extent to which the funding mechanism for a program promotes either funding predictability for the program that it funds, or regular congressional review. In summary, some of the many factors that Congress may take into consideration when it is assessing potential funding mechanisms for a new or existing program include the nature of the government program or service to be provided; whether funding stability or a guarantee of budgetary resources to meet whatever needs arise is important for the purposes or operation of the program; whether the program could adapt and still fulfill its mission if year-to-year funding levels are variable; how accurately the future funding needs of the program can be forecast; how often, and by what types of legislative vehicles, the parameters of the program (including its funding) should be reevaluated by Congress; what funding sources besides the GF could be used for the program; whether a program's dedicated funding source and spending from that source should be evaluated on the same or different schedules, and in the same or different legislative vehicles; and whether congressional control over various aspects of the funding itself, including the source of the funding, should be vested in one or more authorization committees, vested in the appropriations committees, or split between both types of committees. This report has discussed some of the inherent tensions that exist between how frequently Congress makes funding decisions for a program and how stable that funding is for the program. However, policymakers may perceive these tensions differently and have differing perspectives as to how they should be reconciled. The actual funding mechanism that is chosen in a particular instance may be the result of a compromise between Congress and the President or within Congress itself. As policymakers' perceptions of these tensions evolve and change over the course of a program's existence, the funding mechanism also may be altered to better reflect the needs of the program and the needs of Congress in budgetary decisionmaking. Table A-1 and Table A-2 summarize the examples of various funding types and funding sources that were discussed in this report. For further information about each of these examples, please see the relevant portion of the report: Office of Apprenticeship, pp. 4-5, 19 Child Care and Development Block Grant (CCDBG), pp. 5-6, 17 Violence Against Women Family Research and Evaluation, p. 6 State Children's Health Insurance Program (CHIP), p. 10 Technical Assistance for Tribal Child Welfare Programs, pp. 10-11 Social Security Disability Insurance (SSDI), pp. 11, 21-22 Social Services Block Grant (SSBG), p. 12 Supplemental Security Income (SSI), p. 13 Health Center Program, pp. 16-17 Child Care and Development Fund (CCDF), Child Care Entitlement to States, p. 17 Maternal, Infant, and Early Childhood Home Visiting (MIECHV), pp. 19-20 Immigration Examinations Fee Account, pp. 20-21 Manufactured Housing Standard Program, pp. 22-23 Health Surveillance and Program Support, extraordinary surveillance activities, pp. 23-24 Medicare Part A and B, pp. 24-25 Prescription Drug User Fee Act (Food and Drug Administration), pp. 25-27 | Every year, Congress considers numerous pieces of legislation that would create or modify federal government programs and activities. The variety of approaches used across the federal budget to fund these programs and activities involve different timelines for budgetary decisionmaking, and different processes (and committees) within Congress to make those decisions. How a particular funding mechanism is structured requires tradeoffs between the frequency of congressional review and the predictability of funding for the program. The purpose of this report is to explain these approaches, illustrating them with examples of how they have been applied in practice. When attempting to understand the mechanism through which a program is funded, one of its most basic elements is the type of law that controls that funding. Such laws—and the provisions within them—can be distinguished based on whether their primary purpose is to create or modify federal government programs or activities ("authorizations"), or whether their purpose is to fund those activities ("appropriations"). Discretionary spending programs generally are established through authorization laws, but the annual appropriations process determines the extent to which those programs will actually be funded, if at all. Examples of discretionary spending discussed in this report include the Office of Apprenticeship (Department of Labor; DOL) and the Violence Against Women Family Research and Evaluation program (Department of Justice). Mandatory spending is controlled by authorization laws. For this type of spending, the program usually is created and funded in the same law, often on a multiyear or permanent basis. Examples of this type of funding mechanism that are discussed in this report include the State Children's Health Insurance Program (Department of Health and Human Services; HHS), Technical Assistance for Tribal Child Welfare Programs (HHS), and Social Security Disability Insurance (Social Security Administration; SSA). Alternatively, a mandatory spending program might be created in an authorization law but funded annually through an appropriations act; this is often referred to as "appropriated mandatory" spending. Examples of appropriated mandatory spending include the Social Services Block Grant (HHS) and Supplemental Security Income (SSA). In some cases, including the federal Health Center Program (HHS) and the Child Care and Development Fund (HHS), federal government programs are funded using a combination of mandatory and discretionary spending. Besides the type of law that controls the spending, another important aspect of any funding mechanism is what the source of that funding will be. This is because there is a distinction between the authority to expend funds and the source of the funds themselves. Revenue and other collections made by the federal government are generally deposited in the General Fund (GF) of the Treasury, which is the default source of spending for many different types of federal government activities. Examples of funding mechanisms that utilize the GF include the Office of Apprenticeship (DOL) and the Maternal, Infant, and Early Childhood Home Visiting program (HHS). Spending also may be funded by dedicated collections that result from the business-like activities that the federal government undertakes. Both the legal authority to make these collections, and the legal authority to expend them, may be provided either through authorization or appropriations acts, and may support either mandatory or discretionary spending. Examples of dedicated collections that are discussed in this report include those associated with the Immigration Examinations Fee Account (Department of Homeland Security), the Manufactured Housing Standard Program (Department of Housing and Urban Development), and the Health Surveillance and Program Support account (HHS). In some cases, including Medicare Part A and B (HHS) and the Prescription Drug User Fee Act activities undertaken by the Food and Drug Administration (HHS), programs are funded using a combination of the GF and dedicated collections. |
Most analysts agree that Russia's democratic progress was uneven at best during the 1990s, and that the previous two cycles of legislative and presidential elections held under the leadership of President Vladimir Putin (those in 1999-2000 and 2003-2004) demonstrated further setbacks for democratization. After the pro-Putin United Russia Party gained enough seats and allies to dominate the State Duma (the lower legislative house of the Federal Assembly; the upper house is not directly elected) after the 2003 election, the Kremlin moved to make it more difficult for smaller parties to win seats in the future, including by raising the hurdle of minimum votes needed to win seats from 5% to 7%. Also, the election of 50% of Duma deputies in constituency races—where independent candidates and those from small opposition parties usually won some seats—was abolished, with all Duma members to be elected via party lists. Changes in campaign and media laws also made it more difficult for small parties and opposition groups to gain publicity in the run-up to the December 2, 2007, Duma election. Out of 16 registered political parties, eleven succeeded in submitting the required paperwork by late October and were approved by the Central Electoral Commission (CEC) to run in the December 2007 Duma election. The most prominent of the approved parties were United Russia, A Fair Russia, the Liberal Democratic Party of Russia, the Communist Party, Union of Right Forces, and Yabloko. The latter three parties are opposition parties, and the latter two are liberal democratic parties. A Fair Russia is widely viewed as a creation of the Putin administration and considers itself a centrist party. The ultranationalist Liberal Democratic Party usually supports Putin's initiatives in the Duma. Other Russia, an opposition bloc of movements and unregistered parties co-chaired by former international chess champion Garry Kasparov, called on the CEC to permit it to field candidates, but the CEC denied their request, saying it could not rewrite a new law that permits only single registered parties to participate in the election. Perhaps the most significant event in the run-up to the 2007 Duma election was President Putin's October 1, 2007, announcement at the convention of the United Russia Party that he would "accept" its invitation to head its list of candidates, although he declined to join the party. The parties long have relied on the prestige of prominent persons at the top of their lists, and the voters are often aware that these people will pass on taking their seats in the Duma if the party wins. In his acceptance speech, Putin stated that a suggestion by a previous speaker that he become the prime minister after his second term as president ends "is entirely realistic, but it is too soon to talk about this at the moment because at least two conditions would first need to be met. First, United Russia would have to win the State Duma election on December 2, and second, our voters would have to elect a decent, effective and modern-thinking president." A short campaign season was permitted by law to begin on November 3 and end on November 30. On November 16, the Office for Democratic Institutions and Human Rights (ODIHR) of the Organization for Security and Cooperation in Europe (OSCE) informed the Russian CEC that it could not send its electoral observers, stating that "despite repeated attempts to attain entry visas into the Russian Federation for ODIHR experts and observers, entry visas have continuously been denied." CEC head Vladimir Churov claimed that the visas had been issued. President Putin stated that "we have information that ... this [ODIHR decision] was made on the recommendation of the U.S. State Department," and asserted that "actions such as these cannot wreck the elections," by making them appear illegitimate (these allegations were denied by the U.S. State Department and White House; see below). Despite the inability of ODIHR to organize an electoral mission, over one hundred observers came from the Parliamentary Assembly of the OSCE, the Parliamentary Assembly of the Council of Europe (PACE), and the Nordic Council. United Russia declined to participate in any broadcast political debates, but on October 1 approved a platform that pledged to continue Putin's policy course. All the parties were provided with some free television and print access, and on-air candidate debates at times appeared informative. The United Russia Party and the Putin administration-supported Nashi youth group stressed Russian nationalism and an anti-Western image, absorbing and amplifying the themes of the former Motherland Party (which was allegedly created and later abolished by the Putin administration). These themes appeared to at least partly reflect real fears by some part of the Putin administration that small domestic groups funded by "enemy" Western countries might try to launch democratic "color revolutions," like those that took place in Georgia in 2003 and Ukraine in 2004, to re-install the so-called oligarchs and divvy up Russia's oil and gas resources. A flyer attributed to Nashi called for rallies on December 3-6 to prevent the United States from using "traitors and thieves" such as Kasparov to launch a "color revolution." Some observers have warned that although United Russia might have gained some electoral support by using such themes, associated dangers include fueling ethnic and religious hate crimes and calls for a belligerent and isolationist foreign policy. Reflecting these themes, Putin explained in a major speech to his supporters on November 21 that he had agreed to head the United Russia party list in order to prevent the Duma from becoming "a collection of populists paralyzed by corruption and demagoguery," as in the past. He warned his supporters that Russia's stability and peace were still threatened by three groups, which he seemed to conflate: the supporters of Soviet-era politicians, the supporters of former Russian president Boris Yeltsin, and "those who scavenge outside foreign embassies, foreign diplomatic missions, [and] rely on support from foreign foundations and governments." These groups, he asserted, want "a weak and sick state," and a "disorganized and disoriented society ... in order to wheel and deal behind its back; in order to receive their piece of pie at our expense." He warned that some members of these groups are campaigning for seats in the Duma and staging demonstrations as taught by Western advisors in the hope of "restoring the oligarchs' regime based on corruption and lies." According to the final results reported by the CEC, four parties won enough votes to pass the 7% hurdle and win seats in the Duma (see Table 1 ). United Russia increased the number of seats over those it won in 2003, but the real effect may be minor, since many deputies in that Duma later aligned with United Russia, giving it the two-thirds majority needed to approve changes to the constitution. The losing parties altogether garnered about 7% of the vote (another 1% of votes were deemed invalid). The relatively high turnout (63.7% of 109 million voters), compared to 2003 (56%), won plaudits for the CEC, although the main contribution appeared to be Putin's active role. Some regions vied to report high voter turnouts and numbers for United Russia, with the North Caucasus republics hailing improbable turnouts nearing 100% with correspondingly high percentages of votes for United Russia. Observers from the Russian non-governmental organization Golos assessed the election as not free and fair. The observers from the Council of Europe, the OSCE, and the Nordic Council issued a press statement on December 3 that the election was more efficiently run than past races, but "there was not a level political playing field." They criticized the placement of most governors, as well of the president, on the United Russia list as "an abuse of power," the use of government resources to support United Russia, and "widespread reports of harassment of opposition parties." The active role of the president, they stated, turned the election "into a referendum on the president." They stated that it was difficult for voters to make informed choices because "state-funded media failed in their public mandate to offer balanced and objective coverage." One Russian CEC official dismissed this assessment as reflecting only a small group of the observers and dictated "from overseas" (presumably from the United States). Observers from regional organizations Russia belongs to—the Commonwealth of Independent States and the Shanghai Cooperation Organization—assessed the election as democratic. The 2007 Duma election appears very similar to the previous 2003 election as a mandate on Putin's rule, according to many observers. In the 2007 election, however, Putin did not just endorse the United Russia Party but placed his name at the head of its list, and many observers viewed the election results as more a popular endorsement of Putin than an endorsement of United Russia. In this view, the voters were indicating that they wanted Putin to remain in a leadership position even after his presidential term ends. On December 3, Putin announced that he would use his power as president to convene the new Duma within a few days, so that it could start working with the government. He argued that since more citizens than in past elections had turned out and voted for parties that ended up with legislative seats, this incoming Duma would be more legitimate (some critics suggested that by this definition, voting during the Soviet era for the sole communist party would have been the most perfect "legitimacy"). Putin also praised voters for rejecting "a destructive shift in the development of the country," presumably as had occurred in Ukraine and Georgia. He lamented that "tired voters" would soon (March 2, 2008) be faced with a presidential election and suggested that the new Duma examine means of "spreading apart these two election campaigns in the future." Some observers interpreted this as a possible plan to delay the presidential race and stretch out Putin's second term in office, as Uzbek President Islam Karimov did in 2002 to lengthen his term in office. Since United Russia strengthened its dominance of the Duma, the party leader and outgoing Duma Speaker, Boris Gryzlov, stressed on December 3 that the party would not fundamentally change its already nonpareil record in passing legislation to implement Putin's development plans and budgets. Similarly, Deputy Prime Minister Aleksandr Zhukov suggested that there would be few if any changes in the government. Although the Communist Party is now the sole opposition in the Duma, the dominance of United Russia over legislative offices and committees will permit the communists little leeway for influencing legislation. Also, the Communist Party in the last Duma appeared to play the role of a "constructive opposition" by seeking to work with United Russia on many legislative issues, including agreement on such foreign policy issues as sanctions against Georgia and condemnation of NATO enlargement and U.S. missile defense plans. United Russia planned to hold a convention on December 17 to choose its candidate for president. This "choice" is likely to be Putin's preferred successor, according to many observers. There is speculation that the candidate could be first deputy prime ministers Dmitriy Medvedev or Sergey Ivanov, or sitting Prime Minister Viktor Zubkov. According to one scenario, such an official would be elected in March 2008 and serve as a "placeholder" president, and might even resign after a short period in office, permitting Putin to constitutionally run in a presidential by-election. Under this scenario, Putin might serve as prime minister. According to some indicators, intra-elite conflicts are increasing as pro-Putin groups maneuver to protect their interests in the run-up to the supposed Putin succession. One security chief in October 2007 warned that these conflicts threatened Russia's stability. Most opposition party leaders criticized the election as marking the further whittling away of democratic freedoms. Putin's former economic advisor, Andrey Illarionov, now in opposition, denounced the newly elected Duma as illegitimate and predicted on December 3 that Putin will have to stay in office to violently suppress rising dissension against the authoritarian political system. A co-leader of the Union of Right Forces, Boris Nadezhdin, asserted on December 2 that Putin was planning to use United Russia to rule, similar to single-party rule during the Soviet era. Another Union of Right Forces co-leader, Boris Nemtsov, called for opposition parties and groups to join in backing a single presidential candidate to run against the Kremlin's candidate. Under the law, parties that gained only 2-4% or less of the vote face heavy financial penalties that threaten their existence, including losing their state subsidies, forfeiting their relatively large election deposits, and paying for the "free" airtime they had been alloted. The result could be a political system with fewer parties and choices for voters, according to some observers. The Bush Administration has expressed increasing concerns about anti-democratic trends and human rights problems in Russia. Most recently, Secretary of State Condoleezza Rice stated that U.S.-Russia cooperation remained good on global terrorism, nuclear threats, North Korea, and even addressing Iranian nuclear proliferation, but that there was less cooperation in relations with Central Europe and Soviet successor states, and difficulty in seeing eye-to-eye on democratization in Russia. She envisaged that while the United States would probably be able to continue to negotiate with Russia on such issues as ballistic missile defense and Iranian nuclear proliferation, it might prove harder for the United States to convince Russia to democratize or not use its energy for international political leverage. The White House and the State Department on November 25-26 raised concerns about the detention of Garry Kasparov during a demonstration and other Russian government actions that limited freedom of speech and assembly. White House spokeswoman Dana Perino reportedly adopted a cautious tone after the Duma election, stating on December 3 that the United States would reserve judgment for the time being about the legitimacy of the election, and urging Russian authorities to address alleged electoral irregularities. Congress has had growing concerns about democratization and human rights progress in Russia, as reflected in calls in yearly foreign operations appropriations bills for added Administration attention to Russian democratization, as well as in other legislation, in hearings, and visits. Among recent Member attention, the Co-Chairman of the Commission on Security and Cooperation in Europe (the Helsinki Commission), Repr. Alcee Hastings, stated on December 3, 2007, that it was "regrettable" that the Duma election "was fraught with numerous violations of widely accepted democratic standards ... true democracies, and Russia claims to be one, do not make a mockery of elections." Senator Barak Obama on December 3, 2007, likewise criticized the Russian government for restricting media coverage except for United Russia, breaking up opposition party rallies, and being implicated in many vote-counting irregularities. He and other U.S. observers, while criticizing voting irregularities, also have stressed that the United States should continue to cooperate with Russia on counter-terrorism, counter-narcotics, non-proliferation, and other issues. The anti-U.S. rhetoric of the Duma election campaign, however, may signal that such cooperation will be harder to achieve, according to some observers. The international private investment research firm Moody's has suggested that the victory of United Russia in the election signifies a stable economic climate and the likelihood that Russia will maintain progressive macroeconomic policies. | This report discusses the campaign and results of Russia's December 2, 2007, election to the State Duma (the lower legislative chamber), and implications for Russia and U.S. interests. Many observers viewed the election as a setback to democratization. Unprecedented for modern Russia, President Vladimir Putin placed himself at the head of the ticket of the United Russia Party. This party won a majority of Duma seats, and Putin was widely viewed as gaining popular endorsement for a possible role in politics even after his constitutionally-limited second term in office ends in early 2008. This report may be updated. Related reports include CRS Report RL33407, Russian Political, Economic, and Security Issues and U.S. Interests, by [author name scrubbed]. |
The House of Representatives has several different parliamentary procedures through which it can bring legislation to the chamber floor. Which will be used in a given situation depends on many factors, including the type of measure being considered, its cost, the amount of political or policy controversy surrounding it, and the degree to which Members want to debate it and propose amendments. According to the Legislative Information System of the U.S. Congress (LIS), in the 113 th Congress (2013-2014), 943 pieces of legislation received House floor action. This report provides a statistical snapshot of the forms, origins, and party sponsorship of these measures and of the parliamentary procedures used to bring them to the chamber floor during their initial consideration. Legislation is introduced in the House or Senate in one of four forms: the bill (H.R./S.), the joint resolution (H.J.Res./S.J.Res.), the concurrent resolution (H.Con.Res./S.Con.Res.), and the simple resolution (H.Res./S.Res.). Generally speaking, bills and joint resolutions can become law, but simple and concurrent resolutions cannot; they are used instead for internal organizational or procedural matters or to express the sentiment of one or both chambers. In the 113 th Congress, 943 pieces of legislation received floor action in the House of Representatives. Of these, 692 were bills or joint resolutions, and 251 were simple or concurrent resolutions, a breakdown between lawmaking and non-lawmaking legislative forms of approximately 73% to 27%, respectively. Of the 943 measures receiving House floor action in the 113 th Congress, 846 originated in the House, and 97 originated in the Senate. It is generally accepted that the House considers more legislation sponsored by majority party Members than measures introduced by minority party Members. This was born out in practice in the 113 th Congress. As is reflected in Table 1 , 74% of all measures receiving initial House floor action in the last Congress were sponsored by Members of the Republican Party, which had a majority of seats in the House. When only lawmaking forms of legislation are considered, 73% of measures receiving House floor action in the 113 th Congress were sponsored by Republicans, 27% by Democrats, and 0.002% by political independents. The ratio of majority to minority party sponsorship of measures receiving initial House floor action in the 113 th Congress varied widely based on the parliamentary procedure used to raise the legislation on the House floor. As noted in Table 2 , 68% of the measures considered under the Suspension of the Rules procedure were sponsored by Republicans, 32% by Democrats, and less than 1% by political independents. That measures introduced by Members of both parties were considered under Suspension is unsurprising in that (as discussed below) Suspension of the Rules is the parliamentary procedure that the House generally uses to process non-controversial measures for which there is wide bipartisan support. In addition, passage of a measure under the Suspension of the Rules procedure, in practice, usually requires the affirmative votes of at least some minority party Members. The ratio of party sponsorship on measures initially brought to the floor under the terms of a special rule reported by the House Committee on Rules and adopted by the House was far wider. Of the 148 measures the Congressional Research Service (CRS) identified as being initially brought to the floor under the terms of a special rule in the 113 th Congress, 144 (about 97%) were sponsored by majority party Members. The breakdown in party sponsorship on measures initially raised on the House floor by unanimous consent was uneven, with majority party Members sponsoring only 45% of the measures brought up in this manner. The following section documents the parliamentary mechanisms that were used by the House to bring legislation to the floor for initial consideration during the 113 th Congress. In doing so, it does not make distinctions about the privileged status such business technically enjoys under House rules. Most appropriations measures, for example, are considered "privileged business" under clause 5 of House Rule XIII (as detailed in the section on " Privileged Business " below). As such, they do not need a special rule from the Rules Committee to be adopted for them to have floor access. In actual practice, however, in the 113 th Congress the House universally provided for the consideration of these measures by means of a special rule, which, in general, could also provide for debate to be structured, amendments to be regulated, and points of order against the bills to be waived. Thus, appropriations measures considered in the 113 th Congress are counted in this analysis as being raised by special rule, notwithstanding their status as "privileged business." In recent Congresses, most legislation has been brought up on the House floor by Suspension of the Rules, a parliamentary device authorized by clause 1 of House Rule XV that waives the chamber's rules to enable the House to act quickly on legislation that enjoys widespread, even if not necessarily unanimous, support. The main features of the Suspension of the Rules procedure include (1) a 40-minute limit on debate, (2) a prohibition against floor amendments and points of order, and (3) a two-thirds vote of Members present and voting for passage. The suspension procedure is in order in the House on the calendar days of Monday, Tuesday, and Wednesday; during the final six days of a congressional session; and at other times by unanimous consent or special order. In the 112 th Congress (2011-2012), the House Republican leadership first announced additional policies related to its use of the Suspension of the Rules procedure that restrict the use of the procedure for certain "honorific" legislation, generally require measures considered under Suspension to have been available for three days prior to their consideration, and require the sponsor of the measure to be on the floor at the time of a measure's consideration. These policies continued in force in the 113 th Congress (2013-2014). In the 113 th Congress, 555 measures, representing 59% of all legislation receiving House floor action, were initially brought up using the Suspension of the Rules procedure. This includes 520 bills or joint resolutions and 35 simple or concurrent resolutions. When only lawmaking forms of legislation are counted, 75% of bills and joint resolutions receiving floor action in the 113 th Congress came up by Suspension of the Rules. Ninety percent of measures brought up by Suspension of the Rules originated in the House. The remaining 10% were Senate measures. House rules and precedents place certain types of legislation in a special "privileged" category, which gives measures of this kind the ability to be called up for consideration when the House is not considering another matter. Bills and resolutions falling into this category that saw floor action in the 113 th Congress include the following: Order of Business Resolutions. Procedural resolutions reported by the House Committee on Rules affecting the "rules, joint rules, and the order of business of the House" are themselves privileged for consideration under clause 5 of House Rule XIII. Order of business resolutions are commonly known as "special rules" and are discussed below in more detail. Committee Assignment Resolutions. Under clause 5 of House Rule X and the precedents of the House, a resolution assigning Members to standing committees is privileged if offered by direction of the party caucus or conference involved. Correcting Enrollments. Under clause 5 of House Rule XIII, resolutions reported by the Committee on House Administration correcting errors in the enrollment of a bill are privileged. Providing for Adjournment. Under Article I, Section 5, clause 4, of the Constitution, neither house can adjourn for more than three days without the consent of the other. Concurrent resolutions providing for such an adjournment of one or both chambers are called up as privileged. Questions of the Privileges of the House. Under clause 2 of House Rule IX, resolutions raising a question of the privileges of the House affecting "the rights of the House collectively, its safety, dignity, and the integrity of its proceedings" are privileged under specific parliamentary circumstances described in the rule. Such resolutions would include the constitutional right of the House to originate revenue measures. Bereavement Resolutions. Under House precedents, resolutions expressing the condolences of the House of Representatives over the death of a Representative or of a President or former President have been treated as privileged. Measures Related to House Organization. Certain organizational business of the House—such as resolutions traditionally adopted at the beginning of a session to notify the President that the House has assembled and to elect House officers, as well as concurrent resolutions providing for a joint session of Congress—have been treated as privileged business. In the 113 th Congress, 174 measures, representing 18% of the measures receiving floor action, came before the House on their initial consideration by virtue of their status as "privileged business." All of these 174 measures were non-lawmaking forms of legislation, that is, simple or concurrent resolutions. The most common type of measure brought up in the House as "privileged business" during the 113 th Congress was special orders of business (special rules) reported by the Rules Committee, followed by resolutions assigning Representatives to committee. A special rule is a simple resolution that regulates the House's consideration of legislation identified in the resolution. Such resolutions, as noted above, are sometimes called "order of business resolutions" or "special orders," although Members and staff frequently simply refer to them as "rules." Special rules enable the House to consider a specified measure and establish the terms for its consideration—for example, how long the legislation will be debated, what (if any) amendments may be offered to it, and whether points of order against the measure or any amendments to it are waived. Under clause 1(m) of House Rule X, the Committee on Rules has jurisdiction over the "order of business" of the House, and it reports such procedural resolutions to the chamber for consideration. In current practice, although a relatively small percentage of legislation comes before the House via special rule, most measures that might be characterized as significant, complicated, or controversial are brought up in this way. In the 113 th Congress, 148 measures, or 16% of all legislation receiving House floor action, were initially brought before the chamber under the terms of a special rule reported by the Rules Committee and agreed to by the House. Of these, 138 (93%) were bills or joint resolutions, and 10 (7%) were simple or concurrent resolutions. When only lawmaking forms of legislation are counted, 20% of bills and joint resolutions receiving floor action in the 113 th Congress came up by special rule. Ninety-eight percent of the measures considered under a special rule during the 113 th Congress originated in the House, 2% being Senate legislation. As is noted above, all but four measures brought before the House using this parliamentary mechanism were sponsored by majority party Members. In current practice, legislation is sometimes brought before the House of Representatives for consideration by the unanimous consent of its Members. Long-standing policies announced by the Speaker regulate unanimous consent requests for this purpose. Among other things, the Speaker will recognize a Member to propound a unanimous consent request to call up an unreported bill or resolution only if that request has been cleared in advance with both party floor leaders and with the bipartisan leadership of the committee of jurisdiction. In the 113 th Congress, 65 measures, or 7% of all legislation identified by LIS as receiving House floor action, were initially considered by unanimous consent. Of these, 33 (51%) were bills or joint resolutions, and 32 (49%) were simple or concurrent resolutions. When only lawmaking forms of legislation are counted, 5% of bills and joint resolutions receiving floor action in the 113 th Congress came up by unanimous consent. Of the measures initially considered by unanimous consent during the 113 th Congress, 63% originated in the House. Clause 5 of House Rule XV establishes special parliamentary procedures to be used for the consideration of private legislation. Unlike public legislation, which applies to public matters and deals with individuals only by classes, the provisions of private bills apply to "one or several specified persons, corporations, [or] institutions." When reported from House committee, private bills are placed on a special Private Calendar established by House Rule XIII. The consideration of Private Calendar measures is in order on the first and (if the Speaker of the House so chooses) third Tuesday of a month. On those days, the Private Calendar is "called," and each measure on it is automatically brought before the House in order. Private bills are considered under a set of procedures known as the "House as in Committee of the Whole," which is a hybrid of the procedures used in the full House and those used in the Committee of the Whole. Under these procedures, private bills may technically be debated and amended under the five-minute rule, although in actual practice they are almost always passed without debate or record vote. In the 113 th Congress, one measure was brought to the floor via the call of the Private Calendar. The House of Representatives has established special parliamentary procedures that may be used to bring legislation to the chamber floor dealing with the business of the District of Columbia, a discharge process to force consideration of measures triggered by a petition signed by a numerical majority of the House, and a procedure known as the Calendar Wednesday procedure. These procedures are rarely used, and no legislation was brought before the House in the 113 th Congress by any of these three parliamentary mechanisms. | The House of Representatives has several different parliamentary procedures through which it can bring legislation to the chamber floor. Which of these will be used in a given situation depends on many factors, including the type of measure being considered, its cost, the amount of political or policy controversy surrounding it, and the degree to which Members want to debate it and propose amendments. This report provides a snapshot of the forms and origins of measures that, according to the Legislative Information System of the U.S. Congress, received action on the House floor in the 113th Congress (2013-2014) and the parliamentary procedures used to bring them up for initial House consideration. In the 113th Congress, 943 pieces of legislation received floor action in the House of Representatives. Of these, 692 were bills or joint resolutions, and 251 were simple or concurrent resolutions, a breakdown between lawmaking and non-lawmaking legislative forms of approximately 73% to 27%. Of these 943 measures, 846 originated in the House, and 97 originated in the Senate. During the same period, 59% of all measures receiving initial House floor action came before the chamber under the Suspension of the Rules procedure, 18% came to the floor as business "privileged" under House rules and precedents, 16% were raised by a special rule reported by the Committee on Rules and adopted by the House, and 7% came up by the unanimous consent of Members. One measure, representing less than 1% of legislation receiving House floor action in the 113th Congress, was processed under the procedures associated with the call of the Private Calendar. When only lawmaking forms of legislation (bills and joint resolutions) are counted, 75% of such measures receiving initial House floor action in the 113th Congresses came before the chamber under the Suspension of the Rules procedure, 20% were raised by a special rule reported by the Committee on Rules and adopted by the House, and 5% came up by the unanimous consent of Members. Less than 1% of lawmaking forms of legislation received House floor action via the call of the Private Calendar or by virtue of being "privileged" under House rules. The party sponsorship of legislation receiving initial floor action in the 113th Congress varied based on the procedure used to raise the legislation on the chamber floor. Sixty-eight percent of the measures considered under the Suspension of the Rules procedure were sponsored by majority party Members. All but four of the 148 measures brought before the House under the terms of a special rule reported by the House Committee on Rules and adopted by the House were sponsored by majority party Members. |
Charities, houses of worship, and private schools are among the organizations that qualify for tax-exempt status as organizations described in Section 501(c)(3) of the Internal Revenue Code (IRC). Benefits that arise from this status include exemption from federal income taxes and eligibility to receive tax-deductible contributions. One restriction that arises is that these organizations are prohibited under the tax code from engaging in campaign activity. Separate from the tax code's prohibition, the Federal Election Campaign Act (FECA) may also restrict the ability of Section 501(c)(3) organizations to engage in such activity. The tax laws prohibit Section 501(c)(3) organizations from "participat[ing] in, or interven[ing] in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office." An organization that engages in any amount of campaign activity may lose its Section 501(c)(3) status and eligibility to receive tax-deductible contributions. It may also be taxed on its political expenditures, either in addition to or in lieu of revocation of Section 501(c)(3) status. The tax equals 10% of the expenditures, with an additional tax equal to 100% of the expenditures imposed if the expenditures are not corrected (i.e., recovered and safeguards established to prevent future ones) in a timely manner. The organization's managers may also be subject to tax. Other consequences for the flagrant violation of the prohibition include the IRS immediately determining and assessing all taxes due and/or seeking injunctive and other relief to enjoin the organization from making additional political expenditures and to preserve its assets. The prohibition on campaign intervention was introduced by then-Senator Lyndon Johnson as a floor amendment to the Revenue Act of 1954. He analogized it to the lobbying limitation, enacted in 1934, under which "no substantial part" of a Section 501(c)(3) organization's activities may be lobbying; however, he mischaracterized the limitation by saying organizations that lobbied were denied tax-exempt status, as opposed to only those that engaged in substantial lobbying. It appears that the act's legislative history had no further discussion of the provision. It has been suggested that then-Senator Johnson proposed it either as a way to get back at an organization that supported an opponent or as an alternative to a controversial proposal denying tax-exempt status to organizations making donations to subversive entities and individuals. Section 501(c)(3) of the Internal Revenue Code prohibits the organizations described therein from "participating in, or intervening in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office," but does not further elaborate on the prohibition. Treasury regulations define candidate as "an individual who offers himself, or is proposed by others, as a contestant for an elective public office, whether such office be national, State, or local." As to what types of activities are prohibited, the regulations add little besides specifying that they include "the publication or distribution of written or printed statements or the making of oral statements on behalf of or in opposition to such a candidate." Thus, the statute and regulations do not offer much insight as to what activities are prohibited. Clearly, Section 501(c)(3) organizations may not do such things as make statements that endorse or oppose a candidate, publish or distribute campaign literature, or make any type of contribution, monetary or otherwise, to a political campaign. On the other hand, Section 501(c)(3) organizations are allowed to conduct activities that are political in nature but are not related to elections, such as lobbying for or against legislation and supporting or opposing the appointment of individuals to nonelective offices. Additionally, Section 501(c)(3) organizations may engage in certain election-related activities so long as the activities do not indicate a preference for or against any candidate. Whether such an activity is campaign intervention depends on the facts and circumstances of each case. The following examples show some of the ways in which the IRS has indicated that an activity might be biased. As will be seen, some biases can be subtle and it is not necessary for the organization to expressly mention a candidate by name. Section 501(c)(3) organizations may create and/or distribute voter guides and similar materials that do not indicate a preference towards any candidate. The guide must be unbiased in form, content, and distribution. According to the IRS, there are numerous ways in which a guide may be biased, and the determination will depend on the facts and circumstances of each case. For example, a guide could display a bias by not including all candidates on an equal basis. Another way a guide could be biased is by rating candidates, such as evaluating candidates and supporting a slate of the best-qualified candidates, even if the criteria are nonpartisan (e.g., based on professional qualifications). A voter guide could also indicate a bias by comparing the organization's position on issues with those of the candidates. A more subtle way in which a guide may show bias is by only covering issues that are important to the organization, as opposed to covering a range of issues of interest to the general public. Some guides consist of candidate responses to questions provided by the organization. According to the IRS, factors that tend to show these guides are candidate-neutral include the following: the questions and descriptions of the issues are clear and unbiased; the questions provided to the candidates are identical to those included in the guide; the candidates' answers have not been edited; the guide puts the questions and appropriate answers in close proximity to each other; the candidates are given a reasonable amount of time to respond to the questions; and if the candidates are given limited choices for an answer to a question (e.g., yes/no, support/oppose), they are given a reasonable opportunity to explain their positions. Other factors that may be important include the timing of the guide's distribution and to whom it is distributed. For example, the IRS ruled that a Section 501(c)(3) organization could include a compilation of members' voting records on issues important to it and its position on those issues in the edition of its monthly newsletter published after the close of each Congress. The newsletter was sent to the usual small number of subscribers and not targeted to areas where elections were occurring. In this specific situation, the IRS stated that the publication was permissible because it was not timed to an election or broadly distributed. Section 501(c)(3) organizations may conduct unbiased and nonpartisan public forums where candidates speak or debate. According to the IRS, factors that tend to show a public forum is unbiased and nonpartisan include the following: all legally qualified candidates are invited; the questions are prepared and presented by a nonpartisan independent panel; the topics and questions cover a broad range of issues of interest to the public; all candidates receive an equal opportunity to present their views; and the moderator does not comment on the questions or imply approval or disapproval of the candidates. A Section 501(c)(3) organization may invite a candidate to speak at its functions without it being prohibited campaign activity. According to the IRS, factors that tend to indicate the event was permissible include the organization provided an equal opportunity to speak at similar events to the other candidates; the organization did not indicate a preference for or against any candidate; and no fund-raising occurred at the event. Section 501(c)(3) organizations may also invite candidates to speak in their non-candidate capacity. Factors indicating that no campaign intervention occurred include (1) the individual was chosen to speak solely for non-candidacy reasons; (2) the individual spoke only in his or her non-candidate capacity; (3) no reference to the upcoming election was made; (4) no campaign activity occurred in connection with the individual's attendance; (5) the organization maintained a nonpartisan atmosphere at the event; and (6) the organization's communications announcing the event clearly indicated the non-candidate capacity in which the individual was appearing and did not mention the individual's candidacy or the election. Section 501(c)(3) organizations may conduct nonpartisan voter registration and get-out-the-vote drives. Again, the activities may not indicate a preference for any candidate or party. According to the IRS, factors indicating that these activities are neutral include the following: candidates are named or depicted on an equal basis; no political party is named except for purposes of identifying the party affiliation of each candidate; the activity is limited to urging individuals to register and vote and to describing the time and place for these activities; and all services are made available without regard to the voter's political preference. Section 501(c)(3) organizations may take positions on policy issues. Because there is no rule that campaign activity occurs only when an organization expressly advocates for or against a candidate, the line between issue advocacy and campaign activity can be difficult to discern. According to the IRS, key factors that indicate an issue advocacy communication does not cross the line into campaign intervention include the following: the communication does not identify any candidates for a given public office, whether by name or other means, such as party affiliation or distinctive features of a candidate's platform; the communication does not express approval or disapproval for any candidate's positions and/or actions; the communication is not delivered close in time to an election; the communication does not refer to voting or an election; the issue addressed in the communication has not been raised as an issue distinguishing the candidates; the communication is part of an ongoing series by the organization on the same issue and the series is not timed to an election; and the identification of the candidate and the communication's timing are related to a non-electoral event (e.g., a scheduled vote on legislation by an officeholder who is also a candidate). Under certain circumstances, Section 501(c)(3) organizations may sell or rent goods, services, and facilities to political campaigns. This includes selling and renting mailing lists and accepting paid political advertising. According to the IRS, factors that tend to indicate the activity is not biased towards any candidate or party include the following: the selling or renting activity is an ongoing business activity of the organization; the goods, services, and facilities are available to the general public; the fees charged are the organization's customary and usual rates; and the goods, services, or facilities are available to all candidates on an equal basis. A Section 501(c)(3) organization could engage in campaign activity by linking its website to another website that has content showing a preference for or against a candidate. Whether the linking is campaign intervention depends on the facts and circumstances of each case. Factors the IRS will look at include the context of the link on the organization's website, whether all candidates are represented, whether the linking serves the organization's exempt purpose, and the directness between the organization's website and the page at the other site with the biased material. Members, managers, leaders, and directors of Section 501(c)(3) organizations may participate in campaign activity in their private capacity. The organization can not support the activity in any way. For example, these individuals may not express political views in the organization's publications or at its functions (this is true even if the individual pays the costs associated with the statement), and the organization may not pay expenses incurred by the individual in making the political statement. Individuals may be identified as being associated with an organization, but there should be no intimation that their views represent those of the organization. Concerns about violations of the campaign intervention prohibition by Section 501(c)(3) organizations led the IRS to develop the Political Activity Compliance Initiative. It has two parts: the IRS performed educational outreach to Section 501(c)(3) organizations about the prohibition and used a fast-track process for reviewing possible violations. The initiative was used during the 2004, 2006, and 2008 election cycles, although the data from 2008 have not yet been released. The initiative was not used during the 2010 and 2012 election cycles. The 2004 initiative involved the expedited review of 110 cases in which Section 501(c)(3) organizations were alleged to have violated the campaign intervention prohibition. The IRS issued a written advisory in 69 of these cases, which meant that the agency determined the organization engaged in campaign activity but mitigating factors led to the organization not being penalized. Mitigating factors included that the activity was of a one-time nature or shown to be an anomaly, the activity was done in good faith reliance on advice of counsel, or the organization corrected the conduct (e.g., recovered any funds that were spent) and established safeguards to prevent future violations. The IRS revoked the tax-exempt status of five organizations (one for issues not related to campaign activity) and proposed two more revocations. The IRS did not find substantiated campaign activity in 23 of the cases, and found non-political violations of the tax laws in six other cases. The remaining five cases were still open as of the last IRS update in 2007. While the 2004 initiative was proceeding, there were reports in various media outlets that raised the question of whether the IRS had been politically motivated in investigating the Section 501(c)(3) organizations so close to the 2004 election. In response, the IRS Commissioner asked the Treasury Inspector General for Tax Administration (TIGTA) to investigate whether the IRS had engaged in any improper activities while conducting the project. In 2005, TIGTA released its report, which concluded that the IRS had used appropriate, consistent procedures during the initiative. The 2006 initiative involved 100 cases selected for examination. As of the last IRS update in 2007, 60 of these cases remained open. In the 40 closed cases, the IRS issued written advisories in 26 of them, and did not find substantiated political intervention in the other 14 cases. The IRS also identified 269 instances of Section 501(c)(3) groups apparently making direct contributions to political candidates. The Federal Election Campaign Act (FECA), which regulates the raising and spending of campaign funds, is separate and distinct from the tax code. FECA prohibits corporations from using general treasury funds to make contributions in connection with federal elections. While FECA does not prohibit unincorporated Section 501(c)(3) organizations from making such contributions, the IRC prohibits all Section 501(c)(3) organizations, regardless of corporate status, from making such contributions, as discussed above. In its recent ruling in Citizens United v. FEC, the Supreme Court invalidated the prohibitions in FECA on corporations and labor unions using their general treasury funds to make "independent expenditures," which are communications "expressly advocating the election or defeat of a clearly identified candidate" that are not coordinated with any candidate or party, and "electioneering communications," which are broadcast, cable or satellite transmissions that refer to a clearly identified federal candidate and aired within 60 days of a general election or 30 days of a primary. The Court determined that these prohibitions constitute a "ban on speech" in violation of the First Amendment. Due to the tax code prohibition discussed above, Section 501(c)(3) organizations are generally not permitted to engage in the activities regulated by FECA, and thus the Citizens United decision does not appear to impact them in a significant manner. At the same time, the activities that constitute electioneering under the IRC and FECA are not necessarily identical. For example, it appears possible that an issue advocacy communication, depending on its timing and content, might be an electioneering communication under FECA, but might not be treated as campaign intervention under the IRC. Such a communication would need to comply with FECA, such as its disclosure requirement for electioneering communications meeting certain monetary thresholds, if applicable. Legislation has been introduced in the 113 th Congress, H.R. 127 , that would repeal the campaign activity prohibition in Section 501(c)(3) of the IRC. The legislation expressly provides that it "shall not invalidate or limit any provision" in FECA. | The political activities of Section 501(c)(3) organizations are often in the news, with allegations made that some groups engaged in impermissible activities. These groups are absolutely prohibited from participating in campaign activity under the Internal Revenue Code (IRC). On the other hand, they are permitted to engage in nonpartisan political activities (e.g., distributing voter guides and conducting get-out-the-vote drives) that do not support or oppose a candidate. Determining whether an activity violates the IRC prohibition depends on the facts and circumstances of each case, and the line between impermissible and permissible activities can sometimes be difficult to discern. Due to the IRC prohibition, Section 501(c)(3) organizations generally are not permitted to engage in the types of activities regulated by the Federal Election Campaign Act (FECA). However, the activities regulated under the IRC and FECA are not necessarily identical. An organization must comply with any applicable FECA provisions if engaging in activities regulated by FECA (e.g., making an issue advocacy communication under the IRC that constitutes an electioneering communication under FECA). A 2010 Supreme Court case, Citizens United v. FEC, has received considerable attention for invalidating several long-standing prohibitions in FECA on corporate and labor union campaign treasury spending. This case does not appear to significantly impact the political activities of Section 501(c)(3) organizations because they remain subject to the prohibition on such activity under the IRC. This report examines the restrictions imposed on campaign activity by Section 501(c)(3) organizations under the tax and campaign finance laws. For a discussion limited to the ability of churches and other houses of worship to engage in campaign activity, see CRS Report RL34447, Churches and Campaign Activity: Analysis Under Tax and Campaign Finance Laws, by [author name scrubbed] and [author name scrubbed]. |
RS21630 -- Immigration of Religious Workers: Background and Legislation September 30, 2003 Permanent legal immigration to the United States is regulated by a set of numerical limits and systems of preference categories delineated in the Immigrationand Nationality Act (INA), and employment-based immigration comprises one of the major groups of the preferencecategory systems. (1) Aliens who come tothe United States through the permanent legal immigration categories are commonly known as legal permanentresidents (LPRs). The fourth category of theemployment-based preference system is known as "special immigrants," and the largest number of specialimmigrants are ministers of religion and religiousworkers. (2) Religious workers are treated separatelyfrom ministers of religion and are limited to 5,000 immigrants annually. Accompanying spouses and minorchildren of ministers of religion and religious workers are included as special immigrants. Prior to the Immigration Act of 1990 ( P.L. 101-649 ), ministers of religion were admitted to the United States without numerical limits, and there was noseparate provision for religious workers. Religious workers immigrated through one of the more general categoriesof numerically-limited, employment-basedimmigration that were in effect at that time. The Immigration Act of 1990 amended the INA to redefine the specialimmigrant category to include ministers ofreligion and religious workers, but contained a "sunset"of the provision for religious workers on September 30,1994. It was subsequently extended severaltimes, most recently through September 30, 2003. (3) The 1990 Act also created a new nonimmigrant (i.e., temporary) visa for religious workers, commonlyreferred to as the R visa. (4) Defining what constitutes religious work is daunting given the theological diversity of religions, denominations, and faith traditions. The education, training,and ordination requirements for ministers of religion and religious workers vary greatly by religious group. Underthe special immigrant provisions, the INAdefines ministers of religion and religious workers as follows: (C) an immigrant, and the immigrant's spouse and children if accompanying or following to join the immigrant,who -- (i) for at least 2 years immediately preceding the time of application foradmission, has been a member of areligious denomination having a bona fide nonprofit, religious organization in the UnitedStates; (ii) seeks to enter the United States -- (I) solely for the purpose of carrying on the vocation of a minister of thatreligiousdenomination, (II) before October 1, 2003, in order to work for the organization at the requestof the organization in aprofessional capacity in a religious vocation or occupation, or (III) before October 1, 2003, in order to work for the organization (or a bona fide organization which is affiliatedwith the religious denomination and is exempt from taxation as an organization described in Section 501(c)(3) ofthe Internal Revenue Code of 1986) at therequest of the organization in a religious vocation or occupation; and (iii) has been carrying on such a vocation, professional work, or other workcontinuously for at least the 2-yearperiod described in clause (i); (5) The regulations further define religious occupation as "an activity which relates to a traditional religious function." (6) The nonimmigrant R visa category ofreligious workers holds to the same definitions; aliens on R visas are not, however, held to the 2-year experiencerequirement. Religious workers are notsubject to the labor certification requirements that many other employment-based immigrants must meet. (7) The INA is silent on what constitutes a religious denomination, but the regulations offer the following definition: Religious denomination means a religious group or community of believers having some form of ecclesiasticalgovernment, a creed or statement of faith, some form of worship, a formal or informal code of doctrine anddiscipline, religious services and ceremonies,established places of religious worship, religious congregations, or comparable indica of a bona fide religious denomination. For the purposes of this definition,an interdenominational religious organization which is exempt from taxation pursuant to �501(c)(3) of the InternalRevenue Code will be treated as a religiousdenomination. (8) The U.S. Citizenship and Immigration Services Bureau in the Department of Homeland Security (DHS) is the lead agency for immigrant admissions. (9) In the wider sweep of legal immigration to the United States, religious workers represent a tiny fraction of the annual flow -- 0.3% of the 1,063,732 immigrantsin FY2002. While the number of nonimmigrant R visas issued since FY1992 (first year the category was available)exceeds that of the permanent admissions,it likewise constitutes a small portion of all nonimmigrants admitted. The issuances of R visas has moved steadilyupward, but the levels of admission forpermanent religious workers has varied since FY1992 ( Figure 1 ). Most religious workers who become LPRs are not arriving from abroad; rather they are adjusting status after they have lived in the United States. In FY2002,only 389 of the 3,127 religious workers and their families arrived from abroad, while 87.6% adjusted to LPR statusas religious workers in the United States. Itis likely that most of those who adjusted status had entered on R visas as temporary religious workers. PDF version Bills ( H.R. 2152 / S. 1580 ) to extend the religious worker provision through September 30, 2008, have been introduced in bothchambers. Congressman Barney Frank introduced H.R. 2152 on May 19, 2003. The House JudiciaryCommittee ordered H.R. 2152 reported onSeptember 10, 2003, and the House passed H.R. 2152 on September 17, 2003. Senate Committee on theJudiciary Chairman Orrin Hatch introduceda bill similar to H.R. 2152, the Religious Worker Act of 2003 (S. 1580), on September 3, 2003. Although the extension of the religious worker provision has a broad base of support, efforts to make it a permanent immigration category have not succeeded. Some have criticized the religious worker provision as vulnerable to fraud. A few have expressed fear that it maybe an avenue for religious extremists to enterthe United States. Others, however, point out that the INA has provisions to guard against visa fraud and to excludefrom admission aliens who may threatenpublic safety or national security, and who commit fraud to enter the United States. (10) 1. (back) The largest preference grouping isfamily-based immigration. Other groupings include diversity and humanitarian admissions. For more information,see CRS Report RS20916(pdf) , Immigration and Naturalization Fundamentals , by [author name scrubbed]. 2. (back) Other "special immigrants" include certainemployees of the U.S. government abroad, Panama Canal employees, retired employees of internationalorganizations, certain aliens who served in the U.S. armed forces, and certain aliens declared a ward of a juvenilecourt. INA �101(a)(27). 3. (back) Immigration and Nationality TechnicalCorrections Act of 1994 ( P.L. 103-416 ), the Religious Workers Act of 1997 ( P.L. 105-54 ), and the ReligiousWorkersAct of 2000 ( P.L. 106-409 ). 4. (back) Religious workers on the nonimmigrantR visas may be admitted for up to 5 years. 5. (back) INA �101(a)(27)(C); 8 U.S.C.1101(a)(27)(C). 6. (back) The regulations elaborate: "(E)xamplesinclude but are not limited to liturgical workers, religious instructors, religious counselors, cantors, catechists,workers in religious hospitals or religious health care facilities, missionaries, religious translators, or religiousbroadcasters. The group does not includejanitors, maintenance workers, clerks, fund raisers, or persons solely involved in the solicitation of donations." 8C.F.R. �204.5(m)(2). 7. (back) Labor certification provisions are aimedat ensuring that foreign workers do not displace or adversely affect working conditions of U.S. workers. For a fulldiscussion, see: CRS Report RS21520(pdf) , Labor Certification for Permanent Immigrant Admissions , by[author name scrubbed]. 8. (back) 8 C.F.R. �204.5(m)(2). For a discussionof the tax exempt status, see: CRS Report RL31545, Congressional Protection of Religious Liberty ,by [author name scrubbed],p. 47-48. 9. (back) Other agencies with primary responsibilityfor immigration functions are the Bureau of Customs and Border Protection and the Bureau of Immigration andCustoms Enforcement, both in DHS, and the Bureau of Consular Affairs in the Department of State. 10. (back) For a full discussion of the groundsof inadmissibility, see CRS Report RL31215, Visa Issuances: Policy, Issues, and Legislation , by RuthEllen Wasem. | A provision in immigration law that allows for the admission of immigrants to performreligious work is scheduledto sunset on September 30, 2003. Although the provision has a broad base of support, some have expressed concernthat the provision is vulnerable to fraud. The foreign religious worker must be a member of a religious denomination that has a bona fidenonprofit, religious organization in the United States, and musthave been in the religious vocation, professional work, or other religious work continuously for at least 2 years. Bills (H.R. 2152/S. 1580) to extend the religious worker provision through September 30, 2008, have been introduced in both chambers. The House passed H.R. 2152 onSeptember 17, 2003. This report will be updated as legislative activity warrants. |
Chronic political instability in Pakistan and Islamabad's military efforts against the Taliban and al-Qaeda have raised concerns about the security of the country's nuclear weapons. Some observers fear that Pakistan's strategic nuclear assets could be obtained by terrorists or used by elements in the Pakistani government. However, U.S. officials have generally expressed confidence in the security of Pakistan's nuclear weapons. The collapse or near-collapse of the Pakistani government is probably the most likely scenario in which militants or terrorists could acquire Pakistani nuclear weapons. Gary Samore, then-National Security Council Coordinator for Arms Control and Non-Proliferation, stated in an April 2011 interview that The Pakistani government takes the nuclear security threat very seriously, and they've put a lot of resources into trying to make sure that their nuclear facilities and materials and weapons are well secured. There's no lack of recognition that this is a very important issue, and there's no lack of incentive on the part of the Pakistani government to maintain control. What I worry about is that, in the context of broader tensions and problems within Pakistani society and polity—and that's obviously taking place as we look at the sectarian violence and tensions between the government and the military and so forth—I worry that, in that broader context, even the best nuclear security measures might break down. You're dealing with a country that is under tremendous stress internally and externally, and that's what makes me worry. They have good programs in place; the question is whether those good programs work in the context where these broader tensions and conflicts are present. Pakistani efforts to improve the security of its nuclear weapons have been ongoing and have included some cooperation with the United States; former Pakistani President Pervez Musharraf told a journalist in 2009 that Islamabad has "given State Department nonproliferation experts insight into the command and control of the Pakistani arsenal and its on-site safety and security procedures." Moreover, following the 2004 revelations of an extensive international nuclear proliferation network run by Pakistani nuclear official Abdul Qadeer Khan, as well as possible connections between Pakistani nuclear scientists and Al Qaeda, Islamabad has made additional efforts to improve export controls and monitor nuclear personnel. The main security challenges for Pakistan's nuclear arsenal are keeping the integrity of the command structure, ensuring physical security, and preventing illicit proliferation from insiders. Some observers are also concerned about the risk of nuclear war between India and Pakistan. The two countries most recently came to the brink of full-scale war in 1999 and 2002, and, realizing the dangers, have developed some risk reduction measures to prevent accidental nuclear war. Nevertheless, Pakistan continues to produce fissile material for weapons and appears to be augmenting its weapons production facilities as well as deploying additional delivery vehicles—steps that will enable both quantitative and qualitative improvements in Islamabad's nuclear arsenal. Some observers have also argued that Pakistan's expansion of its nuclear arsenal, development of new types of nuclear weapons, and adoption of a doctrine called "full spectrum deterrence" indicate "the growing nuclearization of Pakistan's national security policy." These developments have "sparked international concerns about the safety and security" of the country's nuclear weapons, as well as raised "concerns that these weapons might be used through intentional, inadvertent, or accidental launch in a crisis or in limited warfare with India." A 2013 State Department report explains that India and Pakistan's governments view nuclear weapons as "vital to their security," adding that these states' respective decisions to pursue nuclear weapons stem largely from their troubled bilateral relationship, assessments of threats posed by each other (and China in India 's case), perceptions of enhanced national power or status derived from possession of such weapons, and domestic politics. The nuclear programs are popular within each country and are protected by strong institutional and domestic political constituencies. In view of these factors, international pressure over a period of decades has had little direct impact on the attitudes of India and Pakistan concerning nuclear weapons. Islamabad is expanding its nuclear arsenal and developing of new types of nuclear weapons. Special Representative for Afghanistan and Pakistan Ambassador Richard Olson told the House Committee on Foreign Affairs on December 16, 2015, that the United States is "concerned" about "the pace and the scope of the Pakistan's missile program, including its pursuit of nuclear systems." The Administration also worries that "a conventional conflict in Southwest Asia could escalate to include nuclear use as well as the increased security challenges that accompany growing stockpiles," he added. Similarly, Defense Intelligence Agency Director Vincent Stewart expressed concern in February 9, 2016, testimony before the Senate Armed Services Committee that the growth of Pakistan's nuclear arsenal and Islamabad's "evolving doctrine associated with tactical nuclear weapons, increases the risk of an incident or accident." Pakistan's nuclear energy program dates back to the 1950s, but it was the loss of East Pakistan (now Bangladesh) in a war with India that probably triggered a January 1972 political decision (just one month later) to begin a secret nuclear weapons program. Observers point to India's 1974 "peaceful" nuclear explosion as the pivotal moment that gave additional urgency to the program. During the 1970s, Pakistan began programs to produce highly-enriched uranium (HEU) and plutonium for use as fissile material for nuclear weapons. HEU and plutonium are the two types of fissile material used in nuclear weapons. Pakistan first produced fissile material for its nuclear weapons using gas-centrifuge-based uranium enrichment technology, which it mastered by the mid-1980s. Gas centrifuges enrich uranium by spinning uranium hexafluoride gas at high speeds to increase the concentration of the uranium-235 isotope. Islamabad gained technology for its nuclear weapons program from many sources. This extensive assistance included uranium enrichment technology from Europe and China. Islamabad has received Chinese and European assistance for at least some of its plutonium program. A 2001 Defense Department report states that "China supplied Pakistan with nuclear material and expertise and has provided critical assistance in the production of Pakistan's nuclear facilities." This assistance included help during the 1990s with a "plutonium production reactor" and ring magnets from a Chinese entity for Pakistan's enrichment program. China may also have provided "nuclear weapons design information" to Pakistan. In addition, China and North Korea have supplied missiles to Pakistan. One 2013 non-governmental report argues that Pakistan has been procuring components for its enrichment program from foreign entities. The U.S. and other governments had information during the 1970s that Pakistan was constructing a uranium enrichment facility. A.Q. Khan has stated that Pakistan began enriching uranium in 1978 and produced HEU in 1983. Pakistan told the United States in 1984 that it would produce only low-enriched uranium (which is not used as fissile material in nuclear weapons), but a 1986 Arms Control and Disarmament Agency (ACDA) memorandum indicates that Islamabad had violated the pledge and added that Pakistan had "overcome the last major obstacle to nuclear weapons by producing enough high enriched uranium for one or more nuclear devices." Pakistan's "HEU production capacity" in 1987 was "sufficient to produce one bomb per year," according to an ACDA memorandum written the next year. The country's main enrichment facility is a centrifuge plant located at Kahuta; Pakistan may have other enrichment sites. A 1985 CIA report described a possible Pakistani plan to "build a plutonium production reactor" and Pakistan has operated the 40-50 megawatt heavy-water Khushab plutonium production reactor since 1998. Islamabad has been constructing at least three additional heavy-water reactors, which would expand considerably Pakistan's plutonium production capacity, at the same site; whether all four reactors at the site are operational is unclear, according to nongovernmental expert reports. Additionally, Pakistan has a reprocessing plant at the New Laboratories facility of the Pakistan Institute of Science and Technology (PINSTECH) and is apparently constructing other such plants. Sources identify 2000 and 2002 as the dates when the PINSTECH plant began operating. Pakistan also appears to be constructing a second reprocessing plant at PINSTECH and may be completing a reprocessing plant located at Chasma. The United States had information during the 1970s and early 1980s that Pakistan was pursuing nuclear weapons designs, but exactly when Pakistan produced a workable nuclear explosive device is unclear. According to a 1978 State Department cable, the United States estimated that it would take Pakistan "at least" three to five years to produce a nuclear explosive device. A 1982 National Intelligence Estimate (NIE) assessed that Pakistani nuclear testing would be" feasible for the first time" in late 1983 or 1984. A 1985 National Intelligence Council report states that Pakistan "probably [had] a workable design for a nuclear explosive device" and was "probably ... a year or two away from a capacity to produce enough" highly enriched uranium for such a device. According to a 1991 NIE, Pakistan had "a viable nuclear weapons design and has components that it could assemble into nuclear devices on short notice." Islamabad attained such a capability "by the end of the 1980s," said a 1993 report to Congress, apparently from the National Security Council. Pakistani officials have cited 1984-1985 as the period during which Pakistan acquired the capability to detonate a nuclear explosive device. A.Q. Khan stated in an interview published in May 1998 that Islamabad "attained" the capability to detonate such a device "at the end of 1984." Similarly, Khan reportedly stated in a January 2010 speech that Pakistan "had become a nuclear power" in 1984 or 1985. Moreover, "senior Pakistani politicians" told a Canadian parliamentary committee in June 1998 that Pakistan had "reached the nuclear 'threshold' by 1984-85." According to former Pakistani Strategic Plans Division (SPD) official Feroz Khan, Pakistan developed a nuclear device suitable for explosive testing by the end of 1984, but it "was still a large bomb that could be delivered only by a C-130 cargo aircraft with no assurance of delivery accuracy." According to former President Musharraf, Pakistan's "nuclear capability was not yet operational" in 1999, although the country had tested nuclear explosive devices during the previous year. "Merely exploding a bomb does not mean that you are operationally capable of deploying nuclear force in the field and delivering a bomb across the border over a selected target," he explained. President Bush's failure to certify in 1990 that Pakistan did not "possess a nuclear explosive device" led to a cut-off in military and financial aid under the Pressler Amendment. After India conducted nuclear weapon tests on May 11 and May 13, 1998, Pakistan's government responded on May 28 and May 30 with six tests in western Pakistan. Test yields were about 10 kilotons and 5 kilotons, according to seismic analysis. These tests were to demonstrate the "credibility" of the country's nuclear deterrent, Pakistan's Foreign Secretary said at the time. The United States imposed additional sanctions after the tests, but these were lifted after the September 11, 2001, terrorist attacks on the United States. According to public estimates, Pakistan has about 110-130 nuclear weapons, although it could have more. Dr. Samar Mubarakmand, a scientist closely involved with the country's nuclear weapons program, stated in a 2016 interview that only China, France, Russia, and the United States have more nuclear weapons than Pakistan. According to one unofficial estimate, Pakistan has produced approximately 3,000 kilograms of weapons-grade HEU and approximately 200 kilograms of plutonium for nuclear weapons. Islamabad continues to produce both HEU and plutonium for nuclear weapons and is developing and deploying a variety of weapons. A 2014 press report citing Dr. Mubarakmand states that "Pakistan has over 15 types of nuclear weapons, from large weapons that can be carried on fighter jets to small ones that can be loaded onto ballistic missiles, and even smaller warheads for cruise missiles and tactical nuclear weapons." Pakistan's HEU-based nuclear warheads use an implosion design with a solid core of approximately 15-20 kilograms of HEU. Pakistan has also produced plutonium-based warheads, which likely contain approximately 4-6 kilograms of plutonium, according to one expert estimate. Pakistan has reportedly addressed issues of survivability through pursuing a second strike capability, possibly building hard and deeply buried storage and launch facilities, deploying road-mobile missiles, deploying air defenses around strategic sites, and utilizing concealment measures. Pakistan has "aircraft and land-based missiles capable of delivering nuclear weapons," according to a 2013 State Department report. Pakistan has two types of delivery vehicles for nuclear weapons: aircraft controlled by the Pakistan Air Force and surface-to-surface missiles controlled by the Pakistan Army. According to former SPD official Khan, Pakistan in 1995 "had a nuclear device deliverable by fighter aircraft." Islamabad could modify F-16 fighter aircraft purchased from the United States to deliver nuclear weapons; it is widely believed that Pakistan has made the relevant modifications to its U.S.-supplied F-16s. The Defense Security Cooperation Agency notified Congress in 2006 of a possible sale of 36 F-16s; the United States ultimately sold and delivered 18 of the aircraft. Then-Assistant Secretary of State John Hillen told Congress during a July 2006 hearing that the F-16s to be transferred would not "be capable of carrying a nuclear weapon." Hillen acknowledged that Pakistan could modify the aircraft to carry nuclear weapons, but added that U.S. monitoring of the aircraft, along with U.S. "leverage," would prevent the Pakistanis from carrying out such a conversion. The Defense Security Cooperation Agency notified Congress on February 11, 2016, that the State Department has approved the sale of eight additional F-16s to Pakistan. Mirage V aircraft may also be used as delivery vehicles. Then-DIA Director Burgess told the Senate Armed Services Committee on March 10, 2011, that Pakistan is developing new missile systems which, when deployed and added to Islamabad's current ballistic missiles, will enable Pakistan "to strike a variety of targets at ranges of 200-2000 kilometers with both conventional and nuclear payloads." Several years later, Admiral Cecil Haney, Commander of U.S. Strategic Command, stated in June 2014 event that "Pakistan continues to develop and upgrade their nuclear delivery systems for a full range of platforms, including both ballistic and cruise missiles." Pakistan continues to carry out ballistic missile tests and notifies India in advance in accordance with an October 2005 bilateral missile pre-notification pact. Islamabad has several types of nuclear-capable road-mobile ballistic missiles: the solid-fuel Hatf-III ( Ghaznavi ), with a range of approximately 250-290 kilometers; the solid-fuel Hatf-IV ( Shaheen ), with a range of 750 kilometers; and the liquid-fuel Hatf-V ( Ghauri ), with a range of 1,250 kilometers. According to a 2013 National Air and Space Intelligence Center (NASIC) report, the solid-fuel Hatf-VI ( Shaheen-2 ), with a range of 2,000 kilometers, "probably will soon be deployed." Pakistan has also tested a version of the Shaheen -1 missile, called the Shaheen-1A , with a range of 900 kilometers. Additionally, Islamabad has announced flight tests of a nuclear-capable ballistic missile, called the Shaheen-3 , with a range of 2,750 kilometers. This missile, according to Lieutenant General (Retired) Khalid Ahmed Kidwai, former Director General of Pakistan's Strategic Plans Division, is designed to reach Indian islands so that India cannot use them as "strategic bases" to establish a "second strike capability." Pakistan has also announced successful tests of the Hatf-II (Abdali) , a short-range ballistic missile with a range of 180 kilometers which NASIC characterizes as "[d]evelopmental." The missile "carries nuclear as well as conventional warheads," according to a February 2013 government statement. In addition, Pakistan has also tested its short-range NASR ballistic missile (see below). Pakistan is developing nuclear-capable cruise missiles: the Babur (ground-launched) and the Ra'ad (air-launched), both of which will have estimated ranges of 350 kilometers. A May 31, 2012, flight test announcement gave the Ra'ad's range as "over 350" kilometers; a January 19, 2016, Pakistani government announcement gave the range as 350 kilometers; an October 28, 2011, Pakistani government announcement gave the Babur's range as 700 kilometers. A Pakistani Foreign Ministry spokesperson reacted to India's July 26, 2009, launch of its first indigenously built nuclear-powered submarine by asserting that "continued induction of new lethal weapon systems by India is detrimental to regional peace and stability," adding that "[w]ithout entering into an arms race with India, Pakistan will take all appropriate steps to safeguard its security and maintain strategic balance in South Asia." India is developing "submarine-launched ballistic missiles," according to Admiral Haney. In May 2012, Admiral Mohammad Asif Sandila, then-Chief of Pakistan's Naval Staff, announced "the formal establishment of the Naval Strategic Force Command of Pakistan," describing the force as "the custodian of the nation's 2 nd strike capability." General Kidwai indicated during a March 2015 conference that the submarine program is "a work in progress," adding that "this capability will come into play in the next few years." Pakistan is developing what the Director of the Defense Intelligence Agency described in February 2015 as "close-range 'battlefield' nuclear weapons to augment its existing ballistic missiles." Kidwai explained that Pakistan has "opted to develop a variety of short range, low yield nuclear weapons, also dubbed tactical nuclear weapons." For example, Pakistan conducted in April 2011 the first successful flight test of the solid-fuel Hatf IX (NASR ) , a road-mobile missile with a range of 60 kilometers which "carries nuclear warheads of appropriate yield with high accuracy" and "has been specially designed to defeat all known Anti Tactical Missile Defence Systems." Pakistan has not deployed these weapons, a former Pakistani official knowledgeable about the country's nuclear weapons program stated on July 14. Some observers have expressed concern that non-strategic nuclear weapons could increase the risk of nuclear conflict between India and Pakistan. (See "Nuclear Doctrine" section). The United Kingdom's Foreign and Commonwealth Office has argued that "Pakistan's strategic posture, including nuclear, is clearly framed around its perception of the threat from India." Similarly, then-DIA Director Burgess told the Senate Armed Services Committee on March 10, 2011, that the "persistent India-Pakistan rivalry drives Islamabad to develop its nuclear infrastructure, expand nuclear weapon stockpiles ... and seek more advanced nuclear warheads and delivery systems, including cruise missiles." Pakistan has repeatedly described its strategic doctrine as "credible minimum deterrence." Islamabad has pledged no-first-use against non-nuclear-weapon states, but has not ruled out first-use against a nuclear-armed aggressor, such as India. In 2004, a Pakistani official described four policy objectives for Islamabad's nuclear weapons: deter all forms of external aggression; deter through a combination of conventional and strategic forces; deter counterforce strategies by securing strategic assets and threatening nuclear retaliation; and stabilize strategic deterrence in South Asia. Pakistani officials have also indicated that this nuclear posture is designed to preserve territorial integrity against Indian attack, prevent military escalation, and counter India's conventional superiority. Air Commodore Khalid Banuri, Director of Arms Control and Disarmament Affairs in Pakistan's Strategic Plans Division, explained in December 2011 that Islamabad's nuclear arsenal is part of an effort "to deny India the space for launching any kind of aggression against Pakistan." More recently, Pakistan's Foreign Ministry spokesperson asserted in a September 3, 2013, statement that the country's "nuclear deterrence capability is aimed at maintaining regional stability in South Asia." Pakistani Foreign Secretary Aizaz Ahmad Chaudhry explained in October 2015 that the country's "nuclear programme is one dimensional: stopping Indian aggression before it happens. It is not for starting a war. It is for deterrence." Despite Islamabad's stated wish to avoid a nuclear arms race with New Delhi, Pakistan appears to be increasing its fissile production capability and improving its delivery vehicles in order to hedge against possible increases in India's nuclear arsenal and also to deter Indian conventional military action. Indeed, aspects of the credible minimum deterrence doctrine have always been ambiguous and the concept appears to have changed over time. A 2013 State Department report explains that Islamabad has not "publicly articulated clear requirements or quantified what stockpile of nuclear weapons and fissile material would be sufficient to achieve" its credible minimum deterrence posture. Pakistani officials have argued that a variety of nuclear arsenals could satisfy credible minimum deterrence; Air Commodore Banuri asserted in December 2011 that Pakistan's "deterrence requirement remains dynamic" and a precise number of nuclear weapons to satisfy this requirement "cannot be quantified." He also argued that "India's massive conventional military build up, the India-U.S. nuclear deal," and India's pursuit of missile defense systems, forced Pakistan "to make qualitative and quantitative adjustments" to its nuclear arsenal. Banuri also cited Indian military doctrines that Islamabad describes as prescribing rapid conventional military action against Pakistan. Describing the evolution of Pakistan's deterrent, General Kidwai explained that the nuclear program "started with a concept of credible minimum deterrence," but Islamabad "translated it ... to the concept of full spectrum deterrence." Kidwai added that Pakistan developed this doctrine in response to possible Indian rapid conventional military attacks, arguing that some Indian officials were "toying with the idea of finding space for conventional war," because Pakistan lacked non-strategic nuclear weapons and New Delhi did not believe that Islamabad would retaliate with its other nuclear weapons. Pakistani Adviser on Foreign Affairs Sartaj Aziz asserted in July 2016 that Pakistan's "tactical nuclear weapons were a response" to a potential sudden Indian conventional attack. Pakistani officials have argued that non-strategic nuclear weapons can increase the credibility of its nuclear deterrent versus Indian conventional military operations. General Kidwai argued that "by introducing the variety of tactical nuclear weapons in Pakistan's inventory, and in the strategic stability debate, we have blocked the avenues for serious military operations by the other side." In 2011, Kidwai described the first test of the NASR missile as "a very important milestone in consolidating Pakistan's strategic deterrence capability at all levels of the threat spectrum." Some observers have expressed concern that such weapons could increase the risk of nuclear conflict between India and Pakistan for at least two reasons. First, Pakistani military commanders could lose the ability to prevent the use of such weapons, which would be more portable and mobile than Islamabad's current nuclear weapons and delivery vehicles. Second, Pakistani forces may launch non-strategic nuclear weapons in order to counter possible Indian preemptive attacks on those weapons' launch platforms. Pakistani officials have also argued that the ambiguity concerning Islamabad's no-first-use policy serves to maintain deterrence against India's conventional superiority; a Foreign Ministry spokesperson stated May 21, 2009, that "there are acquisitions of sophisticated weaponry by our neighbour which will disturb the conventional balance between our two countries and hence, lower the nuclear threshold." Other analysts argue that keeping the first-use option against New Delhi allows Islamabad to conduct operations, such as support for low intensity conflict or proxy war in Kashmir, while effectively deterring India at the strategic level. In any case, Pakistani statements suggest that the government has a high threshold for using nuclear weapons. According to a 2012 State Department report, Pakistan previously has said that "nuclear use would be a 'last resort' under circumstances that are 'unthinkable.'" Nevertheless, Pakistani officials have said for some time that the government may need to increase significantly its nuclear arsenal in response to possible Indian plans to do the same. According to an April 2006 television broadcast, Pakistani officials from the government's National Command Authority (NCA) expressed "concern" that the 2008 U.S.-India nuclear cooperation agreement could tilt the strategic balance between India and Pakistan in favor of the former. The officials suggested that Islamabad may need to increase or improve its nuclear arsenal in order to "to meet all requirements of minimum credible defence deterrence." Similarly, according to the January 2010 statement, the NCA identified "developments detrimental to the objectives of strategic stability in the region," including India's acquisition of "advanced weapons systems" and missile defense systems. The NCA also noted that the 2008 decision by the Nuclear Suppliers Group (NSG) to exempt India from some of its export guidelines, as well as subsequent nuclear fuel supply agreements that New Delhi has concluded with several governments, "would enable India to produce substantial quantities of fissile material for nuclear weapons by freeing up its domestic resources." The statement suggests that Pakistan could increase or improve its nuclear weapons in response to these developments, but does not explicitly say so. Shahzad Chaudhry, a retired Pakistani Air Vice Marshall, argued during a July 18, 2011, U.S. Institute of Peace event that India's stockpile of reactor-grade plutonium is an additional concern for Pakistan. India has stated that it needs only a "credible minimum deterrent," but New Delhi has never defined what it means by such a deterrent and has refused to sign the Comprehensive Test Ban Treaty (CTBT). Furthermore, both the 2008 U.S.-India nuclear cooperation agreement and associated NSG decision renewed New Delhi's access to the international uranium market. This access has apparently resulted in more indigenous Indian uranium available for weapons because it will not be consumed by India's newly safeguarded reactors. Pakistani officials have offered estimates for the number of additional nuclear weapons that New Delhi could build. For example, Wajid Shamsul Hasan, Pakistan's High Commissioner to the United Kingdom, argued in an October 2010 letter to a British newspaper that eight Indian nuclear reactors that will not be subject to International Atomic Energy Agency (IAEA) safeguards have the potential to produce 280 nuclear weapons annually. India currently has approximately 110-120 nuclear weapons, according to one public estimate. Whether and to what extent Pakistan intends to continue increasing its nuclear arsenal is unclear. General Kidwai asserted in 2015 that the country's nuclear weapons program "is not open ended" and indicated that Islamabad will not increase the number of weapons significantly during the next 10-15 years. "There's no need" for Pakistan to develop longer-range missiles than it currently possesses, he added. Current and former Pakistani officials have also argued that the country has achieved its goal of deterring Indian conventional attacks. "War is no more an option," Foreign Secretary Aizaz Ahmad Chaudhry stated in October 2015. Despite its increasing nuclear arsenal, Pakistan "reaffirmed" in a May 17, 2016, joint statement with the United States that Islamabad "will not be the first in its region to resume nuclear testing" "Pakistan has neither the need nor intention to test nuclear weapons and would sign the CTBT if India were to do the same," a former Pakistani official knowledgeable about the country's nuclear weapons program stated on July 14. Pakistan's command and control over its nuclear weapons is compartmentalized and includes strict operational security. Islamabad's Strategic Command Organization has a three-tiered structure, consisting of the National Command Authority (NCA), the Strategic Plans Division (SPD), and the Strategic Forces Commands. General Kidwai asserted in 2015 that the NCA and SPD have "operational control" over Pakistan's nuclear weapons, explaining that "only day-to-day administrative control, some kind of technical control" has been delegated to the country's armed services. The NCA, established in 2000 and codified in the National Command Authority Act, 2010, supervises the functions and administration of all of Pakistan's organizations involved in nuclear weapons research, development, and employment, as well as the military services that operate the strategic forces. The prime minister, as head of government, is chairperson of the NCA. The NCA also includes the chair of the joint chiefs of staff; the ministers of defense, interior, foreign affairs, and finance; the director general of the SPD; and the commanders of the Army, Air Force, and Navy. The final authority to launch a nuclear strike requires consensus within the NCA; the chairperson must cast the final vote. The NCA is comprised of two committees, the Employment Control Committee (ECC) and the Development Control Committee (DCC), each of which includes a mix of civilian and military officials. The ECC's functions include establishing a command and control system over the use of nuclear weapons. The DCC "exercises technical, financial and administrative control over all strategic organisations, including national laboratories and research and development organisations associated with the development and modernisation of nuclear weapons." The NCA also has a "fully automated Strategic Command and Control Support System, which "enables robust Command and Control capability of all strategic assets with round the clock situational awareness in a digitized network centric environment to decision makers." The SPD is headed by a director general from the Army and acts as the secretariat for the NCA. The SPD's functions include formulating Islamabad's nuclear policy, strategy, and doctrine; developing the nuclear chain of command; and formulating operational plans at the service level for the movement, deployment, and use of nuclear weapons. The Army, Air Force, and Navy each have their own strategic force command, but operational planning and control remains with the NCA. The SPD coordinates operational plans with the strategic forces commands. According to current and former Pakistani officials, Islamabad employs a system which requires that at least two, and perhaps three, people authenticate launch codes for nuclear weapons. The National Command Authority Act, 2010, addresses the problems of the proliferation of nuclear expertise and personnel reliability. It outlines punishable offenses related to breach of confidentiality or leakage of "secured information," gives the SPD authority to investigate suspicious conduct, states that punishment for these offenses can be up to 25 years imprisonment, and applies to both serving and retired personnel, including military personnel, not withstanding any other laws. Pakistani officials cite their concern about India's recently-acquired ability to expand its nuclear arsenal as a reason for refusing to support negotiations in the Conference on Disarmament (CD), which operates by consensus, on a Fissile Material Cutoff Treaty (FMCT). Such a treaty would ban the production of fissile material for nuclear weapons. The CD adopted a program of work in May 2009 that established a working group charged with negotiating an FMCT on the basis of the 1995 "Shannon Mandate." Although Pakistan supported the work plan in 2009, it did not support the adoption of a draft program of work for 2010. Ambassador Zamir Akram, Pakistan's Permanent Representative to the CD, stated on February 18, 2010, that Islamabad had supported the 2009 program of work because the government had believed that the Obama Administration might reverse U.S. policy on nuclear cooperation with India. Pakistan, which is widely regarded as the main opponent to the start of negotiations, argues that a treaty on fissile material should not only prohibit the production of new material, but should also require states with such material to reduce their stocks. A treaty without such a requirement, according to Pakistan, will put the country at a disadvantage with respect to India because of what Islamabad characterizes as New Delhi's larger fissile material stocks and production capability. Although the Shannon Mandate states that it "does not preclude any delegation" from proposing the inclusion of existing stocks in the negotiations, Islamabad has argued that the CD ought to determine the treaty's scope prior to beginning negotiations. According to a 2001 Department of Defense report, Islamabad's nuclear weapons "are probably stored in component form," which suggests that the nuclear warheads are stored separately from delivery vehicles. According to some reports, the fissile cores of the weapons are separated from the non-nuclear explosives. According to Dr. Mubarakmand, the scientist closely involved with the country's nuclear weapons program, Pakistani nuclear weapons are "stored in three to four different parts at three to four different locations," adding that, "[i]f a nuclear weapon doesn't need to be launched, then it is never available in assembled form." The 2001 Defense Department report says that Pakistan can probably assemble its weapons fairly quickly. It warrants mention that, although separate storage may provide a layer of protection against accidental launch or prevent theft of an assembled weapon, it may be easier for unauthorized people to remove a weapon's fissile material core if it is not assembled. Dispersal of the assets may also create more potential access points for acquisition and may increase the risk of diversion. As the United States prepared to attack the Afghan Taliban after September 11, 2001, then-President Musharraf reportedly ordered that Pakistan's nuclear arsenal be redeployed to "at least six secret new locations." This action came at a time of uncertainly about the future of the region, including the direction of U.S.-Pakistan relations. Islamabad's leadership was uncertain whether the United States would decide to conduct military strikes against Pakistan's nuclear assets if the government did not assist the United States against the Taliban. Indeed, then-President Musharraf cited protection of Pakistan's nuclear and missile assets as one of the reasons for Islamabad's dramatic policy shift. These events, in combination with the 1999 Kargil crisis, the 2002 conflict with India at the Line of Control, and revelations about the A.Q. Khan proliferation network, inspired a variety of reforms to secure the nuclear complex. Risk of nuclear war in South Asia ran high during the 1999 Kargil crisis, when, according to former William J. Clinton Administration officials, the Pakistani military began preparing missiles to deliver nuclear weapons. It should be noted that, even at the high alert levels of 2001 and 2002, there were no reports of Pakistan mating the warheads with delivery systems. In the fall of 2007 and early 2008, some observers expressed concern about the security of the country's arsenal if political instability were to persist. Former Prime Minister Benazir Bhutto said in a November 5, 2007, interview that, although then-President Musharraf claimed to be in firm control of the nuclear arsenal, she feared this control could weaken due to instability in the country. Similarly, Michael Krepon of the Henry L. Stimson Center has argued that "a prolonged period of turbulence and infighting among the country's President, Prime Minister, and Army Chief" could jeopardize the army's unity of command, which "is essential for nuclear security." U.S. military officials also expressed concern about the security of Pakistan's nuclear weapons. Experts also worry that while nuclear weapons are currently under firm control, with warheads disassembled, technology could be sold off by insiders during a worsened crisis. Chairman of the Joint Chiefs of Staff Admiral Michael Mullen described U.S. concern about the matter during a September 22, 2008, speech: To the best of my ability to understand it—and that is with some ability—the weapons there are secure. And that even in the change of government, the controls of those weapons haven't changed. That said, they are their weapons. They're not my weapons. And there are limits to what I know. Certainly at a worst-case scenario with respect to Pakistan, I worry a great deal about those weapons falling into the hands of terrorists and either being proliferated or potentially used. And so, control of those, stability, stable control of those weapons is a key concern. And I think certainly the Pakistani leadership that I've spoken with on both the military and civilian side understand that. U.S. officials have stated that U.S. knowledge of Pakistan's arsenal is limited. For example, then-Chairman of the Joint Chiefs of Staff Mullen stated during a May 14, 2009, hearing before the Senate Armed Services Committee that "we're limited in what we actually know" about Islamabad's nuclear arsenal. Nevertheless, U.S. officials have expressed confidence regarding the security of Islamabad's nuclear weapons. Defense Intelligence Agency Director Stewart stated in February 2016 that "Islamabad continues to take steps to improve its nuclear security, and is aware of the threat presented by extremists to its program." More recently, White House Press Secretary Josh Earnest stated on October 15, 2015, that we continue to have confidence that the government of Pakistan is well aware of the range of potential threats to its nuclear arsenal, and we continue to be confident that Pakistan has a professional and dedicated security force that understands the importance and the high priority that the world places on nuclear security. Ambassador Olson told the House Foreign Affairs Committee on December 16, 2015, that Washington has "confidence in the capabilities of ... the Pakistani security forces to control and secure their nuclear weapons," adding that Islamabad has "specifically taken into account the insider threat" to its nuclear arsenal. A former Administration official wrote in September 2014 that The likelihood [of] terrorists obtaining nuclear weapons or nuclear material from Pakistani facilities is currently very low because of the extraordinary measures the Pakistan government and military have taken over the last decade... Pakistani nuclear materials do not pose the concerns that they once did. Under Secretary of State for Arms Control and International Security Rose Gottemoeller expressed confidence in the security of Pakistan's nuclear arsenal during a March 17, 2016, Senate Foreign Relations Committee hearing, but added that Pakistan's "battlefield nuclear weapons" are a security concern because such weapons "cannot be made as secure" when deployed. Other governments have also voiced opinions regarding the security of Pakistan's nuclear arsenal. For example, Indian National Security Adviser M. K. Narayanan said that the arsenal is safe and has adequate checks and balances. Similarly, then-Secretary of State for Foreign and Commonwealth Affairs David Miliband told the Charlie Rose Show on December 15, 2008, that Islamabad's nuclear weapons " are under pretty close lock and key." Furthermore, according to Director of the French General Directorate of External Security Erard Corbin de Mangoux, Pakistan's military and civilian leaders have a "sense of responsibility" to maintain control over the country's nuclear weapons; these leaders "know that the international status to which they aspire depends directly on their ability to exercise complete control over such an instrument of power," he argued in an interview published in spring 2010. Other non-U.S. officials, however, have sounded somewhat less optimistic. For example, Russian Deputy Prime Minister Sergei Ivanov said in a March 24, 2009, television interview that Moscow is "very much concerned" about the security of Pakistan's arsenal. Indian officials expressed concerns about the security of Pakistan's nuclear arsenal following the May 2011 insurgent attack on the Karachi military installation. Pakistani officials have consistently expressed confidence in the security of the country's nuclear arsenal. Then-President Musharraf stated in November 2007 that Pakistan's nuclear weapons are under "total custodial controls." According to Pakistan's 2014 Nuclear Security Summit statement, the country's "nuclear security regime is anchored in the principle of multi-layered defense for the entire spectrum of any nuclear threat" and includes a "specially trained Special Response Force," an "integrated intelligence system" and "[f]orce validation exercises." The SPD "has two separate divisions to oversee security and intelligence, with more than 25,000 personnel between them," according to SPD official Adil Sultan. Pakistan has also cited its Centre of Excellence on Nuclear Security to bolster its nuclear security credentials. In its 2016 Nuclear Security Summit statement, Islamabad explained that the center, in conjunction with two other Pakistani government bodies, provides "exhaustive education and training in areas including physical protection, material control and accounting, transport security, cyber security and personnel reliability." In addition, the government points to its status as a party to the Convention on Physical Protection of Nuclear Material, including the 2005 amendment to the convention. The May 2011 U.S. strike that killed Al Qaeda leader Osama bin Laden generated a public discussion in Pakistan as to whether a country such as India or the United States could successfully attack and destroy Pakistan's nuclear weapons. Responding to these concerns, then-Prime Minster Gilani stated May 25, 2011, that the country's "strategic assets are well protected and our capability to defend our sovereignty, territorial integrity and liberties of our people, is very much in place." In addition to the above scenarios, the security of Pakistan's nuclear weapons could also be jeopardized by another conflict between India and Pakistan, Michael Krepon argued, explaining that an "escalating war with nuclear forces in the field would increase the probability of accidents, miscalculations, and the use of nuclear weapons" because [w]hen tensions rise precipitously with India, the readiness level of Pakistan's nuclear deterrent also rises. Because the geographical coordinates of Pakistan's main nuclear weapon storage sites, missile, and air bases can be readily identified from satellites—and therefore targeted by opposing forces—the dictates of deterrence mandate some movement of launchers and weapons from fixed locations during crises. Nuclear weapons on the move are inherently less secure than nuclear weapons at heavily-guarded storage sites. Weapons and launchers in motion are also more susceptible to "insider" threats and accidents. Such a war, Krepon added, would also place stress on the army's unity of command. Krepon has also pointed out that Islamabad faces a dilemma, because less-dispersed nuclear weapons may be more vulnerable to a disarming military strike from India. During former Secretary of State Condoleezza Rice's January 2005 confirmation hearing, then-Senator John Kerry asked what would happen to Pakistan's nuclear weapons in the event of a radical Islamic coup in Islamabad, Secretary Rice answered, "[w]e have noted this problem, and we are prepared to try to deal with it," suggesting that the United States had plans to secure Pakistani nuclear weapons in case of a loss of control by the Pakistani government. On November 12, 2007, responding to press reports about this contingency, a Pakistan Foreign Office spokesperson said, "Pakistan possesses adequate retaliatory capacity to defend its strategic assets and sovereignty," emphasizing that Islamabad's nuclear weapons have been under "strong multi-layered, institutionalized decision-making, organizational, administrative and command and control structures since 1998." The issue of U.S. contingency plans to take over Pakistani strategic assets was raised again in the press following Benazir Bhutto's assassination, and was met with similar assurances by Pakistan's government. Responding to a report detailing alleged U.S.-Pakistani discussions regarding contingency plans for U.S. forces to help secure Islamabad's nuclear weapons, a Pakistan Foreign Office spokesperson stated on November 8, 2009, that Pakistan "does not require any foreign assistance in this regard." Pakistan will never "allow any country to have direct or indirect access to its nuclear and strategic facilities," the spokesperson said, adding that "no talks have ever taken place on the issue of the security of Pakistan's nuclear arsenal with U.S. officials." Then-Secretary of Defense Gates stated in January 2010 that the United States has "no intention or desire to take over any of Pakistan's nuclear weapons." The United States reportedly offered nuclear security assistance to Pakistan soon after September 11, 2001. U.S. assistance to Islamabad, which must comply with nonproliferation guidelines, has reportedly included the sharing of best practices and technical measures to prevent unauthorized or accidental use of nuclear weapons, as well as contribute to physical security of storage facilities and personnel reliability. As noted above, Islamabad employs a system requiring that at least two, and perhaps three, people authenticate launch codes for nuclear weapons. Security at nuclear sites in Islamabad is the responsibility of a 10,000-member security force, commanded by a two-star general. Former Pakistani military officials have said Pakistan has developed Permissive Action Links (PALs) for its warheads without U.S. assistance. PALs require a code to be entered before a weapon can be detonated. Former Deputy Secretary of State Richard Armitage confirmed in a November 2007 interview that there has been U.S. assistance in securing Pakistani nuclear weapons, explaining that the United States was unlikely to intervene militarily in a crisis in Pakistan because "we have spent considerable time with the Pakistani military, talking with them and working with them on the security of their nuclear weapons. I think most observers would say that they are fairly secure. They have pretty sophisticated mechanisms to guard the security of those." Rolf Mowatt-Larssen, former Director of the Office of Intelligence and Counterintelligence at the U.S. Department of Energy, pointed out in May 2009 that "there's not a lot of transparency into" how Islamabad spends the U.S. funds, but he nevertheless characterized them as "money well spent." A Pakistani official said in November 2009 that Pakistan reserves the right to "pick and choose" the nuclear security measures it will undertake, adding that Islamabad will only accept such measures that are "non-intrusive." The extent to which Pakistan has shared information about its nuclear arsenal with the United States is unclear. Although, as noted, former President Musharraf has acknowledged that Islamabad has shared some information, General Tariq Majid, then-chair of Pakistan's Joint Chiefs of Staff Committee, stated November 9, 2009, that "there is absolutely no question of sharing or allowing any foreign individual, entity or a state, any access to sensitive information about our nuclear assets." Air Commodore Banuri indicated in a 2008 interview that Islamabad accepts U.S. "education and awareness, but in a completely non-intrusive way," adding that Pakistan has "some rudimentary equipment and some training" from the United States. Banuri described U.S. access to Pakistan's nuclear weapons facilities as a "red line" that Islamabad will not cross. The U.S. government has also reportedly offered assistance to secure or destroy radioactive materials that could be used to make a radioactive dispersal device, and to ship highly enriched uranium used in the Pakistani civilian nuclear sector out of the country. Pakistan's response to these proposals is unclear, and downturns in the bilateral relationship overall may have complicated efforts to make progress in this area. It is worth noting that, according to some observers, spent fuel from Pakistan's Karachi and Chasma nuclear power plants could be vulnerable to theft or attack. However, Pakistani officials have expressed confidence in the security of its facilities and have said that Islamabad has no plans to transport spent fuel from either reactor. Moreover, the Pakistan Nuclear Regulatory Authority (PNRA) has a Nuclear Security Action Plan, which includes a description of regulations for handling spent nuclear fuel. The PNRA states that Pakistan follows IAEA physical protection standards. A fundamental aspect of nuclear security is ensuring that personnel with sensitive knowledge do not transfer that expertise. Although Pakistan has made significant reforms in this area, many observers continue to be concerned that other states or terrorist organizations could obtain material or expertise related to nuclear weapons from elements in Pakistan. Proliferation networks stemming from Pakistan have their roots in the effort to develop a Pakistani nuclear bomb. Beginning in the 1970s, Pakistan used extensive clandestine procurement networks to obtain technology for its own nuclear weapons program. A report from Pakistan's Inter-Services Intelligence published September 15, 2011, stated that Pakistan, as an under-developed country with no industrial infra-structure, had to buy each and every bit of material and piece of equipment surreptitiously from abroad in the open market and had to establish a network of cover companies within the country and outside to by-pass embargoes and import all the necessary items. Former Pakistani nuclear scientist A.Q. Khan directed this procurement and subsequently used a similar network to supply Libya, North Korea, and Iran with designs and materials related to uranium enrichment. The current status of Pakistan's nuclear export network is unclear, although most official U.S. reports indicate that, at the least, it has been damaged considerably. Then-Director of National Intelligence John D. Negroponte implied that the network had been dismantled when he asserted in a January 11, 2007, statement to the Senate Select Committee on Intelligence that "Pakistan had been a major source of nuclear proliferation until the disruption of the A.Q. Khan network." When asked about the network's current status during a July 25, 2007, Senate Foreign Relations Committee hearing, then-Under Secretary for Political Affairs Nicholas Burns replied that I cannot assert that no part of that network exists, but it's my understanding based on our conversations with the Pakistanis that the network has been fundamentally dismantled. But to say that there are no elements in Pakistan, I'm not sure I could say that. Similarly, the London-based International Institute for Strategic Studies found in a May 2007 report that "at least some of Khan's associates appear to have escaped law enforcement attention and could ... resume their black-market business." The State Department imposed sanctions in 2009 on 13 individuals and three companies for their involvement in the Khan network. The sanctions were imposed under the Export-Import Bank Act, the Nuclear Proliferation Prevention Act, and Executive Orders 12938 and 13382. A Pakistani Foreign Office spokesperson told reporters in May 2006 that the government considered the Khan investigation "closed"—a position a Foreign Ministry spokesperson reiterated on February 6, 2009. Acting Assistant Secretary of State Vann Van Diepen described the network as "basically defunct" during a July 22, 2010, congressional hearing, adding that "we're on the lookout for sort of the next A.Q. Khan network, so to speak." Furthermore, a March 2012 State Department report described the network as "defunct" and the 2013 version of the same report stated that "[t]here is no indication" that the Pakistani government "has supplied nuclear weapons-related materials to other countries or non-state actors" since the Khan network was "exposed and shut down in 2004." Asked during the 2007 hearing about Pakistan's cooperation in investigating the network, Burns acknowledged that the United States had not had "personal, consistent access" to Khan, but added that he did not "have all the details of everything we've done." Sources report that Islamabad has responded to written questions from the IAEA and has been cooperative with the agency's investigation of Iran's nuclear program. Former IAEA official Olli Heinonen, who investigated the Khan network during his time at the agency, stated in an interview published in October 2011 that Khan "answer[ed] some of my questions in writing through secret channels." More recently, then-Under Secretary of State for Arms Control and International Security Ellen Tauscher told the Senate Foreign Relations Committee in 2009 that the United States has "obtained a great deal of information about the Khan network without having direct access to A.Q. Khan." According to reports, Al-Qaeda unsuccessfully sought nuclear weapons assistance from the Khan network but did receive limited help from at least one other group in Pakistan. Retired Pakistan Atomic Energy Commission scientists, long-time rivals of A.Q. Khan, and Islamic fundamentalists—Sultan Bashiruddin Mahmood and Chaudiri Abdul Majeed may have provided some help to al-Qaeda representatives. The assistance under the umbrella of the Umma Tameer-e Nau (UTN) humanitarian organization was reportedly related to weapons of mass destruction, but details are scarce on the extent of the transfers, and the events following the September 11, 2001, attacks on the United States may have cut off this interaction. Mahmood and Majeed met with Osama bin Laden and Ayman al-Zawahiri in August 2001 in Afghanistan to discuss, among other topics, the necessary elements for developing a nuclear weapons infrastructure, details of nuclear bomb design, and how to construct radiological dispersal devices. Mahmood was a public figure well-known for his eccentric and extreme views about science and Islam, and he was demoted in 1999 to a lower rank in part because of his radicalism. Mahmood then sought early retirement and started the UTN organization. After the United States briefed the Pakistani government about this activity at the highest levels in the fall of 2001, the Pakistani authorities detained the Mahmood and Majeed for multiple rounds of questioning. Through these interrogations and searches in Afghanistan, UTN's work with al-Qaeda on biological weapons and rudimentary nuclear weapons technology came to light. The Pakistani government did not press criminal charges against Mahmood and Majeed, but put the scientists under house arrest in 2002. This extreme case raised awareness of the "insider threat" and subsequently led to changes in Pakistani personnel security policy, detailed below. Accounts raise the possibility of other groups or individuals also providing al Qaeda or other groups with nuclear expertise, but less information is publicly available. Then-Under Secretary Burns testified in July 2007 that the Bush Administration has "told the Pakistani government that it is its responsibility ... to make sure" that neither the Khan network nor a "similar organization" resurfaces in the country. Since the revelations about the network, Pakistan appears to have increased its efforts to prevent nuclear proliferation. Ambassador Olson argued during a December 16, 2015, House Foreign Affairs Committee hearing that Pakistan has "made considerable progress" in its nonproliferation efforts. It is worth noting that, because Khan conducted his proliferation activities as a government official, they do not necessarily indicate a failure of Islamabad's export controls. Pakistani officials argue that Islamabad has taken a number of steps to prevent further proliferation of nuclear-related technologies and materials. For example, Islamabad adopted in September 2004 new national export controls legislation which includes a requirement that the government issue control lists for "goods, technologies, material, and equipment which may contribute to designing, development, stockpiling, [and] use" of nuclear weapons and related delivery systems. According to a February 2008 presentation by the Director of Pakistan's Strategic Export Controls Division (SECDIV), the lists, which were issued in October 2005, include items controlled by multilateral export control regimes, such as the Nuclear Suppliers Group, the Australia Group, and the Missile Technology Control Regime. The government issued revised control lists in 2011 and 2015. According to a 2013 State Department report, the 2011 revisions contained "gaps" which must be closed before the lists are "fully harmonized with the multilateral [export control] regimes." Pakistan asserted in its 2016 Nuclear Security Summit statement that the 2015 revisions cover "the scope of export controls maintained" by those three regimes. The export controls legislation also includes a catch-all clause, which requires exporters to notify the government if they are aware or suspect that goods or technology are intended by the end-user for use in nuclear or biological weapons, or missiles capable of delivering such weapons. The legislation includes several other important elements, such as end-use and end-user certification requirements and new penalties for violators. Since its adoption, Pakistan has established the SECDIV and an associated Oversight Board. The SECDIV is responsible for formulating rules and regulations for implementing the legislation. The board is comprised of officials from multiple agencies and is headed by Pakistan's Foreign Secretary. Islamabad says that it has also taken several other steps to improve its nuclear security. For example, the government announced in June 2007 that it is "implementing a National Security Action Plan with the [IAEA's] assistance." That same month, Pakistan also joined the U.S.- and Russian-led Global Initiative to Combat Nuclear Terrorism. As noted above, the December 2007 National Command Authority Ordinance also includes measures to prevent the spread of nuclear-related materials and expertise. Pakistani officials participating in an April 2007 Partnership for Global Security workshop argued that Islamabad has improved the reliability of its nuclear personnel by, for example, making security clearance procedures more stringent. However, the officials also acknowledged that Islamabad still needed to do more to control its nuclear expertise. Similarly, then-Chairman of the Joint Chiefs of Staff Mullen stated on May 14, 2009, that the country's personnel reliability system must "continue to improve." Some reports about the early January 2011 shooting of Salmaan Taseer, the governor of Punjab province, have raised questions about Pakistan's ability to vet security personnel properly. The United States has provided export control assistance to Pakistan. Burns described several such efforts in his July 2007 testimony. And according to an October 2007 U.S. Government Accountability Office report, Islamabad was during FY2003-FY2006 the second-largest recipient of bilateral U.S. assistance designed to improve target countries' export controls. Pakistan received such assistance from the Departments of State, Energy, and Homeland Security. More recently, the United States has "provided feedback to Pakistan on improving its strategic trade controls," according to the 2013 State Department report. Pakistan sees nuclear power as a key component of its economic development and energy security. The country obtains slightly less than 5% of its power from nuclear energy, or 400 MWe and electricity consumption in Pakistan is increasing. Islamabad plans to increase nuclear energy production to 8,800 MWe by 2030 and 40,000 MWe by 2050. The Pakistan Atomic Energy Commission is in charge of nuclear R&D, and all research and power reactors. Pakistan operates three civilian power reactors under International Atomic Energy Agency (IAEA) safeguards at two sites: a Canadian-supplied 100 MWe heavy-water-moderated reactor in Karachi (Karachi Nuclear Power Plant 1 (KANUPP)), which began operating in 1971, and two Chinese-built 325 MWe pressurized water reactors (PWRs) at the Chasma site. Chasma-1 started operation in 2000, and Chasma-2 in 2011. The China National Nuclear Corporation (CNNC) is building two additional reactors at KANUPP. There are plans for a fourth reactor at KANUPP; the first reactor will be shut down. At the Chasma site, CNNC is constructing two additional reactors. Furthermore, China and Pakistan have discussed Chinese construction of "three additional nuclear reactors" to be built at Muzaffargarh in central Pakistan. U.S. officials and other NSG members have said that the Chasma-3 and -4 sales by China are inconsistent with current Nuclear Suppliers Group (NSG) guidelines. Contracts for Chasma-1 and -2 were concluded before China joined the NSG in 2004. At that time, other NSG members agreed "to grandfather construction of plants in Pakistan which China had initiated," Assistant Secretary of State Thomas Countryman said during a May 12, 2015, Senate Foreign Relations Committee hearing. In 2008, China and Pakistan agreed to the Chasma-3 and -4 construction "in response to the U.S.-India Peaceful Nuclear Cooperation Agreement," according to a 2015 Nuclear Proliferation Assessment Statement submitted by the Obama Administration to Congress. China argues that the contracts for Chasma -3 and -4 are grandfathered, but Countryman stated that the NSG did not agree to grandfather any additional reactors. As noted, the NSG changed its guidelines in 2008 to allow nuclear trade with India, but the group does not allow trade with Pakistan. At present, China is apparently the only country planning to sell nuclear power reactors to Pakistan. Pakistan also operates two research reactors—Pakistan Research Reactor 1, which went critical in 1965, and Pakistan Research Reactor 2, which went critical in 1989. Pakistan Research Reactor 1, which was originally supplied by a U.S. firm, was converted from using highly-enriched uranium (HEU) to low-enriched uranium fuel in 1992. A "small amount" of the HEU fuel remains in Pakistan. Legislation to authorize various forms of U.S. assistance to Pakistan contains provisions related to Islamabad's nuclear weapons program. S. 1707 , the Enhanced Partnership with Pakistan Act of 2009, which became law ( P.L. 111-73 ) on October 15, 2009, authorizes various forms of U.S. assistance to Pakistan, including strengthening democratic institutions and law enforcement, as well as supporting economic development, education, human rights, and heath care. P.L. 111-73 requires the President to certify that Pakistan is "continuing to cooperate with the United States in efforts to dismantle supplier networks relating to the acquisition of nuclear weapons-related materials, such as providing relevant information from or direct access to Pakistani nationals associated with such networks." It also requires a Semi-Annual Monitoring Report that is to include a detailed description of Pakistan's nuclear non-proliferation efforts and an assessment of whether assistance has directly or indirectly aided the expansion of Pakistan's nuclear weapons program, whether by the diversion of United States assistance or the reallocation of Pakistan's financial resources that would otherwise be spent for programs and activities unrelated to its nuclear weapons program. In response to concerns expressed in Pakistan over the intent of the bill, a "Joint Explanatory Statement" was submitted for the Congressional Record by then-Senate Foreign Relations Committee Chairman John Kerry and then-House Foreign Affairs Committee Chairman Howard Berman. The statement emphasizes that "the legislation does not seek in any way to compromise Pakistan's sovereignty, impinge on Pakistan's national security interests, or micromanage any aspect of Pakistani military or civilian operations." Regarding reporting requirements on nuclear nonproliferation cooperation, the statement says: The many requirements of this report are intended as a way for Congress to assess how effectively U.S. funds are being spent, shortfalls in U.S. resources that hinder the use of such funds, and steps the Government of Pakistan has taken to advance our mutual interests in countering extremism and nuclear proliferation and strengthening democratic institutions. There is no intent to, and nothing in this Act in any way suggests that there should be, any U.S. role in micromanaging internal Pakistani affairs, including the promotion of Pakistani military officers or the internal operations of the Pakistani military. Sections 9017(a) and 7044(d)(1) of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) require the Secretaries of State and Defense to certify that Pakistan is "preventing the proliferation of nuclear-related material and expertise" in order for Pakistan to receive certain U.S. funds. These sections contain waiver provisions. It is worth noting that Pakistani officials have expressed interest in concluding a nuclear cooperation agreement with the United States, which would require congressional approval. Then-Prime Minister Gilani told a visiting congressional delegation in June 2011 that such cooperation "would help build a positive image of the U.S. in the country." More recently, however, Pakistan appears to have emphasized its desire for membership in the NSG and submitted its application for membership on May 19, 2016. Islamabad has argued that it is "eminently qualified" for NSG membership, citing the country's potential as an exporter of civil nuclear goods and what Islamabad says are effective export controls, a good record regarding nuclear safety and security, and adherence to its IAEA safeguards agreements. Pakistan has also asserted that continued exclusion of the country from the NSG "would adversely affect regional peace, security and stability," as well as "undermine the global non-proliferation regime." According to U.S. law, the United States could apparently advocate for Pakistan's NSG membership without congressional approval. Ambassador Olson testified on December 16, 2015, that the Obama Administration is "not negotiating ... a civil nuclear cooperation agreement with ... Pakistan," but the United States reportedly considered supporting Islamabad's NSG membership in exchange for Pakistani actions to reduce perceived dangers associated with the country's nuclear weapons program. A former Pakistani official knowledgeable about the country's nuclear weapons program stated on July 14, 2016, that the United States "asked Pakistan, in exchange for vague U.S. support of Pakistani NSG membership, to freeze its production of fissile material, long-range missiles," and the NASR missile. On July 26, a State Department official described this account as "incorrect," but acknowledged that the two governments have discussed Pakistan's possible NSG membership and concerns regarding Islamabad's nuclear arsenal. In any case, the two governments apparently did not reach an agreement governing these issues. "Pakistan cannot agree to taking any unilateral step not matched by India," the Pakistani official stated. Asked during a May 27, 2016, press briefing whether the United States supports Pakistan's NSG membership, State Department spokesperson Mark Toner stated that "any country can submit its application for membership and we will consider based on a consensus decision." | Pakistan's nuclear arsenal probably consists of approximately 110-130 nuclear warheads, although it could have more. Islamabad is producing fissile material, adding to related production facilities, and deploying additional nuclear weapons and new types of delivery vehicles. Pakistan's nuclear arsenal is widely regarded as designed to dissuade India from taking military action against Pakistan, but Islamabad's expansion of its nuclear arsenal, development of new types of nuclear weapons, and adoption of a doctrine called "full spectrum deterrence" have led some observers to express concern about an increased risk of nuclear conflict between Pakistan and India, which also continues to expand its nuclear arsenal. Pakistan has in recent years taken a number of steps to increase international confidence in the security of its nuclear arsenal. Moreover, Pakistani and U.S. officials argue that, since the 2004 revelations about a procurement network run by former Pakistani nuclear official A.Q. Khan, Islamabad has taken a number of steps to improve its nuclear security and to prevent further proliferation of nuclear-related technologies and materials. A number of important initiatives, such as strengthened export control laws, improved personnel security, and international nuclear security cooperation programs, have improved Pakistan's nuclear security. However, instability in Pakistan has called the extent and durability of these reforms into question. Some observers fear radical takeover of the Pakistani government or diversion of material or technology by personnel within Pakistan's nuclear complex. While U.S. and Pakistani officials continue to express confidence in controls over Pakistan's nuclear weapons, continued instability in the country could impact these safeguards. Furthermore, continued Indian and Pakistani nuclear weapons development could jeopardize strategic stability between the two countries. For a broader discussion, see CRS Report R41832, Pakistan-U.S. Relations, by K. Alan Kronstadt. |
The Internal Revenue Code (IRC) includes several permanent provisions that become relevant when taxpayers are affected by disasters. For example, individuals are generally not taxed on disaster relief payments, and taxpayers whose homes are destroyed by disasters may be able to defer any gain arising from an involuntary conversion. In recent years, Congress has enacted temporary tax legislation intended to assist victims of disasters. Most often, these temporary provisions applied to specific, identified disasters (e.g., Hurricane Katrina). However, in 2008, as part of legislation targeting specific disasters, Congress also enacted temporary provisions that applied generally to federally declared disasters occurring prior to January 1, 2010. The following is a list of the primary laws that have provided relief: The Job Creation and Worker Assistance Act of 2002 (Job Creation Act), P.L. 107-147 , which provided tax benefits for areas of New York City damaged by the terrorist attacks of September 11, 2001; The Katrina Emergency Tax Relief Act of 2005 (KETRA), P.L. 109-73 , which provided tax relief intended to assist businesses and individuals affected by Hurricane Katrina in 2005 and permanently extended the authority of the Internal Revenue Service (IRS) to postpone certain deadlines; The Gulf Opportunity Zone Act of 2005 (GO Zone Act), P.L. 109-135 , which provided tax relief intended to assist businesses and individuals affected by Hurricanes Katrina, Rita, and Wilma in 2005; The Food, Conservation, and Energy Act of 2008 (2008 Farm Bill), P.L. 110-234 , which provided tax relief intended to assist businesses and individuals affected by severe storms and tornados in Kansas in 2007; The Heartland Disaster Tax Relief Act of 2008 and other provisions in P.L. 110-343 (Heartland Act), which provided tax relief intended to assist with the recovery from the severe weather that affected the Midwest during the summer of 2008 and Hurricane Ike, as well as including some general disaster tax relief provisions for federally declared disasters occurring prior to January 1, 2010. This report is intended to assist Congress by identifying provisions that have been enacted to respond to past disasters. As such, it provides only a basic overview of the permanent and temporary provisions. It does not discuss the provisions' qualifications, limitations, and deadlines. For example, some of the laws distinguished between the areas the President determined warranted only public assistance under the Stafford Act, and those areas determined to warrant individual or individual and public assistance, with the latter areas eligible for additional benefits, and these types of distinctions are not noted in the report. The report makes no attempt to evaluate the wisdom, efficacy, or fairness of any of the provisions. The report is divided into three sections: (1) selected permanent disaster tax provisions; (2) temporary provisions that applied generally to disasters; and (3) temporary provisions targeting specific disasters. The Appendix contains a table that indicates which temporary provisions were included in each act. Section 139 of the IRC exempts qualified disaster relief payments from the recipient's income. These include payments made to, or for the benefit of, an individual (1) to reimburse or pay for reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster; (2) to reimburse or pay for reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation, or replacement is attributable to a qualified disaster; and (3) by a federal, state, or local government in connection with a qualified disaster in order to promote the general welfare. The exclusion applies only to expenses not compensated for by insurance or otherwise. A qualified disaster is one determined by the President to warrant federal assistance under the Stafford Act and, for the third type of payment, a disaster determined by an appropriate federal, state, or local authority to warrant government assistance. For a taxpayer whose principal residence is damaged or destroyed by storm or other casualty, or who is denied access to the residence by governmental authorities because of the occurrence or threat of occurrence of such a casualty, gross income does not include payments made under an insurance contract to compensate or reimburse the individual for household living expenses resulting from the loss of use or occupancy of the residence. This exclusion applies only to the extent the amount received does not exceed the amount by which the actual living expenses incurred during the period of non-use or occupancy exceed the normal living expenses that would have been incurred. In other words, the excluded amount generally represents expenses actually incurred due to the casualty for renting housing and paying extraordinary expenses for such things as food and transportation. Several provisions may apply in disaster situations, such as the provisions that permit taxpayers to deduct casualty losses and defer gain on involuntary conversions. Although the general provisions are permanent, Congress has enacted special temporary rules regarding aspects of these provisions in the Job Creation Act, KETRA, the GO Zone Act, and the Heartland Act. For this reason, these provisions are discussed below (see " Casualty Losses ," " Involuntary Conversions "). The Internal Revenue Service (IRS) has the express statutory authority to postpone tax-related deadlines for certain taxpayers, including those affected by a federally declared disaster. These deadlines include those for filing returns and making payments for income, gift, and estate taxes. Prior to KETRA, income taxes withheld at source and employment taxes were explicitly excluded from this authority, and excise taxes were not mentioned. KETRA permanently granted the IRS the authority to postpone deadlines related to these taxes. An individual who underpays his or her estimated income tax is subject to a penalty equal to the interest that would accrue on the underpayment, for the period of the underpayment. The IRS is authorized to waive the underpayment penalty for underpayments due to casualty, disaster, or other unusual circumstance if the imposition of the penalty would be inequitable and against good conscience. Rollover distributions from tax-deferred retirement plans and individual retirement accounts must generally be transferred to an eligible plan within 60 days to avoid incurring income tax and penalties. However, the Secretary of the Treasury (Secretary) has the statutory authority to waive the 60-day period in hardship situations where failure to waive the deadline would be against equity or good conscience. Events that could be considered hardships include casualties, disasters, and other events beyond the reasonable control of the individual subject to the rollover deadline. The Heartland Act contained several provisions that generally applied to federally declared disasters declared after December 31, 2007, and before January 1, 2010. These provisions created temporary rules for casualty losses, expensing, net operating losses, bonus depreciation, and mortgage revenue bonds. Additionally, the Heartland Act, KETRA, and the GO Zone Act sometimes created special rules for these same provisions applicable to the specific disasters covered by those acts. These are mentioned in the footnotes. Taxpayers may deduct unreimbursed losses of property not connected to a trade or business when the losses are from a casualty, such as a hurricane. In addition to losses from the actual damage caused by the casualty, an individual may have a casualty loss if ordered by the state to demolish or relocate the home and such order comes within 120 days of the federal declaration that the location is a disaster area. To determine the amount of the loss, two values are compared: decrease in fair market value (FMV) as a result of the casualty and the taxpayer's adjusted basis in the property (i.e., the cost of the property with certain adjustments). The lower amount is the amount of the loss, subject to several limitations: (1) the first $100 of each loss is not deductible and (2) only the aggregate amount of the net loss (after applying the $100 limitation and offsetting casualty gains) that exceeds 10% of adjusted gross income is deductible. The deduction is generally claimed in the year of the loss. However, a loss in a federally declared disaster area may be deducted in the year prior to the disaster. The Heartland Act made three changes for individuals affected by federally declared disasters occurring prior to January 1, 2010: (1) it waived the 10% restriction; (2) it increased the standard deduction by the amount of such losses (thus permitting individuals who did not itemize deductions to deduct their losses); and (3) it increased the $100 floor to $500. In general, capital expenditures must be added to a property's basis rather than being expensed (i.e., deducted in the current year). IRC Section 179 provides an exception so that a business may expense the costs of certain property in the year it is placed in service. In general, the total cost of the Section 179 property cannot exceed $125,000, and the deduction is decreased by one dollar for every dollar that the total cost of all property the business placed in service during the year exceeds $500,000—both numbers are adjusted for inflation. The Heartland Act increased the Section 179 limitations by up to $100,000 and $600,000 for qualified disaster area property for federally declared disasters occurring prior to January 1, 2010. The Heartland Act also added IRC Section 198A, which permits full expensing (subject to depreciation recapture) of qualified expenditures for the abatement or control of hazardous substances released on account of a federally declared disaster, the removal of debris or the demolition of structures on business-related real property damaged by such a disaster, and the repair of business-related property damaged by such a disaster. This provision only applied to federally declared disasters occurring prior to January 1, 2010. In general, a taxpayer's net operating loss (NOL) may be carried back and deducted in the two tax years before the NOL year, and then carried forward for up to 20 years after the NOL year. These methods are known as "carrybacks" and "carryovers," respectively. The carryback period is extended to three years for individuals who have a loss of property arising from a casualty or theft. A three-year period also applies for small businesses and farmers for NOLs attributable to federally declared disasters. The Heartland Act provided for a five-year carryback period for qualified losses from any federally declared disaster occurring prior to January 1, 2010. For such disasters, it also suspended the alternative minimum tax (AMT) provision that generally limits NOL deductions to 90% of alternative minimum taxable income. Taxpayers who acquire certain types of property may claim an additional depreciation amount equal to 50% of the property's adjusted basis for the year the property is placed in service. This is commonly referred to as "bonus depreciation." The Heartland Act provided a 50% bonus depreciation provision for qualified property from a federally declared disaster occurring prior to January 1, 2010. Mortgage revenue bonds are tax-exempt bonds used to finance below-market rate mortgages for low and moderate-income homebuyers. In general, the homebuyers must not have owned a residence for the past three years, and the houses' costs may not exceed 90% of the average purchase price for the area. However, for areas that are low-income or of chronic economic distress, the three-year restriction does not apply and the purchase price limitation is increased to 110%. For individuals whose homes were declared unsafe or ordered to be demolished or relocated due to a federally declared disaster occurring prior to January 1, 2010, the Heartland Act waived the three-year restriction and increased the purchase price limitation from 90% to 110%. It also permitted individuals whose homes were damaged by the disaster to treat the amount of owner-financing provided for home repair and construction as a qualified rehabilitation loan, limited to $150,000 (the amount is generally limited to $15,000), which had the effect of waiving the three-year requirement for such financing. In addition to the Heartland Act's provisions that generally applied to any federally declared disaster declared after December 31, 2007, and before January 1, 2010, other provisions in federal law have provided temporary relief that were generally available (i.e., not restricted to specific disasters). As mentioned above, capital expenditures must generally be added to the property's basis rather than being expensed (i.e., deducted in the current year). IRC Section 198 provided another exception by allowing taxpayers to expense any qualifying environmental remediation costs paid or incurred prior to January 1, 2012, for the abatement or control of hazardous substances at a qualified contaminated site. Unlike the other expensing provisions discussed above (Sections 179 and 198A), Section 198 is not limited to federally declared disasters or specific disasters. The provision was enacted as a temporary one and has been extended several times, but has now expired. The Heartland Act was among those laws that temporarily extended Section 198. The GO Zone Act had also extended the provision, but only for those costs for contaminated sites in the GO Zone, as well as treating petroleum products as a hazardous substance. In general, donors of food inventory who are not C corporations may only claim a charitable deduction that equals their basis in the inventory (typically, its cost). C corporations may deduct the lesser of (1) the basis plus 50% of the property's appreciated value or (2) two times basis. KETRA provided special rules that allowed donors of wholesome food inventory to benefit from this enhanced deduction and allowed C corporations to claim an enhanced deduction for donations of book inventory to public schools. Neither provision was limited to donations related to the hurricane, but both were originally set to expire on December 31, 2005. The provisions have been extended several times since then, including by the Heartland Act (as part of its tax extenders package, rather than its disaster relief provisions). Most recently, both provisions were extended through December 31, 2011. An involuntary conversion occurs when property is converted to money or other property because of its complete or partial destruction, theft, seizure, or condemnation, or if it is disposed of under threat of condemnation. An example of an involuntary conversion is when an individual receives an insurance payment for damaged property. If the cash or property that was received is worth less than the basis of the property that was converted, the taxpayer has a loss, which may qualify for deduction under the casualty loss rules discussed above. If the cash or property received is worth more than the basis of the property that was converted, then the taxpayer has realized a gain, which may or may not be immediately includable in gross income ("recognized"). There are no immediate tax consequences if the property is converted to property that is similar or related in service or use ("similar property"). If, on the other hand, the property is involuntarily converted to cash or dissimilar property, the taxpayer must recognize any gain unless purchasing similar property within a certain time period. If the taxpayer purchases the replacement property in a timely manner, an election is available that allows recognition of gain only to the extent that the amount realized from the involuntary conversion exceeds the cost of the new property. The time period is generally two years. Taxpayers whose principal residence or any of its contents are involuntarily converted as a result of a federally declared disaster qualify for three special rules. First, gain realized from the receipt of insurance proceeds for unscheduled personal property (property in the home that is not listed as being covered under the insurance policy) is not recognized. Second, any other insurance proceeds received for the residence or its contents are treated as a common fund. If the fund is used to purchase property that is similar or related in service or use to the converted residence or its contents, then the owner may elect to recognize gain only to the extent that the common fund exceeds the cost of the replacement property. Third, the replacement period for property involuntarily converted as a result of a federally declared disaster is four years rather than two. If a taxpayer's business property is involuntarily converted as a result of a federally declared disaster, then the taxpayer is not required to replace it with property that is similar or related in service to the original property in order to avoid having to recognize gain on the conversion, as long as the replacement property is still held for a type of business purpose. The replacement period for business property is two years after the close of the first tax year in which any part of the conversion gain is realized (the replacement period for condemned business property is three years). The Job Creation Act, KETRA, the 2008 Farm Bill, and the Heartland Act increased the two-year time period to purchase the replacement property to five years for property in the applicable disaster area so long as substantially all of the use of the replacement property occurs in such area. When all or part of a debt is forgiven, the amount of the cancellation is ordinarily included in the income of the taxpayer receiving the benefit of the discharge. However, there are several exceptions to this general rule. For example, no amount of the discharge is included in income if the cancellation is intended to be a gift or is from the discharge of student loans for the performance of qualifying services. There are also certain situations in which the taxpayer may defer taxation, with the possibility of permanent exclusion, on income from the discharge of indebtedness, such as if discharge occurs when the debtor is in Title 11 bankruptcy proceedings or legally insolvent. Both KETRA and the Heartland Act included provisions that allowed victims to exclude non-business debt forgiveness from income in certain conditions. Victims of Hurricane Katrina were allowed to exclude non-business debt that was forgiven by a governmental agency or certain financial institutions if the discharge occurred after August 24, 2005, and before January 1, 2007. Individuals were eligible for this benefit if (1) their principal place of abode was in the core disaster area or (2) it was in the Hurricane Katrina disaster area and they suffered an economic loss due to the hurricane. Individuals with certain tax attributes (such as basis) were required to reduce them by the amount excluded from income, which has the effect of deferring (rather than permanently eliminating) the tax on the cancelled debt. For victims with a principal place of abode in a Midwestern disaster area, the Heartland Act provided similar relief. However, if that home was in an area determined by the President to warrant only public assistance, the individual also had to have suffered an economic loss due to the severe weather. KETRA, the GO Zone Act, the 2008 Farm Bill, and the Heartland Act all provided relief relating to retirement plan distributions. First, each act waived the 10% penalty that would otherwise apply on early withdrawals made from a qualifying retirement plan if the individual's principal place of abode was in the disaster area and the individual sustained an economic loss due to the disaster. The distributions were required to occur within a specified time frame, and the maximum amount that could be withdrawn without penalty was $100,000. Funds could be re-contributed to a qualified plan over a three-year period and receive tax-free rollover treatment. Additionally, with respect to any taxable portion of the distribution, the individual could include one-third of such amount in gross income over the course of three tax years rather than including the entire amount on the tax return for the year of distribution. Additionally, the acts permitted individuals who had received qualifying distributions to buy or construct a principal residence in the applicable disaster area, but were prevented from doing so by the disaster, to re-contribute the funds to a qualified plan without tax consequences. Further, the acts increased the amount disaster victims could borrow from their retirement plans without immediate tax consequences. Under current law, the maximum amount that may be borrowed without being treated as a taxable distribution is the lesser of (a) $50,000, reduced by certain outstanding loans or (b) the greater of $10,000 or 50% of the present value of the employee's nonforfeitable accrued benefits. For loans made during the applicable period, the acts increased this to the lesser of (1) $100,000, reduced by certain outstanding loans, or (2) the greater of $10,000 or 100% of the present value of the employee's nonforfeitable accrued benefits, as well as extending certain loan repayment dates by one year. Generally, businesses that hire individuals from groups with high unemployment rates or special employment needs, such as high-risk youths and veterans, may claim the work opportunity tax credit. The credit may be claimed for the wages of up to $6,000 that were paid during the employee's first year. For an employee who worked at least 400 hours, the credit equals 40% of his or her wages—thus, the maximum credit is $2,400. For an employee who worked from 120 to 399 hours, the credit equals 25% of his or her wages. The credit does not apply to wages paid after December 31, 2012. KETRA allowed businesses to claim the work opportunity credit on wages paid to certain employees hired after Hurricane Katrina. Eligible employees were those who had a principal place of abode in the core disaster area and either (1) were hired during the two-year period beginning August 28, 2005, for a position in the area or (2) were displaced by the Hurricane and are hired after August 27, 2005, and before January 1, 2006. The Job Creation Act provided similar treatment for New York Liberty Zone business employees and certain employees outside the zone. KETRA, the GO Zone Act, the 2008 Farm Bill, and the Heartland Act all provided a temporary retention credit for disaster-damaged businesses that continued to pay wages to their employees who were unable to continue in their jobs after the storm had rendered the business currently inoperable. Eligible employees were those whose principal place of employment was in the applicable disaster area. The credit equaled 40% of the employee's first $6,000 in wages paid between the date the business became inoperable and the date it resumed significant operations at that location (or the end of the first calendar year, whichever came first). The credits were generally limited to those employers who employed no more than 200 employees per day during the year before the disaster. Both the GO Zone Act and the Heartland Act excluded the value of certain employer-provided housing, limited to $600 per month, from the employee's income and allowed the employer to claim a credit equal to 30% of that amount. Among other requirements, the employee must have had a principal residence in the applicable disaster area and have performed substantially all employment services for that employer in that area. The employer must have had a trade or business located within the applicable disaster area. Both the GO Zone Act and the Heartland Act temporarily allowed affected states to issue tax-exempt bonds to finance (1) qualified activities involving residential rental projects, nonresidential real property, and public utility property located in the disaster area and (2) below-market rate mortgages for low- and moderate-income homebuyers. Under the GO Zone Act, the maximum amount of bonds that each state could issue was $2,500 multiplied by that state's population that was located in the GO Zone as determined prior to the date of Hurricane Katrina. Under the Heartland Act, the maximum amount of bonds each state could issue was capped at $1,000 multiplied by that state's population in the disaster area, and the act expressly stated that the bonds would have to be designated by the appropriate state authority on the basis of providing assistance to where it was most needed. The Job Creation Act, meanwhile, allowed New York to issue up to $8 billion (divided equally between the state and New York City) in tax-exempt bonds to finance qualified activities involving residential rental projects, nonresidential real property, and public utility property located in the disaster zone. The Job Creation Act and the GO Zone Act also allowed one additional advance refunding of qualifying bonds that were issued by those states. The GO Zone Act, the 2008 Farm Bill, and the Heartland Act allowed operators of low-income residential rental projects financed by IRC Section 142(d) bonds to rely on the representations of displaced individuals regarding their income qualifications so long as the tenancy began within six months of the displacement. Both the GO Zone Act and the Heartland Act permitted affected states to issue tax credit bonds to pay the principal, interest, or premiums on qualified governmental bonds or to make loans to political subdivisions to make such payments. Bondholders may claim a credit based on the product of a credit rate and the bonds' outstanding face amount. The bonds were required to be issued within a certain time period and could not have a maturity date beyond two years, among other requirements. Further, each state was capped in the amount of bonds it could be issued—for example, under the Heartland Act, the maximum amount of bonds that could be issued by states with disaster area populations of at least 2 million was $100 million; the cap was $50 million for states with disaster area populations between 1 million and 2 million; and the other states could not issue any bonds. Bonds could not be used for certain activities (e.g., golf courses). The GO Zone stated that it was the sense of Congress that the Treasury Secretary designate at least one series of bonds as Gulf Coast Recovery Bonds. Taxpayers are generally permitted to deduct contributions made to 501(c)(3) charitable organizations, subject to various limitations. Individuals may not claim a charitable deduction that exceeds 50% of their "contribution base" (adjusted gross income with certain adjustments) and corporations may not claim a deduction that exceeds 10% of their taxable income with certain adjustments. Any excess contributions may generally be carried forward for five years. KETRA and the GO Zone Act temporarily suspended the 50% and 10% limitations for cash contributions. For individuals, the deduction could not exceed the amount that the contribution base exceeded other charitable contributions. For corporations, the deduction was only allowed for contributions used for hurricane relief efforts and could not exceed the amount that taxable income exceeded other contributions. The acts also suspended the overall limitation on itemized deductions. The Heartland Act provided similar rules for donations for Midwest disaster relief. Both KETRA and the Heartland Act provided tax relief to those who provided free housing to those who had been displaced by the storms. Individuals could claim additional personal exemptions of $500 each for up to four displaced people who they housed for at least 60 consecutive days. These exemptions could be claimed in both the year of the disaster and the next year; however, no person could qualify the taxpayer for the exemption in both years. Among other requirements, the displaced person must have had a principal place of abode in the disaster area; if the home was not in the core disaster area, then the person must have been displaced due to either storm damage to the home or evacuation caused by the storm. Generally, individuals who use their personal vehicles for charitable purposes may claim a deduction based on the number of miles driven. The amount is set by statute at 14 cents per mile. KETRA and the Heartland Act each temporarily increase the charitable mileage rate to 70% of the standard business mileage rate if the vehicle was used for hurricane or Midwest disaster relief. The standard business mileage rate is periodically set by the IRS and is 55.5 cents per mile for 2012 and 56.5 cents per mile for 2013. Additionally, both acts provided a temporary exclusion from a charitable volunteer's gross income for any qualifying mileage reimbursements received from the charity for the operating expenses of the volunteer's passenger automobile for such disaster relief. For purposes of depreciation, the Job Creation Act generally shortened the recovery period for leasehold improvement property to five years for qualifying property located in the New York disaster zone. KETRA, the GO Zone Act, and the Heartland Act permitted qualifying disaster victims to elect to use their earned income from the year prior to the disaster for computing the child tax credit and the earned income tax credit instead of the income from the year of the disaster. This may have benefited taxpayers whose income was reduced in the year of the disaster. In general, taxpayers qualified only if the disaster caused them to be displaced from their principal place of abode. KETRA, the GO Zone Act, and the Heartland Act all contained similar provisions that authorized the Treasury Secretary to make adjustments in the application of the tax laws for the tax years of the disaster and the immediate subsequent year so that temporary relocations due to the disaster did not cause taxpayers to lose any deduction or credit or to experience a change of filing status. Individuals with eligible tuition and related expenses may claim the Hope Scholarship or Lifetime Learning credit. Under the law existing when KETRA, the GO Zone Act, and the Heartland Act were enacted, the Hope credit was 100% of the first $1,000 of eligible expenses plus 50% of the next $1,000 of eligible expenses, both adjusted for inflation. The maximum Lifetime Learning credit is and was 20% of up to $10,000 of eligible expenses. Beginning in 2009, the partially refundable American Opportunity Tax Credit (AOTC) temporarily increased the Hope credit, allowing 100% of eligible expenses up to $2,000 plus 25% of the next $2,000 of eligible expenses. Currently, 2012 is the last year in which taxpayers can claim the AOTC. For individuals attending school in the GO Zone for 2005 and 2006, the GO Zone Act allowed certain non-tuition expenses (e.g., books, equipment, and room and board) to qualify for the Hope and Lifetime Learning credits; doubled the $1,000 limitations in the Hope credit to $2,000; and increased the 20% limitation in the Lifetime Learning credit to 40%. The Heartland Act provided similar rules for students attending school in a Midwestern disaster area during 2008 or 2009. However, to take advantage of this provision for 2009, taxpayers were required to waive application of the AOTC provisions. The low-income housing tax credit allows owners of qualified residential rental property to claim a credit over a 10-year period that is based on the costs of constructing, rehabilitating, or acquiring the building attributable to low-income units. Owners may claim a credit based on 130% of the project's costs if the housing is in a low-income or difficult development area. Owners must be allocated the credit by a state. Each state is limited in the amount of credits it may allocate to the greater of $2,000,000 or $1.75 times the state's population (both are adjusted for inflation and are $2,525,000 and $2.20 for 2012), with adjustments. The GO Zone Act temporarily increased the credits available to Alabama, Louisiana, and Mississippi for use in the GO Zone by up to $18.00 multiplied by the state's population that was located in the GO Zone prior to the date of Hurricane Katrina. It also temporarily treated the disaster zones as difficult development areas and used an alternate test for determining whether certain GO Zone projects qualified as low-income housing. The Heartland Act permitted affected states to allocate additional amounts for use in the disaster area of up to $8.00 multiplied by the state's disaster area population. Taxpayers may claim a credit equal to 10% of the qualifying expenditures to rehabilitate a qualified building or 20% of such expenditures for a certified historic structure. Both the GO Zone Act and the Heartland Act temporarily increased these percentages to 13% and 26% for rehabilitating qualifying buildings and structures damaged by the applicable disasters. Under the new markets tax credit, taxpayers are allocated a credit for investments made in qualified community development entities. The credit is claimed over a period of seven years and equals the amount of the investment multiplied by a percentage: 5% for the first three years and 6% for the next four years. The credit was capped at $2 billion for 2005 and $3.5 billion for 2006 and 2007. The most recent year for which it was allocated was 2011, when it was capped at $3.5 million. There is no allocation for 2012. The GO Zone Act increased the cap by $300 million for 2005 and 2006 and by $400 million for 2007, and it allocated these amounts to entities making low-income community investments in the GO Zone. Under IRC Section 194, taxpayers may expense up to $10,000 of qualifying reforestation expenditures. Under IRC Section 172, the general rule is that taxpayers may carry net operating losses back for two years. The GO Zone Act created two special rules for timber producers with less than 501 acres of timber property: it (1) increased the Section 194 limit by up to $10,000 for expenditures made for qualified timber property in the applicable disaster zones; and (2) increased the Section 172 carry back period to five years for certain losses attributable to timber property in those zones. Under IRC Section 172, certain net operating losses, called specified liability losses, may be carried back for 10 years. Under IRC Section 165(i), certain disaster losses may be deducted in the year prior to the disaster. The GO Zone Act treated public utility casualty losses as a Section 172 loss. The GO Zone Act and the 2008 Farm Bill allowed public utility disaster losses to be deducted in the fifth taxable year preceding the disaster. | Relief after a natural or man-made disaster may come from what many might consider an unlikely source: the Internal Revenue Code (IRC). The IRC includes several tax relief provisions that apply to affected taxpayers. Some of these provisions are permanent. The following are among the permanent provisions discussed in this report: casualty loss deductions, IRC Section 165; exemption from taxation for disaster relief payments to individuals, IRC Section 139; exemption from taxation for certain insurance payments, IRC Section 123; and deferral of gain from the involuntary conversion of homes destroyed or damaged by a disaster, IRC Section 1033. In recent years, Congress has enacted tax legislation generally intended to assist victims of specific disasters; as a result, these laws were temporary in nature. One act, however, provided more general, but still temporary, relief for any federally declared disaster occurring prior to January 1, 2010. The acts providing temporary relief include the following: The Job Creation and Worker Assistance Act of 2002, P.L. 107-147, which provided tax benefits for areas of New York City damaged by the terrorist attacks of September 11, 2001; The Katrina Emergency Tax Relief Act of 2005 (KETRA), P.L. 109-73, which provided tax relief to assist the victims of Hurricane Katrina in 2005; The Gulf Opportunity Zone (GO Zone) Act of 2005, P.L. 109-135, which provided tax relief to those affected by Hurricanes Katrina, Rita, and Wilma in 2005; The Food, Conservation, and Energy Act of 2008 (2008 Farm Bill), P.L. 110-234, which provided tax relief intended to assist those affected by severe storms and tornados in Kansas in 2007; and The Heartland Disaster Tax Relief Act of 2008, P.L. 110-343, which provided tax relief to assist recovery from both the severe weather that affected the Midwest during the summer of 2008 and Hurricane Ike. This act also included general disaster tax relief provisions that applied to federally declared disasters occurring before January 1, 2010. This report provides a basic overview of existing, permanent provisions that benefit victims of disasters, as well as past, targeted legislative responses to particular disasters. The relief is discussed without examining either the qualifications for or the limitation on claiming the provisions' benefits. In light of Hurricane Sandy, this report is designed to help Congress identify previous legislative responses to recent disasters. |
The development of satellite reconnaissance systems is one of the major and enduring accomplishments of the U.S. Intelligence Community. Beginning in the Eisenhower Administration, officials in the Department of Defense (DOD) and the Central Intelligence Agency (CIA) developed "remote sensing" devices that would permit the gathering of accurate information on capabilities of potential enemies without entailing the risks of manned overflights or of covert agents. Satellite imagery undergirded U.S. strategic planning for a quarter century and a series of arms control agreements with the Soviet Union. In early years, film canisters were returned to earth and processed at ground stations for further dissemination. In the 1970s it became possible to forward data by electrical transmission directly to collection agencies. The efforts of intelligence agencies are focused abroad, and satellite passes were optimized to gather information on areas of interest, mostly in Europe and Asia. At the same time, satellites also passed over U.S. territory, and collection on domestic targets could be obtained as a "free good." In addition, it was often necessary to undertake "engineering passes" by which technical specialists could compare imagery with data obtained directly from ground observation. Engineering passes provided detailed aerial photography of domestic sites. Declassified documents published by the National Security Archive indicate that as early as 1968 consideration was being given to provide images captured by intelligence satellites to civilian agencies on issues such as hydrology and oceanography, mapping, and emergency preparedness. In the mid-1970s, there was extensive concern about past efforts of the CIA and other agencies to monitor U.S. persons, and these concerns extended to reconnaissance satellites. The 1975 Rockefeller Commission (the Commission on CIA Activities Within the United States) reviewed the issues involved in domestic overhead photography and reported that the CIA, then in charge of most satellite efforts, had provided photography for mapping, assessing natural disasters, conducting route surveys for the Alaska pipeline, national forest inventories, determining the extent of snow cover in the Sierras to forecast the extent of runoff, and detecting crop blight in the Plains States. The Commission noted that it was possible that a small percentage of aerial photography was being used for law enforcement and was "outside the scope of proper CIA activity. The Commission believes, however, that the legislators, when they prohibited the CIA from engaging in law enforcement activities in the 1947 enactment of the National Security Act, could not have contemplated the systems presently in use." In response to the Rockefeller Commission's conclusions and other concerns, the Civil Applications Committee (CAC) was established in 1975 to serve as an interface through which the needs of civilian agencies for satellite data could be reviewed and prioritized. The CAC was created by a joint memorandum signed by the Assistant to the President for National Security Affairs, the Director of the Office of Management and Budget, and the Director of Central Intelligence. With a staff of some 10 officials, the CAC has provided the principal means of communication between civil users of intelligence capabilities and the providers in the Intelligence Community under the chairmanship of the Director of the U.S. Geological Survey, a component of the Interior Department, and there is a secretariat hosted by the Geological Survey. By July 2001, the CAC had a membership of some 10 departments and independent agencies: U.S. Department of Interior U.S. Department of Agriculture U.S. Department of Commerce U.S. Department of Energy U.S. Department of Transportation U.S. Environmental Protection Agency National Emergency Management Agency National Aeronautics and Space Administration National Science Foundation U.S. Army Corps of Engineers Associate members included the following: National Imagery and Mapping Agency National Reconnaissance Office Central Intelligence Agency (Director of Central Intelligence Environmental and Societal Issues Center) Department of State The end of the Cold War saw increased interest in exploiting the Intelligence Community's collection and analytical assets for civilian purposes, especially in regard to environmental issues. Intelligence agencies provided more analytical products to government agencies outside of the national security community. In 1992, as part of Project Medea, a group of civilian scientists were asked to review data collected by intelligence satellites to determine the usefulness of the data to the scientific community. In a number of areas, information gathered by intelligence satellites was deemed especially important—deforestation, indications of global warming, and reductions in rain forests. In response to this effort, President Clinton issued Executive Order 12951, making public some 860,000 satellite images taken from 1960 to 1972. Some of these images were of U.S. territory—clouds off the California coast, the Mojave Desert, the Luquillo experimental forest in Puerto Rico, and permafrost in Alaska. The use of intelligence resources for domestic purposes was described by then-Director of Central Intelligence (DCI) John Deutch in a 1996 speech: In the United States, the Intelligence Community provides support to the Federal Emergency Management Activity and other civil agencies when there is a natural disaster. Using data from a variety of sources, within hours after a disaster strikes we can assess and report the nature and scope of the damage—conditions of roads, airports and hospitals; and the status of potential secondary threats such as dams and nuclear facilities. Here I would like to make two points: First, we only provide this support upon request. To image US territory, we must first get permission. Second, we provide unclassified products generated from classified information. We have a Disaster Response Team that can quickly produce unclassified maps and diagrams that show the damage resulting from an earthquake, fire, flood, hurricane, oil spill, or volcanic eruption. Although the precise capabilities of intelligence satellites are classified, they are known to have greater resolution than anything available in commercial markets, such as Google Earth, SPOT, or Landsat. Their usefulness would appear to be unquestionable for map-making and related civilian uses. Satellite information has continued to have important civil applications in such disparate areas as the movement of glaciers in Yakutat Bay in Alaska, forest fires in Montana, and near Mount Pinatubo in the Philippines. They are regularly relied on to provide coverage of environmental events. Information from intelligence satellites supplements other sources of overhead imagery available to government agencies—from NASA satellites, commercial satellites, or from manned aircraft or unmanned aerial vehicles (UAVs). Generally, satellite-derived intelligence is combined by the National Geospatial-Intelligence Agency (NGA) with information from airborne platforms, commercial imagery, and other information to meet the needs of military commanders and senior policy makers. The NGA employs a wide range of techniques to prepare mapping and elevation data, scene visualization, and situation analysis. Working through the CAC, the NGA has become a routine partner in disaster relief efforts such as those following the 2004 undersea earthquake and tsunami in the Indian Ocean and Hurricane Katrina in 2005, when the NGA provided graphics for "relief efforts that depicted the locations of major airports, police and fire stations, emergency operations centers, hazardous materials, highways and schools." NGA argues that it "has a strong tradition of collaborating with colleagues across government, non-profit academia and industry arenas to exchange ideas, share best practices, display new GEOINT [geospatial intelligence] solutions and technologies and discuss potential tradecraft advances as they relate to GEOINT." Thus, even though commercial data are available for procurement by any government agency, the NGA and other intelligence agencies believe that their experience and expertise will enable them to provide "value-added" information support to agencies responsible for homeland security and law enforcement. Satellites are also capable of supporting measurement and signature analysis (MASINT), which is an important, but little known, intelligence discipline, involving information derived from the analysis of radar, laser, infrared, and other emanations. MASINT could be useful for domestic applications in some circumstances; in particular, it might provide evidence of the existence and location of weapons of mass destruction (WMD) materials or WMDs themselves prepared or smuggled in by hostile individuals or groups. The capabilities that satellite-derived information might add to homeland security and law enforcement efforts are inevitably classified but could be investigated and assessed by congressional committees. The comparative advantages of intelligence satellites are that they can be targeted in an emergency (assuming no foreign intelligence requirements take precedence), their products are cost-free to the requesting agency, and their resolution is higher than what is otherwise available. On the other hand, they may not be available for civil use at a particular time—a prolonged international crisis or ongoing combat operations could significantly limit their availability for civilian uses. They do not "belong" to the civilian agency on a permanent basis. Furthermore, the extreme resolution of their imagery may be superfluous for the tasks at hand. It nevertheless remains uncertain exactly how much "value added" satellites would offer for homeland security and law enforcement purposes. Clearly, additional imagery sources could be useful in many situations, and sophisticated techniques for acquiring information about the presence of WMD materials would be highly valuable, albeit in extremely unlikely circumstances. What other uses would be important remain uncertain and cannot be determined on the basis of unclassified, public materials. The 9/11 attacks led to a general reconsideration of the relationships between law enforcement and intelligence agencies and in 2002, to the establishment of the Department of Homeland Security (DHS), which has both law enforcement and intelligence responsibilities. Concern with threats to homeland security and international terrorism generally led to a perceived need for increased imaging of the United States. In May 2002, the Senate Intelligence Committee recognized "the valuable role that the National Imagery and Mapping Agency (NIMA) [later renamed as the National Geospatial-Intelligence Agency (NGA)] can play in supporting homeland security operations generally and the newly created U.S. Northern Command, specifically." The Committee expressed concern, however, about the process for authorizing imaging the United States: [T]he Committee is concerned that the checks and balances in place to ensure against improper imaging requests not be circumvented or otherwise diminished. At the same time, the Committee does not want the added scrutiny given to such requests to unnecessarily hinder urgent collection needs that may arise. The Committee directed the DCI in coordination with NIMA and the National Reconnaissance Office (NRO) [the organization that builds and operates satellites] to provide a report on the processes for using intelligence satellites to image the U.S. and what changes are being proposed or considered. The report was requested to be provided to the Committee by March 1, 2003. In December 2004, the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) established the position of Director of National Intelligence (DNI), in part as a replacement for the DCI, to coordinate intelligence activities and their relationship with law enforcement. One of the intelligence capabilities that appeared to have a greater potential contribution to law enforcement and homeland security was the data collected by satellites. A further review of the potential contribution of satellite surveillance to the civil sector was undertaken in 2005 by an Independent Study Group (ISG) established by the Office of the DNI and the Interior Department's Geological Survey (USGS). Keith Hall, a former director of the NRO, was designated as chairman of the ISG. Nine civilian experts and three from government agencies completed the membership of the ISG, with staff support from the Booz Allen Hamilton consulting firm. The group reviewed the use of satellite information for scientific and environmental research, including monitoring and recovery from natural disasters and related hazards, and considered the potential for additional missions. The ISG concluded that far better use could be made of satellite-derived data: As the nation searches for methods to improve information and intelligence sharing for homeland security, the ISG believes that geospatial information—often, but not exclusively, maps and map products—are a compelling tool for sharing information. While localities and police services may differ in their sophistication with remote sensing data and technology, virtually everyone has familiarity with maps and map products as decision aids. This is an area where both the Intelligence Community and the civil agencies have extensive experience providing information, even information derived from sensitive sources. The ISG discussed at some length the past inability or unwillingness of law enforcement agencies to make use of information available from intelligence satellites. It argued that the law enforcement community has virtually no significant engagement with the IC [Intelligence Community] for the use of [satellite] collection resources. They are viewed by the IC as a major risk to 'sources and methods' during the discovery process inherent in prosecutions and trials. They are also constrained by extremely limited budgets, and they generally focus on criminal activity post event rather than preventing an event. These attributes make them unappealing to the IC as a customer and partner. In cases where important and useful IC information is provided, the highly classified nature of the sources and methods involved are either placed in jeopardy in the discovery process leading up to prosecution, or the prosecution is jeopardized by potential IC decisions to not allow their information to be so used. This conflict of interests and objectives is a classic prescription for dysfunction, and has led the IC and LE [law enforcement] communities to generally treat each other with extreme caution. The ISG noted the opportunities for the domestic applications of satellite reconnaissance, but argued that not enough was being done to take advantage of them: The current system operates in a risk-averse vice risk-management environment where protection of sources and methods and individual civil liberties, while important concerns to be carefully considered and taken into account, are the predominant concerns unreasonably operating to limit appropriate support to the defense of homeland. The ISG suggested that the disinclination to use information from intelligence satellites for law enforcement and homeland security purposes was another instance of the intelligence/law enforcement "wall" that was extensively discussed in the aftermath of 9/11. The protection of intelligence sources and methods (from the discovery process in a judicial proceeding) was an ongoing concern of intelligence agencies, while the desire to ensure that intelligence agencies are not used to gather information on U.S. persons had led to the establishment of the CAC in the 1970s. The result of these deeply felt concerns in practice had meant that officials in all agencies believed they had sound reasons to avoid, or at least minimize, information sharing between intelligence and law enforcement agencies. The drafters of the ISG sought to establish a venue through which information from intelligence satellites could be shared with DHS and law enforcement agencies. They argued: "The root of the problem is a lack of a clearly articulated comprehensive policy on the use of IC [Intelligence Community] capabilities for domestic needs." Based on a judgment that the CAC had not effectively provided information to law enforcement agencies, the commission suggested that DHS, a member of the Intelligence Community, serve as the intermediary between the Intelligence Community and state, local, and tribal law enforcement agencies serving as the executive agent of what it termed a new Domestic Applications Office (DAO). This recommendation was based on the premise that "DHS was created to help foster better relations between all facets of LE [law enforcement] and the IC [Intelligence Community], as to facilitate the collection and movement of terrorism-related intelligence and information in ways not previously considered pre 9/11." The Bush Administration maintained that the results of the ISG were briefed to all relevant agency and department heads, but it did not indicate that congressional committees were similarly briefed. The Bush Administration apparently accepted the thrust of the recommendations of the ISG. In March 2006, a Memorandum of Understanding between the Interior and Homeland Security Departments was signed assigning responsibilities of the two departments for creating and maintaining geospatial information to support homeland security. In May 2007, the DNI designated DHS as the executive agent and functional manager of what was designated as a National Applications Office (NAO). There was, however, no public notice of the establishment of the new office at that time. According to the Administration fact sheet, Congress agreed with this approach and provided funding for the office to initiate operations in the fall of 2007: "Intelligence and Appropriations oversight committees have been briefed and approved the reprogramming." The reprogramming in question probably involved a transfer of funds from an account under the control of the DNI to the DHS. Funding for the Office of the DNI is not part of Homeland Security appropriations legislation but is provided in intelligence appropriations included in defense appropriations legislation. It is possible that this funding was provided in classified annexes of defense legislation that was not brought to the attention of the House Homeland Security Committee or to the Homeland Security Subcommittee of the Appropriations Committee. It became clear, however, that these actions had not been approved by the House Committee on Homeland Security, which has oversight jurisdiction over the DHS. The publication of media accounts of the establishment of the NAO in August 2007 took Members of the Committee by surprise. At a September 6, 2007, hearing on "Turning Spy Satellites on the Homeland: the Privacy and Civil Liberties Implications of the National Applications Office," Committee Chairman Representative Bennie Thompson complained about the absence of notification: There was no briefing, no hearing, no phone calls from anyone on [the DHS] staff to inform any member of this committee of why, how or when satellite imagery would be shared with police and sheriff's offices nationwide. This concern was shared by the ranking member, Representative Peter King. At the same hearing, witnesses from civil liberties organizations criticized "turning our nation's surveillance capabilities inwards upon our own population," and argued, "If spy satellites are to be deployed domestically, it is vital that the most rigorous checks and balances and oversight mechanisms be put in place." Although they had little criticism of using satellite data for mapping and disaster relief purposes, they expressed deep concern about the possibility of highly sophisticated technical systems being used on a wide scale by law enforcement agencies. Lisa Graves, the Deputy Director of the Center for National Security Studies, argued that deploying these extraordinary powers against people in the U.S. would fundamentally alter the relationship between the government and the governed. Calling this "Big brother in the sky" is modest given the array . . . that might be available multi-headed, medusa-like powers to monitor Americans encompassed by this array of arrays. The witnesses recommended that the committee investigate further and withhold funds until civil liberties issues are resolved. The principal DHS witness, Charles Allen, the Under Secretary for Intelligence and Analysis and a long-time intelligence official, defended the new office: National Technical Means (NTM)—such as overhead imagery from satellites—have been used for decades, lawfully and appropriately, to support a variety of domestic uses by the US government's scientific, law enforcement and security agencies. The NAO, when operational, will facilitate the use of remote sensing capabilities to support a wide variety of customers, many of whom previously have relied on ad hoc processes to access these intelligence capabilities. The NAO will provide not only a well-ordered, transparent process for its customers but also will ensure that full protection of civil rights, civil liberties and privacy are applied to the use of these remote sensing capabilities. The leadership of the Homeland Security Committee stated that we are gravely concerned by the Department's [DHS'] lack of progress in creating the appropriate legal and operational safeguards necessary for ensuring that military spy satellites do not become the "Big Brother in the Sky" that some in the privacy and civil liberties community have described. Accordingly, the Committee on Homeland Security, like the House Homeland Security Appropriations Subcommittee, have asked the Department [DHS] to provide a written legal framework for the NAO and the standard operating procedures (SOPs) under which it will operate in order to allow Members an opportunity to review the plans and suggest changes to ensure that the Constitutional rights of all Americans are protected. Concern was also expressed that the use of satellites to support law enforcement efforts might not be consistent with the Posse Comitatus Act of 1878, which precludes the use of military forces to execute domestic laws. Some observers argue, however, that although the Posse Comitatus statute applies to the uniformed services, they do not apply to DOD agencies providing information to civilian law enforcement agencies. According to media reports, in late September 2007, DHS delayed opening the NAO in order to provide congressional committees with more detailed information regarding NAO plans with special attention to civil liberties issues. In the interim, the CAC was to continue to respond to domestic needs. After several months of consideration, the Bush Administration was prepared to submit plans for the NAO to Congress. In testimony concerning the Intelligence, Information Sharing and Terrorism Risk Assessment of the House Homeland Security Committee on February 26, 2008, Charles Allen stated, "We're in the final process of having the charter [of the NAO] signed by the principals involved, the Secretary of Defense, the Attorney General, the Director of National Intelligence, and the Secretary of the Interior. We believe we have an agreed upon charter that will be very clear to you on permissible and impermissible uses of the National Applications Office.... We are very confident that we have privacy and civil rights and civil liberties fully protected." The Charter of the NAO was to establish a framework for addressing requests for IC support to domestic missions. The NAO was to "receive, evaluate, consolidate, and prioritize requests." It will, in addition, "conduct legal reviews of all requests for access to IC capabilities or archived data to determine whether such access is consistent with the U.S. Constitution and existing laws, policies, and procedures." Its goals included the promotion of information sharing and the protection of intelligence sources and methods, and the NAO is to advocate to the IC the budgetary implications of domestic missions. The Charter precluded any authority of the NAO to accept requests to use IC capabilities to intercept or acquire communications, including those covered by Title III of the Omnibus Safe Streets and Crime Control Act of 1968 or the Foreign Intelligence Surveillance Act (FISA). Such requests are to be referred to the Justice Department. The Charter also specified that no requests for IC support to law enforcement will be accepted until all associated legal, privacy, civil rights, civil liberties, and policy issues have been satisfied. According to the Charter, the NAO was to be overseen by the National Applications Executive Council (NAEC). The NAEC will be "tri-chaired" by the Deputy Secretary of Homeland Security, the Deputy Secretary of DOI, and the Principal Deputy of the DNI. It will be composed of senior-level agency representatives and their advisors. The NAO Charter also stated that All activities contemplated under this Charter will be conducted pursuant to the respective authorities and within the mission priorities of the individual Parties to this Charter. This Charter, in and of itself, does not result in transfer of legal authority, appropriated funds, or any other financial obligations among the Parties. It further stated that the Interior Department will provide, on a reimbursable basis, the initial facility for the NAO at the USGS Advanced Systems Center in Reston, VA, and that the DNI will provide National Intelligence Program (NIP) funding as appropriate. In June 2008, both the Subcommittee on Homeland Security of the House Appropriations Committee and the Senate Appropriations Committee included language in their homeland security appropriations bills for FY2009 to withhold authorization for NAO operations until DHS submits and the Government Accountability Office (GAO) reviews an explanation of the legality of NAO operations. Language to this effect was included in the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 ( P.L. 110-329 , Section 518), approved on September 30, 2008. On November 6, 2008, the GAO reported that despite having taken steps to comply with privacy standards and identifying civil liberties concerns with NAO operation, DHS "has not fully justified its certification that the NAO complies with applicable laws." The Obama Administration, taking office in January 2009, undertook a review of the NAO. On June 23, 2009, DHS Secretary Janet Napolitano announced her decision to end the NAO program maintaining that other programs "better meet the needs of law enforcement, protect the civil liberties and privacy of all Americans, and make our country more secure." Details on current arrangements for using information derived from intelligence satellites have not been made public. Members' concerns about the constitutionality of the National Applications Office were expressed not only in correspondence but are also reflected in statutory law. The Consolidated Appropriations Act, 2008 ( P.L. 110-161 , Division E, Section 525), signed by the President on December 26, 2007, provides that "none of the funds provided in this Act shall be available to commence operations of the National Applications Office ... until the Secretary certifies that these programs comply with all existing laws, including all applicable privacy and civil liberties standards, and that certification is reviewed by the Government Accountability Office." Although some argued that the NAO Charter would have delayed use of the IC capabilities for domestic law enforcement purposes until the legal issues were resolved, the leadership of the House Homeland Security Committee continued to express its concerns, noting that the NAO Charter had been drafted without any input from the Committee. In a letter of April 7, 2008, the Homeland Security Committee Chairman, Representative Thompson, joined by subcommittee chairpersons, Representatives Carney and Harman, indicated their opposition to the establishment of the NAO until the legal framework for supporting law enforcement efforts was established. They argued, "bifurcating the NAO into 'easy to do' domains and a 'hard to do' law enforcement domain is not an option." Observers see a number of legal issues involved in the use of satellite-derived information for law enforcement purposes, although discussion and analysis are complicated by the classified nature of satellite capabilities and operations and the absence of public information about ways that satellite-derived information could be used by law enforcement agencies. Most frequently, the proposed expansion of the use of satellite intelligence for domestic law enforcement purposes has been called into question on the basis of possible civil liberties implications, including concerns about privacy rights. Other commentators have also questioned whether the proposed surveillance would violate the Posse Comitatus Act, post-Civil War legislation that restricts the use of military forces for domestic law enforcement. A key consideration in this regard is the nature of the intelligence agencies that would be involved. The CIA is a civilian institution to which some military personnel on active duty are assigned. DHS is also a civilian department with both law enforcement and intelligence responsibilities. The NRO, which develops and operates satellites, and the NGA, which processes and analyzes the data collected, are components of DOD. Although the NRO is currently headed by a civilian, both agencies have sizable numbers of active duty military personnel assigned. Questions about the appropriate or lawful assignment of military personnel to functions that substantively support domestic law enforcement thus have particular relevance to the NGA and NRO. The following sections describe the state of the law regarding the application of Fourth Amendment analysis to satellite surveillance (not including electronic surveillance of communications ), as well as the current statutory framework regarding intelligence collection and military involvement in law enforcement. The Fourth Amendment provides that The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated; and no Warrants shall issue but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized. In general, the amendment prohibits the government from conducting unreasonable searches or seizures of "the people" and their property, in most cases (subject to a number of exceptions) requiring a warrant supported by a particularized description of the object of the search or seizure. The term "search" refers to a governmental infringement of an expectation of privacy that society is prepared to consider reasonable, that is, under circumstances where an individual reasonably expects that the privacy of his or her person, home, papers, or effects are protected from uninvited intrusion. A "seizure" occurs when there is meaningful governmental interference in a property interest or intentional detention of a person. Searches and seizures can involve intangible as well as tangible things. Government surveillance where there is no legitimate expectation of privacy does not amount to a "search" within the meaning of the Fourth Amendment and therefore carries no requirement for a warrant, probable cause, or even any semblance of reasonableness. A finding that surveillance does constitute a search leads to an analysis of whether it was conducted reasonably under the circumstances. All such analysis tends to be rather fact-intensive, and factors said to be important to the analysis frequently cut against each other. The circumstances under which satellite surveillance constitutes a search and, if so, whether it is reasonable, may depend on what information is collected from where, and how the collection is accomplished. Traditionally, government conduct that did not involve a physical trespass of an individual's person, home, papers, or effects did not constitute a "search" within the meaning of the Fourth Amendment. Surveillance that could be accomplished without entering the premises of the targeted individual was held not to implicate the Fourth Amendment at all. The emphasis on the trespass doctrine appeared to change in 1967 with the Supreme Court's decision in Katz v. United States , which held that the Fourth Amendment protected the petitioner's conversation intercepted through the use of an electronic device placed on the outside of a public phone booth. The amendment is now said to cover people rather than places, so that a person might have a legitimate expectation of privacy even in a public place. However, Katz also reinforced the "plain view" doctrine, which holds that a government official who merely observes (or smells, hears, or touches) something from a lawful vantage point does not conduct a "search." As Justice Harlan wrote: What a person knowingly exposes to the public, even in his own home or office, is not a subject of Fourth Amendment protection. But what he seeks to preserve as private, even in an area accessible to the public, may be constitutionally protected. Whether evidence can be considered to be in "plain view" of a lawfully present police officer who requires binoculars (or some other vision-enhancing technology) to view it appears to depend on whether the object is hidden and whether a court believes the equipment used to view it to be in common use, both of which are factors in assessing the legitimacy of a person's expectation to be free from such observation. That a person has taken normal precautions to maintain her privacy, that is, precautions customarily taken by those seeking to exclude others, is also a factor in determining legitimacy of expectation. Echoes of the trespass doctrine repudiated in Katz frequently reverberate throughout decisions regarding whether a given claim to an expectation of privacy is reasonable, for example, by determining whether a law enforcement officer was lawfully positioned to make a particular observation regarding the goings-on in or near a private home. Consequently, persons continue to have a greater expectation of privacy in the home than they have in public places. The curtilage of a private home receives greater protection than privately owned land used for business purposes. Under the "open field" doctrine, Fourth Amendment protection does not extend to activities that take place out of doors in an area beyond the curtilage of a home, despite efforts to maintain privacy and notwithstanding the fact that law enforcement officers had to commit trespass to come within viewing range, unless perhaps particularly sophisticated sensory enhancement technology is utilized. The Supreme Court has not addressed whether satellite imagery constitutes a search within the meaning of the Fourth Amendment. However, the Court has applied the expectation of privacy test to aerial surveillance to conclude that no search was conducted. In California v. Ciraolo , the Supreme Court determined 5-4 that the aerial observation from an altitude of 1,000 feet of a fenced-in backyard within the curtilage of a home, conducted without a warrant, did not constitute a search. The defendant was growing marijuana in a small garden plot in his backyard, protected by two fences from observation by casual passers by. That the marijuana could be seen from public navigable airspace without the use of sensory enhancement equipment defeated the defendant's claim to a reasonable expectation of privacy, even in the curtilage of his private home. On the same day that Ciraolo was handed down, the Supreme Court issued its 5-4 opinion in Dow Chemical Co. v. United States , which addressed aerial photography of an industrial compound from much greater heights (but still within navigable airspace) by government regulators using a specialized mapping camera. The surveillance here was likewise not a search, although the Court suggested that such surveillance might have been a search had it involved the curtilage of a private home or used less commonly available technology. The Court also suggested that imagery taken from a satellite might not be permissible: It may well be, as the Government concedes, that surveillance of private property by using highly sophisticated surveillance equipment not generally available to the public, such as satellite technology, might be constitutionally proscribed absent a warrant. The Court did not explain whether the use of equipment with capabilities identical to those of the mapping equipment at issue would be less reasonable if such equipment were mounted on a satellite rather than an aircraft. The infrequency of private space travel might be a factor tipping in favor of Fourth Amendment protection, given the Court's emphasis on the reasonableness of government officials' being at a vantage point where any member of the public might plausibly be. However, any emphasis in the aerial surveillance cases as to the observing officer's location in "public navigable airspace" should probably be read as a possible objection to the use of aircraft flying below navigable airspace, which would be more physically intrusive than ordinary aerial overflights and might well encroach on property interests. By contrast, satellites using passive surveillance technologies are arguably less physically intrusive, possibly making an expectation of privacy from them less reasonable. The Supreme Court addressed whether an observation made from a low-flying helicopter constituted a search in Florida v. Riley , a plurality concluding that it did not. At issue was the use of a police helicopter, hovering at 400 feet (an altitude prohibited for fixed-wing aircraft), to observe, through an opening in a greenhouse roof, marijuana growing inside. The plurality read Ciraolo as establishing that so long as there was no breach of the Federal Aviation Agency (FAA) safety regulations, the property owner had no legitimate reason to expect privacy with respect to non-intimate activities undertaken in the curtilage of his home that were plainly visible from above. Five justices would have preferred to consider how often members of the public actually make low-altitude helicopter flights over populated areas in determining whether the claimed expectation of privacy was reasonable. The plurality suggested that surveillance overflights that comply with FAA regulations might nevertheless constitute searches if they were to involve "undue noise, [] wind, dust, or threat of injury" or to reveal "intimate details connected with the use of the home or curtilage." The Supreme Court has not addressed whether the use of airborne surveillance equipment other than those involving standard photography (recording visible light) would implicate Fourth Amendment concerns. However, Kyllo v. United States strongly suggests such concerns would arise, at least if the surveillance targets a private dwelling. In Kyllo , a federal agent used infrared thermal imaging equipment to compare the heat emanating from a triplex unit to the heat signatures of other nearby residences. Based in part on the equipment reading indicating that the defendant's home was warmer than the others, the agent obtained a search warrant. Officers searched the home and seized marijuana plants growing inside. The government argued that the Fourth Amendment had no application, because the defendant had made no effort to conceal the heat escaping the walls of his home and had no reasonable expectation that passers-by would not take notice. The Supreme Court disagreed, 5-4, holding that the use of sense-enhancing technology not in general public use, in order to reveal details about the interior of a private home that could not otherwise be ascertained without entering the home, constitutes a search. The majority placed great emphasis on the fact that the technique was aimed at a private dwelling, yet it is not clear from the decision whether (or why) the use of such technology against a barn or private office should yield a different result. The threshold for determining when surveillance equipment can be said to have achieved usage common enough to upend the legitimacy of a resident's expectation of privacy was left unresolved. The dissent criticized the usage criterion as "somewhat perverse [as a guarantor of Fourth Amendment protection] because it seems likely that the threat to privacy will grow, rather than recede, as the use of intrusive equipment becomes more readily available." The secrecy shrouding satellite surveillance capabilities may amplify the difference between the average individual's subjective expectation of privacy and the real extent of their risk of observation by the government. The use of surveillance techniques that are so narrowly focused that they can only reveal unlawful activity or contraband may not constitute a search, at least when it takes place outside of a home and is not aimed at a person. In United States v. Place , the Supreme Court concluded that the use of a drug-sniffing dog to indicate the presence of narcotics in closed luggage was not a search because it "does not expose noncontraband items that otherwise would remain hidden from public view." Thus, satellite surveillance technology that would enable the government to uncover the presence of unlawful activity or contraband, and nothing more, might not constitute a search at all. Under Kyllo , however, technology that can reveal the presence of phenomena (like heat) that may form part of a "signature" associated with unlawful activity, but not the activity itself, would nevertheless constitute a search, at least if the signature emanates from a private dwelling. It is also unclear whether artificial means of limiting the information revealed by a sensor so that the operator has no way of identifying non-contraband would, by itself, make the use of such a sensor not a search. If a particular type of satellite surveillance is deemed to be a search within the meaning of the Fourth Amendment, it is permissible only if its conduct is reasonable. The "reasonableness" of a search is generally determined through a balancing test that weighs the degree to which the search intrudes upon an individual's legitimate expectation of privacy and the degree to which it is necessary for the promotion of legitimate governmental interests. Oftentimes, the reasonableness factor may be determined by the adequacy of the applicable warrant and whether the officer conducting the search complied with its terms; however, warrants are not required in each instance. In particular, warrantless searches may be reasonable if "exigent circumstances" would prevent the timely application for a warrant. There is also a "special needs" exception for warrantless searches not based on individualized suspicion, particularly when conducted for purposes other than ordinary law enforcement. For example, the government may conduct routine inspections, without warrant or suspicion, of persons and things crossing a U.S. border (or its functional equivalent), and remain within the reasonableness requirement of the Fourth Amendment. Although the Fourth Amendment does not state that its warrant requirement is limited to searches conducted in the context of criminal investigations, what is "reasonable" under those circumstances may differ from what may be deemed "reasonable" in circumstances where fewer liberty interests are arguably at stake. Many courts have found an exception to the warrant requirement for searches conducted primarily for foreign intelligence gathering purposes. Evidence of criminal activity discovered during these types of permissible warrantless searches may be used in criminal prosecutions. Warrantless satellite surveillance that falls unambiguously into a special needs exception can be conducted without a warrant subject to a test of its reasonableness, but may require a showing of probable cause in some cases. Courts frequently look to the statutory basis for government conduct as part of their inquiry into whether the investigation is a search to begin with or whether it was conducted reasonably. Consequently, the following statutory authorities, as well as any statutes Congress may choose to enact with respect to domestic satellite surveillance, may have a bearing on how courts treat the fruits of such surveillance. The following provides an overview of relevant intelligence authorities, in particular those affecting the Department of Defense. The primary authority for the NRO lies in the National Security Act of 1947, as amended, which provides that the DNI is responsible for providing timely and objective national intelligence "based upon all sources available to the intelligence community and other appropriate entities." The Secretary of Defense has significant authorities and responsibilities related to the collection of national intelligence, including the management of military intelligence satellites. The National Security Act expressly provides for the use of intelligence to assist law enforcement officials abroad : [E]lements of the intelligence community may, upon the request of a United States law enforcement agency, collect information outside the United States about individuals who are not United States persons. Such elements may collect such information notwithstanding that the law enforcement agency intends to use the information collected for purposes of a law enforcement investigation or counterintelligence investigation. DOD intelligence agencies, including the NRO, are subject to certain limitations when providing such assistance. 50 U.S.C. § 403-5a(b) provides that such assistance "may not include the direct participation of a member of the Army, Navy, Air Force, or Marine Corps in an arrest or similar activity" and may not be provided "if the provision of such assistance will adversely affect the military preparedness of the United States." The Secretary of Defense is required to establish regulations governing the provision of assistance to law enforcement agencies by DOD intelligence elements. There is no similar statutory authority (or restriction) regarding DOD's collection of imagery intelligence in support of law enforcement agencies within U.S. territory. By contrast, the National Security Act contains a law enforcement proviso prohibiting the Central Intelligence Agency from exercising law enforcement powers or internal security functions. Signals intelligence collection of targets within the United States is governed by the Foreign Intelligence Surveillance Act. The NGA has statutory authority to "design, develop, deploy, operate, and maintain systems related to the processing and dissemination of imagery intelligence and geospatial information that may be transferred to, accepted or used by, or used on behalf of" the armed forces and any other department or agency of the United States. In addition, the NGA has the statutorily prescribed mission of "support[ing] the geospatial intelligence requirements of the Department of State and other departments and agencies of the United States outside the Department of Defense." There is no direct authority for NGA to provide support to state or local law enforcement entities, except possibly during emergencies under the Stafford Act. The Director of National Intelligence (DNI) has the responsibility for establishing collection requirements and priorities by NGA. The National Security Act neither authorizes nor prohibits the use of intelligence for law enforcement purposes within the United States, but other statutes apply. Military personnel assigned to defense intelligence entities are subject to the Posse Comitatus Act, which provides that Whoever, except in cases and under circumstances expressly authorized by the Constitution or Act of Congress, willfully uses any part of the Army or the Air Force as a posse comitatus or otherwise to execute the laws shall be fined under this title or imprisoned not more than two years, or both. Questions regarding which activities violate the Posse Comitatus Act arise most often in the context of assistance to civilian police. At least in that context, the courts have held that, absent a recognized exception, the act is violated (1) when civilian law enforcement officials make "direct active use" of military investigators, (2) when the use of the military "pervades the activities" of the civilian officials, or (3) when the military is used so as to subject citizens to the exercise of military power that is "regulatory, prescriptive, or compulsory in nature." The act does not apply to the Navy or Marines and does not prohibit activities conducted for a military purpose that incidentally benefit civilian law enforcement bodies. Inside the United States (as well as abroad), DOD support for law enforcement agencies is authorized in accordance with chapter 18 of title 10, U.S. Code. The legislation contains both explicit grants of authority and restrictions on the use of that authority for DOD assistance to law enforcement agencies—federal, state, and local—particularly in the form of information and equipment. Section 371 specifically authorizes the Secretary of Defense to share information acquired during military operations, and encourages the armed forces to plan their activities with an eye to the production of incidental civilian benefits. Under sections 372 through 374, DOD equipment and facilities, including intelligence collection assets, may be made available to civilian authorities. DOD personnel are permitted to provide training and expert advice to civilian law enforcement personnel, and may conduct maintenance on equipment it provides. However, DOD personnel are expressly authorized to operate the DOD-provided equipment only in support of certain federal law enforcement operations, which include counter-terrorism operations, renditions of suspected terrorists from a foreign country to the United States to stand trial, and investigations involving violations of certain laws that control imports, exports, immigration, drug trafficking, and terrorism. DOD personnel are authorized to operate equipment for the purpose of, among other things, detection, monitoring, and communication of the movement of air and sea traffic, as well as surface traffic outside of the geographic boundary of the United States and within the United States not to exceed 25 miles of the boundary (if the initial detection occurred outside of the boundary), and "aerial reconnaissance." DOD equipment, facilities, and personnel may also be provided if necessary during emergency situations involving chemical or biological weapons of mass destruction. Permitted forms of assistance in such an event include the operation of equipment to "monitor, contain, disable, or dispose of the weapon involved or elements of the weapon." The authority granted in sections 371-382 is subject to three general caveats. It may not be used in any way that could undermine the military capability of the United States ; the civilian beneficiaries of military aid must pay for the assistance; and the Secretary of Defense must issue regulations to ensure that the authority of sections 371 to 382 does not "include or permit direct participation by a member of the Army, Navy, Air Force, or Marine Corps in a search, seizure, arrest, or other similar activity unless participation in such activity by such member is otherwise authorized by law." For the emergency provision of assistance in cases involving weapons of mass destruction, DOD and the Department of Justice (DOJ) regulations prohibit DOD personnel (including civilians) from making arrests and from directly participating in a search or seizure or the collection of intelligence for law enforcement purposes, unless the action is "considered necessary for the immediate protection of human life, and civilian law enforcement officials are not capable of taking the action" or the action is otherwise authorized by law. It appears that DOD initially presumed that the statutory term "search" in 10 U.S.C. § 375 was intended to be "coextensive with the same term in the Fourth Amendment," so that military assistance would be prohibited in connection with any law enforcement activities that constitute a "search" within the meaning of the Fourth Amendment. However, DOJ's Office of Legal Counsel disagreed, opining in 1991 that the use of military personnel to conduct aerial infrared monitoring of private property for law enforcement purposes is "aerial reconnaissance" authorized by 10 U.S.C. § 374(b)(2)(B), and is neither inconsistent with 10 U.S.C. § 375 (assistance may not involve military personnel in search, seizure or arrest) nor prohibited by the Posse Comitatus Act. To reach this conclusion, OLC relied on its interpretation of the legislative history of § 375 to find that Congress did not mean the term "search" to include all conduct that would constitute a search under the Fourth Amendment. Rather, OLC found, when Congress used the term "search" in section 375, it intended that the term encompass at most only searches involving physical contact with civilians or their property, and perhaps only searches involving physical contact that are likely to result in a direct confrontation between military personnel and civilians. The legislative history suggested to OLC that Congress had intended to codify certain court decisions interpreting the Posse Comitatus Act to have as its primary aim the prevention of any "direct confrontation between military personnel and civilians." It is evident from the legislative history of [10 U.S.C. §§ 371-375] that Congress intended to codify the distinction—articulated by the district court in United States v. Red Feather —between "indirect passive" assistance and "direct active" involvement in law enforcement activity. Under this analysis, participation of military personnel in satellite surveillance would not constitute a search or similar activity under 10 U.S.C. § 375 and thus would not violate the Posse Comitatus Act. On the other hand, whether the activity is authorized at all may depend on whether it constitutes "aerial reconnaissance" or another activity authorized under 10 U.S.C. §374 and whether it is conducted for one of the permissible missions. The question of the relevance of the Posse Comitatus Act and related statutes is complex and entwined with legislation adopted long before the possibility of satellite reconnaissance was contemplated. Congress has been willing in the past to permit military personnel to provide assistance to law enforcement officers but has reaffirmed the continued importance maintaining the separate roles of civil law enforcement authorities and the armed forces. Ultimately, the issue may depend on a shared understanding by the executive and legislative branches of the appropriateness of the use of satellite-derived information for domestic law enforcement purposes and an agreement on the limitations placed on such uses. Proper adherence to government regulations (not inconsistent with valid statutes or the Constitution) may also be a factor in determining whether an investigation was a search and whether it was conducted reasonably. E.O. 12333 augments statutory intelligence authority for the Secretary of Defense as well as relevant offices and agencies within the Department. The functions of the NGA are described in paragraph 1.7(e), and include the production and dissemination of geospatial intelligence information and data "for foreign intelligence and counterintelligence purposes to support national and departmental missions," as well as the provision of "geospatial intelligence support for national and departmental requirements and for the conduct of military operations." Assistance to law enforcement agencies is covered in paragraph 2.6 of E.O. 12333, which authorizes agencies within the Intelligence Community to participate in law enforcement activities to investigate or prevent clandestine intelligence activities, international terrorist activities, or narcotics trafficking activities. The order also permits the intelligence elements to provide specialized equipment, technical knowledge, or assistance of expert personnel for use by any department or agency, or, when lives are endangered, to support local law enforcement agencies. E.O. 12333 requires agencies within the Intelligence Community to use "the least intrusive collection techniques feasible within the United States or directed against United States persons abroad." Monitoring devices may be used only "in accordance with procedures established by the head of the agency concerned and approved by the Attorney General. Such procedures shall protect constitutional and other legal rights and limit use of such information to lawful governmental purposes." The Attorney General is delegated the authority to approve the use, within the United States or against a United States person abroad, of "any technique for which a warrant would be required if undertaken for law enforcement purposes, provided that such techniques shall not be undertaken unless the Attorney General has determined in each case that there is probable cause to believe that the technique is directed against a foreign power or an agent of a foreign power." DOD Directives (DODD) establish or describe policy, programs, and organizations; define missions; provide authority; and assign responsibilities. The directive governing DOD Intelligence Activities states that "[a]ll DoD intelligence and CI activities shall be carried out pursuant to the authorities and restrictions of the U.S. Constitution, applicable law, [E.O. 12333, and other DOD policies and procedures]," as well as "Presidential guidance concerning the authorities and responsibilities of the Director of National Intelligence (DNI)." It further notes that "special emphasis shall be given to the protection of the constitutional rights and privacy of U.S. persons." DODD 5240.1-R governs the intentional collection of foreign intelligence information about a U.S. person, permitting such collection only if the targeted person is "reasonably believed to be an officer or employee, or otherwise acting for or on behalf, of a foreign power; or is reasonably believed to be engaged or about to engage, in international terrorist or international narcotics activities"; or "is reasonably believed to be a prisoner of war; missing in action; or the target, the hostage, or victim of international terrorist organizations." In general, intelligence collection against U.S. persons requires a reasonable belief that the targeted person poses a threat or has knowledge relevant to a valid intelligence mission of the Department of Defense. Such collection must be carried out using the least intrusive means, which generally means that information should be collected from open sources or with the consent of the person concerned. If such collection is not feasible or sufficient, the information is to be collected from cooperating sources or through the use of other lawful investigative techniques, if necessary obtaining a judicial warrant or the approval of the Attorney General. However, unintentionally collected intelligence, or collection not targeting specific persons, is not subject to these restrictions. The directive specifically permits the collection of information from overhead reconnaissance that is not directed at specific U.S. persons. The Bush Administration indicated that the NAO activities it envisioned would comply fully with E.O. 12333 and other relevant statutes and regulations. Further, the NAO would "rely on existing, long-standing practice and procedures established by the Intelligence Community to ensure the appropriate protection of privacy and civil liberties," and were to be subject to multiple layers of oversight. Although mechanisms for using imagery and other data acquired by satellites for some domestic needs have been in existence since the 1970s without controversy, the possibility of using satellites to support law enforcement and homeland security missions has raised serious concerns among Members of Congress and individuals and groups concerned about the possibility of using intelligence resources as a weapon against U.S. persons. The complexities of congressional oversight of agencies with law enforcement and foreign intelligence missions along with widely circulated reports that Congress was not notified of new satellite missions contributed significantly to these concerns. The Bush Administration delayed the establishment of the NAO and provided an opportunity for further congressional consideration of the issues involved but took steps to establish the NAO for some purposes even before important legal issues were resolved. Having conducted a review of the issue, the Obama Administration terminated the NAO, but has not provided detailed information about current procedures for the domestic use of satellites for domestic purposes. | Reconnaissance satellites, first deployed in the early 1960s to peer into denied regions of the Soviet Union and other secretive enemy states, have from time to time been used by civilian agencies of the federal government to assist with mapping, disaster relief, and environmental concerns. These uses have been coordinated by the Civil Applications Office at the U.S. Geological Survey, a component of the Interior Department. Post 9/11, the Bush Administration sought to encourage use of satellite-derived data for homeland security and law enforcement purposes, in addition to the civil applications that have been supported for years. In 2007, it moved to transfer responsibility for coordinating civilian use of satellites to the Department of Homeland Security. The initiative was launched, however, apparently without notification of key congressional oversight committees. Members of Congress and outside groups raised concerns that using satellites for law enforcement purposes may infringe on the privacy and Fourth Amendment rights of U.S. persons. Other commentators questioned whether the proposed surveillance will violate the Posse Comitatus Act or other restrictions on military involvement in civilian law enforcement, or would otherwise exceed the statutory mandates of the agencies involved. Such concerns led Congress to preclude any funds in the Consolidated Appropriations Act, 2008 (H.R. 2764, P.L. 110-161), from being used to "commence operations of the National Applications Office ... until the Secretary [of the Department of Homeland Security] certifies that these programs comply with all existing laws, including all applicable privacy and civil liberties standards, and that certification is reviewed by the Government Accountability Office." (Section 525.) Similar language has been included in a subsequent Continuing Appropriations Act (P.L. 110-329) approved in September 2008. The Obama Administration conducted its assessment of the issue and terminated the NAO in June 2009, maintaining that there were better information sharing programs to meet the needs of state and local homeland security partners. Little public information is available concerning current policies for the use of satellite information for domestic purposes. This report provides background on the development of intelligence satellites and identifies the roles various agencies play in their management and use. Issues surrounding the current policy and proposed changes are discussed, including the findings of an Independent Study Group (ISG) with respect to the increased sharing of satellite intelligence data. There follows a discussion of legal considerations, including whether satellite reconnaissance might constitute a "search" within the meaning of the Fourth Amendment; an overview of statutory authorities, as well as restrictions that might apply; and a brief description of executive branch authorities and Department of Defense directives that might apply. The report concludes by discussing policy issues Congress may consider as it deliberates the potential advantages and pitfalls that may be encountered in expanding the role of satellite intelligence for homeland security purposes. |
Immigration policy has been an ongoing subject of congressional attention in recent years and a topic of concern for the U.S. public at large. Mexicans are by far the largest group of U.S. migrants, and about 1 in 10 Mexicans now live (legally or illegally) in the United States. Indeed, Mexico-U.S. migration represents the largest binational migration flow in the world. What does Mexico's prominence in the U.S. migration system mean for U.S. immigration policy? On one hand, it means that U.S. immigration policy, to varying degrees, primarily affects Mexicans and Mexico. Today's Mexico-U.S. migration flows and the Mexico-born population in the United States are the product of previous immigration policy decisions, as well as of the long and complex history of the U.S. and Mexican economies, labor markets, and demographics. On the other hand, it also means that Mexico remains at the center of today's immigration debate, even if sometimes only implicitly. Recognizing Mexico's status within the U.S. migration system focuses attention on how the U.S. immigration debate affects Mexico, and on how Mexico may affect certain migration outcomes. This report begins with an overview of Mexico-U.S. migration flows, and reviews the history of migration policies in both countries. The report then describes current demographics of Mexico-born persons in the United States and their recent dispersion to new U.S. destinations—factors that have helped shape the politics of U.S. immigration policy in recent years. The last section of the report discusses four major issues in the U.S. immigration debate: migration control and border security, the lawful permanent resident (LPR) visa system, temporary worker programs, and potential legalization programs for certain unauthorized aliens. For each of these issues, the report describes the impact of proposed reforms on Mexicans and raises questions about how Mexico may affect policy outcomes. Does Mexico support U.S. immigration policy goals? Should the United States and Mexico pursue more collaborative approaches to certain immigration issues? The report also examines a fifth, related policy issue: efforts to reduce emigration pressures within Mexico. Migration to the United States consists of three main groups of migrants: LPRs, temporary nonimmigrants, and unauthorized aliens. Within each of these categories, Mexicans represent the largest group of foreign born in the United States. Lawful permanent residents are foreign nationals who live lawfully and permanently in the United States, and they are typically eligible to apply for U.S. citizenship five years after receiving their visas. The Immigration and Nationality Act (INA) specifies a complex set of numerical limits and preference categories for permanent immigration reflecting the principles of family reunification, the admission of immigrants with needed skills, the protection of refugees, and diversity by country of origin. The INA prioritizes family-based immigration, making more than three times as many visas available in the family-based preference categories as in the employment-based categories. The INA does not set aside LPR visas for Mexico, but Mexicans are especially likely to take advantage of the law's family-friendly rules, with 122,686 Mexicans becoming LPRs as immediate relatives of U.S. citizens or family-sponsored immigrants in FY2010 (see Figure 1 ). Overall, 88% of Mexicans were admitted in one of the family categories in 2010, compared to 67% of all LPRs. The figures differ even more for the decade 2000-2009: 93% of Mexicans were family-based compared to 65% of all LPRs (see Appendix B ). Foreign nationals who are admitted to the United States for a temporary period of time and an expressed reason are known as nonimmigrants. There are 24 major nonimmigrant visa categories, commonly referred to by the letter and numeral that denotes their subsection in Section 101(a)(15) of the INA, including for example B-2 tourists, E-2 treaty investors, and F-1 foreign students. The nonimmigrant visa categories authorizing employment include the H-2A visa for agricultural guest workers, the H-2B visa for other lower-skilled seasonal or intermittent workers, the H-1B visa for temporary professional workers, the J-1 cultural exchange visa, the E visa for treaty traders and treaty investors, and the L visa for intra-company transferees. Temporary professional workers from Canada and Mexico also may enter under terms set by the North American Free Trade Agreement (NAFTA) on NAFTA professional (TN) visas. Mexico was the top sending county of temporary nonimmigrants in FY2010, making up 27.8% of all such entries. Aside from tourists and business visitors, the large majority of Mexican nonimmigrants enter as H-2A or H-2B low-skilled workers (see Figure 2 ). Mexico was one of 58 countries eligible to send H-2A and H-2B nonimmigrants (as of January 2012), and Mexicans accounted for 82.9% of such low-skilled nonimmigrant visas issued in 2010. Mexicans represent a small proportion of other legal nonimmigrants (also see Appendix C ). About 11.4 million unauthorized aliens from various countries were estimated to be in the United States in 2010, down from about 12.1 million in 2007. Between one-half and two-thirds of unauthorized aliens enter without inspection (by crossing the border between ports of entry or being smuggled through a port) or enter illegally by using fraudulent documents. The remainder enter legally as nonimmigrants but then remain past the visa expiration date (becoming visa overstayers) or otherwise violate the terms of their nonimmigrant visa. Of the 11.4 million, an estimated 6.7 million unauthorized Mexicans resided in the United States in 2010, meaning about 59% of the unauthorized population was from Mexico (see " Legal Status "). In recent years, the George W. Bush and Barack Obama Administrations, along with some Members of Congress, have favored "comprehensive immigration reform" (CIR) packages that would include reforms to the LPR and nonimmigrant visa systems to expand legal inflows, legalization for certain unauthorized aliens, and new migration control measures. Congress has considered a number of CIR bills and related proposals during this period, but none have been signed into law. Thus, legislative and administrative action during the last decade mainly has focused on new enforcement measures at the U.S.-Mexican border and within the United States; and a record number of unauthorized aliens have been removed in each year since 2003, with Mexicans accounting for almost three-quarters of all removals (see " Immigration Enforcement and Border Security "). This section describes how social, economic, and demographic factors in Mexico and the United States along with migration-related policies in both countries have produced four phases in the regional migration system: limited seasonal flows prior to World War II, the Bracero temporary worker program from 1942 to 1964, the emergence of a predominantly illegal system from 1965 through the 1980s, and the consolidation of that system along with increased family-based immigration since the 1990s. While seasonal migration by Mexican agricultural workers dates back to the 19 th century—and while most of California, Arizona, New Mexico, Texas, Nevada, Colorado, and Utah once belonged to Spain and later Mexico—large-scale permanent immigration from Mexico to the United States is a recent phenomenon, as Figure 3 illustrates. Mexican LPR immigrants exceeded 1 million in a decade for the first time in the 1980s (the darker bars in Figure 3 ) and Mexicans accounted for more than 15% of total LPR inflows for the first time in the 1990s (the line in Figure 3 ). The lighter bars in Figure 3 depict U.S. census data on the total Mexican-born population living in the United States, which include legal immigrants, temporary nonimmigrants, and unauthorized migrants. As the figure illustrates, fewer than 1 million Mexicans lived in the United States as recently as 1970. All of these Mexican migration and population trends increased markedly beginning around the 1970s, however, with legal immigration (LPR inflows) and the total Mexico-born population living in the United States both roughly doubling during each decade beginning in 1970. Even as growth rates slowed after 2000, the Mexico-born population in the United States climbed to 11.5 million people by 2009. In contrast with earlier periods, in which the migration system was dominated by short-term, seasonal, migration for agricultural work in the U.S. Southwest, Mexican migrants in the United States today are equally divided by gender; most live permanently in the United States; they work overwhelmingly in non-agricultural occupations (see Table 3 ); and they are dispersed throughout the entire country (see Figure 6 ). What explains the shift from relatively low immigration levels for the first two-thirds of the 20 th century to the rapid growth of Mexican migration since 1970? International migration is primarily a function of structural demographic, economic, and social forces. High birth rates and limited economic opportunities have been "push factors" that encouraged emigration from Mexico for most of this period; and plentiful employment opportunities, connections to family networks, and an aging population have been "pulls factors" within the United States—though all of these push and pull factors are in flux. How these structural forces translate into migration outcomes also depends on migration-related policies in both countries that encourage or discourage international migration and that afford aliens different legal statuses. Push and pull factors propelling Mexico-U.S. migration were relatively limited in the early 20 th century. Transportation and social networks linking Mexicans to the United States were poorly developed, and migrant farm workers had limited access to labor markets beyond the four southwest border states. Violence and economic dislocation during the Mexican Revolution (1910-1920) resulted in additional migration, but also created opportunities within Mexico during the 1920s. U.S. demand for migrant workers plunged during the Great Depression as unemployment rates climbed to 25% in 1933, and remained above 15% until 1940. With limited push-pull factors, agricultural employers lobbied to exempt Mexicans from tough overall immigration restrictions passed in 1917. Over the objection of labor advocates, Congress created the first U.S. guest worker program, allowing Mexican nonimmigrant admissions between 1917 and 1920, and then exempted Mexicans and other Western Hemisphere migrants from per-country immigration limits imposed on the rest of the world beginning in 1921. U.S. migration policy swung the other way in 1929, when tighter screening criteria for Mexican visa applicants produced a 75% reduction in LPR admissions. Hundreds of thousands of Mexicans and their U.S.-born children returned to Mexico during the Great Depression, including many who were deported. Mexico also discouraged emigration (i.e., migration to the United States) during this period, with a 1926 law requiring exiting workers to obtain permission from municipal authorities, and a series of public relations campaigns to discourage outflows and support return migration. As a result, the 1930s were the only decade in which net migration in the region flowed north to south. As the United States mobilized for World War II, agricultural employers demanded increased labor; but after a decade of limited inflows they struggled to recruit Mexican workers. Mexican officials continued to oppose new emigration, which they viewed as a drain on Mexican resources and—based on the experiences of earlier migrants—as a threat to workers' rights. U.S. officials viewed immigration through the lens of the war effort, including the need to strengthen U.S.-Mexican relations, and were deferential to Mexican concerns. Thus, the Franklin D. Roosevelt Administration initiated negotiations with Mexico for a bilateral guest worker program, which became known as the Bracero program (from the Spanish term for laborer). Under the resulting treaty, Mexican workers were guaranteed a minimum wage (unlike U.S. farm workers), health benefits, housing, and transportation expenses. The United States suspended the bilateral program in 1948, partly over objections to its labor-friendly provisions, but resumed it in 1951 when the Korean War prompted new fears of labor shortages. After the war, the United States demanded changes that weakened the program's labor protections. The Bracero program had a lasting impact on the Mexico-U.S. migration system. With nearly 50,000 farms employing more than 400,000 Mexicans a year at the program's peak in the late 1950s, strong constituencies on both sides of the border grew to favor labor flows. Both governments supported the program, including by developing a transportation infrastructure to move agricultural workers from the Mexican interior to the border region and beyond. The mid-1960s marked the beginning of the modern era of regional migration and the shift from a system of mostly temporary agricultural migration to one characterized by longer-term resettlement, greater geographic and labor market diversity, and a growing volume of flows. The Bracero program had issued 4.6 million visas by 1964, and so helped spark the transformation by fostering a new generation of migration-oriented Mexican workers, U.S. employers, and transnational labor recruiters. In its aftermath, a variety of national and global forces combined to hold down wages and to expand low-skilled employment opportunities in the United States, factors which created increased migration pulls. At the same time, high fertility rates in Mexico combined with an agricultural privatization program produced high levels of agricultural dislocation, rural-urban migration, and new job seekers in Mexico—factors which together resulted in stronger migration pushes as well. With the end of the Bracero program, these stronger migration pushes and pulls coincided with fewer legal pathways for Mexican workers to enter the United States. Although Mexicans were eligible for H-2 temporary worker visas, the Department of Labor rejected many H-2 petitions in an effort to protect U.S. workers, and few employers used the program. The watershed 1965 amendments to the INA (P.L. 89-236) imposed the first numeric limits on Western Hemisphere immigration and prohibited unskilled seasonal/temporary workers from receiving employment-based LPR visas, a provision that mainly affected migrants from Mexico. The 1965 amendments also increased the priority of visas for family-based LPRs, which became the main pathway for legal immigration from Mexico (see Figure 4 ). The convergence of growing migration push and pull factors and shrinking opportunities for legal low-skilled migration increased illegal migration from Mexico. The number of unauthorized aliens apprehended grew three-fold between 1965 and 1970, and the proportion of such aliens from Mexico increased from 50% to 80%. The imposition of numeric limits on permanent immigration produced a backlog of roughly 300,000 Mexican visa applicants by 1976, resulting in a two-and-a-half year wait for visas for qualified applicants. By 1979, an estimated 1.7 million unauthorized aliens resided in the United States, including 1.4 million from Mexico. The House Committee on the Judiciary held a series of hearings on illegal migration beginning in 1971, and both chambers considered bills during the 1970s to discourage illegal immigration by penalizing employers of illegal aliens, among other proposals. Congress examined the issue for 15 years and then passed the Immigration Reform and Control Act of 1986 (IRCA, P.L. 99-603 ), which combined employer sanctions with a pair of legalization programs for certain unauthorized aliens and a 50% increase in border patrol staffing, among other provisions. A total of about 2.6 million people eventually were legalized through IRCA, including about 2.1 million Mexican migrants (81%, see Figure 4 ). Push and pull factors on both sides of the border remained strong in the quarter-century after IRCA. Globalization exerted downward pressure on U.S. wages and the continued shift to lower-skilled production, driving up demand for foreign workers in new types of occupations and in regions far away from the U.S.-Mexican border. Mexico enjoyed periods of rapid economic development, but employment creation did not keep pace with population growth as children born during Mexico's baby boom of the 1960s and 1970s entered the workforce during the 1980s and 1990s; and many Mexicans continued to see emigration as the most viable path to higher wages. By the 1990s, social scientists described U.S. employers and Mexican workers as "structurally dependent" on migration, meaning that migration had become a core feature of the regional labor market, regardless of cyclical wage and employment trends. Congress responded to these trends by passing four additional laws focused on illegal migration in the decade after the 1986 IRCA, authorizing additional investments in border security, restricting migrants' access to welfare and other public benefits, and streamlining procedures to remove unauthorized aliens. Border enforcement and migration control received additional attention after the 9/11 attacks, with Congress passing five more laws related to immigration control in 2002-2006. Overall, U.S. spending on migration control and related activities increased from about $1.2 billion in 1986 to about $17.4 billion in FY2012. At the same time, immigration reforms sought to reduce low-skilled employment-based inflows. The Immigration Act of 1990 ( P.L. 101-649 ) and the Nicaraguan Adjustment and Central American Relief Act ( P.L. 105-100 , Title II) reduced the total number of low-skilled LPR visas from 29,000 to 5,000 per year. IRCA provided for an unlimited number of temporary agricultural workers through the H-2A visa program, but many employers considered the program too cumbersome to use, and fewer than 10,000 H-2A workers were admitted per year prior to the mid-1990s. The 1990 Immigration Act also reaffirmed the commitment to family reunification as the chief goal of U.S. immigration policy, and immigrants from Mexico have been the top beneficiaries of this policy. Section 101 of P.L. 101-649 raised the numerical limits on family-sponsored immigration by establishing an annual floor of at least 226,000 immigrants to be admitted within these categories. Section 102 exempted the spouses and children of LPRs ("second preference immigrants") from the INA's 7% per-country ceiling, a provision that mainly benefits Mexicans since few other countries approach the 7% limit, and Mexico is the only such country with a large number of second preference immigrants. And Section 112 set a special allotment of 55,000 visas each year from FY1992 through FY1994 for spouses and children of LPRs who had legalized through IRCA. Thus, during the first decade the 1990 act was in effect, Mexicans made up 37% of all second preference spouses and children and 70.5% of all spouses and minor children of LPRs who had legalized through IRCA. Overall, 52% of all second preference spouses and children of LPRs admitted during FY2000-FY2009 came from Mexico. Mexico lacked a cohesive migration policy for most of the post-Bracero period, and successive Mexican governments expressed little public concern about the number of Mexican citizens leaving for the United States without proper documents, often at great personal risk. Beginning in the late 1990s, however, increasing migrant deaths along the U.S.-Mexico border, the precarious situation of unauthorized Mexican migrants in the United States, and attention to human rights abuses of Central Americans in Mexico led the Mexican government to take a more active approach to migration issues, including by reforming its own migration policy and by engaging with the United States about U.S. immigration policy. The Administration of Mexican President Felipe Calderón and the Mexican Congress have taken significant steps to overhaul Mexico's migration policies. Previously, Mexico's immigration law, the General Population Act (GPA) of 1974, limited legal immigration and restricted the rights of foreigners in Mexico, with unauthorized migrants subject to criminal penalties. In 2008, the Mexican Congress reformed the GPA to decriminalize simple migration offenses, making unauthorized migrants subject to fines and deportation, but no longer subject to imprisonment. That year the Calderón government also announced a new strategy and authorized more than $200 million in new investments to improve security conditions, modernize customs and immigration facilities, and promote development in Mexico's southern border region (also see " Reducing Unauthorized Emigration from Mexico "). In 2010, Mexico passed a law increasing penalties for alien smuggling, particularly abuses committed by public officials. Mexico's recent migratory reform efforts likely hinge on how well the government implements a new version of the GPA that was unanimously approved by the Mexican Congress and signed by President Calderón in May 2011. Some of the main objectives of the law are (1) to guarantee the rights and protection of all migrants in Mexico; (2) to simplify Mexican immigration law in order to facilitate legal immigration; (3) to establish the principles of family reunification and humanitarian protection as key elements of the country's immigration policy; and (4) to concentrate immigration enforcement authority within the federal Interior Ministry in order to improve migration management and reduce abuses of migrants by public officials. The law guarantees that all migrants have access to education, justice, and healthcare services, and limits the time that unauthorized migrants may be held in detention centers to 15 working days. The law also gives legal status to special government "Beta Groups" that assist migrants in distress and establishes special procedures for how children and other vulnerable groups should be treated. Since the regulations for the new law are still being developed, its implications are not yet known. Despite U.S. enforcement efforts after 1986, Mexico-U.S. migration increased steadily in the 25 years after IRCA, with the total Mexico-born population growing from about 2.8 million in 1979 to about 11.5 million in 2009. Unauthorized migrants accounted for about 60% of the increase. Yet Mexican migration flows have declined since 2006, and recent data from multiple sources show a net rate of unauthorized migration fluctuating near zero, with some evidence that more Mexicans are leaving the United States than arriving, particularly unauthorized Mexicans. Researchers attribute this decline to the U.S. recession, stepped-up U.S. border security and interior enforcement, increasing abuses of migrants by smugglers and transnational criminal organizations, and expanding job opportunities in Mexico, among other factors. Some researchers also have found evidence that the high cost of crossing the border has encouraged some unauthorized migrants to remain in the United States for longer periods of time rather than returning to Mexico on a seasonal basis. In addition to these short-term factors, lower Mexican emigration rates also may be a function of long-term demographic trends, as Mexico's fertility rate has fallen from an average of 7.2 children per woman in 1960 to about 2.2 today. Thus, while emigration from Mexico may increase with U.S. economic growth, some analysts doubt that future flows will reach the high levels observed in recent years because many fewer Mexicans will enter the workforce and because Mexico is becoming an increasingly middle-class country. While total emigration flows have declined, there is some evidence of increased emigration by middle and upper class Mexicans, particularly from northern Mexico, in response to drug trafficking-related violence. One study in December 2010 estimated that 230,000 Mexicans had been displaced by violence, and that roughly half of them had moved to the United States. Media reports indicate that some Mexicans who feared that they could be victims of the violence have sought asylum in the United States. CRS analyzed several data sources that could reflect increased flows by people fleeing violence in Mexico and found ambiguous results. U.S. asylum and nonimmigrant visa data do not show increasing Mexican inflows in these categories between FY2005 (the year before the recent surge in trafficking-related violence) and FY2010. Yet there is some evidence of a growing number of "credible fear" claims during this period and of a higher approval rate for such claims, with most of the increase occurring in FY2010. Some middle and upper class Mexicans also may be entering through other legal channels not reflected in these data, including as LPRs. Another development that could cause an uptick in Mexico-U.S. migration is a severe drought that began in May 2011 and now affects more than half of Mexico. Subsistence farmers and indigenous communities in northern Mexico have been particularly hard hit, with 200,000 people reportedly fleeing their homes for feeding centers. Mexico has set aside $2.5 billion for drought relief, but it is not yet known whether the aid will prevent additional displacement from affected areas, or whether internal displacement will lead to international migration. The Mexico-born population in the United States accounted for about 29% of the total U.S. foreign-born population of 39.9 million in 2010. Recent foreign-born population growth has occurred as native-born population fertility levels have declined and the median age of the U.S. population has increased. Thus, while the foreign born represented 12.9% of the total U.S. population in 2010, they accounted for roughly 32% of total U.S. population growth since 2000, and almost all growth in the 25- to 54-year-old population. Partly for this reason, the foreign born are disproportionately likely to be in the labor force: 25.5 million foreign-born workers represented 16.3% of the civilian labor force in 2010; and 7.8 million Mexico-born workers represented 29% of the foreign-born labor force and 5% of the total U.S. labor force. Mexican migration to the United States has attracted the attention of Congress and the public not only because of its scale, but also because the Mexico-born population in the United States possess a different socioeconomic profile from most other foreign-born groups. On average, the Mexican born in the United States are more likely than other foreign born to be unauthorized; and compared to other foreign-born and native-born populations in the United States, Mexicans are younger, have lower education levels, are more likely to work in lower-skilled occupations, and have lower measures of economic well-being. Recent changes in the geography of Mexican migration to the United States have directed additional attention to these issues (see " Geographic Dispersion "). With respect to their legal status, the foreign born fall into three broad groups: naturalized citizens, legal noncitizens (which includes permanent and temporary residents), and unauthorized aliens. Table 1 shows that the legal profile of those born in Mexico differs markedly from that of the rest of the foreign-born population. While the majority (52%) of all foreign born are naturalized citizens, the majority of the Mexican born (55%) are unauthorized. Thus, Mexicans accounted for an estimated 6.5 million of the 11.2 million unauthorized aliens estimated to be living in the United States in 2010, or 58% of the total number of unauthorized aliens in the United States. Mexicans also differ from most other foreign born and U.S. born in their age distribution, which may have important economic implications. While about 24% of native-born citizens fall within the prime 25-44 working-age cohort, this proportion rises to 38% for foreign-born persons from countries other than Mexico and 50% for the Mexican born (see Figure 5 ). Mexicans' prime-age bulge is associated with small populations at both ends of the age scale: just 6% of Mexicans are older than 64 (compared to 13% of natives and 14% of other foreign born); and just 8% of Mexicans are younger than 18 (compared to 8% of other foreign born and 27% of natives). Differences at the low end of the age range mainly reflect high fertility among first generation immigrants and the relative youth of many second generation immigrants. The large proportion of the native-born population under age 18 is also a function of the children born to the large post-World War II "baby-boom" generation that is between the ages of 47 and 65 in 2012. Education is a critical yardstick by which immigrants are often measured and immigration policies evaluated; and higher education levels correlate positively with labor market participation, higher incomes, and other measures of well-being. Mexicans born in the United States possess lower average levels of education than most other migrants, with 60% lacking a high school diploma, compared to 20% for all other foreign born and 11% for the native-born population (see Table 2 ). At the other end of the education spectrum, just 6% of the Mexican born have at least a four-year college degree compared with 36% for all other foreign born and 28% for native born, though an increasing proportion of Mexicans have obtained bachelor's degrees in recent years (see " High-Skilled Mexican Migration "). Similar differences between the Mexican born and other foreign born exist with respect to English language proficiency (see Table 2 ), another factor associated with positive labor market outcomes and social and cultural integration. Only half of the Mexican born describe their English speaking ability as proficient compared to more than four-fifths of other foreign-born persons. English proficiency is much higher (72%) among Mexicans younger than age 25 (as well as other migrants, 90%), largely as a result of being enrolled in U.S. schools. Legal status, age, educational attainment, and English proficiency all contribute to economic outcomes such as occupational attainment. Table 3 presents a broad occupational distribution for Mexicans, other foreign born, and U.S. natives. The Mexico-born labor force is concentrated in industries characterized by low-skilled employment, such as construction, cleaning, food preparation, and agriculture. In contrast, all other foreign born have similar distributions as the native born and are more concentrated in sales, business, and scientific occupations. Type of occupation correlates with economic well-being. Table 4 shows that the Mexican born have lower median personal incomes, greater poverty, smaller proportions covered by health insurance, and fewer people owning their own homes. In contrast, all other foreign born resemble the native born relatively closely on the first three measures, and have a proportion of homeowners (58%) roughly midway between the Mexican born (46%) and the native born (69%). In summary, the Mexican born residing in the United States possess a distinct demographic profile compared to most other foreign born: they are more likely to lack legal status (55% compared to 17%), to be of prime working age (50% compared to 38%), and to lack a high school diploma (60% compared to 20%) and English proficiency (51% compared to 80%). This profile helps explain why the Mexican born concentrate more heavily in lower-skilled, lower-paid occupations and measure lower on key indicators of economic well-being. The contrasting profiles between the Mexican born, other foreign born, and native born have contributed to debates about the size and character of immigration flows. Mexican migration has also attracted attention in recent years because of the geographic dispersion of Mexican migrants to new U.S. regions and destinations, increasing the visibility of Mexican migration beyond traditional southwestern and selected urban settlement areas. As Figure 6 illustrates, states in the Southwest have the highest proportion of Mexican born, but states in the South and Midwest have experienced the greatest proportional increases in their Mexico-born populations over the past two decades (see Appendix A for greater detail). Several states and localities with high levels of Mexican migration and/or rapid growth of Mexican migration have passed immigration-related legislation in recent years. Immigration policy has been a subject of congressional concern over many decades. Since 2001, Congress has considered a range of measures to strengthen border security and migration control, changes to the LPR and nonimmigrant visa systems, and proposals to legalize certain unauthorized aliens, among other issues. Mexico's status as the largest source of U.S. migrants and as a continental neighbor means that many U.S. policies primarily affect Mexicans. Viewing the immigration debate from a U.S.-Mexico perspective raises a number of questions about each of these issues, including about Mexico's role in shaping U.S. migration flows and steps Mexico has taken and could take to reduce unauthorized migration. The United States and Mexico have several common interests in a well-functioning migration system. First and foremost, both countries benefit from a secure border that permits safe and orderly migration and commerce, limits illegal flows, protects public safety and human rights, and disrupts criminal enterprises. Second, with Mexico being the United States' third-largest trading partner in 2012 and migrant remittances being among Mexico's largest sources of foreign exchange earnings, regional migration issues are inextricably linked to both countries' economic well-being. Third, both countries have benefitted from demographic complementarities, with Mexico's post-1960 baby boom helping to sustain U.S. population growth in recent decades as the U.S. population has aged. These common interests have, at times, led the United States and Mexico to approach migration from a bilateral perspective, as they did through the Bracero program (see " 1942-1964: The Bracero Program "). More recently, President George W. Bush and Mexican President Vicente Fox reached a framework agreement to pursue a major bilateral migration deal. Under the agreement, announced on September 6, 2001, the two presidents outlined a bilateral approach to migration reform that would combine a new Mexico-U.S. guest worker program, legalization for most unauthorized Mexican migrants in the United States, enhanced border enforcement including steps by Mexico to discourage illegal outflows, and increased U.S. investment to create alternatives to emigration in Mexican migrant-sending communities. Although the migration talks fell off the bilateral agenda after the 9/11 attacks, the pillars of the framework agreement remained at the center of the U.S. immigration debate. At the same time, migration has also been a source of bilateral tension. Some people are concerned about the impact of low-skilled immigration on the U.S. economy and about illegal migration, and many Mexican migrants fall into these categories (see " Mexicans in the United States "). Conversely, while Mexico recognizes U.S. authority to make and enforce immigration laws—just as Mexico enforces its own migration laws—Mexico also seeks to protect the rights of its nationals abroad. This perspective has led to episodic disagreements over U.S. immigration policy and policy enforcement. Immigration enforcement and border security are at the heart of the immigration debate, including questions about how to prevent or deter illegal migration across the U.S.-Mexican border and the removal of unauthorized migrants and certain other aliens from within the United States. Under an internal INS planning document developed in 1994 and a U.S. Border Patrol national plan published in 2005, U.S. border enforcement during the last two decades has been organized around a strategy of "prevention through deterrence," an approach that places enhanced personnel, fencing, and surveillance technology along heavily trafficked stretches of the border. The border patrol's strategy has been designed to discourage aliens from entering the United States at traditional illegal crossing points and to funnel illegal crossers to ports of entry (POEs), where they are subject to inspection by U.S. Customs and Border Protection (CBP) officers, or to remote areas, where difficult terrain and the absence of a transportation infrastructure give border patrol agents a tactical advantage in apprehending illegal crossers. This approach has resulted in substantial enforcement resources at the U.S.-Mexican border. Since the strategy was initiated beginning in FY1994 through FY2011, the number of border patrol agents posted on the Southwest border has increased from 3,747 to 18,506; the United States has installed fencing along 651 miles of the border; and over $1 billion has been spent to develop an integrated border surveillance system, with mixed results. In addition, Presidents George W. Bush and Obama both ordered National Guard troops to be deployed to the U.S.-Mexican border, and six unmanned aircraft systems now operate there. Since 2005, a second key feature of border enforcement has been a policy CBP describes as its "consequence delivery system." Whereas immigration agents historically returned most aliens apprehended at the U.S.-Mexican border to Mexico with minimal processing, an increasing proportion of such aliens now are subject to formal removal, face immigration-related criminal charges, or are repatriated to Mexico at a remote location rather than the nearest POE (also see " Efforts to Reduce Illegal Migrant Recidivism "). The goal of these enhanced consequences is to raise the costs to aliens of being apprehended and to make it more difficult for them to reconnect with smugglers in Mexico following a failed entry attempt. The United States also conducts interior immigration enforcement, with U.S. Customs and Immigration Enforcement (ICE) taking the lead on efforts to identify, detain, and remove unauthorized migrants and certain other aliens from within the United States. Certain U.S. states and localities also have passed migration control measures of their own, though the Obama Administration has filed suit to block several such laws, with Mexico filing amicus curiae (friend of the court) briefs in some of the cases. The Supreme Court is expected to rule on the constitutionality of key state immigration enforcement measures in 2012. As Figure 7 illustrates, Mexicans account for the vast majority of deportable and removable aliens apprehended since 1991 (the orange bars in the figure): 427,940 out of 516,992 aliens apprehended in FY2010 (83%), and 23.1 million out of 24.8 million apprehended overall during this period (93%). Similarly, Mexicans accounted for 282,003 out of 387,242 aliens formally removed in FY2012 (73%, the blue bars in the figure) and 2.7 million out of 3.7 million aliens formally removed overall during this period (72%)—even higher proportions than their estimated share of unauthorized migrants within the United States. The United States has invested considerable resources in personnel, fencing, and other border enforcement tools over the last two decades. By some measures, these investments may have begun to have paid off, as apprehensions of unauthorized migrants reached a 42-year low in 2011 and crime rates in U.S. border cities were below the national average. Thus, the Obama Administration has described the border as more secure than ever, and the Administration has proposed no major increases in border spending for FY2012-FY2013. Similarly, while U.S. Border Patrol (USBP) national strategies published in 1996 and 2004 proposed substantial new investments at the border, its forthcoming strategic plan mainly proposes, instead, to reallocate existing resources along the border in response to changing threats. Yet some people question whether the border is truly secure, especially in light of high rates of drug trafficking-related violence on the Mexican side of the border. The recent drop in apprehensions may primarily reflect changing push-pull factors, including the U.S. economic downturn, robust economic growth in Mexico, and Mexico's lower birthrate, rather than successful border enforcement. Will unauthorized migration increase as the U.S. economy recovers or if Mexico experiences a downturn of its own? In light of these concerns, some Members of Congress have called for greater investments in border fencing and personnel, including a greater role for the National Guard in border enforcement. Questions about how to enforce the border have additional implications when viewed from a bilateral perspective. Border fencing and the U.S. policy of prevention through deterrence have been controversial in Mexico because some people believe that enhanced border enforcement has resulted in a rising death toll among unauthorized border crossers, because of the negative symbolism of a "border wall," and because of the effects of fencing and surveillance infrastructure on the sensitive border ecosystem. Enhanced enforcement also may have contributed to higher fees charged by Mexican smugglers and to stronger connections between human trafficking and other types of smuggling, though the relationship between migration, crime, and violence is complex, and the impact of migration enforcement on these factors is unknown. Given the large number of unauthorized Mexicans in the United States, some people believe that Mexico bears some responsibility for illegal flows and should play a greater role in migration control. Mexico currently supports U.S. migration enforcement in two main ways. First, Mexico's National Migration Institute (INM) within the Secretariat of the Interior combats transmigration by unauthorized migrants crossing Mexico bound for the United States. As Figure 8 indicates, the estimated number of illegal Central American transmigrants increased from about 236,000 in 2000 to a high point of about 433,000 in 2005 before falling back to about 140,000 in 2010. INM detained and deported slightly more than half of these migrants between 2001 and 2010. Second, Mexican and U.S. law enforcement agencies collaborate to combat alien smuggling and human trafficking, along with other transnational criminal activities. CBP's International Liaison Unit (ILU) maintains regular contact with Mexican law enforcement agencies to share information about border area crime and to coordinate responses when agents confront border-area violence. U.S. Border Patrol sector chiefs and Mexican Interior Ministry officers co-chair monthly meetings among border-area law enforcement agencies. U.S. and Mexican law enforcement agencies cooperate through the ICE Border Enforcement Security Task Force (BEST) program, initiated in 2006 to combat drug and human smuggling. ICE's Transnational Criminal Investigative Unit in Mexico City works with Mexican Federal Police and Customs Officials to combat high-risk human smuggling. U.S. and Mexican law enforcement agencies also collaborate to prosecute smugglers through the Operation Against Smuggling Initiative on Safety and Security (OASISS), a bilateral program that enables Mexican alien smugglers apprehended in the United States to be prosecuted in Mexico. From the time of its inception in 2005 through the end of FY2011, OASISS referred 2,617 cases to Mexican authorities. Mexican and bilateral investigations and prosecutions against human trafficking have intensified since Mexico reformed its federal criminal procedure code to criminalize trafficking in late 2007. Since that time, all of Mexico's states have enacted code reforms that criminalize at least some forms of human trafficking. Since 2007, the State Department has removed Mexico from its human trafficking watch list and ranked Mexico as a "Tier 2" country (i.e., the second-best out of four categories) in its annual Trafficking in Person s (TIP) reports, reflecting this progress. In 2011, President Calderón proposed a series of constitutional reforms that would require those accused of trafficking to be held in prison during their trials and guarantee the anonymity of victims involved in TIP cases. The Mexican Congress recently approved a new law against trafficking that amends the 2007 federal anti-TIP law and includes prison sentences of up to 40 years for people convicted of sexual exploitation. Yet the Mexican Congress also cut funding for anti-TIP efforts and for the Attorney General's Office in the 2012 budget, which could weaken Mexico's ability to prosecute TIP cases. Most Mexican law enforcement activities with respect to illegal migration and transnational crime receive some degree of U.S. financial support. One way to increase Mexico's role in migration enforcement may be for Congress to consider additional investments in these programs. The United States also could include migration control as an explicit priority within other existing programs, such as the Mérida Initiative, which focuses on combating drug trafficking-related organized crime. On the other hand, Mexico is already among the largest recipients of U.S. anti-TIP assistance in the Western Hemisphere, and some Members of Congress may be reluctant to invest more resources in such programs. In addition, given ongoing concerns about corruption in Mexico, U.S. law enforcement agencies may prefer to carry out their own investigations, and Congress may prefer to emphasize unilateral enforcement policies. Although the numbers have dropped since 2007, hundreds of thousands of aliens are repatriated to Mexico each year. What happens when aliens are repatriated to Mexico, and what can be done to promote migrants' successful re-integration and to minimize repeat entries (i.e., "recidivism") among illegal migrants? Under a 2009 agreement with the Mexican Foreign Ministry, ICE and CBP administer repatriations to Mexico in accordance with a standard template, with operational details arranged at the local level between CBP and Mexican Consular and INM officials. The arrangements allow for most Mexicans to be repatriated to the Mexican POE closest to the point of apprehension and in a manner consistent with mutual hours of operation and staffing availability. Four groups of Mexicans receive special treatment during the repatriation process: Unaccompanied minors must be repatriated during daylight hours, and the United States works with Mexican consular officials and other agencies to transfer unaccompanied minors to appropriate child welfare representatives in Mexico. The Mexican Interior Repatriation Program (MIRP) is a voluntary program established in 2003 to allow certain unauthorized aliens apprehended in Arizona during the summer months to fly to Mexico City and take a bus to their communities of origin, rather than being returned to the border. The MIRP is designed to prevent migrant deaths in the desert, to remove deportees from precarious conditions in northern border cities, and to reduce recidivism. About 125,000 individuals participated in the Interior Repatriation Program between 2004 and 2011, with the United States covering most program expenses. The countries announced plans in February 2012 to expand the interior repatriation program to other regions of the border beginning in 2012. The Alien Transfer Exit Program (ATEP) is part of CBP's Consequence Delivery System. Under ATEP, certain Mexicans are removed to locations hundreds of miles away from the point of apprehension—typically involving the movement of people apprehended in Arizona to POEs in Texas or California. CBP sees the program as a way to disrupt migrant smuggling networks and discourage recidivism, but the program is controversial in Mexico because persons repatriated through ATEP may find themselves effectively stranded in border communities without resources to find employment or to return home. In cases involving serious criminal aliens, ICE has responded to a request from Mexico to remove certain people apprehended near El Paso, TX, to locations other than Mexico's Ciudad Juárez in order to avoid exacerbating high levels of violence there. As security conditions in other border cities have deteriorated, however, it has become increasingly difficult for U.S. and Mexican officials to find places to send criminals, particularly those with felony convictions. In addition, whereas ICE historically provided limited biographical information to INM officials regarding criminal (and non-criminal) aliens removed to Mexico, under a 2010 agreement DHS shares criminal histories with Mexico about Mexicans who have been convicted of certain serious felonies in the United States and are being removed to Mexico. Under a pilot program at the Calexico POE, DHS provides the Mexican Federal Police with information about serious criminal aliens 24 hours prior to their removal. Whether these programs succeed in reducing recidivism among illegal migrants is unknown, though CBP has recently begun collecting data to allow it to evaluate how the MIRP, ATEP, and other enforcement programs affect recidivism. To the extent that these programs are viewed as successful, and to the extent that coordination and information sharing about serious criminals aids Mexican efforts to reduce violence in the border region, Congress could consider providing direct funding for these programs, and DHS could expand them. On the other hand, some may oppose certain information sharing due to privacy concerns, and ATEP and MIRP are both more expensive than standard repatriation procedures. Congress also could support Mexican programs to promote the successful reintegration of people repatriated to Mexico. In December 2007, President Felipe Calderón inaugurated a program for deportees called Programa de Repatriación Humana (Humane Repatriation Program or PRH). The program began in Tijuana and has since expanded to nine locations along the U.S.-Mexico border, assisting 267,317 migrants in 2010—roughly 60% of people returned that year. Although PRH does not have a programmatic budget, it works with non-governmental organizations, the private sector, and local and federal government officials to ensure that migrants receive information on where they have been deported, food, a phone call to relatives, medical attention, shelter, and local transport. Special attention is provided to unaccompanied minors and other vulnerable groups. Expanded services—job training, employment referrals, and micro-enterprise loans—have recently been offered to migrants in Ciudad Juárez through a municipal partnership with the International Organization for Migration (IOM). These types of services have been offered by IOM to returning migrants in other countries, often funded by countries from which the migrants have been returned, including the United States. To the extent that these programs promote successful reintegration for returning migrants and reduce recidivism, they also may merit additional U.S. support. The Illegal Immigration Reform and Immigrant Responsibility Act of 1996 ( P.L. 104-208 Div. C), as amended, requires DHS to develop and implement a comprehensive biometric system to record the entry and exit of every alien arriving in and departing from the United States. The U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) System, which manages entry-exit data, is operational at all U.S. POEs. But many visitors are exempted from the US-VISIT system, including most Mexicans entering the United States with border crossing cards (BCCs, or "laser visas"), who account for the majority of Mexican admissions to the United States. In addition, while CBP collects biographic data (i.e., names, addresses, document numbers, and other identifying information) from persons departing the United States by air and sea, it does not collect any data from people exiting the United States through land POEs on the U.S.-Canadian or U.S.-Mexican borders. Some Members of Congress have urged DHS to implement a full entry-exit tracking system. The primary obstacles to more complete entry-exit tracking are limited infrastructure and staffing. Mexicans with multiple-use BCCs are exempted from the US-VISIT system because to require them to provide fingerprints each time they enter the United States would result in longer wait times for all visitors. The challenges are even greater on the exit side because existing POEs were not designed to include exit processing, so CBP would have to reconfigure ports to create exit lanes and shift personnel away from entry lanes in order to begin collecting exit data. The United States and Canada have proposed a potential solution to the exit infrastructure problem on the northern border which also could serve as a model for the U.S.-Mexican border: an integrated entry-exit system. Under the U.S.-Canadian proposal, the record of a land entry in Canada could be utilized to establish an exit record from the United States (and vice versa). An integrated entry-exit system would not require new infrastructure because all travelers to Canada already must be inspected and admitted by Canadian immigration officials. Pilot projects to test integrated entry-exit on the U.S.-Canadian border are expected to begin in 2012. The United States and Mexico could consider a similar integrated system at southwest border land ports, especially if the U.S.-Canadian project is deemed successful. On one hand, an integrated entry-exit system may offer a solution to the challenge of tracking land exits given the limited infrastructure for tracking land exits. On the other hand, Mexico currently does not screen 100% of land entries (in contrast with Canada), and establishing an integrated entry-exit system likely would require construction of additional inspection lanes in Mexico. Some people also may question the integrity of Mexican border officials or identification technology, and whether an integrated system would be as reliable as one based fully in the United States. The Mexico case exemplifies two tensions in U.S. permanent immigration policy. First, family reunification has always played an important role in U.S. immigration law, but some people believe the system is unbalanced, and places too great an emphasis on family immigration at the expense of employment-based flows. While about 65% of all permanent immigrants to the United States from 2000 to 2009 were admitted on the basis of family connections, the proportion rises to 93% for Mexican immigrants (see Appendix B ). Second, while the United States admits about 1 million LPRs per year, millions more wait in the approved visa backlog: that is, the "queue" of people whose visa applications have been approved by DHS but for whom the State Department has not made a visa available due to overall and per-country numeric limits. Depending on their nationality and visa category, some people may wait in the visa queue for years or even decades. As of November 1, 2011, the backlog of Mexican visa applicants with approved LPR petitions totaled 1.4 million people, or about 30% of the 4.5 million people worldwide with pending petitions (see Table 5 ). The overwhelming majority (97%) of the these approved petitions are for family-based LPRs, and the proportion is even higher (99%) for approved Mexican petitions. Mexico is the leading country within each of the family-based visa queues, and Mexican petitions account for over 40% of approved petitions for spouses and children of LPRs. Several legislative proposals introduced during the last decade would have shifted the balance between family- and employment-based flows and/or reduced visa backlogs: Some have proposed changes to the LPR system to reallocate some family-based visas into employment-based categories. A 2007 Senate bill would have accomplished this change by adopting a Canadian-style points-based system favoring immigrants with particular job skills. Other have proposed eliminating one of the family-based preference categories, such as siblings of U.S. citizens. Some have proposed placing the spouses and minor children of LPRs (i.e., certain second preference family-based immigrants) in the same category as immediate relatives of U.S. citizens, and so exempting them from numeric limits. Reclassifying such immigrants as immediate relatives would ease family backlogs but likely would result in a higher proportion of LPR visas going to family members. Some have proposed raising or eliminating the per-country ceiling on certain types of LPRs. A bill passed by the House in 2011, for example, would eliminate the per-country ceiling on employment-based LPR admissions, and would raise the per-country ceiling on family-based admissions from 7% to 15%. Any change to LPR visa rules would have a disproportionate impact on Mexicans. In general, changes to shift visas from family- to employment-based categories would reduce the number of visas available to Mexicans. Conversely, given the high proportion of Mexicans in the family-based visa queue, Mexicans would be the primary beneficiaries of proposals to reclassify family members of LPRs as immediate relatives. While the 2011 proposal to raise per-country ceilings mainly is designed to address employment-based visa backlogs among professional and skilled immigrants from India and China, the bill's inclusion of a higher per-country ceiling on family-based immigration means that it also would result in increased Mexican inflows. Some argue that the LPR system should make more visas available for Mexicans. Long waiting lists for people with approved petitions divide families, and may be a factor in the decision by some family members to migrate illegally. Some employers may hire unauthorized Mexican (and other) workers, in part, because they cannot hire an employment-based LPR immigrant in a timely manner. Thus, more Mexican LPR visas could result in less unauthorized migration. There is historical precedent for providing Mexicans with special treatment under U.S. immigration law (see " History of Mexico-U.S. Migration and Policies "). Mexicans were exempted from certain grounds for inadmissibility during World War I; Mexicans (and other Western Hemisphere immigrants) were not subject to numeric limits like Europeans and other Eastern Hemisphere immigrants after 1921; and Mexicans had privileged status under the Bracero program. Even after imposing the per-country ceiling in 1965, Congress considered several bills to raise Mexico's immigration quota; and Mexicans were the main beneficiaries of special visa categories created in 1976 (for "non-preference immigrants"), 1986 (IRCA's legalization provisions), and 1990 (for relatives of LPRs who had legalized through IRCA). On the other hand, generating more LPR visas for Mexico would require either an increase in total immigration levels or a reduction in visas for some other country. Either of these options may face opposition from various constituencies. To raise the LPR visa ceiling for Mexico and not other countries would cut strongly against the norm of universality that was at the heart of reforms to the INA passed in 1965. Some people also would oppose increasing the number of low-skilled immigrants entering the United States, the demographic most common among Mexican immigrants. According the U.S. Department of State Visa Office, 84% of Mexican nationals who were issued a temporary visa (excluding short-term B1/B2 visas) in FY2010 received H visas for temporary workers. Mexicans made up 92% of 40,330 H-2A workers and 71% of 40,671 H-2B workers in 2010. As Figure 9 shows, even after a decline during the recent economic downturn, the number of Mexicans receiving temporary work visas increased 253% between 1997 and 2010, with the vast majority in low-skilled categories. Congress has considered a number of proposals in recent years to facilitate the admission of high-skilled workers to the United States. With several categories of Mexican nonimmigrant visas not subject to numerical limits, including the North American Free Trade Act (NAFTA) TN visa for professional workers, the existing system already includes opportunities for additional temporary educational and employment migration from Mexico. As an increasing proportion of Mexicans obtain a bachelor's degree or higher, more may qualify for professional and cultural exchange visas, and Mexico may be a ready source of high-skilled labor for the United States. The most promising avenue for high-skilled circular migration may be in the areas of science, technology, engineering, and mathematics (STEM) fields. A 2011 multi-country survey of 4,800 students from around the globe found that 69% of Mexican students planned to pursue a STEM education—the highest proportion of any country in the survey. Yet while the United States remains the leading host country for international students in STEM fields, Mexico is not among the top 10 sending countries of foreign graduate students pursuing U.S. STEM degrees. Increasing the number of Mexicans obtaining STEM degrees at U.S. universities may prompt U.S. employers to hire more Mexicans with TN or H-1B visas, and return migration by high-skilled Mexicans may make Mexico's economy more competitive. Yet high emigration levels among talented and educated persons from Mexico also may hinder economic development there, especially if a large proportion of such visitors eventually remain in the United States. Some people who oppose increased permanent migration from Mexico may favor a bilateral temporary worker program. Large-scale low-skilled temporary worker programs have been a part of most CIR bills since 2006, and a new temporary worker program for agricultural workers was proposed in the House in 2011. If a low-skilled temporary worker program is created or expanded, should it set aside certain visas for Mexican workers? Although legislative proposals during the last decade have not focused on a Mexico-specific temporary worker program, the Bracero program offers a historical precedent. President George W. Bush also proposed a Mexico-specific program as part of his framework agreement with President Fox in 2001, and the TN visa sets a present-day precedent for a bilateral program with Mexico. A temporary worker program could be designed to target sectors of the U.S. economy in which employers may struggle to recruit legal workers, particularly sectors in which Mexicans are concentrated (see Table 3 ), and so could address the "jobs magnet" that drives much unauthorized migration to the United States. Some people see the "circular migration" that dominated the Mexico-U.S. migration system prior to the 1980s as a good model, with many Mexicans spending short periods of time in the United States, and then returning to Mexico with new job skills and money to invest in their home communities, rather than settling (often illegally) in the United States. Although the Bracero program offers a cautionary tale, numerous countries have established broadly similar bilateral guest worker programs in recent decades. Some observers consider government-to-government agreements such as Canada's temporary agricultural visa for Mexican workers as a "best-practice model" because they give countries of origin a role in selecting workers, overseeing contract enforcement, and supervising return migration. Mexico also could be involved in additional aspects of a bilateral temporary worker program, such as managing temporary workers' health care expenses and/or their retirement savings. On the other hand, the arguments that ended the Bracero program in the 1960s also remain salient today. From this perspective, visas for temporary workers who are low-skilled or unskilled—regardless of their country of origin—are likely to depress domestic wages and working conditions unless there are strong worker protections. Any temporary worker program confronts a tension over how to enforce such protections without discouraging employer participation. Perhaps most importantly, the markets for visas may not follow the same logic of supply and demand as other types of commodities: more low-skilled visas may encourage increased migration overall, rather than shifting workers from unauthorized to legal channels. Even people who are sympathetic to U.S. employers' requests for such workers point out that the current level of unemployment in the United States does not bode well for increasing low-skilled migration. A variety of proposals have been put forth over the past decade to enable certain unauthorized resident aliens to qualify for an adjustment to LPR status. Many of these options would establish new mechanisms or pathways, with Mexicans being among the largest group of beneficiaries of most such proposals. The experience of IRCA has cast a shadow on these debates: while some people view the 1986 law as a partial success for having helped weave millions of previously unauthorized aliens into the fabric of the United States, others oppose legalization, and IRCA ultimately failed to fulfill one of its primary goals: to stop the flow of illegal migration. Given the sheer number of unauthorized Mexicans living in the United States, some maintain that Mexico should be involved in a discussion about how to structure a possible legalization program. Whether such a program would provide unauthorized aliens the opportunity for LPR status or for a temporary visa would have an impact on Mexico's demography and economy. The handling of those aliens deemed ineligible for legalization could also benefit from a bilateral agreement. For example, Mexico could assist with the identification of unauthorized Mexicans within the United States, many of whom lack up-to-date travel documents. Some previous legalization proposals contained a requirement that foreign nationals return home to obtain return visas (i.e., a "touch back" provision), and coordination and cooperation with Mexico could facilitate an orderly "touch back" process. On the other hand, the United States alone would determine who among millions of unauthorized aliens may be eligible for legalization. While Mexico would be a large stakeholder in any legalization program, such a program would not require an agreement with Mexico; and some may argue that a bilateral legalization program would not be in the national interest. Poverty and a lack of economic opportunities have been major drivers of Mexico-U.S. migration, and scholars have long suggested that fostering development in Mexico could reduce unauthorized migration flows. IRCA established a Commission for the Study of International Migration and Cooperative Economic Development charged with "consult[ing] with the governments of Mexico and other sending countries in the Western Hemisphere" and "examin[ing] the conditions in Mexico and such other sending countries which contribute to unauthorized migration to the United States." The commission concluded that economic development stimulates migration in the short term by raising expectations and providing people with the resources to emigrate, but that economic development and job creation are "the only way to diminish migratory pressures over time." As part of its poverty-alleviation efforts, Mexico has supported cash remittances from migrants in the United States to migrant communities of origin in Mexico. Such remittances exceed $20 billion annually, and have become a key source of income for many households. In particular, Mexico has helped migrants gain access to banks and other formal remittance channels rather than using informal money transfer systems, which are less reliable and which typically charge high fees to transfer funds. Since 2002, the Mexican government also has supported the "3 X 1 Citizen's Initiative." Under this program, remittances sent from Mexican home town associations (HTAs) in the United States are matched dollar for dollar by each level of the Mexican government (municipal, state, and federal). In 2005, Western Union began to contribute its own matching funds for a "4+1" matching program to support micro-enterprise initiatives funded by HTAs. The 3 X 1 program remains limited in scope, however, with a federal budget of about $38 million in 2010, compared to total remittance flows of about $22.6 billion that year. The United States provided about $178 million in foreign assistance to Mexico in FY2011, including about $25 million in development aid and $143 million under the Mérida Initiative. Should foreign assistance to Mexico be focused on creating alternatives to emigration? Some people have suggested that the United States should support development projects in Mexico to discourage unauthorized emigration. One suggestion is to have the U.S. Agency for International Development support farmer-to-farmer exchange programs to connect rural farmers' cooperatives in Mexico with Mexican farmers in the United States. Another possibility would be to expand the mandate of the North American Development Bank from environmental infrastructure projects to also include broader development goals. Yet as an upper middle-income developing country by World Bank standards, Mexico does not receive large amounts of U.S. development aid. Moreover, using economic assistance as a tool to reduce emigration may be challenging because even if economic development creates jobs and reduces emigration in the long run, development may be associated with increased migration flows in the short run as a result of rising expectations and market dislocations. The United States also supports Mexican counter-narcotics efforts through the Mérida Initiative. Given evidence that drug trafficking-related violence may contribute to unauthorized emigration, strengthening the social fabric in violence-prone communities could help reduce such flows. Whereas U.S. assistance under the Mérida Initiative initially focused on training and equipping Mexican counterdrug forces, it now targets the weak law enforcement institutions and underlying societal problems that have allowed the drug trade to flourish in Mexico. Pillar four of the "Beyond Mérida" framework aims to build strong and resilient communities that can withstand the pressures of crime and violence, thereby mitigating citizens' needs to emigrate for safety. Congress could consider migration dynamics in the design of such programs in the future. On the other hand, some people may object as a matter of principle to any effort to target U.S. funding to Mexican emigration communities. Some people also have proposed linking foreign assistance to illegal migration through another mechanism: by reducing foreign aid to Mexico in proportion to the number of illegal border crossers. History and geography guarantee that Mexico and the United States have a unique migration relationship—a point driven home by Mexico's ranking as the number one source of U.S. immigrants, both legal and unauthorized. The size of the Mexican population in the United States, its demographic characteristics, and its increasing dispersion to new U.S. destinations all place Mexico at the center of the U.S. immigration debate; and the proportion of Mexicans who migrate to the United States also places migration issues at the center of the bilateral relationship. As described above, these flows are a function of economic push and pull factors and of previous policy decisions. This history directs attention to policy choices being made today. Many of the core issues in the U.S. immigration debate—including efforts to strengthen migration control and border security, possible reforms to the lawful permanent resident and nonimmigrant visa systems, and proposals to legalize certain unauthorized migrants—have important implications for both countries. The United States and Mexico also may share common interests around some of these issues, such as combating smuggling and other transnational crime, encouraging circularity among temporary workers, promoting the orderly repatriation of unauthorized Mexicans and criminal aliens, and generally reducing unauthorized migration. Thus, as in the past, some people in the United States may see reasons to treat Mexico as a "special case" on certain immigration questions. From this perspective, previous Mexico-U.S. migration policies not only help explain the scope of contemporary flows, but also set a precedent for those who may favor taking a bilateral approach. These factors also get at the practical argument for Mexico-specific policies: the sheer size of the bilateral flow and Mexico's status as America's continental neighbor mean that bilateral policies may offer promising opportunities for more effective migration enforcement and more efficient management of flows. These potential advantages underlay the 2001 framework agreement between George W. Bush and Vicente Fox that would have included a Mexico-specific temporary worker program, collaborative border enforcement, legalization for certain unauthorized Mexicans in the United States, and new investments in Mexican communities of origin aimed at reducing illegal outflows. The United States and Mexico may continue to see opportunities to better manage migration flows and control unauthorized migration through collaborative approaches to these issues, as discussed above. On the other hand, a truly collaborative approach to bilateral migration issues along these lines would require a high level of mutual trust. Some people may question whether Mexico would be a reliable partner in a bilateral visa program, border enforcement, or port security—nor is it clear that Mexico would be willing to take on such a role in all of these cases. At a minimum, any major changes in the U.S.-Mexican migration relationship likely would require that the countries first achieve greater success in combating illicit drugs and reducing the violence associated with the drug trade. In the long run, the future of the U.S.-Mexican migration relationship depends in great part on economic and demographic trends in both countries, and their impact on regional migration flows. What will be the shape of the U.S. economic recovery, and will U.S. employers continue to demand high levels of low-skilled migration? Will emigration from Mexico pick back up with the U.S. economic recovery, perhaps including more higher-skilled migrants, or have economic and demographic changes in both countries ushered in a new period of lower regional flows? As in the past, it will be a combination of these structural factors and of policy decisions in both countries that influences Mexico-U.S. migration flows. Appendix A. Total and Mexico-Born Population, by State, 1990, 2000, and 2010 Appendix B. Immigrant Visas, FY2000–FY2009 Appendix C. Nonimmigrant Visas Issued, Selected Types, FY2000-FY2009 | History and geography have given Mexico a unique status in the U.S. immigration system, and have made the Mexico-U.S. migration flow the largest in the world. Mexicans are the largest group of U.S. migrants across most types of immigration statuses—a fact that may have important implications for how Congress makes U.S. immigration policy. This report reviews the history of immigration policy and migration flows between the countries and the demographics of Mexicans within the United States. It also analyzes contemporary issues in U.S. immigration policy and the impact Mexico may have on U.S. immigration outcomes. The U.S.-Mexican migration system has passed through four main phases since the early 20th century. Migration flows were limited and mainly short-term prior to the 1920s, and Mexicans were exempted from certain immigration restrictions and admitted as the first U.S. guest workers during World War I. The bilateral "Bracero" temporary worker program marked a second phase, with 4.6 million temporary visas issued to Mexican workers between 1942 and 1964. With the end of the Bracero program and other immigration reforms in 1965, along with social and economic changes in the United States and Mexico, the third stage was marked by growing illegal inflows, eventually leading Congress to pass the Immigration Reform and Control Act of 1986. Finally, despite a series of additional enforcement measures, the Mexican population in the United States doubled during each decade since 1970, with unauthorized migrants accounting for a majority of the growth, followed by legal family-based immigration. Today, the Mexico-born population in the United States stands at about 11.7 million people. Compared to other migrants, the Mexican born in the United States are more likely to be unauthorized, be younger, have lower education levels, work in lower-skilled occupations, and have lower measures of economic well-being. In contrast with earlier periods and virtually all other migrants, Mexicans are now dispersed throughout all 50 U.S. states. Given the size of the Mexico-born population in the United States and the 2,000-mile border shared between the two countries, Mexicans and Mexico are uniquely affected by U.S. immigration policies. Mexicans are the largest group of aliens subject to U.S. immigration control and border security policies, the largest group of lawful immigrants within permanent and temporary visa categories, and the majority of unauthorized migrants within the United States. On one hand, Mexico's prominence in the U.S. migration system means that U.S. immigration policy, to varying degrees, primarily affects Mexicans and Mexico. Today's Mexico-U.S. migration flows and the Mexico-born population in the United States are the product of previous immigration policy decisions, as well as of the long and complex history of the U.S. and Mexican economies, labor markets, and demographics. On the other hand, Mexico also remains at the center of today's immigration debate, though often only implicitly. Recognizing Mexico's status within the U.S. migration system focuses attention on how the U.S. immigration debate affects Mexico, and on how Mexico may affect certain migration outcomes. Mexico's role in the U.S. immigration system, along with the importance of the bilateral relationship to both countries, creates a number of opportunities, and challenges, as Congress weighs changes to U.S. immigration policy. First, Mexico already plays a key role in U.S. immigration enforcement and border security. The United States and Mexico share information about transnational threats, Mexico combats illegal migration by third country nationals, and Mexico supports certain U.S. enforcement efforts related to the repatriation of Mexican nationals. This report explores possibilities for additional bilateralism in these areas, including strategies to reduce recidivism among illegal migrants and to better manage U.S.-Mexican ports of entry. Second, with respect to lawful permanent immigration, Mexico benefits from rules that favor family-based flows, but still dominates the waiting lists of people with approved immigration petitions for whom visas have not yet been made available. The analysis here focuses attention on recent proposals to reduce visa backlogs and on other reforms that could affect the number of immigrant visas for Mexico. Third, Mexico dominates temporary visa categories for low-skilled workers, and an increasing number of Mexicans could also qualify for high-skilled worker visas. The report reviews previous experience with Mexico-specific temporary worker programs, which offer mixed lessons about managing flows this way. Additional policy considerations concern potential legalization proposals and efforts to reduce unauthorized emigration from Mexico. Given the large number of unauthorized Mexican migrants in the United States, Mexico could play a role in a potential legalization program, including by providing information to verify migrants' identities and by facilitating proposed "touch-back" requirements. Finally, in the long run, economic development and employment creation in Mexico are widely viewed as being among the best tools to reduce unauthorized emigration. While demographic and economic trends in Mexico likely have already contributed to reduced illegal outflows, the relationship between international trade and financial flows, U.S. economic assistance, and economic opportunities in Mexico may represent promising areas for policies to reduce illegal migration in the future. This report supplements other CRS research on Mexico (such as CRS Report RL32724, Mexico: Issues for Congress; and CRS Report R41349, U.S.-Mexican Security Cooperation: The Mérida Initiative and Beyond ) and on immigration (such as CRS Report R42036, Immigration Legislation and Issues in the 112th Congress; and CRS Report R42138, Border Security: Immigration Enforcement Between Ports of Entry). |
Imposing criminal punishment is the province of the criminal justice system, but how cases are resolved within that system inevitably can affect rights and benefits beyond it. Congress and state legislatures often attach additional legal consequences to criminal activity. At times, these consequences may be at least as significant as a potential fine or incarceration. Deportation of a noncitizen (a term synonymous with "alien") under federal immigration law is a case in point. Nevertheless, a noncitizen charged with a crime may not be fully aware of what is at stake before going to trial or deciding to plead guilty to a particular offense. This report discusses the extent of deportation-related advice a noncitizen defendant is constitutionally owed in deciding whether to plead guilty to a particular crime. Two possible doctrinal bases for a right to be advised are the Due Process requirement that a guilty plea be voluntary and the Sixth Amendment right to effective assistance of counsel. The Supreme Court had not found that either basis required advising noncitizen defendants on deportation, however, and a distinction in the Court's jurisprudence between direct and collateral consequences of criminal conviction potentially precluded finding any constitutional right. Then, in Padilla v. Kentucky , the Court found a right to be advised of possible deportation grounded in the Sixth Amendment right to effective assistance of counsel. The holding in Padilla is discussed below, as are its possible implications. Also mentioned are steps that have been taken by courts and legislatures, constitutional requirements aside, to integrate consideration of immigration consequences into the criminal process. When an accused is a noncitizen, one especially momentous result of prosecution is possible deportation. For decades now, Congress has placed priority on the removal of criminal aliens from the United States. One result of this effort has been a significant statutory expansion of the list of felonies and other offenses (especially those types of federal and state crimes categorized as aggravated felonies under the Immigration and Nationality Act of 1952 (INA), as amended) that lead to swift and increasingly certain deportation following criminal imprisonment. If a noncitizen accused of a serious crime is to avert deportation, therefore, the primary legal arena for attention has become the criminal justice system rather than the immigration adjudication system, even though the latter formally adjudicates and issues removal orders. Two things should be kept in mind in this context. First, the United States has a large noncitizen population. Roughly 25.5 million people residing in the United States in 2008, or around 8½% of the population, were noncitizens, according to one leading authority. The exact number of noncitizens who are charged with a crime is not known, but it would appear that many thousand noncitizens pass through criminal courts each year. During FY2008, over 97,000 criminal aliens were removed from the United States, over one-third of these for drug-related offenses. During the same period, the Criminal Alien Program, a cooperative federal-state law enforcement effort, issued 221,085 charging documents, the first step in removal proceedings, against criminal aliens incarcerated in federal, state, or local facilities. The second observation concerns how criminal cases are in fact resolved. The criminal grounds for removal are premised on a "conviction," and in the United States convictions most commonly take the form of guilty pleas. Guilty pleas are the mainstay of the American criminal justice system. In 2004, they comprised 95% of state felony convictions, 96% of state felony drug convictions. In federal courts, 96% of the defendants whose cases were resolved through conviction in the year beginning June 2007 pleaded guilty. Thus, one commentator has observed the following about the modern role of a criminal defense lawyer: The most important service that criminal defense lawyers perform for their clients is not dramatic cross-examination of prosecution witnesses or persuasive closing arguments to the jury; it is advising clients whether to plead guilty and on what terms. More than ninety percent of dispositions on the merits of criminal prosecutions are convictions, and more that ninety percent of convictions result from guilty pleas. Accordingly, the accuracy and fairness of the criminal justice system depend principally on the actions of defense lawyers, prosecutors, and judges at the guilty plea stage. In Hill v. Lockhart , the Supreme Court recognized the significance of counsel at the pleading stage, holding that the Sixth Amendment grants clients the right to effective assistance of counsel when pleading guilty. Jose Padilla had been a legal permanent resident of the United States when he was pulled over by Kentucky authorities at a weigh station for failing to have a weight and distance number on his truck. A subsequent search of the truck revealed approximately 1,000 pounds of marijuana, and Padilla was charged with drug trafficking. He pleaded guilty to three charges, trafficking in more than five pounds of marijuana among them. Two years later, in August 2004, Padilla filed a petition with the Kentucky courts alleging ineffective assistance of counsel. He asserted that his attorney had failed to adequately investigate and advise him on the possible immigration consequences of his guilty plea, but instead, according to Padilla, said that Padilla "did not have to worry about [his] immigration status since he had been in the country so long." Padilla further claimed that he would not have pleaded guilty as he did, had he known of the possibility of deportation. The Hardin County Circuit Court ruled against Padilla, holding that advice (or failure to advise) on deportation cannot give rise to a claim of ineffective assistance of counsel in a criminal case. The Kentucky Court of Appeals reversed, finding further proceedings were warranted by the allegation that affirmative misadvice had been given. The Kentucky Supreme Court reversed the Court of Appeals, concluding that neither a failure to advise nor misadvice on deportation could support an ineffective assistance of counsel claim. Padilla submitted a petition for a writ of certiorari to the United States Supreme Court, which granted the writ and heard oral argument October 13, 2009. It was evident in the pleadings and oral argument that the Court's decision in Padilla depended on what it conceived to be the reach of defense counsel's obligations under the Constitution. Must defense counsel ever advise a client about matters not immediately before the criminal court as a predicate to the client pleading guilty? If so, what breadth of expertise is expected? Is there a distinction between failing to advise a client and misinforming a client? The Sixth Amendment includes an express right to counsel among other procedural protections it confers to criminal defendants: In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed ... and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the Assistance of Counsel for his defense . (emphasis added) The Court has long held that "Assistance of Counsel" meant effective assistance of counsel, but it had not explored what "defense" entailed. The text of the Sixth Amendment suggests the assistance due under it is discrete in scope. The Amendment pertains in a "criminal prosecution," the process by which the government moves against a person before a court of law for specified criminal acts. Certainly, other rights afforded an accused in the Amendment—speedy trial, jury trial, knowledge of the accusation, confrontation of witnesses, compulsory process—all address the fairness and integrity of this adversarial effort to convict and impose punishment. Though the Supreme Court had not set a clear precedent, the prevailing test for "ineffective assistance of counsel" in plea cases appeared to many to be bound by a tight focus on criminal jeopardy alone. The critical distinction was between "direct" and "collateral" consequences of prosecution. In the context of guilty pleas, the most apparent direct consequence is the punishment that can be imposed, but even here, it may be uncertain how far the duty to advise extends beyond potential maximum sentences, and possibly mandatory minimums, to more nuanced matters involving possible parole and probation. Collateral consequences, by contrast, are more diverse, and can include, in addition to possible conditions on how sentences may be served, such eventualities as loss of the right to vote, loss of a passport, loss of the right to possess firearms, loss of public employment or public benefits, loss of professional or business licenses, possible civil liability, possible enhanced punishment for future crimes, and an obligation to register as an offender. Immigration consequences of a conviction, including deportation, also were regarded as collateral, because they were not immediately imposed as punishment by a convicting court. The direct versus collateral consequence distinction made in many "ineffective assistance" cases under the Sixth Amendment would appear to have migrated from case law on the requirement of a court to inquire into whether a guilty plea is voluntary for purposes of meeting a defendant's due process rights under the Fifth and Fourteenth Amendments. Those cases drew a line past which the court was not obligated to inquire into a defendant's motives for pleading guilty or the defendant's expectations on how a sentence would be carried out. Absent improper coercion or deceit, a knowing "plea of guilty entered by one fully aware of the direct consequences, including the actual value of any commitment made to him by the court, prosecutor or his own counsel, must stand...." Though "ineffective assistance" analysis in plea cases might have appeared to have become tethered to the voluntariness test applied in due process cases, the Court did develop distinct standards for Sixth Amendment challenges. The seminal case is Strickland v. Washington . The Strickland Court began its analysis with an observation reminiscent of due process cases. "The benchmark for judging any claim of ineffectiveness must be whether counsel's conduct so undermined the proper functioning of the adversarial process that the trial cannot be relied on as having produced a just result." The Court then continued to speak of defense counsel's role in the adversarial process, but in doing so began to relate adequacy of counsel to prevailing standards of representation instead of exclusively to fairness of result. [T]he proper standard for attorney performance is that of reasonably effective assistance.... More specific guidelines are not appropriate.... Representation of a criminal defendant entails certain basic duties.... From counsel's function as assistant to the defendant derive the overarching duty to advocate the defendant's cause and the more particular duties to consult with the defendant on important decisions and to keep the defendant informed of important developments in the course of the prosecution. ... In any case presenting an ineffectiveness claim, the performance inquiry must be whether counsel's assistance was reasonable considering all the circumstances. Prevailing norms of practice as reflected in the American Bar Association standards and the like ... are guides to determining what is reasonable, but they are only guides. No particular set of detailed rules for counsel's conduct can satisfactorily take account of the variety of circumstances faced by defense counsel or the range of legitimate decisions regarding how best to represent a criminal defendant. Broad leeway is to be given to defense counsel in fashioning defense strategies, and reasonable professional assistance can comprehend a wide range of options. The purpose of the Sixth Amendment, according to Strickland, is limited to setting a baseline for acceptable attorney conduct to preserve the integrity of the criminal justice system. "[T]he purpose of the effective assistance guarantee of the Sixth Amendment is not to improve the quality of legal representation, although that is a goal of considerable importance to the legal system. The purpose is simply to ensure that criminal defendants receive a fair trial." The test for relief under Strickland is two-pronged. Even if representation is constitutionally deficient, a defendant still must show that the deficiency was prejudicial to the outcome of the case. The Supreme Court did not address this second prong in its Padilla decision. As discussed below, application of the prejudice requirement can be both difficult and strict. The Supreme Court issued its decision in Padilla v. Kentucky on March 31, 2010. Seven of the nine Justices agreed that the Sixth Amendment right to effective assistance requires that a defense lawyer, at a minimum, raise the possibility of deportation in advising a noncitizen in a criminal case. Writing the five-Justice majority opinion, Justice Stevens acknowledged the prevalence of the direct v ersus collateral consequence s test in effective assistance jurisprudence. Nevertheless, he eschewed applying that test in Padilla's case "because of the unique nature of deportation." Justice Stevens raises several considerations that together make deportation different. First, the impact of deportation is profound. Though recognizing that removal proceedings are civil in nature and that deportation is not strictly a criminal sanction, Justice Stevens characterizes deportation as a "particularly severe 'penalty.'" Second, it is "'most difficult' to divorce the penalty [of removal] from conviction in the deportation context." Though he states that he is reserving the question of whether a direct versus collateral consequence s test is ever appropriate in an effective assistance case, Justice Stevens emphasizes that changes in immigration law now make deportation a "nearly automatic result" for many noncitizen offenders. Third, deportation has long been closely associated with criminal prosecutions. For example, Justice Stevens observes that, from 1917 to 1990, Congress had given both state and federal sentencing judges discretion to make a "judicial recommendation against deportation" (JRAD) in individual criminal cases in which a noncitizen offender would otherwise be vulnerable to removal, and immigration authorities had honored these recommendations. The majority further notes that the United States Court of Appeals for the Second Circuit had held that, before Congress repealed authority for them, JRAD requests were part of criminal sentencing, and not of deportation proceedings, and failure of defense counsel to be aware of, advise on, and pursue JRAD relief during sentencing could be the basis of a Sixth Amendment ineffective assistance claim. After holding that "advice regarding deportation is not categorically removed from the ambit of the Sixth Amendment right to counsel," Justice Stevens turns to whether the level of representation provided to Padilla by his counsel was reasonable under prevailing professional norms. In quick order, the majority opinion holds that it was not. In doing so, Justice Stevens in one paragraph marshals the American Bar Association Standards for Criminal Justice and 15 other authorities, from bar guides to practice manuals to a Department of Justice compendium of standards for defending indigents to scholarly treatises and articles. Echoing Strickland in calling these authorities valuable guides, the majority finds that "[t]he weight of prevailing professional norms supports the view that counsel must advise her client regarding the risk of deportation." Simply requiring defense counsel to mention a possibility of deportation provides minimal guidance. Immigration law can be complicated and each plea negotiation presents its own challenges. Unless the duty to advise is never to extend beyond a general warning that plea bargains might implicate deportation, courts will inevitably be called upon to determine what assistance is reasonable in particular circumstances. There may be several facets to an inquiry into effective assistance. For example, at what stage must an attorney discern the prospect of deportation attendant to possible plea offers that might arise during plea negotiations and discuss them with the defendant? Also, when is consultation with an immigration law expert required? (And at whose expense—noncitizens do not have a right to an attorney at government expense in removal proceedings?) On this issue of what immigration expertise is required of defense counsel, the five-Justice majority opinion and the two-Justice concurrence part ways. The majority has some expectation that defense counsel will personally look into, though not necessarily become an expert on, the deportation risks attending a potential guilty plea. According to the majority, when immigration law is "succinct, clear, and explicit in defining the removal consequence" of a conviction for a specified crime, an attorney must correctly advise on the very high likelihood of deportation before the accused pleads guilty to the offense. On the other hand, if the prospect of deportation due to a particular plea appears less certain, the lawyer's obligation is more general. In less straightforward cases, "a criminal defense attorney need do no more than advise a noncitizen client that pending criminal charges may carry a risk of adverse immigration consequences." Silence, however, is never an option. Ultimately, silence, or at least willful silence, is not an option for concurring Justices Alito and Roberts either. Beyond avoiding affirmative misadvice, they would require that "[w]hen a criminal defense attorney is aware that a client is an alien, the attorney should advise the client that criminal conviction may have adverse immigration consequences under immigration laws and that the client should consult an immigration specialist if the client wants advice on the subject." The concurrence's preference for a "warn and refer" standard rests largely with its view of immigration law. Immigration law is complicated; courts of appeals disagree on the criminal alien provisions; what appears to be clear may not be; and, therefore, requiring criminal defense lawyers to assess and advise on immigration consequences carries with it the risk that the advice may be incomplete, misleading, or mistaken. Better, in the concurrence's view, to limit defense counsel's responsibilities to matters germane to guilt and criminal punishment and leave responsibility for giving advice on immigration consequences to immigration experts or, possibly to a lesser extent, the courts. In dissent, Justice Scalia, joined by Justice Thomas, finds "no basis in text or in principle to extend the constitutionally required advice regarding guilty pleas beyond those matters germane to the criminal prosecution at hand—to wit, the sentence that the plea will produce, the higher sentence that conviction after trial might entail, and the chances of such a conviction." In the dissent's view, even if a defense lawyer should look into possible immigration issues under prevailing norms of practice, not "all professional responsibilities of counsel ... become constitutional commands." Rather than being a Sixth Amendment issue of effective assistance of counsel in a criminal prosecution, the dissent finds the heart of the controversy in Padilla to lie closer to notions of ensuring the fairness and voluntariness of guilty pleas. This is a due process obligation of the court, not counsel, and even though there may not be a constitutional remedy in a case like Padilla's—the dissent observes that the matter had not been presented to the lower courts and, remember, that the distinction between direct and collateral consequences was drawn in due process plea decisions—legislatures and the courts could establish (and to a degree have established) nonconstitutional rules and remedies for falling to advise, or for misadvising, on deportation. The Padilla Court did not decide whether Padilla was entitled to relief because the courts below had never reached the "prejudice" prong of the Strickland test. Again, a failure to provide reasonable professional assistance can fall short of Sixth Amendment expectations but still not warrant setting a plea aside. For that, a defendant must have been "prejudiced" by the error. As articulated in Strickland : "It is not enough for the defendant to show that the errors had some conceivable effect on the outcome.... On the other hand, we believe that a defendant need not show that counsel's deficient conduct more likely than not altered the outcome in the case.... The defendant must show that there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different." When a defendant seeks to set aside a guilty plea for ineffective assistance reasons, "in order to satisfy the 'prejudice' requirement, the defendant must show that there is a reasonable probability that, but for counsel's errors, he would not have pleaded guilty and would have insisted on going to trial." Determining what a defendant would have done had counsel met Sixth Amendment standards is necessarily predictive. Also, when effective counsel would have consisted of telling a defendant that a particular plea would result in deportation, it may be especially difficult in many cases to safely conclude that a reasonable defendant nevertheless would have accepted the plea instead of going to trial or continuing plea negotiations. Why not "roll the dice" when exile is the alternative? Still, courts have been willing to rigorously explore what the counterfactual would have been. As to Padilla, it may be argued that the case against him was so overwhelming that conviction of some deportable offense was certain and going to trial would have exposed him to a much longer term of imprisonment. The rub is that without a trial record, it is difficult to assess the strength of the government's case or the accused's defense. It thus appears that assessing prejudice could entail holding an evidentiary hearing to determine whether the defendant had a triable case with some reasonable chance of acquittal or conviction of a lesser, non-deportable offense. But even this type of process may not adequately get to whether "there is a reasonable probability that, but for counsel's errors, [the defendant] would not have pleaded guilty and would have insisted on going to trial." When deportation is certain, it may especially difficult to conclude that trial is not a reasonable alternative without also taking into account such broader considerations as the defendant's family ties in the United States and the conditions he would face in his home country if deported there. The majority in Padilla based its analysis on the purported uniqueness of deportation. Also, because the majority found deportation to be unique, resolving Padilla did not, according to the majority, require consideration of whether to apply a distinction between direct and collateral consequences to define the scope of constitutionally compelled legal representation under the Sixth Amendment. After Padilla , it seems inevitable that a variety of offenders will allege they were not advised on some matter not directly germane to guilt and criminal punishment and that the failure to be advised caused them to enter a guilty plea they otherwise would have rejected. Will the courts hold the line at deportation, or will they engage in an extended exploration of what consequences "count" (e.g., because of their harshness and immediacy, or for some other reason) and what consequences "do not count"? Justice Scalia, among others, sees the floodgates opening: "[The concurring opinion's] suggestion that counsel must warn defendants of removal consequences ... cannot be limited to those consequences except by judicial caprice. It is difficult to believe that the warning requirement would not be extended, for example, to the risk of heightened sentences in later federal prosecutions pursuant to the Armed Career Criminal Act. We could expect years of elaboration upon these issues in the lower courts, prompted by the defense bar's devising of ever-expanding categories of plea-invalidating misadvice and failures to warn—not to mention innumerable evidentiary hearings to determine whether misadvice really occurred or whether the warning was really given." Even if the courts were to consider "effective assistance" claims in additional contexts, some do not see the implications of considering "collateral" consequences to be overwhelming. One commentator envisions that the great majority of collateral consequences would flow from three circumstances: Is the client an alien? Does the client have a criminal history or other pending charges? Does the client hold government licenses, hold a government job, or collect public benefits? Further considerations might pertain to drug or sex crimes. Exploring these issues, it is claimed, is "a manageable amount of basic spadework." Also, judicial delineation of what consequences merit "effective assistance of counsel" during the course of a prosecution may not be as "prolonged" or "arbitrary" as Justice Scalia may suggest. For one thing, there may be a range of consequences that are so relatively inconsequential that they rarely will be found to have prejudiced a defendant's calculus in deciding whether to plead guilty. Will failure to be informed of possibly losing the right to vote, for example, ever be found to have unreasonably prejudiced the decision of a defendant to plead guilty instead of risking many more years of imprisonment or capital punishment? Further, though not directly at issue before the trying court, some consequences might be seen as fitting more naturally into the inner orbit surrounding "direct consequences" and thus meriting advice of counsel. In addition to deportation, for example, there are the possible and easily identifiable consequences for defendants within the criminal justice system itself—for example, eligibility for parole and heightened penalties for future convictions. Finally, there may be policy and legal limits on legislatures in establishing incidental effects of criminal convictions. Though the Constitution does not require trial courts to inform noncitizen defendants of possible deportation consequences of guilty pleas—due process requirements for knowledgeable and voluntary pleas cover only "direct" criminal consequences—many jurisdictions do. According to one amicus brief in Padilla , 28 states, the District of Columbia, and Puerto Rico have a statute, court rule, or standard plea form requiring an advisement on immigration consequences. The requirements vary. For example, the District of Columbia Code requires that a court give the following advisement on the record prior to accepting a plea of guilty or nolo contendere: "If you are not a citizen of the United States, you are advised that conviction of the offense for which you have been charged may have the consequences of deportation, exclusion from admission to the United States, or denial of naturalization pursuant to the laws of the United States." Additionally, the court is directed to allow a defendant additional time to consider a plea upon request of the defendant after the advisement. Moreover, if a court fails to give the required advisement and the plea may have one of the consequences included in the advisement, the defendant can have the judgment vacated and enter a plea of not guilty in its stead. Some states require a more general warning that a plea can have immigration consequences. Other variations require that the court direct a defendant to defense counsel for advice, or even that the court ascertain whether a defendant's attorney has discussed possible deportation consequences with the accused. Not all of the statutes and rules call for automatic vacation of a plea for failure to meet pertinent requirements. Constitutionalizing a defense counsel obligation to advise on possible deportation does not foreclose this type of legislation or rules, nor necessarily make existing statutes and rules superfluous. Rather, statutes and rules could still have an important complementary or supplementary role. For example, a requirement that a court inform a defendant of the possibility of deportation consequences, along with an opportunity to consult with defense counsel further, presumably could lessen the possibility of a Sixth Amendment violation for failure of defense counsel to advise. Also, allowing a defendant to have a plea vacated upon showing, for example, that the court failed to warn of possible deportation on the record, or give additional time to consult counsel on this point, could provide for a statutory remedy through a much easier process than might be required to show a constitutional violation. A statutory case could be made simply by consulting the court record, whereas a constitutional case might necessitate difficult inquiries into prejudice and what defense counsel told, or failed to tell, the defendant and when. | The Sixth Amendment entitles an accused in a criminal prosecution to "Assistance of Counsel for his defense." This right to counsel implies a right to "effective assistance." Effective assistance has dimensions of both breadth and depth: breadth in the sense of what considerations beyond those immediately at issue in the prosecution should be taken into account, so-called collateral consequences; depth in the sense of what professional standards pertain. In Padilla v. Kentucky, the Supreme Court held that "ineffective assistance" standards require informing a noncitizen defendant on possible deportation when advising on whether to accept a guilty plea. Forced removal through deportation is a civil proceeding separate and apart from criminal prosecution. The test for deficient representation for Sixth Amendment purposes is two-pronged. First, was the attorney's performance reasonable under prevailing professional norms? Second, was the defendant prejudiced by the attorney's shortcomings? As to the first prong, the Padilla Court emphasized the unique nature of deportation. Criminal courts do not decide whether to deport a noncitizen defendant; rather, federal immigration authorities do. Nevertheless, the Court recognized that deportation can have enormous repercussions for a noncitizen and the noncitizen's family. The Court further observed that Congress curtailed the historic, though indirect, ability of criminal judges to forestall a convict's deportation, at the same time it dramatically expanded the range of crimes that can lead to deportation. The Court cited the hardship of deportation and its increasingly automatic application in prelude to discussing whether Padilla's attorney fell short of prevailing practice. The lawyer had volunteered that Padilla did not have to worry about deportation in considering whether to plead guilty to marijuana trafficking because he had legally resided in the United States for over 40 years. Yet it was not the volunteering of mistaken advice that was critical to the Court. According to the Court, silence was not an adequate option. Instead, professional norms, as reflected in standards of the American Bar Association, criminal defense organizations, and the like, pointed to an affirmative duty to inform on the risk of deportation. How far must an attorney go in advising a defendant? The five-Justice majority found immigration law to be "succinct, clear, and explicit" in Padilla's case, and held that in this circumstance defense counsel must correctly advise on the high likelihood of deportation. In less straightforward cases, the majority opined, it might suffice to advise that the pending charges carried a risk of deportation. The two concurring Justices found immigration law to be so complex that defense counsel need only warn of a general risk of deportation in all cases and suggest that the defendant see a specialist for further advice. Deportation is commonly a risk for noncitizen criminal defendants, but there are other possible immigration consequences of a criminal conviction. Also, all defendants can face other collateral consequences, from loss of a business license to loss of the right to vote to loss of certain public benefits. A number of factors might bear on a defendant's decision to plead guilty, but the Padilla Court carefully limited its holding to advice on deportation. Also left open by Padilla is guidance on when failing to advise on deportation is sufficiently prejudicial to a defendant to warrant nullifying a guilty plea. The Court remanded this issue to lower courts for further consideration. |
T he Bureau of Prisons (BOP) is the largest correctional agency in the country in terms of the number of prisoners under its jurisdiction. BOP was established in 1930 to house federal inmates, professionalize the prison service, and ensure consistent and centralized administration of the federal prison system. BOP must confine any offender convicted and sentenced to a term of imprisonment in a federal court. Changes in federal criminal justice policy since the early 1980s—enforcing a growing number of federal crimes, replacing indeterminate sentencing with a determinate sentencing structure through sentencing guidelines, and increasing the number of federal offenses subject to mandatory minimum sentences—led to rapid growth in the federal prison population. The total number of inmates under BOP's jurisdiction increased from approximately 25,000 in FY1980 to over 219,000 in FY2013. Between FY1980 and FY2013, the federal prison population increased, on average, by approximately 5,900 inmates annually. However, since the peak in FY2013, the number of inmates in the federal prison system decreased each subsequent fiscal year to approximately 192,000 inmates in FY2016. Generally, the increase in the federal prison population necessitated an increase in appropriations for BOP's operations and infrastructure. In FY1980, Congress appropriated $330.0 million for BOP; by FY2016, the total appropriation for BOP reached $7.479 billion , which was the largest nominal appropriation ever for BOP. Appropriations for BOP have generally continued to increase since FY2013 (FY2017 was the exception) even though the prison population has decreased since that time. Increasing appropriations for BOP, despite the declining prison population, could be the result of a growing per capita cost of incarceration or BOP's need to maintain staffing levels commensurate with the size of the prison population. This report provides an overview of BOP's appropriations since FY1980. Specifically, this report examines trends in BOP's total appropriations, changes in funding for BOP's appropriations account, and trends in funding for the decision units under BOP's appropriations accounts. The report provides a brief analysis of how the Administration's requested funding for BOP compares to enacted appropriations. It also discusses changes in the per capita cost of incarceration and how appropriations for BOP have changed relative to those for the Department of Justice, both issues that have been of interest to policymakers. As shown in Figure 1 , BOP's appropriations increased by nearly $7.149 billion from FY1980 to FY2016. FY2016 was the peak, in nominal terms, for BOP's funding. BOP's funding decreased by $340 million in FY2017. Between FY1980 and FY2016, the average annual increase in BOP's appropriations was approximately $199 million. The increasing appropriations for BOP generally coincided with an increase in the number of inmates under BOP's jurisdiction. This trend changed somewhat in recent years. BOP's appropriations increased each fiscal year from FY2014 to FY2016 even though the total number of federal inmates decreased in each of those fiscal years. Figure 1 also shows that BOP's appropriations have increased at a rate that is significantly greater than inflation, as indicated by the positive slope on the inflation-adjusted line in the figure. In FY2017 inflation-adjusted dollars, BOP's appropriations increased 787% from FY1980 to FY2016. BOP's appropriations increased 732%, in inflation-adjusted dollars, when accounting for the decrease in appropriations for FY2017. It has been argued that even though appropriations for BOP are discretionary, they are effectively mandatory because "[b]y law, the BOP must accept and provide for all [f]ederal inmates, including but not limited to inmate care, custodial staff, contract beds, food, and medical costs. BOP cannot control the number of inmates sentenced to prison, and unlike other [f]ederal agencies, cannot limit assigned workloads and thereby control operating costs." Nearly all of BOP's operations are funded through annual appropriations provided by Congress. BOP's annual budget is divided between two major accounts: Salaries and Expenses (S&E) and Buildings and Facilities (B&F). The S&E account (i.e., the operating budget) provides for the custody and care of federal inmates and for the daily maintenance and operations of correctional facilities, regional offices, and BOP's central office in Washington, DC. It also provides funding for the incarceration of federal inmates in state, local, and private facilities. The B&F account (i.e., the capital budget) provides funding for the construction of new facilities and the modernization, repair, and expansion of existing facilities. Two trends emerge from a review of BOP's appropriations from FY1980 through FY2017. First, while there has been a nearly continuous increase in the overall appropriations for BOP, it is in large part driven by an almost continuous increase in appropriations for BOP's Salaries and Expenses (S&E) account since FY1980 (see Figure 2 ). The one exception to this trend is the appropriation for FY2013, which is lower than the FY2012 appropriation due to the sequestration ordered pursuant to the Budget Control Act of 2011 ( P.L. 112-25 ). In general, appropriations for BOP's S&E account increased as the prison population increased, which is not surprising given that the S&E account funds the operation of the federal prison system, including the salaries and benefits of both correctional officers and other institutional employees. BOP hired more officers and other employees as it opened more prisons and supervised more inmates. However, funding for the S&E account has continued to increase, albeit at a reduced rate, even though the prison population has decreased each fiscal year from FY2013 to FY2016. BOP has continued to request increased funding for the S&E account even though it is housing fewer inmates, and Congress has continued to increase appropriations, though generally below the level requested. BOP notes that additional funding is needed to cover the cost of pay raises and benefits for employees, as well as to cover growing costs associated with inmate health care, food, and prison utilities. Also, during some of these years, BOP requested additional funding to increase its capacity to provide programs and services for inmates (e.g., reentry programming and mental health treatment) and to hire more staff to increase institutional safety, something BOP might not have been able to do during the years when the inmate population was growing at a sustained clip and resources were dedicated to providing basic levels of care and security. In addition, even though there are fewer inmates under the BOP's jurisdiction, the federal prison system is still operating over its rated capacity. In short, the federal prison population has not declined enough that BOP could start to close prisons and reduce staff, which would help bring down the cost of the federal prison system. Second, funding for the Buildings and Facilities (B&F) account is more irregular, with Congress appropriating more in some fiscal years and less in others. The irregularity in B&F funding is likely the result of the cyclical nature of the expansion of BOP's prison capacity as more offenders entered the federal prison system. Congress would appropriate funding to help boost bedspace in the federal prison system; BOP would use that funding to plan and construct new prisons. Upon completion of the new prison, BOP's capacity would expand, but it would need to expand again in later years as the prison population continued to grow, and the cycle would begin anew. In FY2017, a $400 million decrease in funding for the B&F account was the primary reason why BOP's total appropriation decreased for FY2017. Each of BOP's two appropriations accounts are divided into decision units, each of which fund specific aspects of BOP operations. The S&E account is divided into four decision units: Inmate Care and Programs : This decision unit covers the cost of inmate food, medical supplies, institutional and release clothing, welfare services, transportation, gratuities, staff salaries, and other operational costs directly related to providing inmate care. It provides funding for inmate programs, including education and vocational training, psychological services, religious programs, and drug treatment. This decision unit also covers costs associated with regional and central office administration and support related to providing inmate care. Institution Security and Administration : This decision unit funds institution maintenance, motor pool operations, powerhouse operations, institution security, and other administrative functions. It also covers costs associated with regional and central office administrative and management support functions such as research and evaluation, systems support, financial management, budget functions, safety, and legal counsel. Contract Confinement : This decision unit provides for the costs associated with the confinement of federal inmates in contract facilities, which include private prisons, Residential Reentry Centers (RRC), state and local facilities, and home confinement. It provides funding for the management and oversight of contract confinement functions. This decision unit also provides funding for the National Institute of Corrections (NIC). Management and Administration : This decision unit provides funding for costs associated with general administration and provides funding for BOP's central office, regional offices, and staff training centers. Since FY1999, approximately 80% of BOP's S&E funding has gone to combined appropriations for the Inmate Care and Programs and the Institution Security and Administration decision units. Funding for these two decision units has increased at about the same rate as funding for the S&E account overall. From FY1999 to FY2017, funding for the Inmate Care and Programs decision unit increased 141% and funding for the Institution Security and Administration decision unit increased 123%. In comparison, funding for the S&E account increased 143% over the same time period. Funding for the Contract Confinement decision unit increased 295% between FY1999 and FY2017. The steeper increase in funding for the Contract Confinement decision unit comes as BOP has relied on confining more inmates in contract facilities, along with growing demand for RRC bedspace (a byproduct of more inmates being imprisoned and eventually released after serving their prison sentences). While funding for the Contract Confinement decision unit outpaced the growth of funding for the S&E account overall, funding for the Management and Administration decision unit grew at a rate below that of the S&E account. From FY1999 to FY2017, funding for the Management and Administration decision unit increased 74%. The B&F account is divided into two decision units: New Construction : This decision unit covers lease payments for the Oklahoma Transfer Center, the salaries and administrative costs of staff involved in new prison construction, construction of inmate work program areas and expansion and conversion projects (i.e., additional special housing unit space). Modernization and Repair : This decision unit provides resources to undertake essential rehabilitation, modernization, and renovation of correctional facilities and their grounds. This includes modifications to facilities to accommodate correctional programs, repair or replace utilities systems and other critical infrastructure, repair projects at existing institutions, and maintain all systems and structures in a good state of repair. In 10 of the 19 fiscal years since FY1999, a majority of the funding for the B&F account has been dedicated for new prison construction. In fiscal years where funding for the B&F account increased, funding for new prison construction generally increased. On average, Congress appropriated $333 million for the B&F account from FY1999 to FY2017. Fiscal years in which funding for modernization and repair accounted for a majority of B&F funding were usually years in which funding for the B&F account was significantly below this average, usually when total B&F funding was less than $100 million. A comparison of BOP's annual appropriations for its S&E and B&F accounts to the Administration's request for both accounts shows that Congress has been more likely to fund the Administration's request for prison construction and less likely to fully fund the Administration's request for operating the federal prison system (see Figure 3 ). The requested appropriation indicates what BOP believed it would need to properly manage the prison population each fiscal year. The data suggest that in many fiscal years BOP operated with a budget below what it felt was adequate. The data presented in Figure 3 show that from FY1980 to FY2017, Congress appropriated less than the Administration's request for the B&F account 16 times. Over the same time period Congress appropriated less than the Administration's request for the S&E account 24 times. In contrast, however, the amount appropriated for the S&E account between FY2007 and FY2010 actually exceeded the Administration's request. The additional amounts provided by Congress during these fiscal years, as noted by the House Committee on Appropriations, were to compensate for underfunding BOP in previous years, which resulted in inadequate staffing levels and shortfalls in inmate programs. In the past, both the House and the Senate appropriations committees reported that they felt the Administration's requests for BOP were inadequate, which did not allow BOP to meet its basic operational needs. However, Congress has not raised similar concerns in more recent fiscal years. Appropriations for the S&E account have been below the Administration's request for six of the past seven fiscal years, by an average of $232 million. As noted above, appropriations for BOP have continued to increase even though the federal prison population has decreased in recent years. This trend might be partly explained by the increasing per capita cost for incarceration. As show in Figure 4 , the nominal per capita cost of incarceration has increased from approximately $22,000 per inmate in FY2000 to almost $35,000 in FY2016, a 61% rise. From FY2000 to FY2012, the per capita cost of incarceration roughly increased at the same rate as inflation. However, since FY2013 increases in the per capita cost have started to outstrip inflation. The increasing per capita cost of incarceration is partly due to inflationary pressures, such as the increasing cost of health care, food, clothing, and utilities. However, it is notable that the per capita cost of incarceration has increased at a greater rate than inflation since FY2013, which coincides with the decreasing prison population. Stable or increasing obligations combined with a decreasing prison population will result in increasing per capita costs because the shared inmate expenses are dispersed across fewer inmates. Per capita costs are not equivalent to marginal costs (i.e., what it costs BOP to incarcerate one additional inmate). For example, if the per capita cost of incarceration is $22,000 per inmate and BOP's prison population decreased by 1,000 inmates, it does not mean that BOP would save $22 million. Per capita costs do not equate to marginal costs because per capita costs reflect the total amount BOP obligates in a fiscal year divided by that fiscal year's average daily population. Some costs (e.g., food and clothing expenses) would decrease if BOP incarcerated fewer inmates. However, obligations also account for items like staff salaries, which might not change until the prison population decreases to a point where BOP could close prisons and reduce staff. For example, if all of BOP's high security facilities hold 10% more inmates than their rated capacity and BOP's prison population decreases to a point where these facilities hold the same number of inmates as their rated capacity, it is likely that BOP would not reduce staffing at those prisons, which would mean that obligations for high security facilities for that fiscal year would not decline significantly. One concern among some policymakers is that BOP's expanding budget is starting to consume a larger share of the Department of Justice's (DOJ) overall annual appropriations. Figure 5 shows what proportion of DOJ's annual discretionary budget was dedicated to BOP. BOP's overall budget is more susceptible to fluctuations due to changes in year-to-year appropriations for BOP's B&F account. The trend lines (the dashed lines in the figure) show that since FY1980, both BOP's total budget and the S&E account have, in general, encompassed a growing share of DOJ's annual appropriations. The noticeable spike in BOP's share of DOJ's annual appropriations in FY1990 was the result of Congress appropriating more than $1 billion for the B&F account. In addition, the decrease in BOP's share of DOJ's appropriations observed in FY2009, a break in a general upward trend that started in FY2000, was the result of Congress appropriating an additional $4 billion for DOJ under the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). Appendix A. BOP Appropriations: Total and by Decision Unit Appendix B. BOP Per Capita Costs | The Bureau of Prisons (BOP) is the largest correctional agency in the country in terms of the number of prisoners under its jurisdiction. BOP must confine any offender convicted and sentenced to a term of imprisonment in a federal court. Changes in federal criminal justice policy since the early 1980s spurred growth in the federal prison population. The total number of inmates under BOP's jurisdiction increased from approximately 25,000 in FY1980 to over 192,000 in FY2016. While the federal prison population in FY2016 is nearly 7 times larger than what it was in FY1980, the number of inmates under the BOP's jurisdiction peaked in FY2013 at approximately 219,000 inmates. The federal prison population has decreased each fiscal year from FY2013 to FY2016. BOP's appropriations increased by nearly $7.149 billion from FY1980 to FY2016, which was the peak of BOP's nominal appropriations. Between FY1980 and FY2016, the average annual increase in BOP's appropriations was approximately $199 million. Its appropriations decreased by $340 million in FY2017. BOP's annual budget is divided between two major accounts: Salaries and Expenses (S&E, i.e., the operating budget) and Buildings and Facilities (B&F, i.e., the capital budget).The nearly continuous increase in BOP's appropriations is in large part driven by a nearly unbroken year-by-year increases in the S&E account. Funding for the S&E account has continued to increase even though the prison population decreased from FY2013 to FY2016. An increasing per capita cost of incarceration might explain why funding for the S&E account has not decreased along with the prison population, but it might also be due to the fact that the prison population has not decreased to a point where BOP can reduce staff and shutter prisons. The nominal per capita cost of incarcerating an inmate in the federal system has increased every fiscal year from FY2000 to FY2016, from approximately $22,000 per inmate to nearly $35,000 per inmate. After adjusting for inflation, the overall cost of incarceration was relatively flat from FY2000 to FY2012, but in recent fiscal years increases in per capita costs have started to outstrip inflation. A comparison of requested and enacted funding for BOP's S&E and B&F accounts shows that Congress has been somewhat more likely to fund the Administration's request for prison construction and less likely to fully fund the Administration's request for operating the federal prison system. From FY1980 to FY2017, appropriations were lower than the Administration's request for the B&F account 16 times while appropriations were lower than the request for the S&E account 24 times. One concern among some policymakers is that BOP's expanding budget is starting to consume a larger share of the Department of Justice's (DOJ's) overall annual appropriations. A review of funding for DOJ and BOP show that since FY1980 both BOP's total budget and the S&E account have, in general, encompassed a growing share of DOJ's annual appropriations. |
O n October 10, 2017, the U.S. Environmental Protection Agency (EPA) proposed to repeal the Clean Power Plan (CPP), an Obama Administration rule that would limit carbon dioxide (CO 2 ) emissions from existing fossil-fuel-fired power plants. The action came in response to Executive Order 13783, in which President Trump directed federal agencies to review existing regulations and policies that potentially burden the development or use of domestically produced energy resources. Among the E.O.'s specific directives was that EPA review the CPP, which was one of the Obama Administration's most important actions directed at reducing greenhouse gas (GHG) emissions. EPA promulgated the CPP on August 3, 2015. The rule set standards for CO 2 emissions from existing fossil-fuel-fired power plants under Section 111(d) of the Clean Air Act (CAA). Information regarding the rule, including EPA's Regulatory Impact Analysis and numerous EPA Fact Sheets, can be found at https://web.archive.org/web/20161104002205/http://www2.epa.gov/cleanpowerplan/clean-power-plan-existing-power-plants . Interest in the rule has been intense, reflecting what is generally recognized to be the importance of its potential effects. The economy and the health, safety, and well-being of the nation depend on a reliable and affordable power supply, which many contend would be adversely affected by controls on GHG emissions from power plants. At the same time, an overwhelming scientific consensus has formed that there are risks, potentially catastrophic, of greenhouse gas-induced climate change. To determine how the CPP addresses these issues, congressional committees asked EPA officials numerous questions about the rule, and individual Members wrote EPA seeking additional information about the rule's potential impacts. Following the rule's proposal, EPA received more than 4.3 million public comments, the most ever for an EPA rule. EPA responded to questions and comments by making numerous changes to the rule between proposal and promulgation. Congressional and public interest has continued since the final rule was promulgated. Besides EPA's proposal to repeal the rule, the rule is the subject of ongoing litigation: a number of states and other entities have challenged it, while other states and entities have intervened in support of it. On February 9, 2016, the Supreme Court granted applications to stay the rule for the duration of the litigation. The U.S. Court of Appeals for the District of Columbia heard oral arguments in the case in September 2016, but agreed to an EPA request to continue to hold the case in abeyance while the agency proceeds with the repeal process. In order to provide basic information about the rule as promulgated, and about the ongoing litigation and proposed repeal of the rule, this report presents a series of questions and answers. A: EPA promulgated emissions guidelines to limit carbon dioxide (CO 2 ) emissions from existing power plants under Section 111(d) of the CAA for a variety of reasons. Some important context includes the following: The Supreme Court in Massachusetts v. EPA in 2007 determined that "air pollutant," as used in the CAA, covers GHGs. EPA thereafter determined that GHGs are air pollutants that were "reasonably anticipated to endanger both public health and welfare." In December 2010, EPA entered into a settlement agreement to issue New Source Performance Standards (NSPSs) for GHG emissions from electric generating units (EGUs) under Section 111(b) of the CAA and emission guidelines under Section 111(d) covering existing EGUs. As discussed further below, EPA finalized NSPSs for GHG emissions from new, modified, and reconstructed fossil-fuel-fired EGUs at the same time as the CPP. In the context of U.S. commitments under a 1992 international treaty, the United Nations Framework Convention on Climate Change (UNFCCC), President Obama pledged in 2009 to reduce U.S. GHG emissions by 17% below 2005 levels by 2020, consistent with an 80% reduction by 2050. The President set a further goal as the U.S. national contribution to global GHG reductions under the 2015 Paris Agreement: a 26% to 28% reduction from 2005 levels to be achieved by 2025, consistent with a straight-line path to an 80% reduction by 2050. Other countries have also pledged GHG emissions abatement. Parties to the Paris Agreement (currently 143) are legally bound to submit GHG emission reduction pledges, although they are not bound to the quantitative targets themselves. As of April 27, 2017, 165 intended nationally determined contributions—covering more than 190 countries, including all major emitters—had been submitted. The PA entered into force on November 4, 2016, and the United States is a Party, following President Obama's communication of U.S. acceptance of the agreement in September 2016. The U.S. Nationally Determined Contribution (NDC) is registered in the interim Registry of NDCs. Fossil-fueled EGUs account for 29% of U.S. GHG emissions. It would be challenging to substantially abate U.S. GHG emissions without addressing these sources. A: Figure 1 illustrates net U.S. GHG emissions between 1990 and 2015. As the figure indicates, U.S. GHG emissions increased during most of the years between 1990 and 2007. GHG emissions decreased substantially in 2008 and 2009 as a result of a variety of factors—some economic, some the effect of government policies at all levels. Since 2010, emissions have fluctuated but have not surpassed 2009 levels. The figure also compares recent U.S. GHG emission levels to the 2020 and 2025 emission goals. Based on 2015 GHG emission levels, the United States is more than halfway to reaching President Obama's 2020 goal (17% below 2005 levels). U.S. GHG levels in 2015 were 11% below 2005 levels. Figure 2 illustrates the percentage change in net U.S. GHG emissions, U.S. economic activity measured as gross domestic product (GDP, adjusted for inflation), and U.S. population between 1990 and 2015. As Figure 2 indicates, during that period, U.S. economic activity increased by 83%, population increased 28%, and GHG emissions increased by 5%. A: The U.S. electricity generation sector contributed about 29% of all U.S. GHG emissions in 2015. CO 2 emissions account for the vast majority (99% in 2015) of GHG emissions from the electricity sector. As illustrated in Figure 3 , CO 2 emissions from electricity generation generally increased between 1990 and 2007, but have generally decreased since that time. A: Prior to the promulgation of this rule, EPA had already promulgated GHG emission standards for light-duty and medium- and heavy-duty vehicles, using its authority under Section 202 of the CAA. Light-duty vehicles (cars, SUVs, vans, and pickup trucks) and medium- and heavy-duty vehicles (including buses, heavy trucks of all kinds, and on-road work vehicles) are collectively the largest emitters of GHGs other than power plants. Together, on-road motor vehicles accounted for 23% of U.S. GHG emissions in 2015. GHG standards for light-duty vehicles first took effect for Model Year (MY) 2012. Allowable GHG emissions will be gradually reduced each year from MY2012 through MY2025. In MY2025, emissions from new vehicles must average about 50% less per mile than in MY2010. The standards for heavier-duty vehicles began to take effect in MY2014. They will require emission reductions of 6% to 23%, depending on the type of engine and vehicle, when fully implemented in MY2018. A second round of standards, to address later medium- and heavy-duty vehicles, was promulgated on August 16, 2016. The new standards cover model years 2018-2027 for certain trailers, and model years 2021-2027 for semi-trucks, large pickup trucks, vans, and all types and sizes of buses and work trucks. The standards are expected to lower CO 2 emissions by approximately 1.1 billion metric tons over the life of the covered vehicles, according to EPA. EPA determined that the promulgation of standards for motor vehicles also triggered Clean Air Act requirements that new major stationary sources of emissions (power plants, refineries, etc.) obtain permits for their GHG emissions, and install the Best Available Control Technology, as determined by state and EPA permit authorities on a case-by-case basis, prior to construction. The Supreme Court partially upheld that position in June 2014, provided that the sources were already required to obtain permits for other conventional pollutants. The GHG permitting requirements for stationary sources have been in place since 2011 but were limited by EPA's "Tailoring Rule" to the very largest emitters—about 200 facilities as of mid-2014. The Supreme Court's June 2014 decision invalidated the Tailoring Rule, but found that EPA could limit GHG permit requirements to "major" facilities, so-classified as a result of their emissions of conventional pollutants. In so doing, the Court limited the pool of potential GHG permittees to a number similar to what the Tailoring Rule would have provided. In 2016, EPA also promulgated GHG (methane) emission standards for new oil and gas sources and for new and existing municipal solid waste (MSW) landfills. Although these rules have been promulgated, they are being challenged in the U.S. Court of Appeals for the D.C. Circuit. President Trump's Executive Order 13783 requires EPA to review the methane emission standards for oil and gas sources. In addition, EPA announced that it will reconsider fugitive emissions monitoring and other requirements that are part of the oil and gas methane standards and has proposed to stay the compliance date for those requirements for two years. A: EPA cited Section 111(d) of the CAA for its authority to promulgate the CPP. Section 111(d) requires EPA, among other things, to issue regulations providing for states to submit plans to EPA to impose "standards of performance" for existing stationary sources for any air pollutant that meets certain criteria. The first criterion is that the air pollutant must not already be regulated under certain other CAA provisions, which are discussed further below. The second criterion is that CAA Section 111(b) NSPSs apply to the source category for the air pollutant. EPA finalized Section 111(b) NSPSs for new, modified, or reconstructed power plants for CO 2 when it issued the CPP rule. EPA often refers to Section 111(d) regulations as "emission guidelines." A: CAA Section 111(d) bars EPA from regulating an air pollutant pursuant to Section 111(d) if the air pollutant is already regulated as a criteria pollutant under a National Ambient Air Quality Standard (NAAQS) under CAA Section 108 or, per EPA's interpretation, as a hazardous air pollutant (HAP) under CAA Section 112. CO 2 is not regulated as a criteria pollutant or a HAP under either of these provisions. Because the House and Senate passed different versions of CAA Section 111(d) in the 1990 CAA amendments, controversy exists over EPA's authority per the Section 112 criterion. Under the House's provision, CAA Section 111(d)(1)(A)(i) requires EPA to issue a rule under which each state shall submit to EPA a plan adopting standards of performance for any air pollutant that "is not included on a list published under section 108(a) or emitted from a source category which is regulated under section 112.... " Because EPA regulates power plants under Section 112 for HAP, some have argued that EPA is barred from regulating power plants under Section 111(d) for CO 2 , although CO 2 is not regulated as a HAP under Section 112. In the final CPP rule, EPA addressed this issue, finding the CAA Section 112 exclusion to "not bar the regulation under CAA section 111(d) of non-HAP from a source category, regardless of whether that source category is subject to standards for HAP under CAA section 112." Describing the House amendment as ambiguous, EPA stated that the "sole reasonable" interpretation is that "the phrase 'regulated under section 112' refers only to the regulation of HAP emissions. In other words, EPA's interpretation concluded that source categories 'regulated under section 112' are not regulated by CAA section 112 with respect to all pollutants, but only with respect to HAP." In making this argument, EPA also cited the Senate's 1990 amendment to CAA Section 111(d)(1)(A)(i), which is published in the U.S. Statutes at Large but not in the U.S. Code . The Senate's amendment excludes from Section 111(d) regulation any air pollutant "included on a list published under section 108(a) or 112.... " As such, the Senate language excludes air pollutants regulated under Section 112, rather than source categories, from Section 111(d) regulation, which is consistent with EPA regulating power plants for CO 2 under Section 111(d). A: An analysis by the American College of Environmental Lawyers observed that since the 1970s, EPA has promulgated emission guidelines under Section 111(d) of the CAA on seven occasions. EPA's 2005 Clean Air Mercury Rule (CAMR) delisted coal-fired electric utility steam generating units from Section 112 of the CAA and, instead, established a cap-and-trade system for mercury under Section 111(d); however, the U.S. Court of Appeals for the D.C. Circuit vacated CAMR in 2008. The court found that EPA's delisting of the source category from Section 112 was unlawful and that EPA was obligated to promulgate standards for mercury and other hazardous air pollutants under Section 112. The court, therefore, did not reach the question of whether the flexible approach taken by EPA for mercury controls (i.e., a cap-and-trade system) met the requirements of Section 111(d). In 1996, EPA used its Section 111(d) authority to regulate emissions of methane and non-methane organic compounds from large landfills. These regulations set numeric emission limits and required designated landfills to use certain types of control equipment . In August 2016, EPA revised emission guidelines for existing landfills operating prior to July 17, 2014. EPA also used its Section 111(d) authority for another emission guideline rule for large municipal waste combustors, which EPA proposed in 1989 and finalized in 1991 pursuant to a consent decree. However, the 1990 CAA amendments added a new CAA Section 129 specifically to address emissions from solid waste incinerators, including municipal waste combustors. Section 129 required Section 111 NSPS and emission guidelines for solid waste incinerators to meet certain requirements, so the 1991 rule for large municipal waste combustors was superseded by a later rule intended to comply with Section 129. EPA adopted the remaining Section 111(d) emission guidelines for acid mist from sulfuric acid production units, fluoride emissions from phosphate fertilizer plants, total reduced sulfur emissions from kraft pulp mills, and fluoride emissions from primary aluminum plants. Additionally, EPA has promulgated six rules that implement Section 111(d) in conjunction with the requirements of CAA Section 129. A: EPA finalized standards for new fossil-fuel-fired power plants under Section 111(b) of the CAA on the same day it finalized the CPP rule. As discussed earlier, when EPA sets NSPSs for a source category for an air pollutant under Section 111(b), EPA triggers Section 111(d)'s applicability for existing sources in the Section 111(b) regulated source category for the air pollutant if the air pollutant is neither regulated as a criteria pollutant under a NAAQS nor, according to EPA's interpretation, regulated as a HAP for the source category. Consequently, EPA's adoption of NSPSs for new fossil-fueled power plants for CO 2 triggered Section 111(d)'s applicability for existing fossil-fueled power plants for CO 2 . Conversely, EPA has no authority to set Section 111(d) performance standards for existing sources in a source category for an air pollutant if EPA has no NSPSs for new sources in the source category for the air pollutant. Many of the petitioners challenging the CPP rule for existing power plants are also challenging EPA's NSPSs for new, modified, or reconstructed power plants for CO 2 . Because the CPP rule is predicated on the Section 111(b) NSPS rule, a court decision striking down or repeal of the NSPS rule would undermine the CPP rule's legal basis. Pursuant to Executive Order 13783 , EPA is currently reviewing the NSPS rule. Because EPA has not completed its review, it is unclear what actions, if any, EPA will take with respect to the NSPS rule. A: The term "standards of performance" appears repeatedly in CAA Section 111, including in both the Section 111(b) provisions relating to new sources and the Section 111(d) provisions relating to existing sources in a source category. Section 111(a) defines "standard of performance" as [A] standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated. Under this definition, EPA must determine the "best system of emission reduction" (BSER) that is "adequately demonstrated," considering certain factors. Then, EPA or states, as applicable, must base the standard for emissions on the degree of emission limitation that is "achievable" through the BSER. The CAA does not define these component terms within the definition of "standard of performance." As discussed in more detail below, in the CPP rule, EPA determined the BSER for existing power plants based on three "building blocks": (1) efficiency improvements at affected coal-fired power plants, (2) generation shifts among affected power plants, and (3) renewable generating capacity. It then used the BSER to set CO 2 emission performance rates. EPA used a different approach to determine the BSER for new, modified, and reconstructed power plants. Courts have expanded on the CAA Section 111 definition of the term "standards of performance" and EPA's interpretation of its component terms, but they have done so generally with respect to NSPSs under Section 111(b) rather than emission guidelines for existing sources under Section 111(d). As discussed further below, EPA explains that the interpretation of the term "standards of performance" and related terms is guided by Chevron U.S.A. Inc. v. NRDC , 467 U.S. 837 (1984), in which the U.S. Supreme Court stated that if a statute "is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute." However, some opponents of the CPP rule argue that this framework, known as " Chevron deference," should not apply, at least to certain aspects of EPA's interpretation of CAA Section 111. A: EPA's final rule does not set a future level of CO 2 emissions from existing electricity generators. The rule establishes uniform national CO 2 emission performance rates—measured in pounds of CO 2 per megawatt-hour (MWh) of electricity generation—and state-specific CO 2 emission rate and emission targets. States determine which measure they want to use to be in compliance. Although it has been widely reported that the rule would require a 32% reduction in CO 2 emissions from the electricity sector by 2030, compared to 2005 levels, this reduction was EPA's estimate of the rule's ultimate effect nationwide. The final rule does not explicitly require this level of emission reduction from electric generating facilities or states. EPA used computer models to project these CO 2 emission levels. The actual emissions would depend on how states choose to comply with the rule and how much electricity is generated (and at what type of generation units). Figure 4 compares EPA's projections of CO 2 emissions in the electricity sector resulting from the final rule with historical CO 2 emissions (1990-2015) from the electricity sector. The figure also illustrates the projected CO 2 emissions from the electricity sector under EPA's baseline scenario (i.e., business-as-usual). The figure indicates that the final rule would reduce CO 2 emissions in the electricity sector by 32% in 2030 compared to 2005 levels. Under the baseline scenario (without the rule), EPA projected a 16% reduction by 2030 compared to 2005 levels. U.S. CO 2 Emissions from Electricity Generation The Energy Information Administration (EIA) provided comparable results in its 2017 Annual Energy Outlook . EIA estimated that under a reference case scenario, which includes the CPP and other assumptions, CO 2 emissions in the electricity sector would decrease by 36% in 2030 compared to 2005 levels. Under a scenario without the CPP, EIA estimated that CO 2 emissions in the electricity sector would decrease by 22% in 2030 compared to 2005 levels. A: Due to a variety of factors, including market forces, state and federal regulations, technological innovation, and federal tax incentives, the electric power industry is changing rapidly. Market forces have included the abundance and low price of natural gas; the flattening of demand for electric power; and advances that have sharply lowered the costs of renewable power. These forces have resulted in the retirement of dozens of coal-fired power plants, their replacement by natural gas-fired and renewable generation, and a decline in GHG emissions from the power sector. The market forces have been buttressed by state and federal regulations—principally, the renewable power requirements in place in about 30 states; the caps on GHG emissions in California and nine Northeastern states; efficiency standards set in both state and federal regulations; emission standards limiting cross-state air pollution, mercury, and air toxic emissions; and standards for the disposal of coal combustion waste. At the same time, significant technological innovations have been deployed, including high efficiency gas turbines, which result in less CO 2 per unit of power produced for new plants. In addition, over the last decade, Congress has provided federal tax incentives for the use of wind and solar generation technologies. As a result of this combination of factors, between 2005 and 2016, emissions of CO 2 from electric power generation declined almost 25%, while Gross Domestic Product grew and the amount of power generated remained essentially unchanged. The CO 2 emission reduction already achieved represents 77% of the reduction that EPA expected the electric power sector to achieve by 2030 under the CPP. A: The final rule directs governors (or their designees) to submit state-specific plans to EPA that describe how the states would meet their compliance obligations established by the final rule. A: The final rule addresses CO 2 emissions at "affected" electric generating units (EGUs). In general, an affected EGU is a fossil-fuel-fired unit that was in operation or had commenced construction as of January 8, 2014, has a generating capacity above a certain minimum threshold, and sells a certain amount of its electricity generation to the grid. The state-specific plans describe the requirements that would apply to affected EGUs. A: Based on data EPA provided in support of its final rule, the affected EGU definition applied to approximately 3,000 EGUs at approximately 1,100 facilities. The number of EGUs and facilities varies by state. A: EPA did not establish emission rate goals for Vermont and the District of Columbia, because they did not have affected EGUs. Although Alaska and Hawaii had targets in EPA's proposed rule, in its final rule, EPA stated that Alaska, Hawaii, and the two U.S. territories with affected EGUs (Guam and Puerto Rico) would not be required to submit state plans on the schedule required by the final rule, because EPA "does not possess all of the information or analytical tools needed to quantify" the best system of emission reduction for these areas. In the final rule preamble, EPA stated it would "determine how to address the requirements of section 111(d) with respect to these jurisdictions at a later time." A: Under the final rule as promulgated, states were required to submit to EPA either an initial plan or final plan by September 6, 2016. If a state submitted an initial plan, the state could seek an extension from EPA to submit its final plan by September 6, 2018. If EPA granted this extension, the state would have been required to submit a progress report by September 6, 2017. Because the rule is currently stayed for the duration of the litigation, these deadlines do not have legal effect and will likely be delayed if the rule is ultimately upheld. A: States have several key decisions to make when crafting their state plans. Perhaps the most important decision is whether to measure compliance with an emission rate target (pounds of CO 2 per MWh) or a mass-based target (tons of CO 2 ). EPA provided both targets in its final rule. If a state decides to set up an emission (or emission rate) trading system, the trading system would be compatible only with systems using the same metric. In other words, a rate-based state cannot trade with a mass-based state. In addition, the final rule allows for two types of state plans, described by EPA as (1) an "emission standards" approach and (2) a "state measures" approach. With an emission standards approach, a state would implement national CO 2 emission performance rates (discussed below) directly at the affected EGUs in the state. In contrast, a state measures approach would allow a state to achieve the equivalent of the national CO 2 emission performance rates by using some combination of federally enforceable standards and elements that would be enforceable only under state laws (e.g., renewable energy and/or energy efficiency requirements). A: States have the option of submitting multi-state plans. The same deadlines apply to multi-state plans. A multi-state plan would employ either a rate-based or mass-based approach. A: The final rule establishes uniform national CO 2 emission performance rates—measured in pounds of CO 2 per MWh of electricity generation—for each of the two subcategories of EGUs affected by the rule ( Table 1 ). These subcategories include (1) fossil-fuel-fired electric steam generating units, of which coal generation accounts for 94%—oil and natural gas contribute the remainder—and (2) stationary combustion turbines, namely natural gas combined cycle (NGCC) units. The national rates are a major change from the proposed rule, which did not include similar performance rates at the EGU level. As discussed below, the national CO 2 emission performance rates are the underpinnings for the calculations that EPA used to develop state-specific emission rates and mass-based targets. A: EPA compiled 2012 CO 2 emissions and electricity generation data from each affected EGU in each state. Then EPA divided the states into three regions (see Error! Reference source not found. ), aggregating the CO 2 emission and electricity generation data. Next, EPA applied three "building blocks" to the aggregated regional data: Building block 1: EPA applied heat rate improvements to coal-fired EGUs, improving their overall emission rate. The improvements vary by region from 2.1% to 4.3%. Building block 2: EPA assumed that NGCC generation would increase to a specific ceiling, displacing an equal amount of generation from steam units (primarily coal). Note that in the final rule, EPA applies building block 3 before building block 2, dampening the impact of building block 2. Building block 3: EPA projected annual increases in renewable energy generation, which resulted in corresponding decreases in generation from affected EGUs. EPA based the future increases on renewable energy generation increases between 2010 and 2014. EPA's building block application produced annual CO 2 emission performance rates for steam and NGCC units in each region. EPA compared the rates in each of the three regions and chose the least stringent regional rate as the national standard for that particular year for each EGU category ( Table 1 ). A: To generate state-specific emission rate targets, EPA applied the national CO 2 emission performance rates to each state's baseline (2012) of fossil fuel generation (steam generation vs. NGCC generation). For example, in 2012, Arizona's electricity generation mix included 49% steam generation, and 51% NGCC generation. To calculate Arizona's 2030 emission rate target, EPA multiplied the percentage of each generation type by the corresponding 2030 national CO 2 emission performance rate ( Table 1 ): (49% X 1,305 lbs. CO 2 /MWh) + (51% X 771 lbs. CO 2 /MWh) = 1,031 lbs. CO 2 /MWh A: Table 2 lists the 2030 emission rate targets for each state and the 2012 emission rate baselines. In addition, the table lists the implied percentage reductions required to achieve the 2030 emission rate targets compared to the 2012 baselines. EPA used different formulas to calculate the 2012 baselines in the proposed and final rules. The final rule baseline includes pounds of CO 2 generated from affected EGUs in each state (the numerator) divided by the electricity generated from these units. The proposed rule baseline included pounds of CO 2 generated from affected EGUs in each state (the numerator) divided by the electricity generated from these units and "at-risk" nuclear power and renewable energy generation (the denominator). Including these additional elements in the denominator often yielded lower baselines compared to the final rule. Therefore, it is problematic to compare the percentage rate reductions from the proposed rule with the final rule, because the 2012 baseline calculations changed—sometimes dramatically—in the final rule. For example, Washington's 2012 baseline was 756 lbs. CO 2 /MWh in the proposed rule. In the final rule, Washington's 2012 baseline increased by 107% to 1,556 lbs. CO 2 /MWh. A: EPA's conversion from emission rate targets to mass-based targets involved two steps. First, EPA multiplied a state's emission rate target (lbs. CO 2 /MWh) for a particular year (e.g., 2022) by the state's 2012 CO 2 generation baseline (MWh). This yields an initial mass-based value for that year. Second, EPA determined the amount of renewable energy generation (pursuant to building block 3) that would not be needed to achieve the emission rate targets. This "excess" generation is available because EPA chose the least stringent of the three regional CO 2 performance rates as the national CO 2 performance rate. EPA explained: Due to the nature of the emission performance rate methodology, which selects the highest of the three interconnection-based values for each source category as the CO 2 emission performance rate, there are cost-effective lower-emitting generation opportunities quantified under the building blocks that are not necessary for affected EGUs in the Western and Texas interconnections to demonstrate compliance at historical generation levels. EPA calculated the CO 2 emissions associated with this "excess" generation and allocated the CO 2 emissions to all of the states based on their 2012 generation, increasing their annual mass-based targets. As a result, some of the states' 2030 mass-based targets are higher than their 2012 emission baselines. EPA based the renewable energy allocation on each state's share of total electricity generation in 2012 from affected EGUs. For example, in 2012, Florida's affected EGUs accounted for 8% of the generation from all affected EGUs nationwide, so Florida received 8% of the excess renewable energy generation in the mass-based calculation. A: Table 3 lists the state-specific, mass-based targets from EPA's final rule. The table compares the 2030 targets with the 2012 baselines as calculated for the final rule and provides a percentage change between the two values. Most of the states have emission reduction requirements, but three states (Connecticut, Idaho, and Maine) have 2030 targets that are higher than their 2012 baselines (as discussed above). A: The final rule established emission rate and emission targets for three areas of Indian country: the Navajo Nation, the Ute Tribe of the Uintah and Ouray Reservation, and the Fort Mojave tribe. The targets ( Table 4 ) are based on two facilities in the Navajo Nation (the Navajo Generating Station and the Four Corners Power Plant), the South Point Energy Center on the Fort Mojave Reservation, and the Bonanza Power Plant on the Uintah and Ouray Indian Reservation. EPA stated that tribes have "the opportunity, but not the obligation," to establish and submit a plan (after obtaining the necessary approval from EPA) to meet their emission rate targets. If a tribe does not seek approval to submit its own plan, EPA is responsible for establishing a plan, if the agency determines, at a later date, that "a plan is necessary or appropriate." On October 23, 2015, in addition to finalizing the CPP and NSPSs for EGUs, EPA proposed a rule for a federal plan, which would be implemented by EPA in states that do not submit a satisfactory state implementation plan. In the federal plan rule, EPA proposed "to find that it is necessary or appropriate to regulate affected EGUs in each of the three areas of Indian country that have affected EGUs under the proposed federal plan." Therefore, EPA would develop and implement the federal plan for EGUs in the relevant Indian lands, unless the tribal governments received EPA approval to submit their own plans to meet their emission targets. However, pursuant to President Trump's Executive Order 13783, EPA withdrew the federal plan proposed rule on April 3, 2017. Although EPA withdrew the proposed federal plan, the targets in Indian lands established by the final rule remain. If the final rule is upheld in court, the agency would need to develop and finalize a new federal plan if it determines that "a plan is necessary or appropriate" if a tribe does not seek approval to submit its own plan. A: States would not receive "credit" in their emission rate or emission targets for emission reduction measures already taken. Whether individual power companies would receive some type of credit would be decided by states as they develop their implementation plans. The rule requires each state to submit an implementation plan to EPA that identifies what measures/regulations the state would implement to reach its goal. EPA used 2012 data to prepare the national CO 2 emission performance rates and each state's emission rate and emission targets. The final rule does not have a process for providing credit for emissions reductions made prior to 2012. EPA contended that states that began action prior to 2012, including a shift to less carbon-intensive energy sources or energy efficiency improvements, would be "better positioned" to meet state-specific emission rate goals. However, some stakeholders would likely argue that the 2012 demarcation is unfair to states where investments in substantial amounts of low-carbon generation technology and/or energy efficiency improvements were made prior to 2012. A: A number of U.S. states have already required greenhouse gas (GHG) emission reductions. The most aggressive actions have come from a coalition of states from the Northeast and Mid-Atlantic regions—the Regional Greenhouse Gas Initiative —and California. The Regional Greenhouse Gas Initiative (RGGI) is a cap-and-trade system involving nine states that took effect in 2009. RGGI applies to CO 2 emissions from electric power plants with capacities to generate 25 megawatts or more. Pursuant to legislation passed in 2006, California established a cap-and-trade program that took effect in 2013. California's cap applies to multiple GHGs from multiple economic sectors, covering approximately 85% of California's GHG emissions. In addition, California has other policies and regulations that address GHG emissions directly and indirectly. EPA allows states considerable flexibility in meeting their emission rates or emission targets. For example, states can establish new programs to meet their goals or use existing programs and regulations. Moreover, states can meet their goals individually or collaborate with other states to create (or use existing) multistate plans. Both California and the RGGI states have taken action to extend the emission caps in their respective programs beyond 2020. In July 2017, California enacted AB 398, which extends the state's cap-and-trade program through 2030. The legislation received a two-thirds vote, which may help avoid subsequent legal challenges. In August 2017, RGGI state officials announced an initial agreement to extend the RGGI program through 2030, with additional emission reductions. The agreement is still in its early stages and will undergo a public comment process. RGGI states would then need to update their respective statutes or regulations to implement the program changes. In addition, Virginia has taken recent steps to potentially join the regional partnership, releasing a draft proposal of emission reduction regulations in November 2017 that would link with the RGGI program. A: The respective roles of actions that individual power plants take (i.e., "inside the fence" actions, such as the adoption of pollution control devices or fuel switching) versus actions by other actors, including energy consumers ("outside the fence" actions) have been the subject of much of the controversy surrounding the CPP. "Outside-the-fence" emission reductions play a central role in the methodology EPA used to establish the national CO 2 emission performance rates, which, in turn, provide the foundation for state-specific targets. In particular, building block 3 (discussed above) includes incremental increases of renewable energy generation, with corresponding decreases in electricity generation by fossil-fuel-fired units. Renewable energy appears to play a greater role in the final rule's methodology than in the proposed rule. However, the final rule omits building block 4 from the proposed rule, which included energy efficiency improvements other than by the fossil fuel-fired units. Although outside-the-fence activities were a major component of EPA's target calculations, the degree to which outside-the-fence emission reductions would be used would depend on the policies and requirements states implement through their state plans. A: In EPA's final rule, new EGUs are treated differently under rate-based and mass-based plans. Under a mass-based approach, states have the option of including new fossil-fuel-fired sources in their emission reduction plans. In its final rule, EPA provided mass-based emission targets that include projections of new sources (described by EPA as a "new source complement"). This inclusion would facilitate emissions trading within the state and with other states. These new sources would remain subject to the performance standards under CAA Section 111(b). In its proposed rule, EPA considered whether states could include new NGCC units in their emission rate calculations. In the final rule, EPA specifically prohibited states from including new NGCC units as a means of directly adjusting the state's emission rate. However, if a new NGCC were to effectively replace existing electricity generation from a coal-fired EGU, the state's emission rate would likely decrease with the removal of the coal-fired unit. A: EPA modified its treatment of nuclear power in the final rule. In its proposed rule, EPA factored "at risk" nuclear power (estimated at 5.8% of existing capacity) into the state emission rate methodology. As a result, states would have had an incentive to maintain the at-risk nuclear power generation so their emission rates would not increase (all else being equal). The final rule does not include at-risk nuclear generation in its building block calculations. In addition, in its final rule, EPA decided not to include under-construction nuclear power capacity in the emission rate calculations. Including the estimated generation from these anticipated units in the emission rate equation would have substantially lowered the emission rate targets in Georgia, South Carolina, and Tennessee. If the final rule had retained this feature, and these nuclear units did not enter service, these three states would likely have more difficulty achieving their emission rate goals. EPA clarified that the final rule would allow the generation from under-construction units, new nuclear units, and capacity upgrades to help sources meet emission rate or emission targets. A: In EPA's proposed rule, demand-side energy efficiency (EE) improvements were part of the agency's state-specific emission rate target calculations ("building block 4"). However, in its final rule, EPA did not include demand-side EE improvements as part the agency's national CO 2 emission performance rate calculations, which underlie the state-specific targets. Although EPA removed demand-side EE assumptions from its target calculations, states may choose to employ EE improvement activities as part of their plans to meet their targets. In particular, the final rule included a new voluntary program that provided incentives for early investments (in 2020 and 2021) in EE programs in low-income communities (as discussed below). In addition, in its 2015 Regulatory Impact Analysis (RIA) for the final rule, EPA assumed that EE will play an important role in meeting compliance obligations: [EE] is a highly cost-effective means for reducing CO 2 from the power sector, and it is reasonable to assume that a regulatory requirement to reduce CO 2 emissions will motivate parties to pursue all highly cost-effective means for making emission reductions accordingly, regardless of what particular emission reduction measures were assumed in determining the level of that regulatory requirement. A: In its final rule, EPA would allow states to use "qualified biomass" as a means of meeting state-specific reduction requirements. EPA defined qualified biomass as a "feedstock that is demonstrated as a method to control increases of CO 2 levels in the atmosphere." This appears to be a narrower approach than was taken in the proposed rule. Also, EPA required additional accounting and reporting requirements if a state decides to use qualified biomass. The agency gave some indication as to which biomass types may qualify. A: The Clean Energy Incentive Program (CEIP) is a voluntary program that would complement the CPP. The CEIP encourages states to support energy efficiency measures and renewable energy projects before the first CPP compliance obligations are scheduled to take effect in 2022. In order to participate in the CEIP, states would need to include particular design elements in their final state plans. EPA established the framework of the CEIP in its CPP final rule in 2015. EPA issued a proposed rule for the CEIP that was published in the Federal Register on June 30, 2016. The proposed rule provided additional details, clarified certain elements that were previously outlined, and altered some of the program eligibility requirements. In response to President Trump's Executive Order 13783 to review and potentially revise the CPP, EPA withdrew the CEIP 2016 proposed rule on April 3, 2017. The following discussion describes the CEIP as established in the CPP 2015 final rule. The CEIP would create a system to award credits to energy efficiency projects in low-income communities and renewable energy projects (only wind and solar) in participating states. The credits would take the form of emission rate credits (ERCs) or emission allowances, depending on whether a state uses an emission rate or mass-based target, respectively. The credits could be sold to or used by an affected emission source to comply with the state-specific requirements (e.g., emission rate or mass-based targets). Renewable energy projects would receive one credit (either an allowance or ERC) from the state and one credit from EPA for every two MWh of solar or wind generation. EE projects in low-income communities would receive double credits: For every two MWh of avoided electricity generation, EE projects will receive two credits from the state and two credits from EPA. EPA would match up to the equivalent of 300 million short tons in credits during the CEIP program life. The amount of EPA credits potentially available to each state participating in the CEIP depends on the relative amount of emission reduction each state is required to achieve compared to its 2012 baseline. Thus, states with greater reduction requirements would have access to a greater share of the EPA credits. To generate the credits, states would effectively borrow from their mass-based or rate-based compliance targets for the interim 2022-2029 compliance period. EPA would provide its share of credits from a to-be-established reserve. A: EPA's 2015 final rule was different from EPA's 2014 proposed rule in multiple respects. A key change was the establishment of national CO 2 emission performance rates for the sources affected by the rule: fossil-fuel-fired electric steam generating units and stationary combustion turbines. EPA used what it called "building blocks" to derive the national emission performance rates and state-specific targets based on the national rates. The final rule's state-specific targets differed from those in the proposed rule, because in the final rule, EPA applied its building block assumptions to regional-level data to create regional CO 2 emission performance rates. These regional rates led to national rates, which were then used to produce state-specific emission rate and emission targets. By contrast, in the proposed rule, EPA applied building blocks to state-level data, yielding different outcomes. In addition, EPA modified its target creation methodology (e.g., building blocks) in the final rule. Key modifications included adjustments to renewable energy, natural gas combined cycle (NGCC) displacement of coal-fired electricity generation, heat rate improvements at coal-fired units, energy efficiency, nuclear power, and state-specific 2012 baselines. These methodological changes impacted only the state-specific targets. States can choose to use a variety of mechanisms to meet their targets, including, but not limited to, the emission reduction activities assumed in EPA's methodology. In addition, state compliance with the final rule begins in 2022 instead of 2020 under the proposed rule. The final rule has additional compliance options available to states, particularly in the form of state plans. A: EPA cannot enforce the rule while it is stayed, pursuant to Supreme Court order, for the duration of the litigation over the rule. The final rule, as promulgated, set a deadline of September 6, 2016, for each state to submit a State Implementation Plan to EPA. In lieu of a completed plan, the final rule authorized a state to make an initial submittal by that date and request up to two additional years to complete its submission. For the extension of time to be granted, the final rule required the initial submittal to address three components sufficiently to demonstrate that the state is able to submit a final plan by September 6, 2018: 1. an identification of the final plan approach or approaches under consideration, including a description of progress made to date; 2. an appropriate explanation for why the state needs additional time to submit a final plan; and 3. a demonstration of how the state has been engaging with the public, including vulnerable communities, and a description of how it intends to meaningfully engage with community stakeholders during the additional time. In light of the stay, these near-term deadlines lack legal effect. If the rule is ultimately upheld or remanded back to EPA, but is not repealed, then initial compliance deadlines would likely be extended until a revised rule is finalized. Following submission of final plans, EPA would review the submittals to determine whether they are approvable. The interim compliance period for the rule, as promulgated, begins in 2022, although it is possible that this compliance date could be delayed as well if the rule is ultimately upheld and not repealed. EPA set an eight-year interim period that begins in 2022 and runs through 2029 and is separated into three steps (2022-2024, 2025-2027, and 2028-2029), each with its own interim goal. Affected EGUs would have to meet each of the step 1, 2, and 3 CO 2 emission performance rates or follow an EPA-approved emissions reduction trajectory designed by the state itself for the eight-year period from 2022 to 2029. The final rule, as promulgated, requires compliance with the state's final goal by 2030. A: In general, the CPP states Incremental emission reduction measures, such as RE [renewable energy] and demand-side EE, can be recognized as part of state plans, but only for the emission reductions they provide during a plan performance period. Specifically, this means that measures installed in any year after 2012 are considered eligible measures under this final rule, but only the quantified and verified MWh of electricity generation or electricity savings that they produce in 2022 and future years may be applied toward adjusting a CO 2 emission rate. As noted earlier, however, the CPP provided incentives for states to adopt measures to reduce emissions in 2020 and 2021 under the CEIP. Under the CEIP, EPA would provide credits against CPP requirements for wind and solar projects that commence construction after the date that a state submits its final plan to EPA and that generate metered electricity in 2020 and 2021. EPA would provide double credits for EE measures that result in reducing electricity consumption in low-income communities in participating states in the same two years. A: EPA cannot compel a state to submit a Section 111(d) plan. Rather, if a state fails to submit a satisfactory plan by EPA's deadline, CAA Section 111(d) authorizes EPA to prescribe a plan for the state. This authority is the same, Section 111(d) says, as EPA's authority to prescribe a federal implementation plan (FIP) when a state fails to submit a state implementation plan to achieve a National Ambient Air Quality Standard (NAAQS). EPA proposed a model FIP on August 3, 2015 (which appeared in the Federal Register on October 23, 2015), but withdrew it as directed by Executive Order 13783. If the CPP is upheld in court and is not repealed, EPA would need to re-propose a FIP for states that fail to submit an approvable plan to EPA. A: Just as EPA cannot compel a state to submit a state plan, it also cannot compel a state to meet its average emission targets. FIPs, therefore, would require compliance by individual EGUs in the affected state. The proposed FIP would set either emission rates or emission limits for affected EGUs. According to EPA, the stringency of the federal plan would be the same as the national CO 2 emission performance rates specified in the CPP. In addition, the FIP would establish a trading program that could be used by affected EGUs to meet those limits. If the agency chooses to implement a mass-based program, the proposal envisions the allocation of allowances to individual EGUs based on their historical emissions during the years 2010-2012. Although the proposed rule set forth both a mass-based and a rate-based option for the proposed trading program, the agency stated that it intended to finalize a single approach—that is, either a rate-based or a mass-based approach—in all FIPs "in order to enhance the consistency of the federal trading program, achieve economies of scale through a single, broad trading program, ensure efficient administration of the program, and simplify compliance planning for affected EGUs." While accepting comments on both approaches, the agency appeared to be leaning toward a mass-based option for use in the FIPs, stating that it would be more straightforward to implement compared to the rate-based trading approach, both for industry and for the implementing agency. The EPA, industry, and many state agencies have extensive knowledge of and experience with mass-based trading programs. The EPA has more than two decades of experience implementing federally-administered mass-based emissions budget trading programs including the Acid Rain Program (ARP) sulfur dioxide (SO 2 ) trading program, the Nitrogen Oxides (NOX) Budget Trading Program, CAIR, and CSAPR. The tracking system infrastructure exists and is proven effective for implementing such programs. EPA noted that, under its proposed FIP rule, states with FIPs could still participate in the implementation of the program under these conditions: After a federal plan is put in place for a particular state, the state would still be able to submit a plan, which, if approved, would allow the state and its EGUs to exit the federal plan. States would be allowed to take delegation of administrative aspects of the federal plan in order to become the primary implementers, or they could submit partial state plans in order to take over the implementation of a portion of a federal plan. For example, the states could replace the federal plan's allowance-distribution provisions with their own allowance-distribution provisions. States operating under a federal plan would be allowed to adopt complementary measures outside of that plan to facilitate compliance and lower costs to the benefit of power generators and consumers. A: Although the CPP is a final rule and set a deadline of September 6, 2016, for each state to submit a State Implementation Plan to EPA, EPA was unable to enforce that deadline because the rule was stayed, pursuant to Supreme Court order, for the duration of the litigation over the rule. The U.S. Court of Appeals for the District of Columbia heard oral arguments in the case in September 2016, but agreed on April 28, 2017, to an EPA request to hold the case in abeyance while the agency conducts the review required by Executive Order 13783. On October 10, 2017, pursuant to that review, EPA proposed to repeal the CPP. The proposed repeal is subject to public comment until January 16, 2018. Two days of public hearings on the proposal were held November 28 and 29, 2017, in Charleston, West Virginia. The court further extended the abeyance of the litigation while EPA proceeds to repeal the CPP. A: EPA proposed to repeal the Clean Power Plan based on a change in its legal interpretation of Section 111(d) of the Clean Air Act. In its new interpretation, the agency maintains that the CPP exceeded the agency's 111(d) authority by requiring compliance through activities that are "outside the fence line" of the power plants whose emissions are the rule's targets. For example, the rule effectively assumes that electric power producers would reduce CO 2 emissions by substituting lower carbon or non-carbon sources of electricity for some of the fossil-fueled generation whose emissions it seeks to reduce. The lower carbon sources might be wind or solar power units located miles away from the coal-fired unit whose emissions are to be reduced. The proposed repeal states that such outside-the-fence-line measures are not authorized by Section 111; it maintains that the agency's historical practice has been to interpret the authority in Section 111 to allow only measures that can be applied "at and to an individual source" of pollution. A: Following the public comment period, a repeal of the CPP could be promulgated. Like the proposal to repeal the CPP, the promulgated repeal would need to be accompanied by a statement of basis and purpose. It would also require an explanation of the reasons for any major changes from the proposal. The promulgated repeal must also be accompanied by a response to each of the significant comments, criticisms, and new data submitted in written or oral presentations during the comment period. The promulgated repeal may not be based (in part or whole) on any information or data which has not been placed in the docket as of the date of promulgation. A: In the case of review of any action of the Administrator to which subsection 307(d) of the Clean Air Act applies, including repeal of a rule, the U.S. Court of Appeals for the D.C. Circuit may reverse any such action found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, or without observance of the procedures required by law, if the failure to observe such procedure is arbitrary or capricious. A: Although the agency has proposed to repeal the Clean Power Plan, it did not propose repeal of the GHG "endangerment finding," the 2009 agency finding that emissions of CO 2 and other GHGs endanger public health and welfare. Without addressing this finding, the agency appears to have a continuing obligation to limit emissions of CO 2 from power plants. Thus, in addition to the proposed repeal of the CPP, on December 18, 2017, EPA issued an Advance Notice of Proposed Rulemaking (ANPRM) to solicit information on whether it is appropriate to issue another rule to replace the CPP and if so, in what form and scope. EPA will take public comment on the notice for 60 days following its publication in the Federal Register . A: Under Section 111(a)(1)'s definition of "standards of performance," EPA must consider cost in developing NSPSs and related emission guidelines for existing sources of pollution. Section 111(d)(1) also states that the regulations shall permit the states "to take into consideration, among other factors, the remaining useful life of the existing source to which such standard applies." In addition, EPA is required by Executive Order 12866 to provide a cost-benefit analysis when it proposes or promulgates economically significant rules. The CPP is an economically significant rule and was therefore subject to the executive order. E.O. 12866 states that "in choosing among alternative regulatory approaches, agencies should select those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity), unless a statute requires another regulatory approach." The agency's 2015 RIA, which it prepared to comply with the executive order, is available on the agency's website. The proposed repeal of the CPP is also an economically significant rule subject to E.O. 12866. EPA prepared a new Regulatory Impact Analysis that summarizes the costs and benefits of repealing the rule. A: The cost of the rule would depend on whether states adopt a rate-based or a mass-based approach to compliance, among other factors. In EPA's 2015 analysis, the cost associated with a mass-based approach is generally less than that of the rate-based: EPA estimated the annual incremental compliance cost for the mass-based approach to be $1.4 billion in 2020, $3.0 billion in 2025, and $5.1 billion in 2030. The comparable figures for the rate-based costs were $2.5 billion in 2020, $1.0 billion in 2025, and $8.4 billion in 2030. Because states would generally determine how to comply with the goals established by the final rule, EPA referred to these cost estimates as "illustrative" and noted that they "do not represent the full suite of compliance flexibilities states may ultimately pursue." EPA described the cost estimates as including "the net change in the annualized cost of capital investment in new generating sources and heat rate improvements at coal-fired steam-generating units, the change in the ongoing costs of operating pollution controls, shifts between or amongst various fuels, demand-side energy efficiency measures, and other actions associated with compliance." A: On November 9, 2015, the American Coalition for Clean Coal Electricity, an industry group, released a study of the CPP's impacts prepared by NERA Economic Consulting. The study concluded that the annual cost of compliance would range from $29 billion to $39 billion in the period 2022-2033 and that 40 states would see average electricity price increases of 10% or more under at least one of the scenarios it modeled. A study released by the National Mining Association projected sharp increases in the cost of both electricity and natural gas as a result of the rule, with a cumulative increase in wholesale electricity costs of $214 billion between 2022 and 2030. Others, including electric power producers and regional transmission organizations, have argued that it is too early to arrive at cost estimates. Much would depend on decisions to be made by the states as to how they would structure their regulatory programs and on projections of the cost of natural gas, coal, renewable power, and end-use efficiency measures between now and 2030. As noted below, EPA has revised its estimates of the costs and benefits of the rule in the RIA that accompanies the proposed repeal. A: In the preamble to the final rule, EPA cited monetized climate benefits of the rule to be $20 billion in 2030 and the air pollution health co-benefits of the rule to be an additional $12 billion to $34 billion (all estimates in 2011 dollars). The agency used global estimates of the social cost of carbon (SCC) to estimate the value of climate benefits expected under the CPP. The SCC is an estimate of the monetary value of impacts from CO 2 emission changes, including net changes in agricultural productivity and human health, property damage from increased flood risk, and changes in energy system costs, such as reduced costs for heating and increased costs for air conditioning. The SCC estimates that EPA used in its analysis of the CPP final rule have since been withdrawn by E.O. 13783. As noted below, in proposing to repeal the CPP, EPA has developed a set of new SCC values that resulted in notably different estimates of the monetary value of changes in CO 2 emissions. The air pollution health co-benefits of the CPP reflect reduced exposure to fine particulate matter (PM 2.5 ) and ozone. The health co-benefit estimate was expressed as a range. The range primarily reflected the use of concentration-response functions from different epidemiology studies. Health benefits reflected monetized estimates for the contiguous United States, not the rest of the world. A reduction in premature fatalities each year accounted for over 98% of the total monetized health co-benefits in the 2015 RIA. With estimated compliance costs rising to a maximum of $8.4 billion in 2030, EPA's 2015 RIA expected that the CPP would yield net benefits of $24 billion to $49 billion in 2030. EPA did not monetize other expected co-benefits of this rule in the 2015 RIA, including reduced morbidity from exposure to nitrogen dioxide, sulfur dioxide, and methylmercury and reduced effects from acid deposition. EPA also did not quantify pollution effects on ecosystems or visibility. A: Broadly speaking, the benefits of repealing a rulemaking are avoiding the costs that would have been incurred through implementing the rule; the costs of the repeal are forgoing the benefits that would have resulted from rule implementation. EPA defined the benefits of the proposed CPP repeal as the "avoided compliance costs" (i.e., the compliance costs that would have been incurred to implement the CPP); EPA also refers to this category as "cost savings." Likewise, EPA defined the costs of the proposed CPP repeal as the forgone reductions in CO 2 and non-GHG emissions and the associated forgone climate benefits and health co-benefits, respectively. EPA estimated the benefits and costs of the proposed repeal based on the power sector modeling it conducted in 2015 and under the same illustrative scenarios—mass-based and rate-based—but applied several methodological changes. These modifications include the application of new estimates of the social cost of carbon, changing the accounting treatment of demand-side energy efficiency savings, and using thresholds to exclude portions of the forgone health co-benefits from the benefit-cost comparison. Based on this approach, EPA reported benefits of the proposed repeal in the year 2030 under the mass-based scenario ranging from about $25 billion to $31 billion and costs of the proposed repeal in 2030 ranging from approximately $20 billion to $50 billion. The comparable figures for the rate-based scenario in 2030 were benefits ranging from about $27 billion to $33 billion and costs ranging from approximately $19 billion to $56 billion. EPA broke out the benefits and costs in several ways that resulted in qualitatively different conclusions. Roughly two-thirds of the comparisons in the primary analysis showed net benefits of the proposed repeal and roughly one-third of the comparisons in the primary analysis showed net costs of the repeal. (See the next question for a more detailed discussion.) Notably, these estimates do not reflect changes that have occurred in the power sector since 2015, such as changes in expected electricity demand, expected growth in electricity generation by renewable methods, retirement of older generating units, changes in the prices and availability of different fuels, and state and federal regulations. Such changes may have implications for the projected emissions baseline and therefore for the benefits and costs of the CPP. EPA committed to updating the power sector modeling and publishing updated benefit and cost estimates based on this analysis before it finalizes the proposed repeal. In the meantime, EPA also estimated the benefits and costs of the proposed repeal using the more recent power sector projections in the Annual Energy Outlook (AEO), which is developed by the U.S. Energy Information Administration. EPA observed that baseline CO 2 emissions (i.e., CO 2 emissions without the CPP) have been lower in each AEO projection released since EPA conducted the 2015 CPP analysis. EPA used the AEO 2017 projections of CO 2 emissions in scenarios with and without the CPP to estimate the forgone reductions in CO 2 emission and non-GHG emissions and the associated forgone benefits and avoided compliance costs. This analysis suggested that using a more recent emissions baseline would result in lower estimates of the emission reductions expected from the CPP, thereby lowering the estimated compliance costs and benefits. EPA emphasized, however, that the estimates it developed using AEO 2017 are not directly comparable to EPA's 2015 estimates because the accounting treatments of demand-side energy efficiency programs differs. A: EPA's 2015 analysis of the CPP concluded that monetized benefits outweighed the monetized costs (i.e., resulted in net benefits) under the illustrative scenarios considered. All of the benefit-cost comparisons presented in the 2015 analysis showed positive net benefits on the order of billions of dollars. EPA's comparisons of the benefits and costs to repeal the CPP, however, offer mixed results, with roughly two-thirds of the benefit-cost comparisons showing net benefits of the proposed repeal and roughly one-third of the comparisons showing net costs of the repeal. EPA compared the monetized benefits and costs of the proposed repeal using four different tallies that showed qualitatively different conclusions. The only variable across the four tallies was the level of forgone health co-benefits considered; the estimates of the avoided compliance costs, forgone climate benefits, and forgone energy efficiency savings did not vary. The first tally compared avoided compliance costs to the forgone domestic climate benefits and forgone energy efficiency savings; it did not include any of the forgone health co-benefits. The second tally compared avoided compliance costs to forgone domestic climate benefits, forgone energy efficiency savings, and the forgone health co-benefits. The third and fourth tallies made the same comparison as the second except they each applied a threshold to the forgone health co-benefits, counting only the forgone health co-benefits that exceeded the defined threshold. Specifically, EPA assumed in the third tally that forgone health co-benefits related to particulate matter reductions fell to zero below the lowest measured level (LML) of each long-term particulate matter mortality study; EPA therefore only counted the forgone health co-benefits exceeding the LML. The threshold applied in the fourth tally assumed that health co-benefits related to particulate matter reductions fell to zero below the fine particulate matter National Ambient Air Quality Standard. The first tally provided the most favorable benefit-cost comparison for the proposed repeal as nearly all of the scenarios show the monetized benefits of the proposed repeal exceeding the monetized costs of the repeal. The fourth tally also provided a generally favorable benefit-cost comparison, with most of its scenarios showing net benefits of the repeal. The second and third tallies showed the least favorable benefit-cost comparison for the proposed repeal, with nearly half of the scenarios in each tally showing net costs of the proposed repeal. A: EPA's 2017 analysis presented some different conclusions about the benefits and costs of the CPP relative to its 2015 analysis. One reason for the difference in qualitative conclusions is that some of the benefit-cost comparisons in EPA's 2017 analysis excluded portions of the estimated health co-benefits. For example, one of the benefit-cost comparisons excluded the forgone health co-benefits entirely to focus on the forgone benefits from the "targeted pollutant," CO 2 . In two of the other benefit-cost comparisons, EPA applied a threshold to the forgone health co-benefits, counting only the forgone health co-benefits that exceeded a defined threshold for ambient particulate matter concentration. That is, EPA assumed that health co-benefits would equal zero for any particulate matter reductions beyond a threshold. The Agency established one threshold on the "lowest measured level" of long-term particulate matter from two studies on mortality related to particulate matter. EPA based the second threshold on the current federal air quality standard for fine particulate matter. In addition, EPA's estimates of forgone climate benefits under the proposed repeal were lower than the climate benefits it estimated in the 2015 CPP analysis due to changes it made to the social cost of carbon (SCC). The SCC is an estimate of the monetary value of impacts from CO 2 emission changes, including net changes in agricultural productivity and human health, property damage from increased flood risk, and changes in energy system costs, such as reduced costs for heating and increased costs for air conditioning. In 2015, EPA used estimates of the SCC to estimate the global value of climate benefits expected from domestic CO 2 reductions under the CPP. The SCC estimates, however, have since been withdrawn by E.O. 13783. EPA therefore developed new SCC values under E.O. 13783, which highlighted consideration of domestic measures of the SCC as well as the OMB guidance on selection of discount rates. EPA's new SCC estimates are domestic measures of the social cost of carbon—i.e., estimates of the "direct impacts of climate change that are anticipated to occur within U.S. borders"—and are discounted at rates of 3% and 7%. The domestic perspective and use of a 7% rate in particular contributed to lower estimates relative to the estimates used in 2015. EPA characterized the new SCC estimates as "interim values ... for use in regulatory analyses until an improved estimate of the impacts of climate change to the U.S. can be developed based on the best available science and economics" but did not give a timeline for updates. EPA also presented sensitivity analyses using global measures of the SCC and alternative discount rates but did not directly compare those estimates to the avoided compliance costs of the proposed repeal. Finally, EPA changed the accounting treatment of demand-side energy efficiency savings but this did not alter the qualitative conclusions of the benefit-cost analysis. EPA's 2015 analysis treated savings from energy efficiency measures as a negative cost whereas the 2017 analysis treated the energy efficiency savings as a positive benefit. That is, EPA broke out the energy efficiency savings from the compliance cost tally presented in the 2015 analysis and moved energy efficiency savings to the tally of forgone benefits in the 2017 analysis. This meant that the avoided compliance cost tally increased by the same amount that the forgone benefits tally increased and therefore there was no change in the comparison of benefits and costs. A: In the 2015 RIA, EPA estimated that the national average retail electricity price in the contiguous United States would increase by less than 1% in both 2025 and 2030 compared to EPA's baseline scenario. However, EPA's analysis indicated the electricity price changes would vary by region, ranging from a 5.9% increase (Wisconsin/Michigan region) to a 9% decrease (Long Island region) in 2030 compared to the baseline scenario. By comparison, EPA estimated that the average monthly residential electricity bill would decline by 7.0%-7.7% in 2030 (compared to a baseline scenario) as consumption of electricity declines due to efficiency measures. (EPA's analysis did not provide a regional breakout for electricity bill impacts.) Although the final rule did not include energy efficiency activities in the state target calculations, energy efficiency plays a substantial role in EPA's 2015 RIA. A: EPA's proposed CPP rule generated substantial interest in the potential effects of the rule on the reliability of electric power supply. EPA asserted that it did not want compliance with the final rule to interfere with industry's ability to maintain the reliability of the nation's electricity supply. EPA's final CPP rule addressed electric system reliability in several ways. In particular, the final rule contained a provision for a reliability "safety valve" for individual power plants. EPA stated that there may be a need for an EGU to continue to operate and release "excess emissions" if an emergency situation arises that could compromise electric system reliability. The reliability safety valve would allow for a 90-day reprieve from CO 2 emissions limits. EPA stated that the safety valve could be triggered only in an emergency situation. For example, extreme weather events are "of short duration and would not require major—if any—adjustments to emission standards for affected EGUs or to state plans." EPA also implemented a formal memorandum of joint understanding on maintaining electric system reliability with the Department of Energy and the Federal Energy Regulatory Commission so as to coordinate efforts while the state compliance plans are developed and implemented. The memorandum expresses the joint understanding of how the agencies will cooperate, share information, monitor states' progress and implementation of the rule, and resolve difficulties that may be encountered. A: Although the CPP would not directly require infrastructure changes in the electricity sector, states might need to modify or expand existing infrastructure to meet their emission or emission rate targets. For example, increased use of existing NGCC capacity might require upgraded transmission facilities and potentially new natural gas infrastructure to provide fuel. Projected increases in renewable generation would likely require new transmission lines: it can take anywhere from 3 to 10 years to get the federal, state, and local permits in place to build a major electric transmission line. If additional transmission capacity is required, planning would likely need to begin soon to get new lines in place for when they would be needed in the early 2020s. A. E.O. 13783, which was signed by President Trump on March 28, 2017, required reviews of all agency actions "that potentially burden the development of domestically produced energy resources, with particular attention to oil, natural gas, coal, and nuclear energy resources." The order addresses specific CAA regulations, including the CPP for existing fossil-fueled electric generating units (EGUs) and two proposed rules related to it, the New Source Performance Standards (NSPSs) for new and modified EGUs, and the NSPSs for the Oil and Natural Gas Sector. Each of these rules would control GHG emissions from an energy-producing sector. The E.O. directed EPA to review these rules "for consistency with the policy set forth in section 1 of this order," and, if appropriate, to "suspend, revise, or rescind" them. Section 1 lists many goals, including to "promote clean and safe development of our nation's vast energy resources," "ensure that the Nation's electricity is affordable, reliable, safe, secure, and clean," "take appropriate actions to promote clean air and clean water," and ensure that "necessary and appropriate environmental regulations comply with the law, are of greater benefit than cost, when permissible, achieve environmental improvements for the American people, and … employ the best-available peer-reviewed science and economics." EPA has initiated its review of the CPP and the NSPSs for new and modified EGUs; on October 10, 2017, it proposed to repeal the CPP. The proposed repeal is subject to public comment until January 16, 2018. Two days of public hearings on the proposal were held on November 28 and 29, 2017, in Charleston, WV. A. As the result of a stay issued by the Supreme Court in February 2016, implementation of the CPP is already suspended pending the resolution of judicial challenges. As discussed in the " Judicial Review " section of this report, the U.S. Court of Appeals for the District of Columbia (D.C. Circuit) heard oral argument in a case challenging the rule, State of West Virginia v. EPA , in September 2016, but has yet to issue an opinion. In April 2017, EPA requested that the D.C. Circuit put the legal challenge to the rule in abeyance for 60 days while the agency considers the next steps in the review of the rule mandated by E.O. 13783. The court further extended the abeyance of the litigation after EPA issued its proposal to repeal the CPP. Repealing the CPP, as proposed by EPA on October 10, is more complicated than suspending it. Repealing a promulgated rule requires the promulgating agency to go through the same steps as the original rulemaking, a process governed in this case by Section 307(d) of the Clean Air Act. Under Section 307(d), repeal must first be proposed in the Federal Register , along with "a statement of its basis and purpose" and shall specify a period available for public comment. The statement of basis and purpose must include a summary of the factual data on which the proposal is based; the methodology used in obtaining the data and in analyzing the data; and the major legal interpretations and policy considerations underlying the proposal. (For a discussion of EPA's basis and purpose for repeal of the CPP, see above, " Q: What is the basis of EPA's proposed CPP repeal? ") The statement must also set forth or summarize any pertinent findings, recommendations, and comments by the Clean Air Scientific Advisory Committee and the National Academy of Sciences, and, if the proposal differs in any important respect from any of these recommendations, an explanation of the reasons for such differences. Following proposal and public comment, a repeal of the rule may be promulgated. The promulgated repeal must also be accompanied by a statement of basis and purpose, and an explanation of the reasons for any major changes from the proposal. The promulgated repeal must also be accompanied by a response to each of the significant comments, criticisms, and new data submitted in written or oral presentations during the comment period. The promulgated repeal may not be based (in part or whole) on any information or data which has not been placed in the docket as of the date of promulgation. In the case of review of any action of the Administrator to which subsection 307(d) applies, the D.C. Circuit may reverse any such action found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, or without observance of the procedures required by law, if the failure to observe such procedure is arbitrary or capricious. The CPP was one major element of President Obama's Climate Action Plan (CAP), a broad federal strategy announced in June 2013 to address human-induced climate change. The CAP, in turn, was part of the U.S. contribution to a global effort, embodied in the Paris Agreement (PA) to halt the increase of GHG concentrations in the atmosphere in order to hold the GHG-induced increase of global temperature below 2 o Celsius or less. There is broad agreement that effectively halting the rise in GHG concentrations would require GHG emissions mitigation by all major emitting countries. The United States historically was the leading GHG emitter until around 2007, when China surpassed it. In 2013, the United States emitted approximately 13% of net human-related GHG emissions, second to China, at approximately 24%. President Obama pledged in 2015 that the United States would reduce its GHG emissions to 26-28% below 2005 levels by 2025. The status of that U.S. pledge is now in flux. On June 1, 2017, President Trump announced that the United States would withdraw from the Paris Agreement. The timing, method, and specifics of this action are unclear. A White House official reportedly stated that the United States will follow the four-year legal procedure for withdrawal outlined in Article 28 of the PA: The United States may submit its written intent to withdraw three years after the treaty entered into force for the United States, on November 4, 2016. Withdrawal may take effect one year later—on or after November 4, 2020. In the meantime, the United States remains a Party to the PA (unless, following customary international law, the other Parties agree to allow an earlier exit). The Administration did not indicate whether and how the United States may participate in PA procedures until withdrawal is complete; one question is whether the United States will formally withdraw its NDC prior to withdrawal from the PA. At least 165 GHG pledges have been submitted, covering almost 190 countries, including all major emitters. The PA has 148 Parties—governments that have legally ratified or accepted the agreement—out of 195 Signatories. Of the top 20 emitting nations, only Iran and Russia are not Parties. Though submitting a pledge is mandatory for all countries that are party to the international Paris Agreement (PA), including the United States, the quantitative GHG target is not legally binding. The U.S. submission is now recorded in the PA's registry as the U.S. Nationally Determined Contribution (NDC). President Obama's CAP, along with projected economic and technological developments, was expected to achieve most of the GHG reductions necessary to meet the U.S. NDC target, but further policy actions would likely have been required. EPA estimated that the electricity sector's CO 2 emissions would decrease by 28% from 2005 to 2025 (the target year for the U.S. NDC) under the CPP and certain assumptions; this would be approximately 11-12% below EPA's baseline projection for affected EGUs (i.e., without the CPP). The 680-709 million metric tons (Mt) , of CO 2 reductions projected from the electricity sector under a scenario that includes the CPP were estimated to constitute 36-37% of the 1901 Mt net reduction that would achieve a 26% reduction below the 2005 level—the minimum U.S. target. Other organizations used models to compare baseline scenarios with various CPP scenarios. Table 5 lists the CO 2 emission projections from these groups with EPA's 2015 RIA estimate. Some of these groups produced multiple projections, employing different assumptions of future activities: CPP implementation options (e.g., whether states engaged in emissions trading) and levels of energy efficiency improvements, among others. In general, the modeling results in Table 5 indicate that the CPP would have a substantial impact on future CO 2 emission levels from electricity generation compared to scenarios that do not include the CPP. All of the modeling scenarios below (except for EPA) included the December 2015 renewable energy tax extensions. On December 18, 2015, President Obama signed into law the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). The act, among other provisions, extended and modified the production tax credit (PTC) and the investment tax credit (ITC) for specific renewable energy technologies. Prior to the December 2015 development, the PTC had expired and the ITC was scheduled to expire at the end of 2016. The PTC will not be available to projects starting construction after December 31, 2019. However, PTC tax expenditures will continue after that date, because the PTC is available for the first 10 years of renewable electricity production. The ITC for solar is scheduled to decline from 30% to 26% in 2020, and 22% in 2021, before returning to the permanent rate of 10% after 2021. The CPP would continue to reduce CO 2 emissions beyond the U.S. target for 2025, into the next NDC to 2030 under the Paris Agreement. (Parties must submit subsequent NDCs at least every five years). Two factors that influence the effect of the CPP in 2025 are that (1) it will not have taken full effect by 2025, and (2) the baseline projections through the early 2020s are strongly influenced by federal tax incentives to promote renewable energy investments, which are counted in the baseline projections. These estimates of the potential contribution of the CPP to meeting the U.S. GHG target for 2025 should not be considered precise for a number of reasons. There are uncertainties related to the "baseline" economic and policy circumstances, on which emissions projections are based. Uncertainties include other federal and state policies, rates of economic growth, relative fuel abundances and prices, technological advance, consumer and investor preferences, and other factors. There are also uncertainties, though generally thought to be smaller, regarding how states and affected private entities might implement the CPP. The United States would have been challenged to achieve its NDC GHG target under the Obama Climate Action Plan (CAP). The Clean Power Plan contributes but does not itself enable the United States to meet its NDC pledge. At the end of 2015, the United States provided an accounting of its expectations in its second biennial communication to the international treaty body. It itemized actions, including the CPP, that the United States was implementing or intended that would assist in reducing U.S. GHG emissions. All identified U.S. actions, including the CPP, could reduce GHG emissions (net of removals by sinks) by 12-16% below 2005 levels by 2025, according to the U.S. communication. This would be well short of the U.S. NDC target of 26-28% below the 2005. With additional policies under optimistic assumptions, several analyses indicated that the CAP could have met the U.S. pledge to reduce GHG emissions. More likely, additional measures would be required beyond the CAP. New policies and actions of the Trump Administration could decrease the likelihood that the United States could meet the NDC target. As discussed above, E.O. 13783 directed the Environmental Protection Agency (EPA) Administrator to review and, if appropriate, to suspend, revise, or rescind, "as appropriate and consistent with law," the CPP and other rules that "unduly burden the development or use of domestically produced energy resources beyond the degree necessary to protect the public interest or otherwise comply with the law." E.O. 13783 also withdrew President Obama's Climate Action Plan, along with other actions. On June 8, 2017, EPA sent to the Office of Management and Budget a proposed rulemaking to rescind the CPP. Should the CPP be rescinded, it would further diminish the likelihood that the United States could meet its NDC GHG target. Achieving a Party's GHG emissions target is not a legal obligation, however, even if the United States does not withdraw from the accord. Any projection of future emissions is contingent on assumptions about future economic, policy, and technological conditions. Strategies being undertaken by states and localities and many in the private sector could enhance emission reductions whether or not the CPP is implemented. Other federal policies, including incentives to deploy renewable energy, and to expand production of natural gas, may continue the historical trend away from coal-produced electricity. Rapid technological change in the energy sector may have an even greater influence. Policies of other countries to advance no-emitting electricity production may continue to reduce the costs of key technologies, including renewable energy and carbon capture and sequestration. While many analysts are skeptical that non-federal influences could reduce U.S. emissions to the NDC target, others believe that market, state and local, and philanthropic programs could achieve the 2025 target. A: The CRA provides a mechanism by which Congress may review and disapprove of agency rules through passage of a joint resolution that is eligible for expedited procedures in the Senate. When passed by both houses of Congress, such a joint resolution is sent to the President for his signature or veto. The time to disapprove the CPP through the CRA's expedited procedures has expired. The EPA's final CPP rule for existing power plants was received in Congress on September 17, 2015, and published in the Federal Register on October 23, 2015. Three CRA resolutions of disapproval were introduced following receipt by Congress: H.J.Res. 67 , H.J.Res. 72 , and S.J.Res. 24 . The Senate resolution became eligible for discharge from committee under the CRA's expedited procedures on November 13, 2015. Thirty Senators signed a discharge petition, and the resolution was discharged from the Senate Committee on Environment and Public Works on November 16. The Senate considered the resolution on the floor on November 17, 2015, and passed it by a vote of 52-46. On December 1, 2015, the House considered S.J.Res. 24 , previously passed by the Senate, under procedures from a special rule reported by the Rules Committee and adopted by the House. The resolution was passed in the House by a vote of 242-180. President Obama vetoed the resolution on December 18, 2015. Congress did not take action to override the presidential veto. A: In addition to joint resolutions of disapproval under the CRA, Congress has considered freestanding legislation or legislation that amends the Clean Air Act in a targeted way to reduce GHG emissions. In the 114 th Congress, the House passed H.R. 2042 , which would have delayed the date on which the CPP's state implementation plans were to be submitted to EPA as well as the compliance date of GHG emission standards for EGUs by a period of time equal to the time required for completion of judicial review. The bill would also have allowed a state to opt out of compliance if the governor determined that the rule would have an adverse effect on ratepayers or have a significant adverse effect on the reliability of the state's electricity system. S. 1324 , as reported by the Senate Environment and Public Works Committee in the 114 th Congress, contained similar provisions. In addition, it would have prohibited EPA from regulating under Section 111(d) any category of existing sources regulated under the hazardous air pollutant authorities of Section 112, which would include EGUs. It would also have revoked the NSPSs for EGUs promulgated under Section 111(b) and would have set additional requirements for any future EGU standards issued under that authority. Neither bill was enacted. Another option that Congress has considered was to place an amendment, or "rider," on EPA's appropriation bill to prevent funds from being used to implement the rule. Although riders were attached to appropriation bills as reported or passed by the House or Senate in the 114 th Congress, none was enacted. Appropriations measures could remain important to the debate over the CPP, however. As noted above in " Reconsidering the Rule ," revising or revoking the CPP would itself take the form of a rulemaking, requiring EPA to undertake numerous analytical and procedural steps. Under the FY2018 EPA budget, resources would thus need to be available to support this rulemaking. A: Parties began filing petitions in the U.S. Court of Appeals for the D.C. Circuit (D.C. Circuit) challenging the final CPP rule for CO 2 from existing power plants starting on the day the rule was published in the Federal Register . CAA Section 307(b) requires that such petitions for review must be filed in the D.C. Circuit within 60 days after the rule's publication in the Federal Register . The deadline for petitions for review of the CPP rule was therefore December 22, 2015. Parties that filed petitions challenging the CPP rule include 26 states. West Virginia and Texas spearheaded a coalition of 23 state petitioners in filing the lead case. Oklahoma, North Dakota, and Mississippi filed their own petitions. For an overview of state positions in the CPP litigation, see Figure 6 . Other petitioners challenging the rule include three labor unions, a number of rural electric cooperatives and an association representing them, more than two dozen industry and trade groups, several nonprofit public policy organizations, and more than two dozen fossil-fuel-related companies and local electric utilities. Other fossil-fuel-related companies have moved to intervene on behalf of the petitioners. In all, more than a hundred parties filed more than three dozen petitions challenging the CPP. All of these petitions have been consolidated into one case, captioned State of West Virginia v. EPA . In addition, various amici curiae (non-party "friends of the court") have filed briefs on the merits in support of the petitions challenging the rule. These include briefs filed by the state of Nevada and by 34 Senators and 171 Representatives. Parties that have intervened in this case in support of EPA and its Administrator include a coalition of 18 states, the District of Columbia, five cities, and a county (including some in states that have filed petitions challenging the CPP). Other parties intervening in support of the CPP include regional, state, and municipal utilities and power companies, more than a dozen nonprofit organizations (including environmental organizations), and several energy industry associations. Two former EPA Administrators are supporting the CPP as amici curiae : William Ruckelshaus, who headed the agency in 1970, when the CAA was enacted, and again in the 1980s; and William Reilly, the EPA Administrator at the time Congress passed the Clean Air Act Amendments of 1990. A coalition including 54 cities and localities is among the entities supporting the CPP as amici curiae . An amicus brief was also filed in support of the CPP by 44 current and former Senators and 164 current and former Representatives. Five states are not party to the litigation: Alaska (for which EPA did not set a goal in the final rule), Idaho, Pennsylvania, Tennessee, and North Carolina. North Carolina was initially one of the petitioners challenging the rule, but later asked to be removed. The Supreme Court stayed the rule on February 9, 2016. The stay pauses the rule's legal effect while the rule undergoes judicial review, and EPA may not enforce the rule during the stay. During the Supreme Court's stay of the CPP rule, the full en banc court of the D.C. Circuit heard oral arguments in West Virginia v. EPA on September 27, 2016. For oral argument, the court focused on five main areas: (1) statutory issues related to state authority and electricity generation shifts among affected power plants and renewable energy providers; (2) different amendments affecting CAA Sections 111(d) and 112; (3) constitutional issues; (4) notice issues; and (5) record-based issues. On April 28, 2017, the D.C. Circuit granted EPA's request to pause or hold in abeyance the CPP litigation for 60 days. After EPA proposed to repeal the CPP, the court ordered that the case remain in abeyance for an additional 60 days and required EPA to submit status reports to the court regarding its process in repealing the rule every 30 days. Pausing the litigation has no effect on the CPP's implementation because the Supreme Court stayed the CPP pending the litigation's resolution. Specifically, the Supreme Court stayed the CPP "pending disposition of the applicants' petitions for review in the [D.C. Circuit] and disposition of the applicants' petition for a writ of certiorari, if such writ is sought." If the D.C. Circuit decides to continue to hold the litigation in abeyance during EPA's review, the CPP's implementation will remain stayed because the court has not resolved the litigation. The litigation could resume at a later date depending on EPA's actions or other issues that arise in the course of the agency's review. A: This report does not aim to provide a comprehensive preview of the legal arguments for or against EPA's CPP rule as the litigation proceeds. However, the bullet points below offer a few examples, drawn from litigation filings and EPA documents, to illustrate the range of issues. Petitioners challenging the rule have argued that EPA lacks authority under CAA Section 111(d) to regulate CO 2 from power plants because power plants, as a source category, are already regulated for HAP under CAA Section 112. As noted above, EPA has interpreted Section 111(d) as requiring regulation of CO 2 from existing power plants because CO 2 is not a HAP, and other conditions for regulation under Section 111(d) are met. Petitioners have also challenged EPA's design of the CPP as exceeding EPA's scope of authority under Section 111(d). They have argued, for example, that Section 111(d) authorizes EPA to require only measures that can be applied to an individual source's performance by the source's owner or operator ("inside the fence line"), such as adoption of pollution control devices or other design or operational standards. Conversely, they say, it does not authorize what they characterize as a reorganization of the nation's electric grid or states' energy economies. EPA has countered, in part, that "the phrase 'system of emission reduction' … is capacious enough to include actions taken by the owner/operator of a stationary source designed to reduce emissions from that affected source, including actions that may occur off-site and actions that a third party takes pursuant to a commercial relationship with the owner/operator." Various petitioners have challenged different technical or programmatic aspects of the rule as arbitrary, capricious, an abuse of agency discretion, or otherwise not in accordance with law pursuant to the judicial review provisions of Section 307 of the CAA. EPA responded to numerous comments along these lines in its rule preamble, Response to Comments documents, and other technical support documents as well as in its response in opposition to the motions to stay. The parties also debated the standards by which a court should evaluate EPA's interpretation and implementation of CAA Section 111. Under Chevron v. Natural Resources Defense Council, Inc. , a court reviewing an agency rule defers to the agency's interpretation of a statute in cases where the statutory language is ambiguous, if the agency's interpretation is reasonable. In the 2014 Utility Air Regulatory Group v. EPA decision, however, the Supreme Court opined that where a statutory interpretation by EPA "would bring about an enormous ... expansion in EPA's regulatory authority"—which some petitioners claim the CPP rule would do—a court should demand "clear congressional authorization." Some petitioners have argued for CAA Section 111(d) to be interpreted more narrowly than EPA interprets it so as to avoid certain constitutional issues. For example, states and other petitioners have argued that the CPP impermissibly invades traditional state police powers over the electrical grid and commandeers state legislatures. EPA has previewed its responses to such arguments in its Response to Comments and other documents and in its response in opposition to the motions to stay. EPA calls the rule a "textbook example of cooperative federalism" and argues that states can opt to do nothing, in which case the federal plan option imposes no new regulatory obligations on states. Some challengers have disputed the adequacy of certain other procedural aspects of the issuance of the rule, alleging impermissible deviation from the proposed rule or impermissible ex parte contacts. Supporters of the rule assert that the final rule is a logical outgrowth of the proposal and comments and that EPA properly followed all other procedural requirements. Some of these issues were addressed during oral argument. A: On November 9, 2017, the D.C. Circuit ordered that the CPP litigation continue to be held in abeyance (i.e., paused temporarily) for 60 days from th at date to allow EPA to reconsider the CPP. Because the repeal of the CPP has not been finalized, it is difficult to predict the next steps for the litigation. The court could remand or continue to pause the litigation—actions that the court considered when it first issued the abeyance. EPA recently filed a litigation report on the status of its reconsideration of the CPP, explaining that the court should continue to hold the case in abeyance until the repeal is finalized. EPA could also seek to dismiss the case as moot once the repeal is final. A: In addition to the direct legal challenge to the CPP rule for CO 2 from existing power plants, 25 states—led by North Dakota and West Virginia—have filed petitions challenging EPA's final NSPS rule for CO 2 from new, modified, or reconstructed power plants. They have been joined by other petitioners including a labor union, a rural electric cooperatives association, several other fossil-fuel-related companies and utilities, and several industry and trade groups. Most of the states and a number of the nonprofit organizations that intervened in support of the CPP case also intervened in the NSPS challenge in support of EPA. As noted above, the finalization of NSPS for new air pollutant sources under Section 111(b) of the CAA is a prerequisite for the use of authority under Section 111(d) to regulate existing sources, so this litigation could threaten EPA's basis for the CPP. On March 30, 2017, the D.C. Circuit canceled the April 17 oral argument for the case and on April 28, 2017, the D.C. Circuit granted EPA's request to pause or hold in abeyance the litigation challenging the NSPS rule. On August 10, 2017, the court further extended the abeyance until further order of the court and directed EPA to file status reports at 90-day intervals beginning October 27, 2017. A: CRS analysts, listed below, cover areas related to the proposed rule. | On October 10, 2017, the U.S. Environmental Protection Agency (EPA) proposed to repeal the Clean Power Plan (CPP), the Obama Administration rule that would limit carbon dioxide (CO2) emissions from existing fossil-fuel-fired power plants. The action came in response to Executive Order 13783, in which President Trump directed federal agencies to review existing regulations and policies that potentially burden the development or use of domestically produced energy resources. Among the E.O.'s specific directives was that EPA review the CPP, which was one of the Obama Administration's most important actions directed at reducing greenhouse gas (GHG) emissions. The Clean Power Plan was promulgated in August 2015 to reduce GHG emissions from the generation of electric power. Fossil-fueled electric power plants are the largest individual U.S. sources of GHG emissions, accounting for about 29% of the U.S. total from all sources. The rule set individual state targets for average emissions from existing power plants—interim targets for the period 2022-2029 and final targets to be met by 2030. The targets for each state were derived from a formula based on three "building blocks"—efficiency improvements at individual coal-fired power plants and increased use of renewable power and natural gas combined-cycle power plants to replace more polluting coal-fired units. Although EPA set state-specific targets, states would determine how to reach these goals, not EPA. EPA has said it would expect the rule's targets to reduce total power plant CO2 emissions by about 32% when fully implemented in 2030 as compared with 2005 levels. A variety of factors—some economic, some the effect of government policies at all levels—have already reduced power sector CO2 emissions more than ¾ of this amount as of 2016. Although EPA is proposing to repeal the CPP, it did not propose repeal of the GHG "endangerment finding," the 2009 agency finding that emissions of CO2 and other GHGs endanger public health and welfare. Without addressing the finding, EPA appears to have a continuing obligation to limit emissions of CO2 from power plants. Thus, in addition to the proposed repeal of the CPP, EPA has issued an Advance Notice of Proposed Rulemaking (ANPRM) to solicit information on systems of emission reduction that it might require in a future rule to replace the CPP. Besides EPA's proposal to repeal the rule, the rule is the subject of ongoing litigation in which a number of states and other entities have challenged it (while other states and entities have intervened in support of it). On February 9, 2016, the Supreme Court stayed implementation of the rule for the duration of the litigation. The U.S. Court of Appeals for the District of Columbia heard oral arguments in the case in September 2016, but agreed to an EPA request to continue to hold the case in abeyance while the agency proceeds to repeal the CPP. This report provides background information, discusses the statutory authority under which EPA promulgated the rule, and describes the rule's current status as of November 2017. The Clean Power Plan relies on authority asserted by EPA in Section 111(d) of the Clean Air Act (CAA). This section has been infrequently used and seldom interpreted by the courts, so a number of questions have arisen regarding the extent of EPA's authority and the mechanisms of implementation. The report also summarizes the provisions of the Clean Power Plan rule as it was finalized on August 3, 2015, including how large an emission reduction would be achieved under the rule nationwide, how EPA allocated emission reduction requirements among the states, the potential role of cap-and-trade systems and other flexibilities in implementation, what role the actions of individual power plants (i.e., "inside the fence" actions) and actions by other actors, including energy consumers (i.e., "outside the fence" actions) might play in compliance strategies, and what role there would be for existing programs at the state and regional level, such as the nine-state Regional Greenhouse Gas Initiative (RGGI), and for broader GHG reduction programs such as those implemented in California. The report also discusses options that Congress has to influence EPA's action. |
On March 26, 1991, Brazil, Argentina, Uruguay, and Paraguay signed the Treaty of Asunción, establishing the Common Market of the South (Mercado Común del Sur—Mercosur) with the intention of strengthening sub-regional development and cooperation through economic integration. Since then, Mercosur has struggled to achieve deep economic integration, but has maintained a cooperative economic and political framework, which has also become an influential voice in determining the fate of the hemisphere's regional integration initiatives. In particular, the U.S. vision for hemispheric integration, the Free Trade Area of the Americas (FTAA), has stalled largely because of opposition from within Mercosur. Venezuela's July 2006 signing of an accession agreement only reinforces Mercosur as the undisputed economic counterweight to the United States in the region and raises further doubts over the prospects for a hemispheric-wide trade agreement. This report examines the evolution of Mercosur as it relates to U.S. trade policy in Latin America. It will be updated periodically. The Mercosur countries are experiencing an extended period of strong economic growth after a deep recession caused by financial crises in Brazil (1999) and Argentina (2001). They currently have competitive exchange rates, stable macroeconomic conditions, and strong growth in exports and foreign direct investment largely because of the global commodity price boom. Commodity prices, however, cut two ways. Although strong agricultural prices have fueled export growth, the rising price of oil has offset some of these gains for the net oil importers (Venezuela being the exception), contributing to deteriorating current account balances over the past year. Within Mercosur, Brazil dominates the trade relationship, running a sizable and growing trade surplus with the rest of the pact. Mercosur has a well-diversified trade relationship with the world. In 2006, the European Union (EU) was Mercosur's largest trade partner, capturing 25% of total trade, followed by Asia with 22%, and the United States with 19%. By contrast, the four Mercosur countries together accounted for only 3.0% of total U.S. trade. With the recent addition of Venezuela, the "Mercosur 5" make up 3.6% of total U.S. trade, the increase accounted for almost entirely by U.S. imports of Venezuelan oil. Collectively, the "Mercosur 4" would rank 9 th for U.S. exports and 14 th for U.S. imports, slightly ahead of Brazil by itself, the largest economy in South America, responsible for 80% of total Mercosur trade with the United States. Patterns in U.S. merchandise trade with the "Mercosur-4" appear in Figure 1 (country data for all five appear in Table A -1 ). Note that trends are heavily skewed by Brazil's large economy. U.S. imports of Mercosur goods rose steadily from 1996 to 2006, paralleling growth in the U.S. economy. Expansion of U.S. exports, by contrast, was flat from 1996 to 2001 and then fell as import demand collapsed around deep recessions in Brazil and Argentina. U.S. exports rebounded in 2004 as the Mercosur economies recovered, and by 2007, the U.S. trade balance turned from deficit to surplus for the first time since 2001. The U.S. trade surplus reflects growth in demand in all four Mercosur countries. For Brazil, U.S. imports actually declined slightly in 2007, as U.S. exports rose by 28%. U.S. exports have been helped by Brazil's strong economic growth resulting in increased demand for U.S. inputs such as aircraft engines and parts, as well as the strong appreciation of Brazil's currency relative to the U.S. dollar. Major U.S. exports to Mercosur include mostly capital and high technology goods such as mechanical and electrical machinery (computers, vehicles, aircraft, medical equipment, and pharmaceuticals). The primary U.S. imports are components for machinery and vehicles, agricultural products, and oil if Venezuela is included. Specifically, the United States imports primarily machinery and mineral fuel from Brazil, mineral fuel and processed foods from Argentina, sugars and woods from Paraguay, and meat and woods from Uruguay. Despite being a relatively small U.S. trade partner, Mercosur contains two of South America's largest economies, and so prospects for growth in trade and investment drive, in part, ongoing U.S. interest in maintaining cordial and cooperative relations, as does the expectation for deeper Western Hemisphere integration, perhaps including, at some point, the FTAA. Mercosur evolved from a series of 1980s bilateral agreements between Brazil and Argentina. It was conceived as a way to foster new levels of political and economic openness and cooperation following a prolonged period of mutual distrust, much of it taking place under military dictatorships in both countries. In addition, as the South American economies moved away from an import substitution model of development to one based increasingly on trade openness, a regional trade agreement made sense given the four countries were "natural trade partners," sharing geographical, cultural, and economic complementarities. In fact, Uruguay and Paraguay pressed hard to expand the arrangement to a four-country common market to improve their trade prospects, or at the least, ensure that they would not be isolated by a bilateral economic pact between their two largest neighbors. Mercosur, therefore, evolved from economic and political circumstances that emphasized the need to preserve and enhance the Brazil-Argentine bilateral relationship, while fostering cautious ambitions for sub-regional economic integration that could also serve as a platform for the four countries' insertion into the global economy. Ultimately, as one scholar has observed, meeting expectations is critical, and Mercosur's success rests on the provision of consistent reciprocal market access and a "framework for cooperation" that promotes mutual economic growth and development. It is the difficulty in achieving this standard, as shall be seen, that has been at the root of persistent discontent within Mercosur. Formally, the Treaty of Asunción established Mercosur as a common market among Brazil, Argentina, Uruguay, and Paraguay for the stated purpose of accelerating economic development and social justice. The goal envisioned improved living conditions for all member countries through "balanced and managed growth in trade flows." The treaty followed guidelines compatible with the Latin American Integration Association (Asociación Latinoamericana de Integración—ALADI), a regional trade organization that provides a common, yet flexible framework for establishing sub-regional trade pacts that encourages inclusiveness and minimal harm to non-members. These pacts may be both "regional and partial in scope," in contrast to the U.S. free trade agreement (FTA) model that tends to be comprehensive. For example, Mercosur adopted as basic tenets "gradualism, flexibility, and balance," and allows for the negotiated accession of other countries. Mercosur followed an incremental path to a common market, beginning with a transition period (1991-95) in which it operated as an increasingly comprehensive free trade agreement (FTA) based on a schedule of automatic tariff reductions. The formal jump to a common market was made on January 1, 1995, but in reality, Mercosur became (and remains) only a partial customs union. It adopted a common trade policy and a schedule of common external tariffs (CETs) that applies to 80% of tariff line items, but with some very important exceptions for sensitive sectors such as sugar, automobiles, capital goods, computers, and other technology products. The exceptions were to be phased out by 2006, but many have been extended to 2011, requiring a set of complex rules of origin. In addition, there are weaknesses with the CET, a core requirement of a true customs union. The CET can be levied twice, first when a good initially enters a Mercosur country, and again if it crosses into another member country. Between the double taxation and multiple exceptions problems, resolving application and uniform enforcement of the CET remains an important unaddressed issue. The double taxation issue is a particular problem for Paraguay, which will suffer significant revenue losses without some type of comprehensive customs revenue sharing plan because most goods enter the Mercosur area through one of the other three countries. The incompleteness of the customs union fosters asymmetry issues (discussed below) that are at the root of Mercosur discontent, and that also suggest that the achievement of a full common market remains a distant, if not illusory goal. The Treaty of Asunción also provided for macroeconomic policy coordination and harmonization of policy legislation at the sectoral level (e.g. energy, agriculture, industry, technology). Some macroeconomic policies, such as exchange rates, have been forced toward complementarity by economic events, but differences remain significant and full coordination of policy is not currently feasible. The rationale for sectoral cooperation rests on inter-country factor mobility being pursued gradually, allowing comparative advantage to work, while easing the integration adjustment process. Nonetheless, sectoral issues and disputes remain a continuing challenge, especially between Brazil and Argentina, as does cross-border movement of goods both within Mercosur and to third country markets. All parties were required to accept a common set of rights and obligations (Article 2), with little allowance for special and differential treatment for smaller economies. There were many follow-on protocols. Among the most important was the December 17, 1994 Protocol of Ouro Preto, which formally established the common market and extended the institutional framework accordingly. Mercosur adopted a democratic commitment clause in 1996, and there were two protocols that clarified and expanded the dispute settlement process, the last being the Olivos Protocol signed on February 18, 2002, and implemented two years later. Dispute settlement, however, is largely unenforceable and reflects a continuing problem of Mercosur's institutional effectiveness. Three more recent developments call into question Mercosur's functional institutional capacity. First is the expansion of its membership. Venezuela signed an accession agreement on July 4, 2006 (discussed in detail below), but has been reticent to take on all commitments of the customs union, especially the CET. In December 2006, Bolivia also requested to upgrade its status from associate to full member, although it is reluctant to relinquish its membership in the Andean Community of Nations (Comunidad Andina de Naciones—CAN), as would be required under Mercosur rules. Second is the new Mercosur Parliament established in December 2006 and headquartered in Montevideo. It comprises 18 representatives from each full member country and has as its primary goal to work toward harmonization of national laws and policies, but it has no authority over national government bodies. Already a point of contention, it has come under criticism for being either too weak to be meaningful, or risking unequal national representation relative to the participating countries' population. In either case, it is viewed by some as raising even more questions over the institutional strength of Mercosur. Third is creation in 2006 of a $100 million Structural Convergence Fund, financed mostly by Brazil and Argentina, effectively amounting to a transfer of resources to the smaller countries to help ameliorate the inequalities of Mercosur. It provides funding for development and infrastructure projects, destined primarily for Uruguay and Paraguay, but may not be a sufficient response as a compensatory mechanism for acknowledged trade asymmetries within the pact. Intra-Mercosur trade relations have had an uneven and at times troubled history. A combination of internal policy contradictions, diminishing expectations, and a hostile external economic environment in the late 1990s resulted in uneven trade benefits and recurring recriminations against the incomplete customs union. The return of a highly beneficial global economic environment has alleviated some friction, but has not eliminated the need to make policy adjustments or to address concerns raised by the two smallest members of Mercosur. These issues again collectively point to a consistent criticism of Mercosur: its weak institutions and incomplete integration. Too frequently, decision making is the product of political agreement, often on a bilateral basis rather than a rules-based bloc-wide determination. This ad hoc approach to process generates much of the conflict within the customs union, raising questions about the level of commitment to completing the quadrilateral economic integration scheme. As Mercosur lowered tariffs, intra-Mercosur trade was expected to grow relative to trade with third-party countries. As seen in Figure 2 , this was the initial response from 1991 to 1998, with the jump in intra-Mercosur exports also due to its growth from an initially small base, other economic reforms, and the decade's lengthy global economic expansion. There is, however, an equally evident sudden collapse of intra-Mercosur exports, which fell from 25% of total trade in 1998 to 11% in 2002, before renewing an upward climb to 15% by 2007. This setback reflects a fall in aggregate demand linked to the region's economic crises, intra-Mercosur tariff increases in response to internal Mercosur problems, and Argentina's pressure to lower the CET on capital goods, demonstrating a still strong dependence on trade with developed countries for products not available in the region. From the outset, Mercosur struggled to reconcile a basic inconsistency of partial economic union: how to balance trade integration and equity of member benefits, while retaining some semblance of national control over trade, production, and consumption structure. Natural or structural asymmetries are at the heart of the problem given the pact integrates four economies with huge discrepancies in size, structure, resource endowment, and level of development. In addition to the absolute differences in size, relative differences can fluctuate widely over time. For example, the size of Argentina's economy (GDP) tends to be half that of Brazil's, yet this metric has ranged from a high of 60% in 1992 to a low of 22% in 2002 because of dramatic shifts in relative economic performance, in this case punctuated by the prolonged recession and financial crisis in Argentina. These structural differences can be compounded by "policy asymmetries" that arise from incongruities in fiscal, monetary, industrial, exchange rate, and other policies. Either type of asymmetry can dramatically alter commercial flows, causing large trade imbalances that can threaten the stability of intra-Mercosur relations as seen in Figure 2 . When they operate in tandem, the Mercosur policy adjustment framework has proven to be vulnerable, particularly at times when the countries face external economic shocks. Such a confluence of events occurred in the 1990s following a series of global shocks that spilled over into Mercosur. The July 1997 Asian financial crisis was the first shock, followed by the Russian default in the summer of 1998. These crises directly affected investor confidence in Brazil, causing extensive capital flight in the fall of 1998, which in turn led to Brazil's steep currency devaluation in January 1999 and the abandonment of its fixed exchange rate stabilization program. With Argentina's strict dollar convertibility regime still in place at the time, the two countries faced a significant "exchange rate policy asymmetry" that altered trade patterns. The sudden trade imbalance was compounded by Argentina's lengthy recession that also began in 1998, leading to its own, far more serious, financial crisis. Argentina's crisis led to the abandonment of its fixed exchange rate regime in December 2001 and subsequent sovereign debt default. Mercosur's leaders, aware of macroeconomic weaknesses exposed by these crises, proposed a Mercosur Relaunch program as early as May 2000. It formally reaffirmed a commitment to deeper integration, but the Relaunch enthusiasm soon faded as it proved unable to overcome the effects of the financial crises, including the spread of recession to Uruguay and Paraguay and the dramatic fall in trade between Argentina and Brazil (90% of intra-Mercosur commercial exchange). Intra-Mercosur relations became increasingly strained, with Argentina applying temporary restrictions on Brazilian imports, further reducing trade and diminishing incentives for deeper economic integration. By 2002, the Mercosur economies had all hit bottom and began to rebound, as reflected in intra-Mercosur trade. Problems with intra-bloc trade imbalances, however, remained. As the data in Table A -1 demonstrate, all four countries show a linear increase in intra- and extra-Mercosur trade and, with the exception of Paraguay, expanding trade surpluses in their extra-Mercosur trade relations. A core issue remaining is the persistent and growing trade deficits that each country runs with Brazil. A related concern involves the accumulating trade deficits that Paraguay and Uruguay have with Argentina. The specific asymmetry issues discussed above manifest differently for each country. Two commonly cited threads are the expanding trade deficit with Brazil, particularly since the region began its economic recovery (see Table A -1 ), and unequal investment and trade in industrial goods. Brazil is seen as the undisputed winner on both counts and is the most ardent supporter of Mercosur for political as well as economic reasons. Interestingly, it is also the least trade dependent member of Mercosur, with total Mercosur trade amounting to no more than 10% of its world trade. By contrast, intra-Mercosur trade accounts for 25%-30% of Argentine trade. The two smaller countries are even more dependent on their larger neighbor's markets, but Mercosur has fallen to only 38% of their total exports, down from recent highs of 59% for Uruguay and 41% for Paraguay. This trend may suggest that both countries are reacting to perceived inequalities and structural impediments by diversifying their trade outside of Mercosur. Both Paraguay and Uruguay have made numerous formal proposals to solve the asymmetry issue. To date, some changes in rules and other technical requirements have been made to improve trade opportunities for the small countries. The most salient development was creation of the Structural Convergence Fund, which has been slow in becoming operational and has only approved its first projects in 2007. So far the asymmetries issue has not been resolved and remains a major challenge to the long-term success of Mercosur. Argentina has numerous trade disputes with Brazil, heightened since the post-crisis period when it began to run large trade deficits with Brazil (see data in Table A -1 ). The structure of these deficits were a particular problem because they were weighted toward high value-added industrial goods, competing directly with Argentina's plans to restart its own industrial sector. The imbalance became increasingly severe; Argentine exports fell from 14% of Brazilian imports in 1998 to 9% in 2007. Brazilian exports, in contrast, rose from 22% to 33% of Argentine imports. The growing imbalance resulted from numerous factors: 1) new exchange rate equilibriums that favored Brazilian goods in the Argentine market over U.S. and European products; 2) a post-recession jump in Argentine aggregate demand; 3) Brazil's export promotion policy emphasizing greater use of domestic inputs, and structural factors in the trade composition of the Mercosur countries. An analysis of Mercosur trade composition suggests that Brazil's trade surplus is driven considerably by falling import shares of the smaller Mercosur economies, presenting two structural problems not easily addressed. First, the export supply produced by the Mercosur countries does not correspond strongly with Brazil's import demand. Second, Argentine and Uruguayan exports may be less competitive relative to those from countries outside the Mercosur bloc. They also compete closely with one another in the Brazilian market. Together these trends suggest that a natural correction in the Mercosur trade flows may not be likely, leading to Argentina's continued demand for administered remedies to address certain chronic sectoral trade imbalances (e.g. appliances, textiles, paper). Current administered agreements include the use of voluntary export restraints, quotas, and export taxes. One important example is the Competitive Adaptation Mechanism (CAM) agreed to by Brazil and Argentina in February 2006, over the strong objections of Brazilian industry. It permits protective measures in cases where imports "cause or threaten to cause damage" to a domestic product or industry (safeguards). A convoluted process, it allows for both voluntary export restraints and tariff rate quotas. The CAM was a major policy shift for Mercosur and raises multiple issues. First, it is a bilateral arrangement established under the ALADI system and so not governed by Mercosur. Second, import restrictions represent a retreat from the stated free trade philosophy of Mercosur. Third, the CAM has no enforcement mechanism under ALADI. In short, it compounds existing institutional problems and may undermine the Mercosur agreement even as it attempts, so far unsuccessfully, to restore balance to the largest bilateral relationship within it. The two smaller Mercosur partners face similar trade asymmetries, but also react against the uneven exercise of power. Linked to Mercosur by a natural trade relationship, both Paraguay and Uruguay have still had to respond to structural impediments to their exports. In part, trade asymmetry is a function of their relatively small economies, but the major issue is the disparity between Mercosur's stated intent to help all members attain their development goals and the actual functioning of the agreement itself. The treaty's incomplete integration can impede Paraguay's and Uruguay's exports, does not provide special and differentiated treatment, and often allows bilateral "diplomacy" to circumvent formal decision-making mechanisms. The safeguards mechanism adopted by Brazil and Argentina is one example, which appears to contradict the principle of reciprocity in rights and obligations. Ad hoc restrictions on trade are another major area of complaint. Paraguay and Uruguay are not in identical situations and so each has advocated different remedies. Historically Paraguay's economy has been the most dependent on Mercosur. As a small agricultural economy, geographically remote and landlocked, it depends on its neighbors for export routes to third countries, particularly when river access is seasonally limited. Paraguay is also the poorest and least developed Mercosur member, and so relies on the Mercosur's promises of market access, enforceable obligations, and integration for its fledgling manufacturing industries. Paraguay's exports have at times been blocked by bureaucratic restrictions in both Brazil and Argentina and private sector complaints have had little success in resolving what they believe amounts to protectionist non-tariff barriers (NTBs). Paraguay has expressed interest in exploring the possibility of receiving trade preferences within Mercosur as one remedy, but cannot envision leaving Mercosur. Uruguay faces many of the same NTB problems as Paraguay, but with a higher per capita income, developed port network (direct access to third countries), and more diversified economy, its options for trade expansion both within and outside of Mercosur are greater. It too looks to the Mercosur agreement to fulfill its promises of market access and enforceable obligations. Finding a balance both within and outside Mercosur, including exploring deeper bilateral relationships with the EU and the United States is the challenge for Uruguay. Frustrated by past vulnerability to Argentina's financial crisis and Brazil's periodic barriers to trade, Uruguay has opted to diversify its trade with the world where possible, but its policy options are hindered because it cannot change or ensure enforcement of the Mercosur agreement, it cannot leave Mercosur, nor can it formally negotiate outside it. The asymmetry issue suggests a certain implicit political hold that Brazil has over the Mercosur derived from its disproportional economic power. By presiding over an incomplete customs union, it can selectively limit the free movement of imports to suit its sectoral needs (at a cost to the other countries equal to the high tariff on capital goods or forgone trade for example), and can also inhibit movement of goods from the smaller countries bound for countries within Mercosur or outside it. Brazil's dominant economic and political-institutional control over the Mercosur has therefore at times fostered a resentment among the smaller countries, increasing their interest in pursuing third country trade arrangements. Uruguay has responded in part by exploring deeper trade affiliations outside the pact. On November 4, 2006, following U.S. Senate approval, a Bilateral Investment Treaty (BIT) between the United States and Uruguay went into force. Uruguay also sought and received permission from Brazil to explore an FTA with the United States. It subsequently decided to pursue a Trade and Investment Framework Agreement (TIFA) with the United States, which was signed on January 25, 2007. A Joint Commission on Trade and Investment provides the means for ongoing U.S.-Uruguay discussions regarding opportunities for specific trade deals. The TIFA approach is flexible and allows Uruguay to deepen trade relations with the United States without compromising its Mercosur commitments. Uruguay has linked its desire to develop closer U.S. trade ties with its concern over increasing "bilateralism" between Argentina and Brazil. In December 2006, Argentina responded by criticizing Uruguay for attempting to circumvent Mercosur in its quest to diversify its trade relations, again pointing to an internal strife based on a trade pact that does not appear to operate as promised. Many in Uruguay are not indifferent to this viewpoint and in an ideal world would like to pursue an FTA with the United States in a way that would not compromise its standing with Mercosur. Uruguay's construction of a pulp mill opposed bitterly by Argentina is another conflict within Mercosur. Constructed by a Finnish firm on the Uruguay River, the mill represents the largest single foreign investment project in Uruguay and is expected to provide significant long-term employment opportunities. Argentina alleges that Uruguay is in violation of a bilateral environmental protocol the two countries signed in 1975 and that the plant presents potentially harmful environmental effects that could negatively affect Argentina's national territory, including a resort area across the river from the construction site. A World Bank review concluded that the plant poses no serious environmental problems, but did suggest that construction and production design changes could reduce the risk of environmental hazard even further. The World Bank's International Finance Corporation provided $100 million to finance the project and the issue continues to spawn protests and diplomatic flare-ups. Periodically, Argentine protesters continue to block bridges over the Uruguay River, disrupting trade and tourist traffic between the two countries. Uruguay has responded at times by closing the border. It also turned to the Mercosur system for dispute settlement. A September 2006 ruling by the Mercosur Ad-Hoc Arbitration Tribunal found that Argentina had failed to live up to its commitment to ensure the free movement of people, goods, and services under the pact, but no award was made. Argentina also filed a petition for arbitration with the International Court of Justice (ICJ) at The Hague. The ICJ denied Argentina's request for an injunction to terminate construction. It also declined to require that Argentina take actions to remove protesters. Uruguay subsequently filed a counter claim, arguing that Argentina has failed to take such action. Additional mediation efforts in Madrid and New York ameliorated the conflict temporarily, but the pulp mill began operations in November 2007 even as the parties awaited a final ruling from the ICJ. Brazil has chosen not to mediate and the ongoing dispute highlights the lack of an effective dispute settlement system within Mercosur. Although Mercosur began strictly as a four-party integration plan, changing internal and external circumstances led the customs union to consider expanding its membership in various ways and to consider the merits of seeking trade arrangements with third party countries and trade groups. As part of its charter, Mercosur remains formally open to the addition of new members. In 1996, Chile and Bolivia joined as the first "associate members." Since then, Mercosur has continued to enter into "economic complementarity agreements" with most of South America, under ALADI guidelines. Associate membership is a limited arrangement, largely focused on the long-term pursuit of a free trade agreement, often emphasizing sector-specific agreements and cooperation. It does not convey membership status per se, and while members may attend meetings, they have no voting rights, do not participate in the internal functions of Mercosur, and are not required to adopt the CET. In October 2004, after years of talks, Mercosur and the Andean Community signed a trade pact, giving all Andean countries the equivalent of associate membership. Two months later, this breakthrough led directly to creation of the South American Community of Nations, later renamed the Union of South American Nations (UNASUR), a loosely-conceived pact including 12 countries (those in Mercosur, CAN, along with Chile, Guyana, and Suriname). The CAN and UNASUR in many ways are not true regional agreements; they have some common rules, but details on market access and other specific provisions are bilateral arrangements between each Mercosur country and the CAN. Brazil also granted numerous unilateral concessions to ensure the UNASUR agreement would be completed. These constraints limit prospects for deep continental integration. Nonetheless, sectoral initiatives, such as the proposed South American gas pipeline, already reflect increased cooperation and collective self-determination in the region, which is also now alive in the institutional presence of the CSN. Mercosur's other negotiations have experienced mixed success. Trade talks with the EU for a joint Mercosur-EU FTA and the Western Hemisphere countries for a proposed Free Trade Area of the Americas (FTAA) have both come to an impasse over the inability to reach an agricultural agreement acceptable to Brazil. Brazil has also declined U.S. and EU overtures for "WTO-plus" arrangements on market access for industrial goods, services trade, enforceable intellectual property rights, and investment provisions. Continuing interest will depend in part on the outcome of the Doha Round. South-South trade talks have advanced only in limited form. Mercosur has begun preliminary discussions with a host of countries that include China, India, SACU, Canada, the Russian Federation, Korea, Egypt, Morocco, and Pakistan. None has moved beyond a simple framework agreement. On July 4, 2006, Mercosur agreed to accept Venezuela as the first additional full member of the pact. The accession protocol was accelerated in mid-2006 at the behest of President Hugo Chávez, who viewed it as supportive of his effort to unify South America and advance his "Bolivarian agenda" that generally stands in opposition to U.S. influence in the region. The accession takes full effect only after formal parliamentary approval by all four Mercosur countries. To date, only Argentina and Uruguay have voted to approve. The early stages of the accession process was expected to be longer and more involved because of two significant hurdles: Venezuela's membership in the CAN, which would not have been allowed under Mercosur protocols; and the requirement to adopt the Mercosur CET. Venezuela dispensed with the first issue by defiantly withdrawing from the Andean trade pact in April 2006. Citing Peru and Colombia's negotiations for FTAs with the United States as contrary to CAN's and Latin America's best interests, President Chávez left the pact specifically to join Mercosur. To address the second issue, Mercosur, under Brazil's leadership, negotiated to give Venezuela four years to comply with the CET, with other obligations of the pact not completely phased in until 2014. Mercosur may have many incentives to bring Venezuela into the fold. The addition of a fifth member adds to the economic strength of the bloc, which would comprise three-quarters of South American GDP. Venezuela also promised immediate selective duty-free treatment for imports from Paraguay and Uruguay, with no requirement for reciprocal treatment until 2013. Venezuela may increase the potential for intra-Mercosur trade as a relatively large Latin American market that also offers sectoral complementarity and energy security with its vast oil reserves and plans for a regional pipeline. A more thorough analysis of the potential trade effects, however, suggests that the trade and economic benefits for Mercosur may be easily overstated. Currently, Mercosur trades little with Venezuela and estimates of trade growth are modest at best, given limitations in the accession protocol (exemptions and other restrictions) and current tariff preferences that already apply to a high proportion of goods expected to benefit from the agreement. Trade between Mercosur and Venezuela averages no more than 3% of the pacts total world trade, with the exception of Uruguay where crude oil constitutes 12% of total imports. The energy sector promises the greatest benefit through deeper cooperation in energy supply, but which could also be achieved without Venezuela's full integration into Mercosur. In addition, Venezuela's access will complicate trade policy coordination within the expanded bloc, both regionally and multilaterally. The political motivations and ramifications for Venezuela's accession may be even more of an issue. Concern has grown, for example, over certain of President Chávez's policies that may be construed as hindering democracy, which in turn could be considered a direct challenge to Mercosur's democratic clause. Brazilian Foreign Minister Celso Amorim has reaffirmed his view that Mercosur's primary goal from the start has been to consolidate democracy in South America. Chávez's decision to close a key radio station (viewed by some as suppressing freedom of speech) and his one-time plan to alter the Venezuelan Constitution to abolish presidential term limits (viewed by some as a direct assault on the democratic process) raised concern over real and perceived undemocratic behavior in Venezuela. This issue has escalated with some members of the Brazilian Senate continuing to argue for postponement of a vote to consider Venezuela's accession. Although Venezuela remains a non-voting member until the accession is ratified, it does have a voice in Mercosur affairs, increasing its influence on intra-pact and external trade negotiations. The marginal effect may be to strengthen resolve by some countries to challenge U.S. influence in South America, although there are also moderating influences in all countries. Uruguay and Paraguay could also view Venezuela as having a diluting force on Brazil's political dominance in the pact, but opinions seem divided at present in both countries. Venezuela's accession, however, may have unintended regional consequences should countries outside Mercosur be put in a position of having to choose between a U.S. or Mercosur trade agreement. Peru has even suggested forming a new trade bloc, the Community of the Pacific, which would include countries with complementary trade arrangements: the United States, Canada, Mexico, the Central American countries, Panama, Colombia, Peru, and Chile. This prospect may be further reinforced by Bolivia's request to become a full member of Mercosur, although it appears reluctant to give up its membership in the CAN and accept the tariff convergence challenge inherent in adapting to the Mercosur CET. The current, and now long-extended, WTO multilateral round of trade negotiation highlights other interesting institutional constraints within Mercosur. As a customs union with a supposed common external trade policy and CET, Mercosur would theoretically need to approach the Doha Development Round with some common, if not identical, trade negotiation objectives, or risk differing country policies undermining the integration scheme. Mercosur has responded by creating an ad hoc consultation and coordination group to address the Doha negotiations. The bloc, however, does not approach the WTO as a united voice, but Doha negotiations are exploring the possibility of a more flexible approach to address the interests of the customs union. Brazil has taken the negotiating lead and perhaps has the most to gain from the Doha Round on both political and economic grounds, but it is not clear that positions benefitting Brazil will always be those supported by the other Mercosur countries. Although there has been broad agreement in the realm of agricultural issues, as part of the broader developing country consolidated response to developed country WTO positions, there is less agreement in the areas of nonagricultural market access and services. The most sensitive areas with respect to maintaining a cohesive customs union are in setting tariff levels and determining sensitive product lists that each country may elect to receive special treatment under a WTO agreement. Given there will be limits on the number of tariff lines permitted, large differences in both these areas among Mercosur countries could lead to either a breech of the customs union rules, or those of the Doha agreement. Balancing these goals in the WTO negotiations is a challenge for the four Mercosur countries and should the Doha Round stall indefinitely, it is possible that alternative paths to global integration may take on renewed emphasis. On December 18, 2007, after four years of negotiations, Israel signed a free trade agreement at the Mercosur Summit with the four member countries, the first such agreement with a country outside the Western Hemisphere. The agreement is limited largely to market access for merchandise trade, allowing for full free trade to be phased in within 10 years. Mercosur and Israel have a near even balance of trade in their $1 billion commercial relationship. Mercosur exports mostly agricultural products and imports technology goods. Although this arrangement is highly complementary, treatment of agricultural exports and capital goods imports has been a stumbling block for the Mercosur countries, and particularly Brazil, in trade negotiations with the EU, the United States, and at the Doha Round. Safeguards and other restrictions will apply during the transition period to full free trade. Mercosur and China have no formal trade agreement in effect, but bilateral trade has grown tremendously in recent years. In 2007, Mercosur exported $16.1 billion of goods to China, importing $19.7 billion. China represented 7.2% of Mercosur's exports and 11.2% of its imports. Total trade between China and the four Mercosur countries ranges from a low of 11% of total foreign trade for Uruguay to 18% for Argentina and Brazil, and a high of 28% for Paraguay (importing mostly computer and other electronic equipment). Mercosur's commodity exports and imports of labor-intensive goods explain most of the recent strong growth in this relationship. Such strong trade growth also presents problems for Mercosur because manufactured imports displace local products. China's expanding trade surplus would be even bigger were it not for the world prices of agricultural commodities currently driving Mercosur's export values, suggesting that as China becomes a larger trade partner, the deficit could widen. The prospect for a deteriorating bilateral trade balance has led both Brazil and Argentina to pursue anti-dumping cases and resort to use of import licenses, voluntary export restraints, and higher tariffs. Mercosur came to life as both a Brazilian-Argentine political project and a broader economic integration scheme among four contiguous, but highly differentiated countries. Mercosur has fostered a prolonged period of cooperation in a region with a long history of conflict, an important achievement in both political and economic terms. Still, it is a limited customs union and remains intact despite its "incompleteness" in part because: 1) there is no simple alternative for its members; 2) there is an unknown, but perceived serious downside risk to its dissolution, and; 3) there is always the vague hope that promises of institutional improvements will produce more equitable outcomes. The result remains an uncomfortable status quo in which form (e.g. the new Parliament) often supersedes function (e.g. deeper integration). Economic integration based on mutual growth in trade and development is at the heart of the Mercosur charter, but given shortfalls in achieving this goal, it is likely that a persistent dissatisfaction among the smaller partners may continue, particularly given Brazil's political and economic dominance and Mercosur's inability to address institutional disagreements. Deeper economic integration promises to resolve some problems, but there appears to be little chance for movement in that direction in the near future. Instead Mercosur has opted to pursue new institutional bureaucracies (the Parliament) and outreach to third countries, albeit on a very limited basis. The Parliament is in its infancy and Mercosur has not been able to consummate a trade agreement with its most important trade partners, the United States and the EU. South-South agreements and expansion of associate membership to South American countries has progressed, but only as limited market access arrangements. The big, but questionable move is the accession invitation to Venezuela, which has also had problems. Venezuela has been given leeway in adopting Mercosur commitments, which has undermined the pact's cohesiveness, and could end up shifting the political orientation of Mercosur, while providing only relatively small trade effects. Historically, the United States has supported Mercosur as a potential complementary path to meeting its own goal of Western Hemisphere economic integration, but U.S.-Mercosur trade is small and Mercosur has shown little enthusiasm for supporting U.S. initiatives for a hemispheric-wide trade agreement. The addition of Venezuela would likely solidify this position. Although Mercosur has resisted the FTAA as envisioned by the United States, Venezuela is the only country in Latin America to reject the idea unequivocally. It appears that Mercosur has opted to emphasize its expansion both in the region and with other developing countries over agreements with its largest developed country trade partners, looking to the World Trade Organization (WTO) as the preferred alternative for achieving many of its trade policy goals. Nonetheless, U.S.-Mercosur commercial and economic ties are expanding and the United States is pursuing deeper bilateral trade relations with Uruguay that could provide new ideas for a broader integration commitment. The alternative may be for Mercosur and the United States to expand their mutually exclusive bilateral agreements, increasing the potential for overlapping trading systems, which few, if any, view as either economically or administratively optimal. Appendix A. | Mercosur is the Common Market of the South established by Brazil, Argentina, Uruguay, and Paraguay in 1991 to promote economic integration and political cooperation among the four countries. Since then, Mercosur has struggled to achieve deep economic integration, but has maintained a cooperative economic and political framework, which has also become an influential voice in determining the fate of the hemisphere's regional integration initiatives. In particular, the U.S. vision for hemispheric integration, the Free Trade Area of the Americas (FTAA), has stalled largely because of opposition from within Mercosur, which in turn has focused on its own, albeit limited, expansion. The Mercosur pact calls for an incremental path to a full integration, but after 15 years, only a limited customs union has been achieved. From the outset, Mercosur struggled to reconcile a basic inconsistency in a pact of partial economic union: how to achieve economic integration, while also ensuring that the benefits would be balanced among members and that each country would retain some control over its trade, production, and consumption structure. This delicate balance faced overcoming serious structural and policy asymmetries that became clear when Brazil and Argentina experienced financial crises and deep recessions. These economic setbacks disrupted trade flows among members, causing friction, the adoption of protectionist measures, and a retreat from the commitment to deeper economic integration. For now, Mercosur has turned to expanding rather than deepening the agreement. Many South American countries have been added as "associate members" and Mercosur has reached out for other South-South arrangements in Africa and Asia – all limited agreements and unlikely paths to continental economic integration. Internal conflicts have highlighted Mercosur's institutional weaknesses and slowed the integration process. On July 4, 2006, Venezuela signed an accession agreement to become its first new full member, making Mercosur the undisputed economic counterweight to United States in the region, but raising questions about how Venezuela's membership may shift regional political and trade dynamics. It appears that Mercosur has opted to emphasize its expansion both in the region and with other developing countries over agreements with its largest developed country trade partners, looking to the World Trade Organization (WTO) as the preferred alternative for achieving many of its trade policy goals. Nonetheless, U.S.-Mercosur commercial and economic ties are expanding and the United States is pursuing deeper bilateral trade relations with Uruguay that could provide new ideas for a broader integration commitment. The alternative may be for Mercosur and the United States to expand their mutually exclusive bilateral agreements, increasing the potential for overlapping trading systems, which few, if any, view as either economically or administratively optimal. |
The Higher Education Act of 1965, as amended (HEA; P.L. 89-329), authorizes the operation of numerous federal aid programs that provide support both to individuals pursuing a postsecondary education and to institutions of higher education (IHEs). It also authorizes certain activities and functions. The most recent comprehensive reauthorization of the HEA was in 2008 under the Higher Education Opportunity Act (HEOA; P.L. 110-315 ). As amended by the HEOA, appropriations were authorized for most HEA discretionary spending programs through FY2014. However, under generally applicable provisions in the General Education Provisions Act (GEPA), the authorization periods for most HEA programs were effectively extended through the end of FY2015. From September 30, 2015, through December 18, 2015, Congress provided additional appropriations for many of these programs with three consecutive continuing resolutions. On December 18, 2015, the Consolidated Appropriations Act, 2016 was enacted ( P.L. 114-113 ), under which Congress provided additional appropriations for many of the HEA programs through FY2016, such that they will continue operation until through September 30, 2016. Additional legislative action must occur for the provisions extended by the Consolidated Appropriations Act, 2016 to continue beyond September 30, 2016. Not all authorizations of appropriations in the HEA were set to expire at the end of FY2014. For some HEA programs, authorization of appropriations or mandatory budget authority is permanent, while for others authorization is provided through a date beyond the end of FY2014. For a number of programs, the period during which appropriations are authorized to be provided has ended. For instance, the authorizations of appropriations for Teacher Quality Partnership Grants expired at the end of FY2011. In a few other instances that are discussed below, program authority had a sunset date (e.g., the end of FY2014, the end of FY2015). The General Education Provisions Act (GEPA) contains a broad array of statutory provisions that are applicable to the majority of federal education programs administered by the U.S. Department of Education (ED). GEPA Section 422 provides that, in the absence of the enactment of a law to extend or repeal a program administered by ED, the authorization of appropriations for, or the duration of, a program is extended for one additional fiscal year beyond its terminal year. The authorization of appropriations for such programs in the additional year shall be the same as that for the terminal year of the program. Section 422 of GEPA explicitly states that the automatic one-year extension does not apply to the authorization of appropriations for commissions, councils, or committees that are required by statute to terminate on a specific date. Prior to the conclusion of FY2015, two HEA committees had specific termination dates: Under Section 114(f), the authority for the National Advisory Committee on Institutional Quality and Integrity (NACIQI) terminated on September 30, 2015. Under Section 491(k), the authority for the Advisory Committee for Student Financial Assistance (ACSFA) was provided until October 1, 2015. Congress did not extend or repeal many of the provisions authorized by the HEA through FY2014. Thus, except for the advisory committees noted above, GEPA automatically extended most of these HEA programs and authorizations of appropriations through FY2015 at the same levels as were authorized to be provided for FY2014. However, because GEPA Section 422 only provides an additional one-year extension to HEA programs and many of those programs that were set to expire at the end of FY2014 were automatically extended through FY2015 under GEPA—and subsequently through FY2016, under the Consolidated Appropriations Act, 2016—additional legislative action must occur if these expiring provisions are to continue beyond September 30, 2016. Most HEA provisions that were set to expire at the end of FY2014 had been provided an additional one-year extension under GEPA. This additional one-year extension terminated at the end of FY2015. The implications of this expiration in the context of a particular program or activity depend on the nature of the provision that expired. In general, there is a distinction between an authorization provision that establishes the authority for a program, policy, project, or activity and a provision that explicitly authorizes subsequent congressional action to provide appropriations. The Comptroller General has explained that there is no constitutional or general statutory requirement that an appropriation must be preceded by a specific act that authorized it. "Congress may ... appropriate funds for a program or object that has not been previously authorized or which exceeds the scope of a prior authorization, in which event the enacted appropriation, in effect, carries its own authorization and is available to the agency for obligation and expenditure. " That is, in the event that an authorization of appropriations has lapsed, an appropriation would generally provide the necessary legal authorization for the agency to spend money for the particular purpose specified in the appropriations act. Furthermore, if an authorization of appropriations for an activity expires but the underlying authority for that activity does not, those statutory authorities still exist and the agency may continue to take actions pursuant to them, assuming that appropriations are available for those purposes. Extension of the HEA authorization provisions that expired at the end of FY2014 and were extended through GEPA to the end of FY2015, the vast majority of which are discretionary authorizations of appropriations, could be addressed in a variety of ways through either the authorization or appropriations processes (or both). For instance, one or more laws could be enacted that extend the authorization of appropriations for an individual program or multiple programs. Alternatively, a program for which the authorization of appropriations has expired may continue to operate if Congress continues to appropriate funds for it. In a few other instances, however, where the authority for the program itself terminates, an explicit extension of that program would be required for it to continue to operate. For the HEA provisions that, with the GEPA extension, expired at the end of FY2015, a law could be enacted to explicitly extend the authorization. For instance, prior to the enactment of the HEOA ( P.L. 110-315 ) in 2008, the most recent reauthorization of the HEA, HEA programs were extended beyond their prior terminal authorization date of FY2003 through a series of Higher Education Extension Acts that temporarily extended the HEA. These extension acts broadly extended the authorization of appropriations for and the duration of each program authorized under the HEA for an additional period of time beyond their prior terminal authorization dates. As an alternative to an explicit authorization extension, for many of the HEA provisions that expired, with the GEPA extension, at the end of FY2015, additional funds could be appropriated for periods beyond FY2015 to ensure a program's continued operation. As was previously mentioned, in general, an appropriation for the purposes of a program with an expired authorization of appropriations would ensure the continued operation of that program. For example, although the authorization of appropriations under HEA, Title II, Part A, for Teacher Quality Partnership Grants was provided only through FY2011 (and extended under GEPA through FY2012), the program remains operational due to continued funding provided in previous appropriations acts through FY2015, and now through FY2016 under the Consolidated Appropriations Act, 2016. While it seems that most of the HEA programs that expired at the end of FY2015 could continue operations with the appropriation of funds for FY2016, it appears that an explicit extension would be required for the advisory committees mentioned above to ensure continued operation in their current form beyond the end of FY2015. Congress uses an annual appropriations process to fund routine activities of most federal agencies. This process anticipates regular appropriations bills to fund activities before the beginning of the fiscal year. When this process is delayed beyond the start of the fiscal year, one or more continuing appropriations acts (continuing resolutions) can be used to provide funding until action on regular appropriations is completed. In the event a regular appropriations bill to appropriate funding for the expiring HEA provisions is not enacted prior to their expiration date, a continuing resolution (CR) could be enacted to provide continued funding for these expiring provisions. In most cases, the appropriation of funds for a program through a CR would be sufficient for a program's continued operation. However, for those programs with explicit termination or sunset dates, a CR or other appropriations law would likely need to contain specific language, beyond the appropriation of funds, indicating Congress's intent to continue the operation of the program. Thus, for certain provisions, the extension of the explicit authorization for the program or activity may be required for continued operations. Beginning on September 30, 2015, a variety of measures were taken to provide additional appropriations for federal programs beyond FY2015. First, three CRs were enacted, which, in general, provided continuing appropriations for federal programs through December 18, 2015. Then, on December 18, 2015 the Consolidated Appropriations Act, 2016 was enacted ( P.L. 114-113 ), under which Congress provided additional appropriations for many of the HEA programs through FY2016. Thus, many of the HEA programs that, under GEPA provisions, were set to expire at the end of FY2015 continued to operate through December 18, 2015, under the various CRs and will continue to operate through FY2016 under the Consolidated Appropriations Act, 2016. Congress did not, however, extend the authorization of or provide additional funding under any of the CRs or the Consolidated Appropriations Act, 2016 for the Advisory Committee for Student Financial Assistance. Because the Advisory Committee for Student Financial Assistance neither received additional funding nor an extension of authorization, it has disbanded and operations ceased immediately upon the expiration of its authorization. Additionally, although Congress did not provide additional funding for the Federal Perkins Loan program under the CRs or the Consolidated Appropriations Act, 2016, it did provide authorization for the continued operation, but not additional appropriations, for the program through separate legislation—the Federal Perkins Loan Program Extension Act of 2015 ( P.L. 114-105 ). Under the act, institutions of higher education may continue to award Perkins Loans to eligible undergraduate students through September 30, 2017 and to eligible graduate and professional students through September 30, 2016. Beyond then, the act specifically prohibits additional appropriations for the program. It also specifies that the automatic one-year extension under GEPA Section 422 will not apply to further extend the program. In the event additional funding is not provided beyond September 30, 2016 for those HEA programs that were funded through the Consolidated Appropriations Act, 2016 either through regular appropriations or another CR, a funding gap would follow. Should this occur, an agency must suspend operations of affected programs, except in certain situations when law authorizes continued activity, until further appropriations are provided. The programs may subsequently resume once funds for them are appropriated, unless otherwise provided. In many past instances, a CR following a funding gap has contained authorization extensions and provided that those extensions shall be considered to have been enacted on the date that the funding gap commenced, as if no funding gap occurred. For instance, under the Continuing Appropriations Act of 2014 ( P.L. 113-46 ), which followed the FY2013 16-day funding gap from October 1, 2013, to October 16, 2013, appropriations were provided for federal programs and the time covered by the joint resolution was "considered to have begun on October 1, 2013." This may be especially relevant for programs with a specific termination date, such as the advisory committees discussed above. While additional action beyond providing appropriations is likely needed to continue their operation, should these programs not receive an explicit extension prior to the termination, it appears that Congress would have the ability to restore the committees through provisions in a CR as if a lapse in authorization never occurred, such that it may be unnecessary to reform the committees completely (e.g., appoint new committee members). In addition to the HEA, the Compact of Free Association contains several provisions that relate to the eligibility of students and IHEs of the Freely Associated States to participate in the HEA programs. In accordance with the Compact of Free Association, students and IHEs in the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau are eligible to receive appropriations for and participate in many federal student aid programs through FY2023 (e.g., Pell Grants). With respect to the Federal Supplemental Educational Opportunity Grant (FSEOG) program and the Federal Work Study (FWS) program, however, the Compact of Free Association, as amended by the Consolidated and Further Continuing Appropriations Act of 2015 ( P.L. 113-235 ), extended eligibly for students and IHEs in Palau to receive appropriations for and participate in the programs only through the end of FY2015. The various CRs temporarily extended the provisions of the Compact of Free Association pertaining to students and IHEs in Palau and their eligibility to receive appropriations for and participate in the FSEOG and FWS programs, and the Consolidated Appropriations Act, 2016 further extended these provisions through FY2016. However, it appears this extension would expire September 30, 2016 without additional legislative action. Table 1 presents information on the discretionary authorization of appropriations or mandatory budget authority for HEA programs and activities. For each program, it identifies the HEA section authorizing the appropriation of funds or providing mandatory budget authority; whether budget authority for these funds is classified as discretionary (D) or mandatory (M); the amount authorized to be appropriated during specified fiscal years; the period or duration for which the authorization of appropriations or mandatory budget authority is provided; whether the authorization provision is extended by GEPA; and for discretionary spending authorizations of appropriations, the amount appropriated for FY2016 under the Consolidated Appropriations Act, 2016; for mandatory programs, budget authority for FY2016. Generally, the provisions are presented in the order in which they appear in the HEA. | The Higher Education Act of 1965, as amended (HEA; P.L. 89-329), authorizes the operation of numerous federal aid programs that provide support both to individuals pursuing a postsecondary education and to institutions of higher education (IHEs). It also authorizes certain activities and functions. The HEA was first enacted in 1965. It has since been amended and extended numerous times, and it has been comprehensively reauthorized eight times. The most recent comprehensive reauthorization occurred in 2008 under the Higher Education Opportunity Act (HEOA; P.L. 110-315), which authorized most HEA programs through FY2014. Many of the programs with HEA authorizations set to expire at the end of FY2014 were automatically extended through FY2015 under Section 422 of the General Education Provisions Act (GEPA). Additionally, many HEA programs due to expire at the end of FY2015 were extended through FY2016 under the Consolidated Appropriations Act, 2016 (P.L. 114-113). This report identifies provisions under the HEA that were, with GEPA extensions, set to expire at the end of FY2015. It also discusses authorization and appropriations options for extending the statutory authorities that are scheduled to lapse. These options include an explicit extension of, or an appropriation of funds for, these programs either through a regular appropriations measure or a continuing resolution. Finally, for all HEA mandatory and discretionary programs and activities, the report provides information on the authorization of appropriations or mandatory budget authority, the duration for which such authority is provided, the applicability of extensions under GEPA, and FY2016 appropriations and mandatory budget authority. |
The attorney-client privilege and work product protection are federal evidentiary privileges. The attorney-client privilege is one of the oldest common law privileges. The purpose of the privilege is to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and the administration of justice. It protects confidential communications with an attorney made in order to obtain legal advice or assistance. It is available to corporations as well as to individuals. Although disclosure ordinarily waives the privilege, the circuits are divided over whether the privilege may survive disclosure for limited selective purposes (selective waiver) to government investigators or regulators. At least since the Supreme Court announced its decision in Hickman v. Taylor , the federal courts have recognized that an attorney's work product gathered or created in anticipation of litigation enjoys qualified disclosure protection. The protection can be waived, but here too the circuits are divided on the question of whether it can survive a selective waiver in the form of disclosure to a government investigator or regulator. Five Deputy Attorneys General have issued memoranda to guide the exercise of prosecutorial discretion on the question of whether criminal charges should be brought against a corporation. Each includes provisions concerning the waiver of attorney-client and attorney work product protection, and all but one address employee legal costs and joint defense agreements as well. Signed on June 19, 1999, the Holder Memorandum was designed to provide prosecutors with factors to be considered when determining whether to charge a corporation with criminal activity. It emphasized that "[t]hese factors are, however, not outcome-determinative and are only guidelines." The factors consisted of: "1. The nature and seriousness of the offense ... 2. The pervasiveness of wrongdoing within the corporation ... 3. The corporation's history of similar conduct ... 4. The corporation's timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents ... 5. The existence and adequacy of the corporation's compliance program ... 6. The corporation's remedial actions ... 7. Collateral consequences ... and 8. The adequacy of non-criminal remedies ... ." In the section devoted to cooperation and voluntary disclosure, the Memorandum stated that "In gauging the extent of the corporation's cooperation, the prosecutor may consider the corporation's willingness ... to waive the attorney-client and work product privileges." The Memorandum also addressed the adverse weight that might be given a corporation's participation in a joint defense agreement with its officers or employees and its agreement to pay their legal fees. Although several academics and defense counsel expressed concern over the possible impact of the waiver feature of the Holder Memorandum, a survey of United States Attorneys conducted in late 2002 indicated that waivers were rarely requested. On January 30, 2003, the Holder Memorandum was superseded by the Thompson Memorandum. The Thompson Memorandum was essentially a reissuance of its predecessor. Little of the text was new. That portion of both Memoranda devoted to the waiver of attorney-client and work product protections, and cooperation and voluntary disclosure in general—Part VI—was the same except for a new paragraph added in the Thompson Memorandum. The addition said nothing about waivers per se, but made clear the risks that a corporation ran if it failed to be forthcoming early on or continued to support those officers or employees that prosecutors thought culpable. Yet this is one of the few amendments to the Holder Memorandum. To some, the whole scale adoption of language from the earlier Memorandum suggested a Justice Department perception that the problem with the Holder Memorandum was not its content, but rather its application. The policies articulated in the Holder and Thompson Memoranda were at least roughly similar to enforcement policies announced by a substantial number of federal regulatory agencies that call for voluntary corporate disclosure of statutory or regulatory violations. Some specifically mention the waiver of the attorney-client or work product protection, while others seem to speak with sufficient generality to justify consideration on enforcement and sanction questions. In May of 2004, the United States Sentencing Commission amended the Commentary in the Sentencing Guidelines that some read as an endorsement of this new more aggressive approach. The change explicitly described the circumstances under which a corporation's failure to waive could have sentencing consequences. Although apparently crafted at least in part to ease corporate anxiety, it seemed to have the opposite effect. The following August, the American Bar Association voted to recommend that the Commentary be changed to state that waiver should not be considered a sentencing factor. The Commission instead removed from the Commentary the language that it had added in 2004. Then on October 21, 2005 came the McCallum Memorandum. It made no revision in the Thompson Memorandum, but briefly addressed the manner in which the Thompson Memorandum's policy on waiver was to be implemented. The various United States Attorneys were instructed to prepare written guidelines for supervisory approval of requests for corporate waivers. The effort did little to assuage critics. On May 15, 2006, the Federal Advisory Committee on Evidence reported a proposed evidentiary rule amendment crafted to resolve the splits in the circuits over the selective waiver of corporate attorney-client and work product protection. The selective waiver feature of the rule, however, proved to be highly controversial and was dropped from the proposed rule that the Judicial Conference recommended to the Congress. Congress ultimately accepted the recommendation and enacted a rule with only inadvertent waiver and protective order components. In the summer of 2006, a court in the Southern District of New York held in United States v. Stein that implementation of the Thompson Memorandum's policy with regard to a corporation's reimbursement of the attorneys' fees of its employees and pressure on them to make incriminating statements violated the Fifth Amendment substantive due process rights of the employees, their Fifth Amendment privilege against self-incrimination, as well as their Sixth Amendment right to the assistance of counsel. The case began with the criminal tax investigation of an accounting firm and its employees. After prosecutors issued subject letters to more than twenty of the firm's officers and employees, they met with the firm's attorneys. At the meeting, the firm indicated that it intended to "clean house;" that it had already taken some personnel actions; that it meant to cooperate fully with the government's investigation; and that its objective was to avoid indictment of the firm and the fate of Arthur Andersen by acting so as to protect the firm and not the employees and officers targeted. The firm indicated that it had been its practice to cover the litigation costs of its employees, but that it would not pay the fees of employees who refused to cooperate with the government's investigation or who invoked their Fifth Amendment privilege. Prosecutors referred to the Thompson Memorandum and the Sentencing Guidelines and indicated they would take into account any instances where the firm was legally obligated to pay attorneys' fees. They also indicated, however, that misconduct should not be rewarded, and that prosecutors would examine "under a microscope" the payment of any fees that were not legally required. In consultation with prosecutors, the firm sent the subjects of the investigation form letters informing them that attorneys' fees would be capped at $400,000 and that fees would be cut off for any employee charged with criminal wrongdoing. Thereafter, prosecutors advised the firm's attorney when one of the firm's employees proved uncooperative; the firm then advised the employees that they would be fired and their attorneys' fees cut off if they did not cooperate; and did so in cases of those employees who remained recalcitrant. The firm then entered into a deferred prosecution agreement with prosecutors for the eventual dismissal of charges under which it agreed to waive indictment; pay a $456 million fine; accept restrictions on its practice; waive all privileges including, but not limited to, attorney-client and attorney work product; and provide the government with extensive cooperation in its investigation and prosecution of the firm's former officers and employees. The by-then indicted former officers and employees moved to have their indictments dismissed on constitutional grounds. The court agreed that constitutional violations had occurred but declined at least temporarily to dismiss the indictments under the understanding that the government had agreed that it would accept, without prejudice to the firm in its deferred prosecution agreement or otherwise, any fee arrangement that the firm should come to with its former officers and employees. It subsequently dismissed the indictment against 13 of the defendants, but declined to do so with respect to three others who had left the firm sometime previously and therefore had not been the victims of the misconduct the court perceived. On appeal, the government contended that its conduct could not constitute a violation of the Sixth Amendment because (1) it had occurred before indictment and thus before the right to counsel had attached and (2) the employees had no Sixth Amendment right to pay for their counsel of choice with someone else's money. Attachment was no obstacle, replied the court, when the motive or at least the clearly foreseeable result was to impede the employee's criminal defense after he was indicted. As for the Supreme Court's someone else's money (forfeitable assets) comment, it referred to defendants using the government's money, money to which they had neither right nor expectation. Here, the court said the defendants had every reason to expect that the firm would have assumed their legal expenses, but for the government's intervention. In the eyes of the district court, the government's conduct so struck at the heart of the adversarial nature of the criminal justice system that it commanded redress without reference to proof of actual prejudice to its victims, and warranted the rarely granted dismissal of the indictments. The court of appeals agreed. It held (1) that the firm's "adoption and enforcement of a policy under which it conditioned, capped and ultimately ceased advancing legal fees to defendants followed as direct consequence of the government's overwhelming influence;" (2) that the firm's "conduct therefore amounted to state action;" (3) that "the government thus unjustifiably interfered with defendants' relationship with counsel and their ability to mount a defense in violation of the Sixth Amendment;" and (4) that "the government did not cure the violation." Both the House and Senate Judiciary Committees held hearings on the policy reflected in the Thompson Memorandum during the 109 th Congress, and in its final days, Senator Specter introduced S. 30 which, among other things, would have prohibited federal authorities from requesting a waiver of organizational attorney-client or work product protection or predicating the adverse exercise of prosecutorial discretion of the absence of such a waiver or the payment of attorneys' fees for their employees or officers. The McNulty Memorandum, announced December 12, 2006, superseded the Thompson and McCallum Memoranda. While it incorporated a great deal of the substance of its predecessors, the McNulty Memorandum rewrote the principles and commentary that address corporate attorney-client and work product protection waivers as well as those covering the payment of employee litigation costs. It dropped the specific reference to the waivers from the general statement of factors to be weighed when considering whether to charge a corporation. Where earlier Memoranda stated that waiver was not an "absolute" requirement for the favorable exercise of prosecutorial discretion, suggesting to some that it was a requirement under most circumstances, the McNulty Memorandum suggested that prosecutors' waiver requests were to be considered the exception rather than the rule. Moreover, the McNulty Memorandum divided attorney-client and work product material into two categories. Category I consisted of factual information. Category II material was described in much the same manner as opinion work product material. The Memorandum cautioned prosecutors that only in rare circumstances should they seek the waiver of Category II material. A request for Category I had to be approved by the United States Attorney in consultation with the head of the Department's Criminal Division; a request for Category II information required prior approval of the Deputy Attorney General. A corporation's refusal to waive cannot be considered in the exercise of prosecutorial discretion. The Memorandum also added an explicit provision concerning attorneys' fees, declaring that, "Prosecutors generally should not take into account whether a corporation is advancing attorneys' fees to employees or agents under investigation and indictment," except in "extremely rare cases" where it can be taken into account with the approval of the Deputy Attorney General. Senator Specter introduced the Attorney-Client Privilege Protection Act of 2007 ( S. 186 ) early in the 110 th Congress. The bill as introduced is identical to S. 30 (109 th Cong.) that the Senator introduced at the end of the last Congress. It is also identical to H.R. 3013 introduced in the House by Representative Scott and virtually identical to the version of that bill passed by the House. Senator Specter later introduced S. 3217 which would have carried forward, with some modification, the features of the House bill. Following House passage of H.R. 3013 , then Deputy Attorney General Mark Filip issued a superseding memorandum accompanied by a revised chapter of the U.S. Attorneys Manual. The 110 th Congress adjourned without further action of the proposals. The Filip Memorandum dates from August 28, 2008. Following the pattern of earlier Memoranda, much of what appears in the U.S. Attorneys Manual is a verbatim recitation of the McNulty Memorandum. Some things, however, are new. The Filip Memorandum revisions "concern what measures a business entity must take to qualify for the long-recognized 'cooperation' mitigating factor, as well as how payment of attorneys' fees by a business organization for its officers or employees, or participation in a joint defense or similar agreement, will be considered in the prosecutive analysis." Thus, the Memorandum declares that "a corporation remains free to convey non-factual or 'core' attorney-client communications or work product—if and only if the corporation voluntarily chooses to do so—prosecutor should not ask for waivers and are directed not to do so." Nevertheless, "cooperation is a potential mitigating factor, by which a corporation . . . can gain credit in a case that otherwise is appropriate for indictment and prosecution." The entity's receipt of credit for its cooperation turns on its timely disclosure of information relating to the government's investigation, regardless of whether the entity acquired or maintains information under circumstances that entitle it to claim attorney-client or attorney work product protection. Nor does a corporation's payment of its employees' attorneys' fees or its entry into a joint defense agreement preclude credit for cooperation. On the other hand, "[i]f the payment of attorney fees were used in a manner that would otherwise constitute criminal obstruction of justice—for example, if fees were advanced on the condition that an employee adhere to a version of the facts that the corporation and the employee knew to be false—these Principles would not (and could not) render inapplicable such criminal prohibitions." This represents a substantial modification of the previous standard in the McNulty Memorandum which explicitly permitted prosecutors to weigh negatively any number of specifically identified impediments—some well short of a criminal obstruction of justice. Early in the 111 th Congress, Senator Specter introduced the Attorney-Client Privilege Protection Act of 2009 ( S. 445 ), for himself and Senators Landrieu, Carper, Kerry, McCaskill, and Cochran. It is essentially the same as the later Specter proposal in the 110 th Congress ( S. 3217 ). Towards the end of the first session, Representative Scott (Va.) introduced a similarly styled Attorney-Client Privilege Protection Act of 2009 ( H.R. 4326 ), for himself and Representatives Conyers, Smith (Tex.), Nadler, Delahunt, Coble, and Lungren. It is a replica of the bill which the House passed in the 110 th Congress ( H.R. 3013 ). The two 111 th Congress proposals are much the same, although with occasional differences. They espouse a common purpose: "to place on each agency clear and practical limits designed to serve the attorney-client privilege and work product protections available to an organization and preserve the constitutional rights and other legal protections available to employees of such an organization." They would define "attorney-client privilege" as currently understood under the federal law, that is as "the attorney-client privilege as governed by the principles of the common law, as they may be interpreted by the courts of the United States in the light of reason and experience, and the principles of article V of the Federal Rules of Evidence." They would adopt an equally contemporaneous definition of "attorney work product," i.e., "materials prepared by, or at the direction of an attorney in anticipation of litigation, particularly any such materials that contain a mental impression, conclusion, opinion, or legal theory of that attorney." The Specter bill ( S. 445 ) alone would insert a definition of "organization." The definition would foretell the scope of the bill, since the bill's commands speak to how federal prosecutors and investigators may deal with organizations. The bill's definition has two distinct components—what is an organization and what is not for purposes of the bill. It describes organizations as persons other than human beings and expressly includes state, local, and municipal governmental entities. The absence of similar definition in the Scott bill ( H.R. 4326 ) leaves open the question whether federal, state, local, and municipal entities fall within the scope of its provisions. The omission of federal and tribal governmental entities from the Specter bill's definition suggests that they would not be considered organizations for purposes of the bill. The Specter bill ( S. 445 ) would exclude from the definition of organization, drug cartels (continuing criminal enterprises (21 U.S.C. 848(c))); designated foreign terrorist organizations (18 U.S.C. 2339B(g)(6)); and entities charged under the RICO provisions. The RICO exemption may raise questions. Common business organizations do not ordinarily include drug cartels or designated foreign terrorists organizations, but they are infrequently associated with RICO prosecutions. Federal racketeer influenced and corrupt organization (RICO) provisions proscribe, among other things, the patterned commission of two or more other federal or state offenses in order to conduct the affairs of an enterprise whose activities affect interstate or foreign commerce, 18 U.S.C. 1962(c). Depending upon the circumstances, an organization might either be an offender or the victimized intestate enterprise, 18 U.S.C. 1961(3), (4). Since the bill uses the phrase "entity charged," it might be thought to apply only to offending organizations and only after they are indicted. Such a reading, however, may be more narrow than its sponsors intend. In somewhat different terms, the two bills would bar the Justice Department and other federal investigative, regulatory or prosecutorial agencies from demanding that an organization: (1) waive its attorney-client privilege or attorney work product protection; (2) decline to pay the legal expenses of an employee; (3) avoid joint defense, information sharing or common interest agreements with its employees; (4) refrain from disclosing information concerning an investigation or enforcement action to employees; or (5) terminate or discipline an employee for the employee's exercise of a legal right or prerogative with respect to a governmental inquiry. They would also preclude using such organizational activity as the basis in whole or in part for a civil or criminal charge against the organization. Only the Specter bill ( S. 445 ) would also prohibit the government from rewarding an organization for waiving its attorney-client privilege or work product protection. Both bills would allow the government to request information it believes is beyond the scope of the attorney-client privilege or the attorney work product protection. Also, they would not prevent an organization, on its own initiative, from sharing the results of an internal investigation with authorities, although the Specter bill ( S. 445 ) would preclude the government from considering such a waiver positively. Each of the bills declares that its proposals are not intended to apply to situations when the government is statutorily authorized to demand a waiver. It is not entirely clear what subsection 3014(e) is intended to preserve when it refers to "any other federal statute that may authorize[s], in the course of an examination or inspection, an agent or attorney of the United States to require or compel the production of attorney-client privilege material." Many federal statutes authorize the examination or inspection of corporate records and other materials. Few, if any, federal statutes state in so many words that federal inspectors may examine otherwise privileged attorney-client or work product material. In fact, if privilege is mentioned at all, the statute is likely to preserve the privileged material against inspection. | The Justice Department enjoys prosecutorial discretion to bring criminal charges against a corporation, its culpable officers or employees, or both. For a corporation, indictment alone can be catastrophic, if not fatal, in some instances. The Thompson Memorandum, since replaced with guidelines in the U. S. Attorneys Manual, described the policy factors to be considered in the exercise of prosecutorial discretion. Two of the factors explicitly mentioned were whether a corporation had waived its privileges and whether it had cut off the payment of attorneys' fees for its officers and employees. Justice Department policies and practices under the Thompson Memorandum led to constitutional challenges based on the Fifth Amendment's self-incrimination clause, the Amendment's due process clause, and the Sixth Amendment's right to counsel clause. Due process and right to counsel concerns were enough for a federal district court in New York to throw out the indictments of thirteen former partners and employees of an accounting firm, charged with creating and marketing fraudulent tax shelters, United States v. Stein. The Second Circuit affirmed on right to counsel grounds and consequently found it necessary to address the merits of the due process argument. The House addressed the conflict in attorney-client protective legislation which it passed in the 110th Congress. Soon thereafter, the Department of Justice announced a revised policy concerning the circumstances under which a corporation's failure to waive its attorney-client privilege might influence the decision to prosecute it. The 110th Congress, which had previously amended the Federal Rules of Evidence relating to the inadvertent waiver of the attorney-client privilege, adjourned without taking further action on the House-passed legislation. Similar proposals, however, have been introduced in 111th Congress, H.R. 4326 (Representative Scott); S. 445 (Senator Specter). This report provides a brief discussion of the legislation, the legal background, and a chronology of related issues and events; it is an abbreviated version of CRS Report RL33842, The McNulty Memorandum: Attorneys' Fees and Waiver of Corporate Attorney-Client and Work Product Protection, by [author name scrubbed], without the footnotes or citations to authority found in the longer report. |
On November 25, 2009, to help "launch meaningful negotiations," Israeli Prime Minister Benjamin Netanyahu proposed "a policy of restraint regarding a suspension of new permits and new construction in Judea and Samaria (West Bank) for a period of ten months." The "freeze" or "moratorium" does not apply to 3,000 housing units under construction, to schools, synagogues, and public buildings, to infrastructure needed for national security, or to Jerusalem. He later said that Israel would "revert to the policies of previous governments in relation to construction" at the end of the ten months. Secretary Clinton said that the proposal "helps move forward" the peace process and that through "good faith negotiations the parties can mutually agree on an outcome which ends the conflict and reconciles the Palestinian goal of a independent and viable state based on the 1967 lines, with agreed swaps, and the Israeli goal of a Jewish state with secure and recognized borders that reflect subsequent developments and meet Israeli security requirements." Special Middle East Envoy George Mitchell said that the Israeli step "falls short of a full settlement freeze, but it is more than any Israeli government has done before…" He noted that "the number of buildings under construction will decline since, as each new building is completed, there will be no new building started. So implementation of the moratorium could mean much less settlement construction than would occur if there is no moratorium." He also expressed a desire to get a "resolution of the issue of borders, so that there will no longer be any question about settlement construction, so that Israelis will be able to build what they want in Israel, and the Palestinians will be able to build what they want in Palestine." The Palestinians criticized Israel for not freezing all settlement activity or including Jerusalem. President Abbas described it as "insufficient" and "unacceptable." On December 28, Israel underscored that a "unified" Jerusalem is its capital and excluded from the freeze when it announced plans to build 692 news housing units in East Jerusalem. The White House Press Secretary responded, saying The United States opposes new Israeli construction in East Jerusalem. The status of Jerusalem is a permanent status issue that must be resolved by the parties through negotiations…. Neither party should engage in efforts or take actions that could unilaterally preempt, or appear to preempt, negotiations. Rather, both parties should return to negotiations without preconditions as soon as possible…. We believe that through good faith negotiations the parties can mutually agree on an outcome that realizes the aspirations of both parties for Jerusalem, and safeguards its status for people around the world. In December, President Abbas pledged that, as long as he is in office, he "will not allow anybody to start a new intifadah ." At the same time, he called on the international community and on the United States to pressure the Israeli government. The Obama Administration began 2010 with a renewed effort to restart negotiations. Media reports suggested that it was preparing "letters of guarantee" that would assure the Palestinians that the 1967 borders would form the basis of the negotiations and the Israelis that post-1967 demographic changes (some settlements) would be taken in to account. Secretary Clinton said that the Administration was working "to take the steps needed to relaunch the negotiations as soon as possible and without preconditions." She again stated that a solution would reconcile "the Palestinian goal of an independent and viable state based on the 1967 lines, with agreed swaps, and the Israeli goal of a Jewish state with secure and recognized borders." Later, on January 8, she may have attempted to blur the 2009 U.S. focus on Israeli settlements, saying "resolving borders resolves settlements, resolving Jerusalem resolves settlements…." On January 6, Mitchell was interviewed on the Public Broadcasting System's Charlie Rose Show, and expressed hope for progress on three tracks: political negotiations, security, and Palestinian economic growth and institution building. (These tracks are identical to those suggested by Netanyahu in his March 31, 2009 address to the Knesset. ) Mitchell claimed that Netanyahu's 10-month moratorium is "more significant than any action taken by any previous government of Israel for the 40 years that the settlement enterprise has existed." He stated that Israeli security and the establishment of a Palestinian state are "mutually reinforcing" in that "Palestinians are not going to get a state until the people of Israel have a reasonable sense of sustainable security. The Israelis … are not going to get that reasonable sense of sustainable security until there is a Palestinian state." Mitchell also said that negotiations should last no more than two years and "it can be done within that period of time" or a shorter period of time. Mitchell also said that the United States is seeking a "parallel process" in which "as the Israelis and Palestinians talk in negotiations, Israel, the Palestinians, and all the surrounding countries would meet to deal with regional issues, energy, water, trade, communications, transport…." He seemed to discourage an Israeli-Hamas prisoner exchange because it "will not build confidence in the Palestinian Authority because it will, in fact, be seen as a validation of Hamas's tactics, which is violent resistance." When Rose asked if the United States had any "sticks," Mitchell responded, "the United States can withhold support on loan guarantees to Israel." Some media outlets interpreted this as a threat; so the State Department later clarified that he was not signaling a course of action. Mitchell himself had added, "we think the way to approach this is to try to persuade the parties what is in their self interests." On January 8, a Palestinian newspaper summarized Palestinian ideas about peace negotiations, reportedly formulated by Saeb Erekat, head of the PLO Negotiations Department and Umar Suleiman, Egypt's intelligence chief. First, the goal should be a Palestinian state with Jerusalem as its capital based on the 1967 borders. This could include exchanges of land of similar value. Second, Israeli settlement activity, including natural growth and in Jerusalem, should stop completely for six months. Third, negotiations should resume from the point reached in December 2008 with former Israeli Prime Minister Olmert and include all final status issues. On January 12, President Abbas said for the first time that he might restart negotiations if Israel froze settlement expansions for "a fixed period." He also said, "We don't want (U.S.) guarantees. We want (the United States) to tell Israel to fully freeze settlements for a period of time and then we will resume negotiations." Prior to Mitchell's arrival in Israel, on January 20, Netanyahu asserted that in order "to effectively stop the infiltration of rockets and other weaponry … will require an Israeli presence on the eastern side of the future state," i.e., in the Jordan Valley. An Abbas spokesman replied, "We will not accept anything less than a completely sovereign Palestinian state on all the territories with its own borders, resources and airspace, and we will not accept any Israeli presence, either military or civilian, on our land." Mitchell made his ninth visit to the region from January 21-25. The State Department issued a statement on January 27 that he had continued a "two-pronged approach … (1) To encourage the parties to enter negotiations to reach an agreement on all permanent status issues; and (2) to help the Palestinians build the economy and institutions that will be necessary when a Palestinian state is established. The two objectives are mutually reinforcing. Each is essential. Neither can be attained without the other." Earlier, Netanyahu had said that Mitchell presented "interesting ideas" on how to restart negotiations. Reportedly, the ideas included confidence-building measures such as the withdrawal of Israel forces from more territory in the West Bank, release of prisoners, preliminary talks on a low level, and/or proximity talks, with Mitchell shuttling between Jerusalem and Ramallah to convey messages on core issues of borders, Jerusalem, security, and refugees. A Palestinian official said that Abbas did not favor resuming negotiations at any level before a complete cessation of settlement activity, including in east Jerusalem. After meeting the envoy, Netanyahu visited settlements. On January 24, at Etzyon, he proclaimed, "This place will be an inseparable part of the state of Israel for eternity," and at Ma'ale Adumim, he affirmed, "We are here, and we will stay here and build here as part of sovereign Jerusalem." On January 29, in Ari'el, he declared, "Here is where our forefathers dwelled and here is where we will stay and build…. Ari'el … will be an integral, inseparable part of the state of Israel in any future arrangement." While his statements appeared provocative, it has long been assumed that Israel would retain those large settlements in a final agreement in exchange for other land being given to the new Palestinian state. In a January interview with Time magazine, President Obama assessed the first year of his Administration's involvement in the Israel-Palestinian peace process. He said, "This is as intractable problem as you get. Both sides … have found that the political environment, the nature of their coalitions or the divisions within their societies, were such that it was very hard for them to start engaging in a meaningful conversation. And I think that we overestimated our ability to persuade them to do so when their politics ran contrary to that…. (I)f we had anticipated some of these problems … earlier, we might not have raised expectations as high." On January 28, President Abbas told Russian television that Jerusalem should not be divided and that there should be free passage for people of various faiths. He added that it must be made clear what belongs to the Palestinians and what belongs to Israel. Abbas also said that he could only recognize Israel as a Jewish state in the framework of a conclusive peace agreement that leads to the establishment of a Palestinian state. He could not resume negotiations as long as construction in West Bank settlements and East Jerusalem continues. "If Israel says… that it will not accept the 1967 borders and that it is not prepared to discuss Jerusalem and the refugee situation, what is there to talk about?" Abbas reported that the United States had asked Israel to make gestures to the Palestinians, including transferring additional territories in the West Bank to Palestinian control, halting Israeli military incursions, releasing prisoners, dismantling checkpoints and allowing building materials to enter the Gaza Strip. Israel had not yet responded. On November 15, Prime Minister Netanyahu said that Israel would be willing to have France serve as a mediator with Israel, even though he would prefer direct talks. He said, "The Turkish prime minister (Recep Tayyip Erdogan) has not strengthened his image as an objective, fair mediator." Erdogan repeatedly criticized Israel for launching its offensive against Hamas in Gaza in December 2008, for its conduct of that war, and for its treatment of Gazans since the conflict ended. Meanwhile, Syrian President Bashar al Asad called on France to support Turkey as mediator. He rejected direct talks and urged Netanyahu to join him in sending teams of experts to Turkey to resume the process. Asad also called on the United States to present an "action plan" to renew negotiations. On November 4, Israeli naval commandos seized a cargo vessel in waters near Cyprus which Israeli authorities claimed was carrying anti-tank missiles, rockets, and other weapons from Iran to Hezbollah in violation of the U.N. embargo of Iranian arms exports and of the U.N. prohibition on arms supplies to non-state actors in Lebanon. The ship was taken to Ashdod for further inspection. Syria maintained that it was carrying commercial goods from Syria to Iran and accused Israel of "piracy." Hezbollah denied "any link to the weapons…." On November 25, Lebanon's new cabinet agreed to a statement on the "right of Lebanon, its government, its people, its arm, and its resistance" to liberate all Lebanese territory, thereby recognizing Hezbollah's right to engage in armed conflict with Israel. Before the first Gulf war in 1991, Arab-Israeli conflict marked every decade since the founding of Israel. With each clash, issues separating the parties multiplied and became more intractable. The creation of the State of Israel in 1948 provided a home for the Jewish people, but the ensuing conflict made refugees of hundreds of thousands of Arab residents of formerly British Palestine, with consequences troubling for Arabs and Israelis alike. It also led to a mass movement of Jewish citizens of Arab states to Israel. The 1967 war ended with Israel occupying territory of Egypt, Jordan, and Syria. Egypt and Syria fought the 1973 war, in part, to regain their lands. In 1982, Israel invaded southern Lebanon to prevent terrorist incursions; it withdrew in 1985, but retained a 9-mile "security zone" that Lebanon sought to reclaim. Middle East peace has been a U.S. and international diplomatic goal throughout the years of conflict. The 1978 Camp David talks, the only previous direct Arab-Israeli negotiations, brought about the 1979 Israel-Egypt Peace Treaty. At the beginning of the Gulf war in 1991, President George H.W. Bush declared solving the Arab-Israeli conflict among his postwar goals. On March 6, 1991, he outlined a framework for peace based on U.N. Security Council Resolutions 242 and 338 and the principle of "land for peace." Secretary of State James Baker organized a peace conference in Madrid in October 1991 that launched almost a decade of the "Oslo process" to achieve peace. It continued under President William Clinton, who asserted that only the region's leaders can make peace and vowed to be their partner. With the Hebron Protocol of 1997, however, the United States seemed to become an indispensable and expected party to Israeli-Palestinian talks. Clinton mediated the 1998 Wye River Memorandum and personally led negotiations at Camp David in 2000. The George W. Bush Administration initially sought a less prominent role, and Secretary of State Colin Powell did not appoint a special Middle East envoy. After the September 11, 2001, terrorist attacks, the Administration focused on the peace process mainly as part of the war on terrorism. Secretary of State Condoleezza Rice also did not name a special envoy, asserting, "Not every effort has to be an American effort. It is extremely important that the parties themselves are taking responsibility." She encouraged Israelis and Palestinians to act, but personally mediated a November 2005 accord to reopen the border crossing between Gaza and Egypt after Israel's withdrawal from Gaza. In 2007, she engaged again partly in order to elicit the support of moderate Sunni Arab governments to thwart the rise of Iranian influence. Those governments see resolution of the Palestinian issue as a key to regional stability and to denying Iran opportunities for destabilizing actions. The Joint Understanding presented at the November 2007 Annapolis Conference created a new role for the United States as "judge" of the parties' fulfillment of their commitments under the 2003 international Road Map to a two-state solution. In January 2008, President Bush appointed (Air Force) Lt. Gen. William Fraser III, assistant to the Chairman of the Joint Chiefs of Staff, to monitor compliance with commitments. Gen. Fraser, who has been replaced by Lt. Gen. Paul J. Selva, was not to mediate or enforce compliance, but bring to their actions to the attention of the parties and encourage them to move forward on their obligations. Fraser was to visit the region "from time to time," but the trilateral mechanism barely functioned. At her January 13, 2009, confirmation hearing, Secretary of State-designate Hillary Rodham Clinton said that the Gaza conflict of December 2008 to January 2009 "must only increase our determination to seek a just and lasting peace agreement that brings real security to Israel—normal and positive relations with its neighbors, independence, economic progress, and security to the Palestinians in their own state. We will exert every effort to support the work of Israelis and Palestinians who seek that result...." She added that the United States would not negotiate with Hamas until it recognizes Israel, renounces violence, and abides by previous agreements. "That is just an absolute for me. That is the United States' position and the president-elect's position." On his first full day in office, January 21, President Obama telephoned PA President Mahmud Abbas, Israeli Prime Minister Ehud Olmert, Egyptian President Hosni Mubarak, and Jordanian King Abdullah II "to communicate his commitment to active engagement in pursuit of Arab-Israeli peace from the beginning of his term." The next day, the President and Secretary Clinton jointly announced the appointment of former Senator George Mitchell as their Special Envoy for Middle East Peace. The President emphasized that Mitchell was "fully empowered" to speak for the White House and State Department, thereby boosting his emissary's clout. On January 27, President Obama gave his first television interview to Al Arabiyah television. He said, "I think it is possible for us to see a Palestinian state ... that is contiguous, that allows freedom of movement for its people, that allows for trade with other countries, that allows the creation of businesses and commerce so that people have a better life." During his first trip to the region in January, Senator Mitchell visited Israel, the West Bank, Jordan, Egypt, and Saudi Arabia, but not the Gaza Strip or Syria. Among his goals was listening to the region's leaders' views on an Israeli-Palestinian settlement. In a conference call with Jewish leaders on February 19, Mitchell is said to have expressed support for Egyptian efforts to forge a Palestinian unity government with Fatah and Hamas because divisions among the Palestinians have been an obstacle to bringing peace to the region. He said that Hamas still would need to fulfill the demands that it halt violence, recognize Israel, and accept previous Israeli-Palestinian agreements, and that the chances of Hamas doing that were not good. In Israel on March 3, Secretary Clinton expressed understanding of Israel's need not "to stand idly by while its territory and people are subjected to rocket attacks." The next day, in Ramallah, she described Israel's plans to demolish 88 Palestinian homes in East Jerusalem as "unhelpful and not in keeping with the obligations entered into under the Road Map," and with far-reaching implications. Throughout her visit, perhaps due to a widespread belief that the Israeli government elected in February would not agree, Secretary Clinton emphasized the Administration's commitment to the two-state solution, saying that it was in Israel's best interests. On April 22, after meeting King Abdullah II of Jordan, President Obama expressed hope that "over the next several months that you start seeing gestures of good faith on all sides.... And we will be doing everything we can to encourage" those measures. The President described a U.S. role as helping to "create the conditions and the atmosphere and provide the help and assistance that facilitate an agreement." On April 23, Secretary Clinton told a House committee that "for Israel to get the kind of strong support it is looking for vis-à-vis Iran, it can't stay on the sidelines with respect to the Palestinians and the peace efforts. They go hand in hand." She added that Arab governments "believe that Israel's willingness to reenter into discussions with the Palestinian Authority strengthens them in being able to deal with Iran." Israel generally rejects linkage between the peace process and Iran. In a speech to the American Israel Public Affairs Committee (AIPAC) on May 5, Vice President Joe Biden called on Israel to work toward a two-state solution, not build more settlements, dismantle outposts, and allow the Palestinians freedom of movement. Chairman of the Senate Foreign Relations Committee John Kerry told the same gathering that settlements "don't just fragment a future Palestinian state. They also fragment what the Israeli Defense Forces must defend, they undercut Abbas, and strengthen Hamas by convincing the Palestinians that there is no reward for moderation." He warned that the "window of opportunity is fast closing." Disagreement between Israeli and U.S. officials developed over alleged informal agreements regarding a definition of "settlement freeze" that Israelis claim was reached in May 2003 between then Prime Minister Ariel Sharon and then U.S. National Security Council officials Elliott Abrams and Stephen Hadley. Sharon's (and now Netanyahu's) advisor Dov Weissglas says that they defined a settlement freeze as "no new communities were to be built; no Palestinian lands were to be appropriated for settlement purposes; building will not take place beyond existing community outlines; and no 'settlement encouraging' budgets (incentives) were to be allocated." Weissglas insists an oral agreement was recorded. Yet, he also admitted that settlements were to be allowed within a "construction line" to be demarcated after a joint U.S.-Israeli survey, but the survey was never conducted nor the line demarcated. Abrams wrote that the guidelines were discussed, "but never formally adopted." Secretary Clinton said, "We have the negotiating record, that is the official record, that was turned over to the Obama Administration by the outgoing Bush Administration. There is no memorialization of any informal and oral agreements." If such understandings were reached, she noted, "they did not become part of the official position of the United States government. And there are contrary documents that suggest that they were not to be viewed as in any way contradicting the obligations that Israel undertook pursuant to the Road Map. (See " Significant Agreements and Documents .") And those obligations are clear." Abrams responded that Israel had totally withdrawn from the Gaza Strip and some West Bank settlements in exchange for a U.S. agreement not to demand a total settlement freeze in the West Bank and acceptance of the principles noted above and in the a letter from Weissglas to Secretary of State Rice in April 2004. In his June 4, speech in Cairo, President Obama said that "just as Israel's right to exist cannot be denied, neither can Palestine's." On settlements, he stated, "The United States does not accept the legitimacy of continued Israeli settlements. This construction violates previous agreements and undermines efforts to achieve peace. It is time for these settlements to stop." The only resolution (to the Israeli-Palestinian conflict) is for the aspirations of both sides to be met through two states, where Israelis and Palestinians each live in peace and security." He declared, "(T)he situation for the Palestinian people is intolerable. America will not turn our backs on the legitimate Palestinian aspiration for dignity, opportunity, and a state of their own." In Israel on June 9, Senator Mitchell noted the controversy over settlements and said, "These are not disagreements among adversaries. The United States and Israel will remain close allies and friends." He added, "focusing on a single issue ill serves the wider diplomatic process" and expressed his desire "to create conditions for the prompt resumption and early conclusion of negotiations." The peace conference opened on October 30, 1991. Parties were represented by 14-member delegations. A combined Jordanian/Palestinian delegation had 14 representatives from each. An unofficial Palestinian advisory team coordinated with the Palestine Liberation Organization (PLO). The United States, the Soviet Union, Syria, Palestinians/Jordan, the European Community, Egypt, Israel, and Lebanon sat at the table. The U.N., the Gulf Cooperation Council, and the Arab Maghreb Union were observers. (Incidents of violence are noted selectively.) In November 1991, Israel and the Jordanian/Palestinian delegation agreed to separate Israeli-Jordanian and Israeli-Palestinian negotiating tracks, the latter to address a five-year period of interim Palestinian self-rule in the West Bank and Gaza Strip. In the third year, permanent status negotiations were to begin. On August 9, 1993, Palestinian negotiators were appointed to a PLO coordination committee, ending efforts to make it appear as though the PLO was not part of the talks. Secret talks in Oslo, Norway produced a Declaration of Principles (DOP), signed by Israel and the PLO on September 13, 1993. Through the end of the decade, incremental advances were made, including Israel's withdrawal from major cities and towns and Palestinian self-government as the Palestinian Authority (PA), but no final agreement was reached. (See "Significant Agreements," below, for summaries of and links to accords reached between 1993 and 2000. This narrative resumes with the Camp David summit.) President Clinton, Israeli Prime Minister Ehud Barak, and PA Chairman Yasir Arafat held a summit at Camp David, from July 11 to July 24, 2000, to forge a framework accord on final status issues. They did not succeed. The parties had agreed that there would be no agreement unless all issues were resolved. Jerusalem was the major obstacle. Israel proposed that it remain united under its sovereignty, leaving the Palestinians control, not sovereignty, over East Jerusalem and Muslim holy sites. Israel was willing to cede more than 90% of the West Bank, wanted to annex settlements where about 130,000 settlers lived, and offered to admit thousands of Palestinian refugees in a family unification program. An international fund would compensate other refugees as well as Israelis from Arab countries. The Palestinians reportedly were willing to accept Israeli control over the Jewish quarter of Jerusalem and the Western Wall, but sought sovereignty over East Jerusalem, particularly the Haram al Sharif/Temple Mount, a site holy to Jews and Muslims. On September 28, Israeli opposition leader Ariel Sharon, with 1,000 security forces, visited the Temple Mount/Haram al Sharif. Palestinians protested, and Israel responded forcefully. The second Palestinian intifadah or uprising against the Israeli occupation began as a mob in Ramallah killed two Israeli soldiers, provoking Israeli helicopter gunship attacks on Palestinian official sites on October 12. Barak resigned on December 10, triggering an early election for Prime Minister in Israel. Further negotiations were held at Bolling Air Force Base, in Washington, D.C., December 19-23. On December 23, President Clinton suggested that Israel cede sovereignty over the Temple Mount/Haram al Sharif and Arab neighborhoods in Jerusalem, 96% of the West Bank, all of the Gaza Strip, and annex settlement blocs in exchange for giving the Palestinians Israeli land near Gaza. Jerusalem would be the capital of two countries. The Palestinians would cede the right of refugees to return to Israel and accept a Jewish "connection" to the Temple Mount and sovereignty over the Western Wall and holy sites beneath it. The agreement would declare "an end to conflict." Barak said he would accept the plan as a basis for further talks if Arafat did so. Arafat sought clarifications on contiguity of Palestinian state territory, the division of East Jerusalem, and refugees' right of return, among other issues. The Israeli-Palestinian talks concluded at Taba, Egypt. On February 6, 2001, Ariel Sharon was elected Prime Minister of Israel and vowed to retain united Jerusalem as Israel's capital, the Jordan Valley, and other areas for security. Sharon's associates asserted that the results of negotiations at and after Camp David were "null and void." At the same time, the Bush Administration said that Clinton's proposals were no longer U.S. proposals. Sharon sought an interim agreement, not dealing with Jerusalem, Palestinian refugees, or a Palestinian state and, in an interview published on April 13, said that he could accept a disarmed Palestinian state on 42% of the West Bank. On September 24, Sharon declared, "Israel wants to give the Palestinians what no one else gave them before, the possibility of a state." On October 2, President Bush said, for the first time, "The idea of a Palestinian state has always been part of a vision, so long as the right of Israel to exist is respected." On November 10, he declared that the United States is "working toward the day when two states—Israel and Palestine—live peacefully together within secure and recognized borders...." Secretary Powell sent General Anthony Zinni, USMC (Ret.) to work on a cease-fire, but violence impeded his mission. Israel confined Arafat to his headquarters in Ramallah on December 3. On December 7, Sharon doubted that an accord could be reached with Arafat, "who is a real terrorist." On December 12, Hamas ambushed an Israeli bus in the West Bank and perpetrated two simultaneous suicide bombings in Gaza. The Israeli cabinet charged that Arafat was "directly responsible" for the attacks "and therefore is no longer relevant." On January 3, 2002, Israeli forces seized the Karine A, a Palestinian-commanded freighter, carrying 50 tons of Iranian-supplied arms. Secretary Powell stated that Arafat "cannot engage with us and others in the pursuit of peace, and at the same time permit or tolerate continued violence and terror." At the White House on February 7, Sharon said that he believed that pressure should be put on Arafat so that an alternative Palestinian leadership could emerge. On February 17, Saudi Crown Prince (later King) Abdullah unprecedentedly called for "full withdrawal from all occupied territories, in accord with U.N. resolutions, including Jerusalem, in exchange for full normalization of relations." On March 28, the Arab League endorsed the idea with some revisions; it is known as the "Arab Peace Initiative." Sharon said that he was willing to explore the idea, but it would be a "mistake" to replace U.N. resolutions affirming Israel's right to "secure and recognized borders" with total withdrawal to pre-1967 borders. On March 27, Hamas perpetrated a suicide bombing at a hotel in Netanya, killing 27 and wounding 130. Israel declared Arafat "an enemy" and Israeli forces besieged his compound in Ramallah; they soon controlled all major Palestinian-ruled West Bank cities. On June 24, President Bush called on the Palestinians to elect new leaders "not compromised by terror" and to build a practicing democracy. Then, he said, the United States will support the creation of a Palestinian state, whose borders and certain aspects of sovereignty will be provisional until a final settlement. He added, "as we make progress toward security, Israeli forces need to withdraw fully to positions they held prior to September 28, 2000 ... and (Israeli) settlement activity must stop." The President foresaw a final peace accord within three years. On September 17, the Quartet (U.S., European Union (EU), U.N., and Russian officials) outlined a preliminary "Road Map" to peace based on the President's ideas. (See "Significant Agreements," below for summary and link.) On March 7, 2003, in what was seen as a gesture to appeal to the Quartet, Arafat named Mahmud Abbas (aka Abu Mazen) Prime Minister. On April 14, Prime Minister Sharon acknowledged that Israel would have to part with some places bound up in the history of the Jewish people, but insisted that the Palestinians recognize the Jewish people's right to its homeland and abandon their claim of a right of refugees to return to Israel. On April 14, Israel submitted 14 reservations on the Road Map. On April 30, the Quartet officially presented the Road Map. Abbas accepted it. On May 23, the Bush Administration stated that Israel had explained its concerns and that the United States shares the view "that these are real concerns and will address them fully and seriously in the implementation of the Road Map," leading Sharon and his cabinet to accept "steps defined" in the Road Map "with reservations" on May 25. The next day, Sharon declared, "to keep 3.5 million people under occupation is bad for us and them," using the word occupation for the first time. On June 4, President Bush met Abbas and Sharon in Aqaba, Jordan. Abbas vowed to achieve the Palestinians' goals by peaceful means, while Sharon expressed understanding of "the importance of territorial contiguity" for a viable Palestinian state and promised to "remove unauthorized outposts" in the West Bank. Abbas said that he would use dialogue, not force, to convince Palestinian groups. On June 29, Hamas and Palestine Islamic Jihad (PIJ) suspended military operations against Israel for three months, while Fatah declared a six-month truce. Israel was not a party to the accord, but began withdrawing forces from Gaza. Abbas asked Sharon to release Palestinian prisoners, remove roadblocks, withdraw from more Palestinian cities, allow Arafat free movement, and end construction of a security barrier that Israeli is building in the West Bank. Israel demanded that the Palestinians dismantle terrorist infrastructures and act against terrorists. Neither fulfilled the other's request. On August 6, Israel released 339 prisoners. On August 19, a Hamas suicide bomber exploded in Jerusalem, killing 22, including 5 Americans, and injuring more than 130. Abbas cut contacts with Hamas and the PIJ, and unsuccessfully sought Arafat's support to act against terrorists. Israel suspended talks with the Palestinians, halted plans to transfer cities to their control, and resumed "targeted killings" of terrorist leaders, among other actions. On September 6, Abbas resigned because of what he charged was lack of support from Arafat, the United States, and Israel. On October 15, a bomb detonated under an official U.S. vehicle in Gaza, killing three U.S. security guards and wounding a fourth. Palestinian authorities arrested members of Popular Resistance Committees, who would be freed in April 2004. Sounds of discontent with government policy were heard in Israel, culminating in the signing of the Geneva Accord, a Draft Permanent Status Agreement by Israeli opposition politicians and prominent Palestinians on December 1. Perhaps partly to defuse these efforts, on December 18, Sharon declared that, "to ensure a Jewish and democratic Israel," he would unilaterally disengage from the Palestinians by redeploying Israeli forces and relocating settlements in the Gaza Strip and intensifying construction of the security fence in the West Bank. On February 13, 2004, the White House said that an Israeli pullback "could reduce friction," but that a final settlement "must be achieved through negotiations." After an upsurge in violence, Israeli missiles killed Hamas leader Shaykh Ahmed Yassin on March 22. On April 14, President Bush and Sharon met and exchanged letters. The President welcomed Israel's plan to disengage from Gaza and restated the U.S. commitment to the Road Map. He noted the need to take into account changed "realities on the ground, including already existing major Israeli population centers," (i.e., settlements), asserting "it is unrealistic to expect that the outcome of final status negotiations will be full and complete return to the armistice lines of 1949." The President stated that a solution to the refugee issue will be found by settling Palestinian refugees in a Palestinian state, "rather than in Israel," thereby rejecting a "right of return." He called for a Palestinian state that is "viable, contiguous, sovereign, and independent." Sharon presented his disengagement plan as independent of but "not inconsistent with the Road Map." He said that the "temporary" security fence that Israel is constructing in the West Bank would not prejudice final status issues including borders. A day before, he had identified five large West Bank settlements and an area in Hebron that Israel intends to retain and strengthen. Palestinians denounced the President's "legitimization" of settlements and prejudgment of final status. On April 18, Sharon's chief of staff Dov Weissglas gave National Security Adviser Condoleezza Rice a written commitment to dismantle settlement outposts that Israel itself considers illegal. However, other outposts later sprang up and, as of 2010, Israel has not fulfilled this commitment. On June 6, 2004, Israel's cabinet approved a compromise disengagement plan whereby Israel would evacuate all 21 settlements in the Gaza Strip and 4 settlements in the northern West Bank. On June 30, the Israeli High Court of Justice upheld the government's right to build a security fence in the West Bank, but struck down some land confiscation orders for violating Palestinian rights and ordered the route to be changed. In subsequent rulings, the Israeli Court attempted to balance Israel's security needs and the humanitarian claims of Palestinians and sometimes required that the barrier be rerouted. On July 9, the International Court of Justice (ICJ) issued a non-binding, advisory opinion that the wall violates international law. On October 6, Weissglas claimed that disengagement was aimed at freezing the political process in order to "prevent the establishment of a Palestinian state and a debate regarding refugees, borders, and Jerusalem." Yasir Arafat died on November 11. Mahmud Abbas became Chairman of the PLO and, on January 9, 2005, was elected President of the PA. He called for implementing the Road Map while beginning discussion of final status issues and cautioned against interim solutions to delay reaching a comprehensive solution. Secretary Rice visited Israel and the PA on February 7. She praised the Israelis' "historic" disengagement decision, discussed the need to carry out obligations concerning settlements and outposts, and warned them not to undermine Abbas. She appointed Lt. Gen. William Ward as Middle East Security Coordinator and emphasized the importance of Israeli-Palestinian security cooperation for the disengagement. (Lt. Gen. Keith W. Dayton succeeded Ward in November 2005 and still serves.) On February 20, Israel's cabinet adopted a revised route for the security fence closer to the pre-1967 border in some areas, taking about 7% to 8% of the West Bank that includes major settlement blocs. On March 20, it was reported that Israel's defense minister had approved the building of 3,500 new housing units between the Ma'ale Adumim settlement and East Jerusalem, in the E-1 corridor. Critics charge that the construction would cut East Jerusalem off from Palestinian territory, impose a barrier between the northern and southern West Bank, and prevent a future contiguous Palestinian state. Secretary Rice asserted that the plan was "at odds with American policy." On April 11, President Bush conveyed to Sharon his "concern that Israel not undertake any activity that contravenes Road Map obligations or prejudices final status negotiations." Sharon responded, "It is the position of Israel that the major Israeli population centers will remain in Israel's hands under any final status agreement," declared that Ma'ale Adumim is a major population center, and, therefore, Israel is interested in contiguity between it and Jerusalem. On May 26, President Bush met Abbas and said that "changes to the 1949 armistice lines must be mutually agreed to." Bush reaffirmed, "A viable two-state solution must ensure contiguity of the West Bank, and a state of scattered territories will not work. There must also be meaningful linkages between the West Bank and Gaza. This is the position of the United States today, it will be the position of the United States at the time of final status negotiations." He also said, "The barrier being erected by Israel ... must be a security, rather than political, barrier." Abbas stated that the boundaries of a future state should be those of before the 1967 war and that "there is no justification for the wall and it is illegitimate." Palestine Islamic Jihad (PIJ) claimed responsibility for a suicide bombing in Netanya on July 12, killing 5 and injuring more than 90. Meanwhile, Hamas increased rocket and mortar fire against settlements in Gaza and towns in southern Israel in order to show that Hamas was responsible for Israel's withdrawal from the Strip. On August 15, Defense Minister Shaul Mofaz said that Israel would keep the settlement blocs of Ma'ale Adumim, the Etzyon Bloc, Efrat, Ari'el, Qedumim-Qarney Shomrom, and Rehan Shaqed—all are within or expected to be on Israel's side of the security barrier. Mofaz added that Israel would retain the Jordan Rift Valley to guarantee Israel's eastern border. Israel evacuated all settlements in the Gaza Strip and four small settlements in the northern West Bank between August 17 and August 23. On August 29, Sharon declared that there would be no further disengagements and that the next step must be negotiations under the Road Map. He noted that while large settlement blocs would remain in Israeli hands and linked territorially to Israel, not all West Bank settlements would remain. This would be decided in the final stage of negotiations. On September 27, Hamas claimed responsibility for kidnapping and killing an Israeli settler in the West Bank. Israel responded with air and artillery strikes, closure of charities linked to terror groups, mass arrests including likely Hamas candidates in Palestinian parliamentary elections, and targeted killings of terrorists. On October 20, President Bush pressed Abbas to "confront the threat armed gangs pose to a genuinely democratic Palestine," but did not urge him to prevent Hamas from participating in parliamentary elections or to request that candidates renounce violence. Abbas said that they would be asked to renounce violence after election. On October 26, a PIJ suicide bomber killed 6 and wounded more than 20 in Hadera, on the Israeli coast. Sharon announced an offensive against terrorism. He ruled out talks with Abbas until Abbas takes "serious action" against armed groups. On November 14-15, Secretary Rice visited Israel and the PA. Sharon told her that Israel would not interfere if Hamas participated in the January 2006 Palestinian legislative elections, but warned that if an armed terrorist organization is a partner in the Palestinian administration it could lead to the end of the Road Map. Rice asserted that it would be easier to compel Hamas to disarm after the elections because the entire international community would then exert pressure. Rice vowed not to have contacts with an armed Hamas even if it were part of the Palestinian administration. On November 15, she announced that Israel and the PA had reached an Agreement on Movement and Access from the Gaza Strip. After PIJ perpetrated another suicide bombing in Netanya on December 5, Israel did not hold scheduled talks with the PA about West Bank-Gaza bus convoys foreseen in the agreement, which was not implemented. After Hamas's victories in December 2005 Palestinian municipal elections, speculation increased about possible effects on the peace process if Hamas were similarly successful in January 25, 2006, parliamentary elections. On December 28, the Quartet stated that a future Palestinian cabinet "should include no member who has not committed to the principles of Israel's right to exist in peace and security and an unequivocal end to violence and terrorism." On January 11, 2006, Secretary Rice declared, "It remains the view of the United States that there should be no place in the political process for groups or individuals who refuse to renounce terror and violence, recognize Israel's right to exist, and disarm." On January 4, 2006, Prime Minister Sharon suffered an incapacitating stroke and Deputy Prime Minister Ehud Olmert became Acting Prime Minister. On January 12, Olmert told President Bush that peace efforts could not progress if Hamas joined the Palestinian government. Hamas won the January 25 Palestinian parliamentary elections. It is a U.S.-designated Foreign Terrorist Organization (FTO), claims the entire land of Palestine, including Israel, "from the [Jordan] river to the [Mediterranean] sea" as an Islamic trust, rejects the Oslo agreements of the 1990s, insists on the right of Palestinian refugees to return to Israel, and on the right to "resistance." Olmert declared that Israel would not negotiate with a Palestinian administration that included an armed terrorist organization calling for its destruction and demanded that Hamas disarm, annul its Covenant that calls for the destruction of Israel, and accept all prior agreements. President Bush stated that the United States would not deal with a political party "that articulates the destruction of Israel as part of its platform." On January 30, the Quartet stated that "future assistance to any new (Palestinian) government would be reviewed by donors against the government's commitment to the principles of non-violence, recognition of Israel, and acceptance of previous agreements and obligations, including the Road Map." Hamas countered that it would never recognize Israel, would consider negotiating a "long-term truce" if Israel withdrew to its 1967 borders, released all prisoners, destroyed all settlements, and recognized the Palestinian refugees' right to return (to Israel), and would create a state on "any inch" of Palestinian territory without ceding another. On February 8, Olmert said that Israel was moving toward a separation from the Palestinians and permanent borders that would include a united Jerusalem, major settlement blocs, and the Jordan Valley. Palestinian Prime Minister-designate Ismail Haniyah of Hamas declared, "Let them withdraw. We will make the Authority stronger on every inch of liberated land...." Damascus-based Hamas Political Bureau Chairman Khalid Mish'al said that his group would make no concessions and would "practice resistance side by side with politics as long as the occupation continued." After his Kadima party placed first in the March 28 Israeli parliamentary elections, Olmert said that he aspired to demarcate permanent borders for a Jewish state with a permanent Jewish majority and a democracy. He called for negotiations based on mutual recognition, agreements already signed, the principles of the Road Map, a halt to violence, and the disarming of terrorist organizations. Haniyah said that Hamas would not object to Abbas negotiating with Israel. In an op-ed in (the British newspaper) The Guardian on March 31, Haniyah appealed for no more talk about recognizing Israel's "right to exist" or ending resistance until Israel commits to withdraw from the Palestinians' lands and recognizes their rights. On April 9, the Israeli security cabinet recommended severing all ties with the Hamas-led PA, which it called a "hostile entity." Because it viewed the PA as "one authority and not as having two heads," the cabinet declared that there could be personal contacts, but not negotiations, with President Abbas. On April 17, PIJ carried out a suicide bombing in Tel Aviv, killing 11 and wounding 60, including an American teenager. Abbas condemned the attack as "despicable" and counter to Palestinian interests, while Hamas officials called it an act of "self-defense." On April 26, Abbas called for an immediate international peace conference with himself as the Palestinian negotiator. He claimed that the Hamas-led government was not an obstacle to negotiations because the PLO, which he heads, had the mandate to negotiate as it had all previous agreements and he was empowered as the democratically elected leader of the Palestinians. On May 4, a new Israeli government took office, with guidelines vowing to strive to shape the permanent borders of the State of Israel as a democratic state, with a Jewish majority. Prime Minister Olmert asserted that the security fence would be adapted to conform to borders. The PLO rejected the Olmert plan as aimed at undermining the Palestinian people's right to a state on all territories occupied in 1967, with Jerusalem as its capital. On May 10, imprisoned Fatah, Hamas, and other officials drafted a "National Accord Document" calling for a Palestinian state with Jerusalem as its capital, the right of the return of refugees, and the release of all prisoners. It also called for renewing the PLO and for Hamas and PIJ to join it, supported the right to resist the occupation in lands occupied in 1967, and stated that the PLO is responsible for negotiations and that any agreement should be put to a vote by the Palestinian National Council or a referendum. Abbas accepted the document, but Hamas rejected its implied recognition of pre-1967 Israel. On May 23, at the White House, President Bush accepted that Olmert's ideas for removing Israeli settlements could lead to a two-state solution if a pathway to progress on the Road Map is not open in the period ahead. Olmert said that he had presented ideas for a "realignment" in the West Bank to "reduce friction between Israelis and Palestinians, ensure territorial contiguity for the Palestinians, and guarantee Israel's security as a Jewish state with the borders it desires." Violence increased between Gaza and Israel. The Hamas military wing and other groups repeatedly launched rockets at Sderot in southern Israel, and Israel responded with artillery fire and air strikes. On June 10, Hamas called off its 16-month truce in response to the deaths of Palestinian civilians on a Gaza beach from Israeli artillery fire on June 9. Israel denied responsibility for the deaths, but Israeli strikes caused other Palestinian civilian casualties as well. On June 13, Olmert told a group of British parliamentarians that, even with negotiations, "Israel will never agree to withdraw from the entire West Bank because the pre-1967 borders are not defensible." He asserted that Israel would withdraw from approximately 90% of the West Bank and that not all of Jerusalem's Arab neighborhoods would be part of the future Jewish capital. On June 28, Palestinian factions agreed on a revised National Accord Document. The Document stated that the PLO and the President of the PA will be responsible for negotiations to create a state on territories occupied by Israel in 1967. It changed the May draft to say that, in tandem with political action, resistance will be concentrated in (but not limited to) territories occupied in 1967. Signers vowed to work toward establishing a national unity government. PIJ rejected the Document, while Hamas officials insisted that it did not require them to recognize Israel or to accept two states. Israel's Foreign Ministry noted that the Document did not mention recognizing Israel's right to exist or ending the conflict with Israel and argued that the return of all refugees is a formula for the destruction of Israel, contradicting a two-state solution. On June 25, members of the Hamas military wing, the Popular Resistance Committees, and the previously unknown Army of Islam had attacked Israeli forces in Israel, just outside of Gaza, killing two soldiers, wounding four, and kidnapping Corporal Gilad Shalit. (He has been promoted to sergeant while in captivity.) On June 27, after unsuccessful diplomatic efforts to secure Shalit's release, Israel forces began a major operation to rescue him, to deter attacks, and to weaken, bring down, or change the conduct of the Hamas-led government. Israeli officials claimed that Hamas had crossed a "red line" with the kidnapping and attack within pre-1967 Israel. On June 29, Israel forces arrested 64 Palestinian (Hamas) cabinet ministers, parliamentarians, and other Hamas officials in the West Bank and Jerusalem. On July 1, the kidnappers demanded 1,000 prisoners in exchange for the Israeli soldier. The next day, Israeli missiles destroyed the offices of the Palestinian prime minister. Israeli troops and tanks began sweeping northern Gaza to locate tunnels and explosives near the border and continued targeting Hamas offices in the West Bank. Hamas fired an upgraded rocket at the Israeli port city of Ashkelon, prompting the Israeli cabinet to approve "prolonged" activities against Hamas. Diplomatic efforts were undertaken to resolve the crisis. On July 10, Hamas official Mish'al insisted on the mutual release ("swap") of prisoners. Olmert rejected "trading prisoners with a terrorist bloody organization such as Hamas," adding that to negotiate with Hamas would signal that moderates such as President Abbas are not needed. The White House spokesman said that Hamas had been "complicit in perpetrating violence" and that Israel had a right to defend itself. On October 31, Israeli forces began a six-day incursion into Beit Hanoun in the northern Gaza Strip to stop Palestinian rocket fire; it resulted in heavy Palestinian casualties and did not stop rockets. After it ended, on November 8, an errant Israeli artillery barrage killed 20 and wounded many more, prompting international outcries. On November 25, Olmert and Abbas agreed to a cease-fire in Gaza. Hamas said that it would respect the accord, but other groups would not. The cease-fire nonetheless produced less rocket fire and shooting along the border. On November 27, Olmert said if the Palestinians established a new government committed to carrying out the Quartet's principles, one that would implement the Road Map and bring about the release of the kidnapped soldier, then he would enter a dialogue with Abbas to establish an independent, viable Palestinian state with territorial contiguity and borders outlined by President Bush in his April 14, 2004, letter to Prime Minister Sharon. He listed other gestures Israel would make if the Palestinians recognized Israel's right to live in peace and security alongside them and renounced their demand for the right of return." Although Abbas could not meet Olmert's preconditions, the Israeli government and Bush Administration viewed him as the only partner for a peace process and took steps to bolster him in his contest with Hamas for control of the PA. On January 9, 2007, the Egyptian Foreign Minister asserted that there was a common Egyptian, Jordanian, Arab, and Palestinian position that an agreement on the "end game" was needed before resuming the Road Map. Secretary Rice said that she would discuss "the broad issues on the horizon, so that we can work on the Road Map" with Olmert and Abbas. (The Administration reportedly had promised the "moderate" Arab regimes that it would become more engaged in the peace process in exchange for their support in countering Iranian influence in the region.) On February 8, Abbas designated Haniyah to form a new unity government and called on him to " respect international resolutions and agreements" signed by the PLO, that is, prior accords reached with Israel (italics added because it is not accept ). Abbas's letter of designation resulted from the Mecca Accord reached at a meeting of Abbas and Hamas Political Bureau Chief Mish'al hosted by Saudi King Abdullah. The Accord aimed mainly to stop Palestinian factions' infighting and unite them in a new government; it did not refer to Israel or to the Quartet's demands. On February 19, Secretary Rice met Olmert and Abbas in Jerusalem to discuss the Mecca Accord. Afterwards, Olmert said Israel would continue to boycott the Palestinian government until it met the Quartet's demands, ended rocket attacks from Gaza, and released Shalit. It would not have contact with moderates in a government that does not meet the Quartet's conditions, but would with Abbas in order to limit terror and ease Palestinian daily life. Olmert rejected negotiating with Abbas because doing so, he said, would free Hamas of the requirement to recognize Israel. The 2002 Arab Peace Initiative was revived. Following his reported meeting with Saudi National Security Advisor Prince Bandar in September 2006, Olmert had noted in November 2006 that "some parts of the Saudi Peace Initiative are positive." On March 11, Olmert again stated that the Saudi Initiative, on which the Arab Peace Initiative is based, is "a plan that we are ready to address seriously" and has "positive elements." On March 15, a Palestinian unity government was formed, with a program confirming the Palestinian people's "legitimate" right of resistance, insisting that halting resistance depends on ending the occupation, the right of refugees to return, and independence. The government asserted that it respects international resolutions and agreements signed by the PLO. At the same time, it said that it would work to consolidate the calm in Gaza, extend it to the West Bank, and transform it into a comprehensive and mutual truce. On March 17, Prime Minister Haniyah vowed to work to establish an independent Palestinian state, with Jerusalem as its capital, along the 1967 borders. Hamas said that it would not recognize Israel's right to exist alongside that state. The government program authorized President Abbas to negotiate with Israel. However, the Israeli cabinet voted to shun the new Palestinian government until it met the Quartet's demands that it renounce violence, recognize Israel, and accept all prior accords, and called on the international community to maintain the aid embargo. The Bush Administration decided to deal with individuals in the PA government on a case-by-case basis, and a State Department spokesman said that the aid embargo would continue. The Arab summit in Saudi Arabia, March 28-29, reiterated adherence, without changes, to the Arab Peace Initiative and called for direct negotiations on all tracks. Abbas voted in favor, while Haniyah abstained. The Israeli Foreign Ministry stated, "Israel is sincerely interested in pursuing dialogue with those Arab states that desire peace with Israel" in order to promote a process of normalization. Prime Minister Olmert welcomed the Arabs' "revolutionary change in outlook" that represented "a new way of thinking, the willingness to recognize Israel as an established fact and to debate the conditions of the future solution" and invited all Arab heads of state to meet. In April, an Arab League working group designated Egypt and Jordan to contact Israel. Israel expressed disappointment that League members with no formal ties to Israel would be not involved, but a spokeswoman said that Israel would be "happy to hear the ideas." In May, factional fighting in Gaza between Fatah and Hamas escalated. Later, six days of intense infighting ended with Hamas in complete control of the Gaza Strip by June 14, 2007. President Abbas declared a state of emergency, dissolved the unity government, dismissed Haniyah, and named technocrat Salam Fayyad prime minister. Hamas claimed that the decrees were illegitimate and that Haniyah was still head of government. Each side accused the other of perpetrating a coup. Secretary Rice endorsed Abbas's actions. On June 18, President Bush told Abbas that he was open to restarting peace talks to stabilize the situation, and Israeli officials agreed that the elimination of Hamas from the Palestinian government opened "new possibilities for cooperation" and a diplomatic process. On June 25, Olmert, Abbas, Egypt's President Mubarak, and Jordan's King Abdullah II met in Sharm al Shaykh, Egypt. Abbas called on Olmert to start serious negotiations. Olmert only agreed to resume biweekly meetings with Abbas to create conditions leading to discussions on a Palestinian state and to take other actions to support the PA government in the West Bank. On June 27, the Quartet announced the appointment of former British Prime Minister Tony Blair as their Representative to help the Palestinians build the institutions and economy of a viable state in Gaza and the West Bank. Olmert and Abbas met in Jerusalem on July 16. On July 25, Olmert confirmed that they would work on an "agreement on principles" to include the characteristics of a state, its official institutions, its economy, and customs arrangements with Israel. Olmert favored leaving "final status" issues for the end. Abbas preferred putting all final status issues first. Olmert warned Abbas that a revived Fatah-Hamas unity government would end the diplomatic process. New Palestinian Prime Minister Fayyad presented his government's program on July 27. It stated that the government would seek to establish a state on all lands occupied by Israel in 1967, with Jerusalem as its capital and a just and agreed solution for Palestinian refugees, but did not refer to armed struggle or resistance, rather to "popular struggle against the Israeli occupation." The Bush Administration tried to show the Palestinian people that they have a choice between chaos under Hamas in Gaza and the prospect under Abbas and Fayyad for an effective, democratic Palestinian state, according to National Security Advisor Stephen Hadley. On July 16, President Bush promised to support PA reforms in order to lay the foundations for serious negotiations for a Palestinian state. He called for an "international meeting this fall of representatives from nations that support a two-state solution, reject violence, recognize Israel's right to exist, and commit to all previous agreements between the parties." Olmert and Abbas worked for several months on principles to present to a U.S.-initiated international meeting in Annapolis, MD, on November 27, 2007, but never succeeded. On September 10, they agreed to set up negotiating teams for a two-state solution and ministerial committees to work on security, communications, economic cooperation, water rights, environmental issues, and the like, and later appointed Foreign Minister Tzipi Livni and former Prime Minister Ahmad Quray (aka Abu Ala) to head the teams. Secretary Rice described Annapolis as a meeting at which regional actors and the international community would rally around a bilateral vision of a two-state solution as well as help support the development of Palestinian institutions, economic development, and so forth. Rice excluded Hamas from the process, saying "If you're going to have a two-state solution, you have to accept the right of the other party to exist ... you're going to have to renounce violence." On September 24, Olmert described Annapolis as a "short international meeting intended to give international encouragement to the process that we initiated with the Palestinians." He said that the goal was to increase support for Abbas and deepen Israel's ties with moderate Arab countries. On October 15, Olmert suggested that it is legitimate to question whether Israel should retain outlying Palestinian neighborhoods in Jerusalem, seeming to prepare the Israeli public for concessions and raising the politically sensitive question of "dividing" Jerusalem, which many Israelis and other Jews refer to as their "eternal, undivided capital." On November 12, Olmert told his cabinet that he did not view a freeze on all building on the West Bank to be part of the Road Map's requirements, but that Israel would not build new settlements or expropriate land and would raze illegal outposts. This appeared to conform to Israel's policy on so-called "natural growth," whereby settlers would be allowed to build within the borders of existing settlements. The Palestinians demand a 100% settlement freeze, including ending natural growth, and others in the international community agree with their stance. At the Annapolis Conference on November 27, President Bush read a "Joint Understanding" that dealt with the process of negotiations, not their substance. In it, Olmert and Abbas expressed determination to "immediately launch bilateral negotiations in order to conclude a peace treaty to resolve all core issues without exception, as specified in previous agreements" and to engage in continuous bilateral negotiations in an effort to conclude an agreement before the end of 2008. The parties also committed to immediately implement their respective obligations under the Road Map and to continue implementing the Road Map until they reach a peace treaty. Implementation of the future peace treaty would be subject to the implementation of the Road Map, as judged by the United States. The United States would monitor and judge fulfillment of Road Map commitments and lead a tripartite U.S.-Israeli-Palestinian mechanism to follow up on implementation. Both sides were able to appear successful at Annapolis. Israel succeeded in making implementation of any peace treaty dependent upon implementation of the Road Map and in avoiding a rigid timetable and deadline. It was pleased that President Bush called for Israel to be a homeland for the Jewish people, which the Palestinians have been reluctant to acknowledge because of its possible effect on the refugee issue and Israeli Arabs, and for ending settlement expansion, but not for a freeze. Palestinians were able to remove Road Map implementation as a precondition for final status negotiations, obtained a one-year target date, and involved United States as "judge" of the parties' fulfillment of their commitments. General James L. Jones (Ret.) was named special envoy for Middle East security to oversee the full range of security issues for the Israelis and Palestinians and security cooperation with neighboring countries. He was tasked to design and implement a new U.S. plan for security assistance to the PA, and not to monitor compliance with the Road Map nor to replace Lt. Gen. Keith Dayton, the U.S. Middle East Security Coordinator, who had been assisting the Palestinians with improving their security forces. On December 2, Israel published tenders for the construction of 307 new housing units in the settlement of Har Homa (Jabal abu Ghneim) in East Jerusalem. Israel maintained that, unlike the West Bank, Jerusalem is not part of the Road Map's requirements, and that Israel would retain Har Homa in any peace accord. The PA condemned the decision and Secretary Rice criticized it. Because of the Har Homa controversy, formal peace talks that began on December 12 were brief. On December 30, Prime Minister Olmert directed his ministers to seek authorization from him and Defense Minister Barak for "construction, new building, expansion, preparation of plans, publication of residency tenders, and confiscation of land stemming from settlement activities in the West Bank." The order did not apply to construction that had already been approved, to Jerusalem, or major settlement blocs. On February 12, 2008, the Israeli Housing Minister unveiled plans to build 1,120 new apartments in East Jerusalem. The Palestinians, who claim East Jerusalem as their future capital, condemned the action. On January 9-10, President Bush visited Israel and the PA. He said that any peace agreement "will require mutually agreed adjustments to the armistice lines of 1949 to reflect current realities and to ensure that the Palestinian state is viable and contiguous." He added that new international mechanisms, including compensation, are needed to resolve the refugee issue. He observed that Jerusalem is "one of the most difficult challenges on the road to peace," but did not offer a remedy. National Security Advisor Hadley emphasized the importance of a vision of a Palestinian state and moving toward it so that, at a "moment of clarity," the Palestinian people will choose whether they want to be part of an emerging state or under the rule of Hamas. Olmert emphasized that "as long as there will be terror from Gaza it will be very, very hard to reach any peaceful understanding between us and the Palestinians." He opposed establishing two Palestinian states—a Hamas state in the Gaza Strip and a Fatah state in the West Bank. On January 3, 2008, militants had fired a long range Katyusha rocket from Gaza into northern Ashkelon, an Israeli coastal city. On January 15, Israeli forces killed 19 Palestinians, including three civilians, in operations in Gaza. President Abbas denounced the raid as "a massacre," and, for the first time in seven months, Hamas took credit for launching rockets into Israel. On January 17, in an effort to pressure Hamas to stop the rocket fire, Defense Minister Barak ordered the closing of border crossings from Israel into Gaza, halting supplies of fuel, leading to a major cut in electricity production from the Gaza power plant which affected water and sewage systems, hospitals, and food deliveries. Electricity deliveries from Egypt and Israel continued, and Israel said it would provide for emergency humanitarian needs. There was widespread international condemnation of Israel's action and Hamas vowed not to stop firing rockets. On January 23, tens of thousands of Palestinians poured out of Gaza into Egypt after Hamas militants blew holes in the border wall. Israeli officials expressed concern that more weapons would enter the Strip and called on Egypt to reestablish control over the border. The Egyptian Foreign Minister said that his country wanted to reinstate arrangements for the Rafah crossing established under a 2005 agreement among Israel, Egypt, the PA, and the European Union (EU). Abbas offered to deploy his Presidential Guards to the border, but Hamas, which is physically in control of the Palestinian side of the border, insisted on participating in a new, purely Palestinian-Egyptian arrangement without an Israeli presence. Abbas ruled out talks with Hamas until it gives up control of Gaza and accepts early elections. Egypt refused to cede control of the crossing to Hamas and resealed the border on February 3. It remains closed. A suicide bombing killed one and injured 23 in the Israeli town of Dimona on February 4. The Hamas military wing took credit and named perpetrators from the West Bank, intending to refute Israeli allegations that the bombers had crossed from Gaza into Egypt via the open border and then infiltrated from Egypt into Israel. It was the first suicide bombing in Israel in more than a year. Israel retaliated with air strikes that killed nine Hamas militants. On February 13, Olmert suggested that, in order to avoid an impasse, it might be best to begin negotiating over borders, not Jerusalem or refugees, because there are prior understandings and President Bush's April 14, 2004-letter to former Prime Minister Ariel Sharon to offer direction. Controversially, Olmert claimed an understanding with the Palestinians to delay talks on Jerusalem until the end of negotiations. Palestinian official Saeb Erekat responded, "The border issue cannot advance without addressing Jerusalem's borders." Meanwhile, Foreign Minister Livni said that the talks were proceeding according the principle that "until everything is agreed on—nothing is agreed on." Violence continued. On March 6, an Arab resident of East Jerusalem killed eight students and wounded nine at a rabbinical seminary in West Jerusalem. Police attributed the attack to a lone gunman. Hamas "blessed the operation," while President Abbas condemned it. Several Palestinian groups, including the Hamas military wing, claimed responsibility for a sniper attack near the Israel-Gaza border that wounded an aide to the Israeli Public Security Minister on April 4. On April 9, Palestinian gunmen killed two Israeli civilian employees at the Nahal Oz fuel depot, from which fuel is piped into Gaza. Israeli forces killed two of the perpetrators and an Israeli tank fired at two more, but killed three civilians and others. Israel again suspended fuel shipments to Gaza and, later, Israeli missiles struck a Hamas training site, killing two. On April 16, Hamas claimed responsibility for ambushing and killing three Israeli soldiers in the Gaza Strip as well as firing more than 20 rockets into southern Israel; Israeli retaliatory strikes, including missiles, killed 19 Palestinians. The Hamas military wing claimed responsibility for an April 19 th suicide car bombing and mortar ambush at the Kerem Shalom crossing between Israel and Gaza in which 13 Israeli soldiers were injured. Israel retaliated with airstrikes, killing seven Hamas militants. Five Palestinian groups claimed responsibility for killing two Israeli security guards in Tulkarem on the West Bank on April 25. Israel suspected that PIJ was responsible. On April 28, an Israeli operation against militants resulted in the deaths of a Palestinian mother and four children and the wounding of two other children. Palestinians charged that an Israeli tank shell or missile had struck the home, but an Israeli investigation suggested that explosions caused by Palestinian ammunition were the cause, not an Israeli hit. As President Bush arrived in Israel to help celebrate its 60 th anniversary on May 14, a rocket landed on a shopping mall in Ashkelon, injuring more than 30 people. PIJ and the Popular Resistance Committees claimed responsibility. Although the two sides agreed not to make public statements about the status of negotiations, their officials occasionally made remarks. On February 26, Abbas reported that committees on core issues of water, borders, settlements, refugees, Jerusalem, and security had been formed. On April 18, Olmert maintained that no great gaps exist between him and Abbas "with the exception of the subject of Jerusalem, which from the outset and by agreement was deferred to a later stage." On May 6, however, the PLO Executive Committee (which Abbas chairs) claimed that the gap between the two sides was "very wide" on all issues. On May 14, Olmert spoke of the need to reach an "understanding" that would define the parameters of a two-state solution, mentioning only the issues of borders, refugees, and security, and again suggested that it would only include "a framework for how to deal later with the issue of Jerusalem." The United States encouraged Egypt's efforts to achieve a tahdiyah (temporary truce, cease-fire, or calm) between Israel and Hamas. Egyptian General Omar Suleiman (alt: Umar Sulayman), who is in charge of intelligence services, mediated indirect talks. The issues involved were Palestinian rocket fire from the Gaza Strip into Israel, Israel's military operations in the Gaza Strip and West Bank and its blockade of Gaza; the border crossing at Rafah between Gaza and Egypt; Hamas's release of Cpl. Shalit; and Israel's release of Palestinian prisoners. A cease-fire to last for six months took effect on June 19. While Olmert insisted that "Shalit's release is inseparable" from those the understandings, Hamas maintained that it was not and that separate talks on a prisoner exchange continued. Negotiations on the prisoner exchange stalled. On June 24, in the first breach of the truce, the PIJ fired three rockets from Gaza into Israel after Israeli troops killed a PIJ leader in Nablus on the West Bank; Israel responded by closing the commercial crossings into Gaza. That pattern continued, with smaller groups, but not Hamas, firing rockets and Israel responding with short-term closures of the crossings. On July 28, Olmert told a Knesset committee that it was impossible to reach a comprehensive agreement in 2008 due to difficulty with and lack of negotiations on Jerusalem. He added that agreement on other issues was within reach and that a clause defining a mechanism for dealing with Jerusalem in 2009 could be included. A spokesman for Abbas again responded that an agreement excluding Jerusalem was unacceptable. In a September 29 interview, Olmert admitted that Israel would have to give up "almost all" of the West Bank and accept the division of Jerusalem for peace. He also said that the Palestinians must receive an equal amount of Israeli territory for any West Bank land that Israel retains. Abbas disclosed that the Israeli land swap offer is 6.8% in return for 5.5% and that he rejected "offers that lead to discontinuous land areas and loss of control over water resources." On October 26, Foreign Minister and Olmert's replacement as Kadima Party leader Tzipi Livni reported that she had been unable to form a new coalition government, triggering early national elections in Israel on February 10, 2009. On November 4, Israeli troops entered Gaza to blow up a tunnel that officials said was intended for kidnapping Israeli soldiers, and killed seven Palestinian militants. Officials said that the action was to eliminate a threat to the cease-fire that had begun in June and not to end it. Hamas responded by firing dozens of rockets into Israel daily and Israel reacted by closing the borders of Gaza for extended periods of time. On December 15, Hamas leaders announced that the truce would not be extended after it expired on December 19. The expiration date was followed by a barrage of rocket fire into Israel and Israeli airstrikes. On December 27, Israel launched Operation Cast Lead with an air offensive against Hamas facilities in Gaza. The stated goal of the operation was to strike at Hamas's terrorist infrastructure and to improve security for residents of southern Israel. Israeli officials also said that they intended to regain deterrence that was widely perceived as weakened by the 2006 war against Hezbollah in Lebanon. Israel broadened the Gaza campaign rapidly to target any site considered part of the Hamas terrorism support network, including mosques, universities, schools, factories, homes of Hamas political and military leaders, and weapons caches. Tunnels under the Gaza-Egypt border used to smuggle arms, materiel, and goods were prime targets throughout the 22-day military campaign. On January 4, Prime Minister Olmert set out conditions for a cease-fire: a halt to rocket attacks and terror, international supervision of the cease-fire, and an end to Hamas's military build-up (via smuggling). Israel would not open its borders with Gaza unless Hamas released Gilad Shalit. On January 10, Hamas politburo chief Mish'al stated his group's counter-demands: a halt to Israel's "aggression," the immediate withdrawal of its forces from Gaza, lifting of the siege on Gaza, and opening all the crossings, foremost that between Gaza and Egypt. The Bush Administration supported Israel. From the outset, Secretary Rice held "Hamas responsible for breaking the cease-fire and for the renewal of violence." President Bush called the Hamas rocket attacks on Israel "an act of terror," and added that no peace deal would be acceptable without monitoring to halt the flow of smuggled weapons to the group. On January 8, the U.N. Security Council adopted Resolution 1860 by a vote of 14-0, with 1 abstention—the United States. Secretary Rice said that the United States first wanted to see the outcome of Egyptian mediation for a cease-fire. The resolution called for "an immediate, durable, and fully respected cease-fire." While emphasizing the need to alleviate the humanitarian and economic situation in Gaza, it also called for intensified efforts to sustain the cease-fire, including preventing illicit trafficking in arms and ammunition and the sustained reopening of crossing points on the basis of the 2005 Agreement on Movement and Access. Prime Minister Olmert said that the Gaza operation would continue despite the resolution because "Israel has never agreed that any outside body would determine its right to defend the security of its citizens" and because the Palestinian groups were continuing to fire rockets into southern Israel and would not honor the resolution. Hamas said that that the resolution had nothing to do with it because it did not meet the Palestinian people's demands and Hamas was not consulted. On January 16, Secretary Rice and Foreign Minister Livni signed a memorandum of understanding (MOU) in which they agreed to work with neighbors and others in the international community to prevent the supply of arms and related materiel to terrorist organizations. The United States vowed to work with regional and NATO partners to address the supply of arms to Hamas and others in Gaza through the Mediterranean, Gulf of Aden, Red Sea, and eastern Africa. It also agreed to enhance security and intelligence cooperation to counter arms smuggling. Egyptian officials said they were was not bound by the MOU and would not allow foreign troops on their soil. Britain, France, Italy, and Germany jointly wrote to Olmert and Egyptian President Hosni Mubarak, offering to help end smuggling by all technical, military, naval, and diplomatic means, including patrols off Gaza's coast. On January 17, Israel unilaterally declared a cease-fire, effective January 18. Hamas soon followed with its own one-week cease-fire. According to the U.N., which used figures provided by the Palestinian Center for Human Rights, the conflict resulted in over 1,300 Palestinian deaths and 5,400 injured, and 13 Israeli deaths (including three civilians and five soldiers from friendly fire). Israeli and Palestinian peace negotiators had said that they would continue meeting until the new U.S. Administration took office and the February 10, 2009 Israeli elections were over. However, talks were suspended several weeks before Israel launched its operation against Hamas in December 2008, and formally by Palestinian chief negotiator Quray on December 29. Outgoing Prime Minister Olmert informed the Obama Administration's Special Envoy for Middle East Peace Mitchell of "understandings" he claimed he had reached with Abbas. They included the uprooting of 60,000 settlers out of 250,000 and Israel's withdrawal to its 1967 borders, with adjustments that would allow it to retain large settlement blocs. In return for the blocs, Israel would transfer an equal amount of territory in southern Israel to a Palestinian state. Olmert agreed that Jerusalem would be divided, with eastern neighborhood transferred to Palestinian sovereignty, and holy sites administered by an international authority to include Saudi Arabia, Jordan, the PA, Israel, and the United States, while Israel would retain formal sovereignty over them. Israel would not absorb Palestinian refugees from 1948, but would accept a limited number in a reunification program. On January 27, Palestinian negotiator Erekat said that Olmert's proposal was never written down and its details were vague. Abbas declared, "Our stance on the peace process is clear. We want back all the territories occupied in 1967, a fair solution to the refugee issue in accordance with UN General Assembly Resolution 194, and removal of settlements. We accept an international presence in the Palestinian territories provided the Israeli army does not participate in it." After the Israeli elections, Benjamin Netanyahu was named to form a new government. On February 28, PA President Abbas said, "...we ask the Israeli government to adhere to previous agreements, not to restart from scratch, to be committed to the two-state vision, to stop settlement activity, to remove barriers, and to redeploy to the lines held prior to 28 September 2001, as stipulated in the Road Map." On March 12, Hamas issued a rare criticism of smaller groups' rocket attacks on Israel, saying that their timing was wrong—perhaps because ongoing truce talks with Israel via Egypt. (Israel acknowledges that Hamas has restrained smaller groups' actions.) On March 27, the New York Times reported that Israeli planes had bombed a convoy of trucks near the Egyptian border in Sudan in January that was believed to be carry arms to be smuggled into Gaza and that Iran may have sent the weapons. A new Israeli government took office on March 31. In his maiden address to the Knesset (parliament), Prime Minister Netanyahu vowed that his government would seek to attain peace with the Palestinian Authority on three parallel channels: economic, security and diplomatic. We aspire to assist the accelerated development of the Palestinian economy, as well as of its economic ties with Israel. We will support a Palestinian security apparatus that will fight terror and we will conduct continuous peace negotiations with the Palestinian Authority with the aim of reaching a permanent arrangement.... (W)e don't want to rule over the Palestinians. Under the permanent arrangement, the Palestinians will have all the authorities to govern themselves, except those threatening the existence and security of the State of Israel. Netanyahu avoided reference to a Palestinian state. New Israeli Foreign Minister Avigdor Lieberman raised eyebrows on April 1, when he said that the Joint Declaration presented at the Annapolis conference in 2007 is not binding because neither the Israeli government nor the Knesset ratified it. He said that Israel is bound to follow the multi-stage 2003 Road Map. (See Significant Agreements, below.) The Joint Declaration called for the parties to simultaneously implement the Road Map and conduct final status negotiations. Lieberman wants to return to an incremental process, in which negotiations would be conducted in a final stage, after the Palestinians confront terror, take control of Gaza, and demilitarize Hamas. While Lieberman often comments on the peace process often, most decisions regarding it reportedly are made by Prime Minister Netanyahu in collaboration with Defense Minister Ehud Barak. The Israeli Government Press Office said that, at a meeting in April, Prime Minister Netanyahu told envoy Mitchell that it would not be possible to advance the diplomatic process and reach a peace settlement without recognition of Israel as the national state of the Jewish People. Netanyahu did not set this as a precondition for opening negotiations with the Palestinians. Mitchell said that U.S. policy on a two-state solution "would have a Palestinian state living in peace along the Jewish state of Israel." Palestinians contend that recognition of Israel as a Jewish state would negate Palestinian refugees' "right of return" and be detrimental to the status of Israel's Arab citizens. On April 27, President Abbas said, "It's not my job to give a description to the state. Name yourself the Hebrew Socialist Republic—it is none of my business." According to his spokesman, Abbas stressed to Mitchell the commitment of the Palestinians to a two-state solution and signed agreements and obligations, particularly freezing settlement activities, including natural growth, stopping house demolitions, and not building in E-1 (a corridor of land between Israel and the Ma'ale Adumim West Bank settlement), and demanded that the same criteria be applied to Israel. On in a May 4 speech to AIPAC, Prime Minister Netanyahu restated his positions, which he described as a " fresh approach"—a triple track towards peace between Israel and the Palestinians—a political track, a security track, and an economic track. The political track means the resumption of negotiations without delay and without preconditions. The security track means continued cooperation with the U.S. program to strengthen the Palestinian security apparatus. Finally, the economic track would lead to the removal of obstacles to the advancement of the Palestinian economy. Netanyahu inserted two provisos: "peace will not come without security," and for a final peace settlement to be achieved, "the Palestinians must recognize Israel as a Jewish state,"—the nation-state of the Jewish people. President Obama and Prime Minister Netanyahu met at the White House on May 18, 2009. Afterwards, the President said, "It is in the interests not only of the Palestinians but also the Israelis, the United States, and the international community to achieve a two-state solution in which Israel and the Palestinians are living side by side in peace and security." He also stated, "The Palestinians are going to have to do a better job of providing the kinds of security assurances that Israelis would need to achieve a two-state solution ... the other Arab states have to be more supportive and be bolder in seeking potential normalization with Israel." The President declared, "Settlements have to be stopped in order for us to move forward," and "the humanitarian situation in Gaza has to be addressed." Netanyahu said that he wanted "to start peace negotiations with the Palestinians immediately and to broaden the circle of peace to include others in the Arab world," but that the Palestinians "will have to recognize Israel as a Jewish state" and "enable Israel to have the means to defend itself." If these conditions are met, then he could envision an "arrangement where Palestinians and Israelis live side by side...." He said that Israel wanted the Palestinians to govern themselves, but he did not endorse the goal of a Palestinian state. The President asserted that "To the extent that we can make peace ...between the Palestinians and Israelis, then I actually think it strengthens our hands in dealing with a potential Iranian threat," whereas the Prime Minister heard the President say "there isn't a policy of linkage." On May 21, Secretary Clinton told Al-Jazeera , "We want to see a stop to settlement construction—additions, natural growth, any kind of settlement activity—that is what the President has called for." Netanyahu's spokesman responded, "normal life" in settlements "must be allowed to continue," using a new phrase instead of natural growth. On May 21, on the anniversary of Israel's 1967 the annexation of East Jerusalem, Netanyahu vowed "United Jerusalem is Israel's capital. Jerusalem was always ours and will always be ours. It will never again be partitioned and divided." The Palestinians consider East Jerusalem to be occupied Palestinian territory and, according the parameters of the 1990's peace process, the fate of Jerusalem is to be decided in negotiations between Israel and the Palestinians. On June 1, Netanyahu told a Knesset committee that halting construction in settlements would be equal to "freezing life,' and therefore, "unreasonable." President Obama restated his position regarding settlements at his May 28 White House meeting with President Abbas. On June 14, Netanyahu delivered a major address at Bar Ilan University in which he stated for the first time that Israel would accept the establishment of a Palestinian state. First, however, he said that the Palestinians must publicly recognize Israel as the state of the Jewish people. This is because, he maintained, the root cause of the conflict is the refusal to recognize that right, and not Israel's presence in Judea and Samaria (as Israelis refer to the West Bank) and the Gaza Strip. The Prime Minister claimed that a solution would be based on the establishment of a demilitarized Palestinian state—without an army, without control of its air space, and with effective measures to prevent weapons from being smuggled into its territory—and he asked for international guarantees of this principle. He also declared that Jerusalem must remain undivided as the capital of Israel, and that the Palestinian refugee problem must be solved outside of Israel, thereby rejecting a "right of return." Netanyahu insisted that "the claim that territorial withdrawals will bring peace with the Palestinians ... simply does not square with the facts." He stated that he would not build new settlements or confiscate land for that purpose, but rejected a settlement freeze, insisting that settlers must be allowed to have "normal lives." At the same time, Netanyahu called for the immediate resumption of peace talks without preconditions. He later summarized five principles to provide "clear foundations for a successful completion of peace talks," but said they are not preconditions for those talks. They are recognition of the nation-state of the Jewish people, the problem of the refugees solved outside the State of Israel, effective demilitarization of the Palestinian state, the peace treaty must end the conflict, and be guaranteed by the international community led by the United States. President Obama welcomed Netanyahu's endorsement of the goal of a Palestinian state, saw "some positive movement" in the speech, and said that Netanyahu's conditions were "what negotiations are supposed to be about." He added, "What we are seeing is at least the possibility we can restart serious talks. Special Envoy Mitchell stated that since both Israel and the Palestinians are now both on the record in support of a two-state solution, "There now is a common objective, which was not the case before the speech was made." However, Palestinian negotiator Erekat charged that Netanyahu "systematically took nearly every permanent status issue off the table," referring to borders, Jerusalem, settlements, refugees, and resources. Egyptian President Mubarak said that Israel's demand that Palestinians recognize Israel as the state of the Jewish people "scuttles changes for peace.... You won't find anyone to answer that call in Egypt or in any other place" in the region. Later, Hamas Political Bureau Chief Mish'al described Netanyahu's offer of a demilitarized state as "a big prison, not a country fit for a great people....The minimum we accept is a Palestinian state with Jerusalem as its capital, full sovereignty, removal of settlements, and the refugees' right of return." Mish'al concluded that he saw no alternative to continued armed struggle. President Abbas would later reiterate his demand that Israel recognize the principle of a two-state solution and halt all settlement activities before negotiations on final status issues, including Jerusalem. On July 1, Senator Mitchell met Israeli Defense Minister Barak in New York. Their joint statement did not restate the U.S. demand for a freeze on Israeli settlement activity or provide an Israeli response. Barak told the New York Times , "For us, it is very important that the Palestinians commit to seeking an end to the conflict and a finality of any claims. We should not isolate this issue of settlements and make it the most important one." He said that Israel was eager for a regional agreement that would lead to a state for the Palestinians and security for Israel. On July 6, Barak told Mitchell that Israel is committed to evacuating 23 illegal settlement outposts within weeks or months. (As of January 2010, it had not occurred.) Israel reportedly wants to link agreements to evacuate illegal outposts and a carefully defined, short-term settlement freeze to Arab moves toward normalization. The Obama Administration has worked to fulfill this request. On July 16, Secretary Clinton said, We have been working with the Israelis to deal with the issues of settlements, to ease the living conditions of Palestinians, and create circumstances that can lead to the establishment of a viable Palestinian state....(W)hile we expect action from Israel, we recognize those decisions are politically challenging." She added, "progress toward peace cannot be the responsibility of the United States or Israel alone.... The Palestinians have the responsibility to improve and extend positive actions already taken on security, to act forcefully against incitement and to refrain from any action that would make meaningful negotiations less likely. And Arab states have a responsibility to support the Palestinian Authority with words and deeds, to take steps to improve relations with Israel, and to prepare their publics to embrace peace and accept Israel's place in the region. Mitchell also reported that he is urging Arab leaders "to take steps towards normalization as gestures of their own to demonstrate that everyone in the region shares the vision of comprehensive peace that we share." He said that Washington is not asking any Arab government to normalize ties immediately. The Arab League Secretary General responded, "There will be no Arab steps before Israel stops its policy of settlement building." On July 31, Saudi Foreign Minister Prince Saud al Faisal stated, "The question is not what the Arab world will offer. The question really is: what will Israel give in exchange for this comprehensive offer (referring to the 2002 Arab Peace Initiative)." "Incrementalism and the step-by-step approach have not, and we believe will not achieve peace. Temporary security, confidence-building measures, will also not bring peace." He called for a comprehensive approach that "defines the final outcome at the outset and launches into negotiations over final status issues: borders, Jerusalem, water, refugees, and security." Saudi officials maintain that normalization should follow resolution of the major issues of the conflict and Israel's withdrawal from the West Bank, Gaza Strip, Golan Heights, and Sheba'a Farms in Lebanon. Further, they say that gestures or "concessions" in return for a partial withdrawal would reward Israel for the return of land that does not belong to it. The Administration is reaching out to Arab states which previously had low-level relations with Israel and reportedly requested Oman, Qatar, Morocco, and Tunisia to reopen their commercial interest offices in Israel and the Gulf States to permit Israeli commercial airliners' flyovers. President Obama sent a letter to Moroccan King Mohammed VI, asking him to "be a leader in bridging gaps between Israel and the Arab world." Although none has responded, the Administration continued to favor this approach. On August 10, the Deputy State Department spokesman said, "confidence-building measures are a critical element of getting the parties to the next step, which is negotiations." On August 18, President Mubarak told President Obama that the Arabs are unwilling to make gestures until Israel does something they believe merits such reciprocity, and a temporary settlement freeze would not suffice. The Netanyahu government says that it is proceeding with its "bottom up" approach of working to improve the living conditions for Palestinians in the West Bank as a foundation for future peace. To that end, it reports removing roadblocks, check points, and dirt barriers and expanding the hours that the Allenby Bridge crossing (between the West Bank and Jordan) is open for commercial goods. Abbas charged that Netanyahu is seeking "to divert the world's attention by easing economic restrictions on the Palestinians as a substitute for political rights." In a speech to the Fatah General Congress on August 4, 2009, President Abbas reaffirmed that the Palestinians' main aim is the establishment of an independent state and solving all issues, especially refugees and settlements. He declared, "Although peace is our choice, we reserve the right to resistance, legitimate under international law." The Fatah Congress adopted a political program affirming "the continuation of the negotiations without achieving real progress within a defined time frame endangers our rights and becomes futile because it enables Israel to use the negotiations as a cover for continuing its settlement activity and entrenching the occupation." Its 11 principles for proceeding include: Linking negotiations to real progress on the ground, specifically a complete halt to settlement activity, especially in Jerusalem. In addition, Israel must stop incursions, lift the siege of Gaza, remove barriers in the West Bank, and withdraw to the borders of September 28, 2000 (before the outbreak of the second intifadah or uprising); Negotiations based on U.N. resolutions and the 2002 Arab Peace Initiative; Setting a clear agenda and a time cap for negotiations; Rejecting postponement of negotiations on any final status issue, particularly Jerusalem and refugees; Rejecting a state with temporary borders; Refusing to recognize Israel as a "Jewish state" in order to protect the rights of refugees and of Israeli Arabs; Insisting on international participation in negotiations and on a mechanism for binding arbitration of impasses; Insisting on international monitoring and peace-keeping to guarantee implementation of an agreement; Holding a referendum on a peace agreement. The program refers ambiguously to "popular struggle," and does not explicitly endorse armed resistance. At the first meeting of the new Fatah Central Committee on August 6, Abbas stated that negotiations would only resume if Israel halted "all forms of settlement activity without exception in Jerusalem and the rest of the occupied territories" and he welcomed President Obama's efforts on this matter. On August 17, he told the PA cabinet, "The main and the only path is the path of peace and negotiations. We don't have any other path and we do not wish to use any other path." Palestinian Prime Minister Salam Fayyad announced a Palestine Document: Ending the Occupation, Establishing the State on August 25. It calls for establishing a "de facto state" to "expedite the ending of the occupation" with or without a final peace agreement with Israel. The plan calls for building both institutions and infrastructure. On August 26, Mitchell and Netanyahu met in London. The State Department reported simply that they had "made good progress" and had "agreed on the importance of restarting negotiations." The State Department signaled flexibility on Israeli settlements on August 27, when a spokesman said, "We put forward our ideas ... about what it will take for negotiations to be restarted, but ultimately it'll be up to the parties themselves, with our help, to determine whether that threshold has been met.... Ultimately, this is not a process by which the United States will impose conditions….." On September 6, Israeli Defense Minister Barak approved the construction of 455 pre-planned housing units, most to be built in major West Bank settlement blocs. Israel also plans to complete an additional 2,500 units under construction. Barak said that the action was part of a dialogue with the United States and was aimed at creating the foundation for an agreement that will include the suspension of construction in the West Bank. Most of the approvals were reapprovals of plans advanced during the prior Israeli government and the move was generally depicted as an attempt to placate domestic opponents in advance of a temporary freeze on settlement activity. Netanyahu later said that he was trying to balance the will to make a gesture to promote negotiations and "the need to enable normal living for the residents of Judea and Samaria." Furthermore, he declared "Jerusalem is not a settlement and construction will go on as planned." The White House regretted Israel's decision, saying "The United States does not accept the legitimacy of continued settlement expansion, and we urge that it stop. We are working to create a climate in which negotiations can take place, and such actions make it harder to create such a climate." President Obama, Prime Minister Netanyahu, and President Abbas met on September 22 on the sidelines of the U.N. General Assembly opening session, even though the two sides had not wavered in their views. The Palestinians argued that there was no point in starting negotiations without a settlement freeze and unless Israel agreed to negotiate on Jerusalem and refugees, while Netanyahu would not compromise on settlements and borders before negotiations. President Obama stated, "Permanent negotiation must begin, and begin soon." He called on the Palestinians to build on progress in halting terrorism and to do more to stop incitement. He praised Israel's actions to improve the Palestinians' freedom of movement, and called on it to move beyond discussions of restraining settlement construction to action. Palestinians noted his use of the word "restrain" instead of "freeze." President Obama told the General Assembly that he would continue to seek a just and lasting peace between Israel, Palestine, and the Arab world. He said that he would continue to call on the Palestinians to end incitement against Israel and to emphasize that "America does not accept the legitimacy of continued Israeli settlements." He declared, "the time has come to re-launch negotiations without preconditions that address the permanent status issues: security for Israelis and Palestinians, borders, refugees, and Jerusalem. And the goal is clear: Two states living side by side in peace and security – a Jewish state of Israel … and a viable, independent Palestinian state with contiguous territory that ends the occupation that began in 1967…." In late September, the PLO outlined three conditions for resuming talks: negotiations must be based on international resolutions calling for an independent Palestinian state within a two-state solution, a time limit must be established, and a complete halt to settlement activity must be in place. President Abbas has said that negotiations with Israel should resume from the agreement on "terms of reference" that he says were reached with former Israeli Prime Minister Olmert, i.e., the Palestinian state would have the 1967 borders with reciprocal land adjustments. He admitted that no agreement was reached on borders or exchanging land. Abbas said that he would push for delineation of borders because it would solve, borders, settlements, water, and Jerusalem. He also reported that the Palestinian dialogue with Israel continues on security, economic issues, and daily life. In late October, Netanyahu offered to exercise restraint in construction in the West Bank, while continuing the completion of 3,000 housing units for which permits already have been given or construction begun. The "freeze" or "moratorium" would not apply to East Jerusalem, public buildings, or infrastructure projects. Secretary Clinton described "what the prime minister has offered in specifics of a restraint on policy of settlements … no new starts, for example, is unprecedented (italics added) in the context of prior negotiations. It's also the fact that for 40 years, presidents of both parties have questioned the legitimacy of settlements…." The Palestinians rejected Netanyahu's proposal and, after they and Arab governments expressed disappointment with her remarks, the Secretary conceded that "it is nowhere near enough" and reiterated that "the United States does not accept the legitimacy of continued Israeli settlements" and wanted more from Netanyahu. On November 3, the State Department spokesman said, "We recognize that things have stalled…. We're looking at a variety of ways to increase interaction between the parties in some form." He described the proposals as "baby steps" that would eventually "create a momentum of their own…." In a November 5 speech in which he repeated his known terms of reference for negotiations, President Abbas told his people that he was "not interested" being a candidate in presidential elections then scheduled for January 2010. Abbas would remain Chairman of the Palestine Liberation Organization (PLO), in which capacity he has negotiated with Israel. On December 16, the PLO Central Council (PCC) said that Abbas would stay on as PA president after his tenure ends on January 25, 2010 and until elections are held. No date has been set for elections; the PCC called for them to be held not later than July 1. The Palestinians began to talk of asking the Security Council to recognize an independent Palestinian state in the 1967 borders. Netanyahu warned that it would provoke responding unilateral Israeli steps, while, on November 16, the State Department said that the United States supports "a Palestinian state that arises as a result of a process between the two parties." The EU Presidency said that the move was "premature." Hamas rejected the idea as meaningless. On November 17, the White House Press Secretary expressed dismay that the city of Jerusalem Planning Committee had decided to expand -- by about 900 housing units -- the settlement of Gilo, which Israel considers to be within the borders of Jerusalem (that it enlarged after the 1967 war). He stated that neither party should unilaterally pre-empt negotiations, and that the status of Jerusalem is an issue that "must be resolved through negotiations." He added, "The U.S. also objects to other Israeli practices in Jerusalem related to housing , including the continuing pattern of evictions and demolitions of Palestinian homes." Syria seeks to regain sovereignty over the Golan Heights, 450 square miles of land along the border that Israel seized in 1967. Israel applied its law and administration to the region in December 1981, an act other governments do not recognize. Approximately 20,000 Israeli settlers reside in 33 settlements on the Golan. In 1991, Syria referred to its goal in the peace conference as an end to the state of belligerency, not a peace treaty, preferred a comprehensive Arab-Israeli peace, and rejected separate agreements between Israel and Arab states. Israel emphasized peace, defined as open borders, diplomatic, cultural, and commercial relations, security, and access to water resources. In 1992, Israel agreed that U.N. Security Council Resolution 242 (after the 1967 war) applies to all fronts, meaning that "land for peace" includes the Golan. Syria submitted a draft declaration of principles, reportedly referring to a "peace agreement," not simply an end to belligerency. Israeli Prime Minister Yitzhak Rabin accepted an undefined withdrawal on the Golan, pending Syria's definition of "peace." On September 23, 1992, the Syrian Foreign Minister promised "total peace in exchange for total withdrawal." Israel offered "withdrawal." In 1993, Syrian President Hafez al Asad announced interest in peace and suggested that bilateral tracks might progress at different speeds. In June, U.S. Secretary of State Warren Christopher said that the United States might be willing to guarantee security arrangements in the context of a sound agreement on the Golan. On January 16, 1994, President Clinton reported that Asad had told him that Syria was ready to talk about "normal peaceful relations" with Israel. The sides inched toward each other on a withdrawal and normalization timetable. Asad again told President Clinton on October 27 that he was committed to normal peaceful relations in return for full withdrawal. Asad never expressed his ideas publicly, leaving it to Clinton to convey them. On May 24, 1994, Israel and Syria announced terms of reference for military talks under U.S. auspices. Syria reportedly conceded that demilitarized and thinned-out zones may take topographical features into account and be unequal, if security arrangements were equal. Israel offered Syria an early-warning ground station in northern Israel in exchange for Israeli stations on the Golan Heights, but Syria insisted instead on aerial surveillance only and that each country monitor the other from its own territory and receive U.S. satellite photographs. It was proposed that Syria demilitarize 6 miles for every 3.6 miles Israel demilitarizes. Rabin insisted that Israeli troops stay on the Golan after its return to Syria. Syria said that this would infringe on its sovereignty, but Syrian government-controlled media accepted international or friendly forces in the stations. Talks resumed at the Wye Plantation in Maryland in December 1995, but were suspended when Israeli negotiators went home after terrorist attacks in February/March 1996. A new Israeli government led by Prime Minister Benjamin Netanyahu called for negotiations, but said that the Golan is essential to Israel's security and water needs and that retaining Israeli sovereignty over the Golan would be the basis for an arrangement with Syria. Asad would not agree to talks unless Israel honored prior understandings, claiming that Rabin had promised total withdrawal to the June 4, 1967-border, which gives Syria access to the northern shore of the Sea of Galilee (also known as Lake Tiberias or Lake Kinneret). That border differs from the international border of 1923 and the armistice line of 1949, which Damascus views as the results of colonialist or imperialist decisions. Israeli negotiators say that Rabin had suggested possible full withdrawal if Syria met Israel's security and normalization needs, which Syria did not do. An Israeli law passed on January 26, 1999, requires a 61-member majority in the Knesset (parliament) and a national referendum to approve the return of any part of the Golan Heights. However, holding a referendum would depend on a passage of a Basic Law for Public Referenda, which has not been accomplished. (In July 2009, the Knesset began considering a referendum law, with the support of Prime Minister Netanyahu. In November, it approved the bill, but additional votes are required before it becomes law.) In June 1999, Israeli Prime Minister-elect Ehud Barak and Asad exchanged compliments via a British writer. Israel and Syria later agreed to restart talks from "the point where they left off," with each side defining the point to its satisfaction. Barak and the Syrian Foreign Minister met in Washington on December 15-16, 1999, and in Shepherdstown, WV, from January 3-10, 2000. President Clinton intervened. On January 7, a reported U.S. summary revealed Israeli success in delaying discussion of borders and winning concessions on normal relations and an early-warning station. Reportedly because of Syrian anger over this leak, talks scheduled to resume on January 19, 2000 were "postponed indefinitely." On March 26, President Clinton met Asad in Geneva. A White House spokesman reported "significant differences remain" and that it would not be productive for talks to resume. Barak indicated that disagreements centered on Israel's reluctance to withdraw to the June 1967 border and cede access to the Sea of Galilee, on security arrangements, and on the early-warning station. Syria agreed that the border/Sea issue had been the main obstacle. Asad died on June 10; his son, Bashar, succeeded him. Ariel Sharon became Prime Minister of Israel in February 2001 and vowed to retain the Golan. In a December 1 New York Times interview, Bashar al Asad said that he was ready to resume negotiations from where they broke off. Sharon responded that Syria first must stop supporting Hezbollah and Palestinian terror organizations. On August 29, 2005, Sharon said that it was not the time to begin negotiations with Syria because it is collaborating with Iran, building up Hezbollah, and maintaining Palestinian terrorist organizations' headquarters in Damascus from which terrorist attacks against Israel are ordered. Moreover, he observed that there was no reason for Israel to relieve the pressure that France and the United States were putting on Syria (over its alleged complicity in the February 2005 assassination of former Lebanese Prime Minister Rafik Hariri). On June 28, 2006, Israeli warplanes caused sonic booms over President Asad's summer residence in Latakia to warn him to discontinue support for the Damascus-based head of the Hamas political bureau, Khalid Mish'al, whom Israel considered responsible for a June 25 attack in Israel, and for other Palestinian terrorists. On July 3, Syrian Foreign Minister Walid al Muallem denied that Mish'al had a role in the attack and said that Syria would never force him to leave the country. In a speech on August 15 to mark the end of the war in Lebanon, President Asad declared that the peace process had failed since its inception and that he did not expect peace in the near future. Subsequently, he said that Shib'a Farms (an area near where the Israeli, Syrian, and Lebanese borders meet) are Lebanese, but that the border between Lebanon and Syria there cannot be demarcated as long as it is occupied by Israel. The priority, he said, must be liberation. Responding to speculation about reopening peace talks with Syria, Israeli Prime Minister Olmert said on August 21 that Syria must stop supporting terrorist organizations before negotiations resume. In September, he declared, "As long as I am prime minister, the Golan Heights will remain in our hands because it is an integral part of the State of Israel." He also indicated that he did not want to differ from the Bush Administration, which viewed Syria as a supporter of terror that should not be rewarded. On November 28, U.S. National Security Advisor Hadley concurred that as long as Syria is "a supporter of terror, is both provisioning and supporting Hezbollah and facilitating Iran in its efforts to support Hezbollah, and is supporting Hamas," then it is "not on the agenda to bring peace and security to the region." Hadley agreed that you cannot talk about negotiating with that Syria. On December 6, the Iraq Study Group released a report that included recommendations for changing U.S. policy toward the Arab-Israeli conflict because "Iraq cannot be addressed effectively in isolation from other major regional issues." It stated that the United States will not be able to achieve its goals in the Middle East unless it has a "renewed and sustained commitment" to a comprehensive, negotiated peace on all fronts, including "direct talks with, by, and between Israel, Lebanon, Palestinians (those who accept Israel's right to exist), and particularly Syria...." The report recommended that Israel return the Golan Heights, with a U.S. security guarantee that could include an international force on the border, including U.S. troops if requested by both parties, in exchange for Syria's taking actions regarding Lebanon and Palestinian groups. Olmert rejected any linkage to the situation in Iraq and believed that President Bush shared his view. In December, Asad and his Foreign Minister expressed interest in unconditional negotiations with Israel. Their statements deepened a debate in Israel over Syria's intentions. Olmert was skeptical of Asad's motives and demanded that Syria first end support for Hamas and Hezbollah and sever ties with Iran. On January 17, 2007, Secretary Rice asserted that "this isn't the time to engage Syria," blaming Damascus for allowing terrorists to cross its territory to enter Iraq, failing to support Palestinians who believe in peace with Israel, and trying to bring down the Lebanese government. On May 4, 2007, on the sidelines of a meeting on Iraq in Egypt, Secretary Rice met Foreign Minister Muallem. U.S. officials said that the meeting focused exclusively on Iraq. Some Israelis asked why they should not have contacts with Syrians if U.S. officials could do so. On June 8, Israeli officials confirmed that Israel had sent messages to Syria signaling willingness to engage in talks based on the principle of land for peace and attempting to discern whether Damascus might be willing to gradually end its relations with Iran, Hezbollah, and Hamas in exchange. In a July 10 interview, Olmert said that he was willing to discuss peace with Asad, but complained that the Syrian only wants negotiations to be conducted via Americans, who do not want to talk to Asad. On July 17, Asad called on Israel to make an "unambiguous and official announcement" about its desire for peace and "offer guarantees about the return of the land in full," opening "channels via a third party, but not direct negotiations." This, he said, would lead to direct talks in the presence of an "honest broker." Those talks would be on security arrangements and relations, and not land. Asad asserted that he cannot negotiate with Israel because "we do not trust them." On July 20, Olmert called on Asad to drop preconditions which Israel cannot accept. On September 6, the Israeli Air Force carried out an air raid against a site in northeastern Syria. On September 12, a New York Times report alleged that the target may have been a nuclear weapons installation under construction with North Korean-supplied materials. Syrian and North Korean officials denied this allegation and, on October 1, President Asad claimed that an unoccupied military compound had been hit. On October 25, the International Institute for Science and International Security released satellite photos showing that a suspected reactor building had been razed and the site scraped, raising suspicions about its purpose. Syria has not retaliated for the air raid. On January 8, 2008, International Atomic Energy Agency (IAEA) Director General Mohamed El Baradei initially told a pan-Arab newspaper that, "Based on satellite photographs, experts believe it is unlikely that the targeted construction was a nuclear facility." On January 12, 2008, it was reported that new satellite photos show construction at the site resembling the former building, which would cover the remains of the old one and possibly conceal its past. Syria did not allow inspectors to visit the site until May. In November, the IAEA reported that it had features resembling a reactor and finding traces of uranium amid the ruins, but did not come to any conclusions. On February 24, 2009, a Syrian scientist told the IAEA that the site has been converted into a military installation for firing missiles. Syria has not allowed any further IAEA visits. (See " Role of Congress " " Israeli Raid on Suspected Syrian Nuclear Site ," below, for additional information on this issue.) On September 23, 2007, Secretary Rice had expressed hope that participants in the Annapolis meeting would include the members of the Arab League Follow Up Committee—12 Arab governments, including Syria. On October 1, President Asad responded that his government would not attend unless the Golan Heights were discussed. Syria's Deputy Minister of Foreign Affairs attended the conference and explained that his presence resulted from the inclusion of the return of the Golan on the agenda. In December, Secretary Rice declared that "Annapolis was a chance we gave Syria and its test was the (presidential) elections in Lebanon. So far, the Syrians have failed completely." For months, there was speculation about a revived Israel-Syria peace track as Professor Ahmet Davutoglu, a close foreign policy advisor to Turkish Prime Minister Recep Tayyip Erdogan, was reported to be carrying messages between Damascus and Jerusalem. Israeli officials repeatedly hinted that talks were afoot, acknowledging that the price of peace for Israeli would be the Golan Heights and hoping that it might be a way to distance Syria from Iran, Hezbollah, and Hamas. On April 17, Prime Minister Olmert confirmed that the two sides had been in contact and, on April 24, President Asad revealed that Erdogan had informed him "about Israel's readiness for a full withdrawal from the Golan Heights in return for a peace agreement." Asad claimed that mediation had intensified after the Israel-Hezbollah war of 2006 and especially after Turkey became involved in April 2007. There were reports said that Olmert had first discussed the possibility of mediation with Erdogan in Turkey in February 2007. Asad also asserted that there would be no direct negotiations, only those through Turkey. He maintained that direct talks require a U.S. sponsor and that Syria might discuss them "with the next U.S. administration because this one has no vision or a will for the peace process." U.S. State Department spokesman Tom Casey has said that neither party has formally requested the United States to become directly involved. "If Syria and Israel came to us, we'd certainly consider the request." On May 21, Israel, Syria, and Turkey simultaneously announced that Israel and Syria had indeed launched peace talks mediated by Turkey. On May 19-21, negotiating teams had held indirect talks in Istanbul. The aim was to reach "common ground" on issues relating to withdrawal, security arrangements, water, and normal peaceful relations from which to move toward direct negotiations. This initiative appeared contrary to the Bush Administration's policy of isolating Syria. However, the White House said that the Administration was not surprised by the trilateral announcement and did not object to it. Secretary Rice said, "We would welcome any steps that might lead to a comprehensive peace in the Middle East .... We are working very hard on the Palestinian track. It doesn't mean that the U.S. would not support other tracks." White House spokeswoman Dana Perino added, "What we hope is that this is a forum to address various concerns that we all share about Syria—the United States, Israel, and many others—in regard to Syria's support for Hamas and Hezbollah (and) the training and funding of terrorists that belong to these organizations .... We believe it could help us to further isolate Iran...." On June 5, Secretary Rice thanked Turkey for sponsoring the indirect talks. Asad stated that direct talks were unlikely before 2009 and "depend on the stability of the Israeli government...." He said that eventually direct negotiations would tackle the details of water, relations, and other matters, but, when dealing with water, Syria would never compromise on the 1967 borders that stretch to Lake Tiberias (the Sea of Galilee). Referring to Israel's demands concerning Syria's relations with Iran and Hezbollah, Asad asserted, "We do not accept the imposition of conditions on us that are linked to countries that have nothing to do with peace...." On July 7, Asad told the French newspaper Le Figaro that he would not begin direct talks with Israel while President Bush was in office. On September 4, President Asad disclosed that his representatives had transmitted proposals or principles for peace to serve as a basis for direct talks with Israel to Turkish mediators, but would wait for Israel's response before holding direct talks. He repeated that direct talks also await a new U.S. Administration and stressed that "Syria has no interest in relinquishing its ties with Hezbollah." He added that future negotiations depend on the next Israeli prime minister's commitment to pursuing peace. A fifth round of indirect talks was postponed ostensibly due to the resignation of Olmert's chief of staff and negotiator with Syria. The Turkish government said that Israel had requested a delay due to technical and legal problems. Syria's Deputy Foreign Minister reported that Syria had asked Israeli to express a final opinion about the line of withdrawal and insisted that it be on the June 4, 1967 border. Israeli military intelligence reportedly had concluded that, under the next U.S. administration, Syria would be willing to sign a peace accord with Israel if a return to the 1967 border is guaranteed and if it includes generous U.S. economic aid comparable to that which Egypt has received since signing a peace agreement with Israel. The analysts also believe that Syria would be willing to "cool down" its relations with Iran as the price of an accord. As a result of Israel's offensive against Hamas, Turkey officially ended its efforts to organize more Israeli-Syrian talks. They already had been suspended primarily due to Israel's domestic political turmoil and imminent national election on February 10, 2009. On February 2, Foreign Minster Muallem said that Syria may resume indirect talks with Israel if its elections bring forth a government willing to reach a comprehensive peace. While in Turkey on March 7, Secretary Clinton said the importance of the Israeli-Syrian track and peace effort "cannot be overstated." In Damascus the same day, Acting Assistant Secretary of State for Near Eastern Affairs Jeffrey Feltman said, "We do want to see forward momentum on the Syrian-Israeli track at the time when the parties are ready for this. We want to achieve results. I am sure that Syria will want to achieve results, but let's not expect that things are going to change dramatically from today until tomorrow." In an interview published on March 9, President Asad said that a peace "agreement" with Israel was possible, but that the Syrian people would not accept "peace," meaning trade, normal relations, and open borders, until the Palestinian issue is resolved. He called for coordination with the Palestinians so that Israel would not use peace talks with Syria to avoid a resolution with the Palestinians. Two days later, Asad reiterated his long-standing view that, "We need the United States to act as a mediator when we move from the current indirect negotiations to direct negotiations." In a speech on March 31, he called on Arabs to take a harder line with the incoming Israeli government, and stated, "Peace cannot be achieved with an enemy who does not believe in peace without it begin imposed on him by resistance"—a "moral duty." Israeli Foreign Minister Avigdor Lieberman said on April 2, "there is no (Israeli) cabinet resolution regarding negotiations with Syria, and we have already said that we will not agree to withdraw from the Golan Heights. Peace will only be in exchange for peace." On May 20, Prime Minister Netanyahu said that he was willing to open peace talks with the Syrians without preconditions. Syria has said that Israel must commit to ceding the Golan before talks. On June 13, Senator Mitchell visited Damascus for the first time, accompanied by Acting Assistant Secretary of State for Near Eastern Affairs Jeffrey Feltman and National Security Council Senior Director for Near East and North Africa Daniel Shapiro. Mitchell reported, "I told President Asad that President Obama is determined to facilitate a truly comprehensive Arab-Israeli peace," meaning "peace between Palestinians and Israelis, between Syria and Israel, and between Lebanon and Israel.....We will welcome the full cooperation of the government of the Syrian Arab Republic in this historic endeavor..... Syria and the U.S. share an obligation to create conditions for negotiations to begin promptly and end successfully." Israel's Deputy Foreign Minister Danny Ayalon has said that Israel insists that any new negotiations with Syria be direct and has ruled out a return to mediated talks, several rounds of which were conducted via the Turks in 2007. On September 15, however, President Asad stressed that he wanted indirect talks with Israel to be conducted through Turkey to reach a concrete point or establish "a healthy and proper foundation" before moving on to direct talks. Citing Security Council Resolution 425, Lebanon sought Israel's unconditional withdrawal from the 9-mile "security zone" in southern Lebanon, and the end of Israel's support for Lebanese militias in the south and its shelling of villages that Israel claimed were sites of Hezbollah activity. Israel claimed no Lebanese territory, but said that its forces would withdraw only when the Lebanese army controlled the south and prevented Hezbollah attacks on northern Israel. Lebanon sought a withdrawal schedule in exchange for addressing Israel's security concerns. The two sides never agreed. Syria, which then dominated Lebanon, said that Israel-Syria progress should come first. Israel's July 1993 assault on Hezbollah prompted 250,000 people to flee from south Lebanon. U.S. Secretary of State Warren Christopher arranged a cease-fire. In March/April 1996, Israel again attacked Hezbollah and Hezbollah fired into northern Israel. Hezbollah and the Israeli Defense Forces agreed to a cease-fire and to refrain from firing from or into populated areas but retained the right of self-defense. U.S., French, Syrian, Lebanese, and Israeli representatives monitored the agreement. On January 5, 1998, the Israeli Defense Minister indicated readiness to withdraw from southern Lebanon if the second part of Resolution 425, calling for the restoration of peace and security in the region, were implemented. He and Prime Minister Netanyahu proposed withdrawal in exchange for security, not peace and normalization. Lebanon and Syria called for an unconditional withdrawal. As violence in northern Israel and southern Lebanon increased later in 1998, the Israeli cabinet twice opposed unilateral withdrawal. In April 1999, however, Israel decreased its forces in Lebanon and, in June, the Israeli-allied South Lebanese Army (SLA) withdrew from Jazzin, north of the security zone. On taking office, new Israeli Prime Minister Ehud Barak promised to withdraw in one year, by July 7, 2000. On September 4, 1999, the Lebanese Prime Minister confirmed support for the "resistance" against the occupation, that is, Hezbollah. He argued that Palestinian refugees residing in Lebanon have the right to return to their homeland and rejected their implantation in Lebanon (which would upset its fragile sectarian balance). He also rejected Secretary of State Madeleine Albright's assertion that refugees would be a subject of Israeli-Palestinian final status talks and insisted that Lebanon be a party to such talks. On March 5, 2000, the Israeli cabinet voted to withdraw from southern Lebanon by July. Lebanon warned that it would not guarantee security for northern Israel unless Israel also withdrew from the Golan and worked to resolve the refugee issue. On April 17, Israel informed the U.N. of its plan. On May 12, Lebanon told the U.N. that Israel's withdrawal would not be complete unless it included Shib'a Farms. On May 23, U.N. Secretary-General Kofi Annan noted that most of Shib'a is within the area of operations of the U.N. Disengagement Observer Force (UNDOF) overseeing the 1974 Israeli-Syrian disengagement, and recommended proceeding without prejudice to later border agreements. On May 23, the SLA collapsed, and on May 24 Israel completed its withdrawal. Hezbollah took over the former security zone. On June 18, the U.N. Security Council agreed that Israel had withdrawn. The U.N. Interim Force in Lebanon (UNIFIL) deployed only 400 troops to the border region because the Lebanese army did not back them against Hezbollah. On October 7, Hezbollah shelled northern Israel and captured three Israeli soldiers; then, on October 16, it captured an Israeli colonel. On November 13, the U.N. Security Council said that Lebanon was obliged to take control of the area vacated by Israel. On April 16 and July 2, 2001, after Hezbollah attacked its soldiers in Shib'a, Israel, claiming that Syria controls Hezbollah, bombed Syrian radar sites in Lebanon. In April, the U.N. warned Lebanon that unless it deployed to the border, UNIFIL would be cut or phased out. On January 28, 2002, the Security Council voted to cut it to 2,000 by the end of 2002. In March 2003, Hezbollah shelled Israeli positions in Shib'a and northern Israel. Israel responded with air strikes and expressed concern about a possible second front in addition to the Palestinian intifadah . At its request, the U.N. Secretary-General contacted the Syrian and Lebanese Presidents and, on April 8, Vice President Cheney telephoned President Asad and Secretary of State Powell visited northern Israel and called on Syria to curb Hezbollah. On January 30, 2004, Israel and Hezbollah exchanged 400 Palestinian and 29 Lebanese and other Arab prisoners, and the remains of 59 Lebanese for the Israeli colonel and the bodies of the three soldiers. U.N. Security Council Resolution 1559, September 2, 2004, called for the withdrawal of all foreign (meaning Syrian) forces from Lebanon. Massive anti-Syrian demonstrations occurred in Lebanon after the February 14, 2005, assassination of former Lebanese Prime Minister Rafik Hariri, widely blamed on Syrian agents. On March 5, Asad announced a phased withdrawal of Syrian troops from Lebanon, which was completed on April 26. On May 28, 2006, Palestinian rockets fired from Syria hit deep inside northern Israel and Israeli planes and artillery responded by striking Popular Front for the Liberation of Palestine-General Command (PFLP-GC) bases near Beirut and near the Syrian border. Hezbollah joined the confrontation and was targeted by Israelis. UNIFIL brokered a cease-fire. On July 12, in the midst of massive shelling of a town in northern Israel, Hezbollah forces crossed into northwestern Israel and attacked two Israeli military vehicles, killing three soldiers and kidnapping two. Hezbollah demanded that Israel release Lebanese and other Arab prisoners in exchange for the soldiers and for a third soldier who had been kidnapped by the Palestinian group Hamas on June 25. (On the latter situation, see "Israel-Palestinians," above.) Hezbollah leader Shaykh Hassan Nasrallah said that the soldiers would be returned only through indirect negotiations for a prisoner exchange. He suggested that the Hezbollah operation might provide a way out of the crisis in Gaza because Israel had negotiated with Hezbollah in the past, although it refused to negotiate with Hamas now. Prime Minister Olmert declared that Hezbollah's attack was "an act of war" and promised that Lebanon would suffer the consequences of Hezbollah's actions. The Lebanese government replied that it had no prior knowledge of the operation and did not take responsibility or credit for it. Israeli officials also blamed Syria and Iran, but were careful to say that they had no plans to strike either one. Immediately after the Hezbollah attack, Israeli forces launched a major military campaign against and imposed an air, sea, and ground blockade on Lebanon. In a July 17 speech, Olmert summarized Israel's conditions for the end of military operations: the return of the kidnapped soldiers, the end to Hezbollah rocket attacks, and the deployment of the Lebanese army along the border. Lebanese Prime Minister Fouad Siniora requested U.N. help in arranging a cease-fire. On August 8, the Lebanese government promised to deploy 15,000 troops to the south for the first time since 1978 if Israel withdrew its forces. Hezbollah agreed to the government proposal, while Olmert found it "interesting." On August 9, the Israeli security cabinet authorized the Prime Minister and Defense Minister to determine when to expand the ground campaign while continuing efforts to achieve a political agreement. Only after the U.N. Security Council passed Resolution 1701 calling for the end to hostilities on August 11 did Olmert authorize an offensive, and those two days of fighting proved costly for both sides ensued. Resolution 1701 called for the full cessation of hostilities, the extension of the Lebanese government's control over all Lebanese territory, and the deployment of Lebanese forces and an expanded UNIFIL, 15,000 each, in a buffer zone between the Israeli-Lebanese border and the Litani River to be free of "any armed personnel" other than the Lebanese army and UNIFIL. The resolution authorized UNIFIL to ensure that its area of operations is not used for hostile activities and to resist by forceful means attempts to prevent it from discharging its duties. It banned the supply of arms to Lebanon, except as authorized by the government, and called for the disarmament of all armed groups in Lebanon. The resolution did not require the return of the abducted Israeli soldiers or the release of Lebanese prisoners. It requested the Secretary-General to develop proposals for the delineation of the international borders of Lebanon, "including by dealing with the Shib'a Farms area." The truce went into effect on August 14. In all, 44 Israel civilians and 121 military men, 1,191 Lebanese civilians, 46 Lebanese soldiers, and an estimated 600 Hezbollah militants died in the war. The Lebanese Army began to move south to the border on August 17 as Israeli forces handed over positions to the U.N. Hezbollah leader Nasrallah declared victory and said that Hezbollah would not disarm as long as Israel did not withdraw completely from Lebanon, including the Shib'a Farms. On August 14, the Lebanese Defense Minister said that his army had no intention of disarming Hezbollah, but Hezbollah weapons would no longer be visible. On August 19, Israeli commandos raided an Hezbollah stronghold near Ba'albek in the Bekaa Valley. Hezbollah did not respond and the cease-fire held. Olmert accepted responsibility for the war and claimed as achievements a terrorist organization no longer allowed to operate from Lebanon and a government of Lebanon responsible for its territory. He also claimed that a severe blow had been dealt to Hezbollah. After the war, Olmert expressed hope that the cease-fire could help "build a new reality between Israel and Lebanon," while Prime Minister Siniora declared that Lebanon would be the last country to sign a peace agreement with Israel. On September 7, Olmert said that if the Shib'a Farms is determined to be Lebanese and not Syrian and if Lebanon fulfills its obligations under U.N. resolutions, including the disarming of Hezbollah, then Israel would discuss the Farms with Lebanon. On October 30, the U.N. Secretary-General Ban Ki-moon reported that there has been no breach of the 2006 cease-fire and that the parties show determination to keep it. He noted reports of suspected Hezbollah construction north of the Litani River and in the Bekaa Valley, and stated that the Israeli government contends that Hezbollah has rearmed itself to a level higher than prior to the 2006 conflict because of the transfer of weapons from Iran and Syria in violation of the arms embargo. On February 12, 2008, Hezbollah operative Imad Mughniyah, who was suspected of planning terrorist attacks in the 1980s against Americans in Lebanon and in the 1990s against Jews and Israelis in Argentina, was killed in a car bombing in Damascus, Syria. On May 31, Hezbollah handed over to Israel the remains of five soldiers killed in the summer war of 2006, and Israel released an Israeli of Lebanese descent who had been convicted of spying for Hezbollah. On June 29, the Israeli cabinet approved a larger prisoner exchange with Hezbollah. The remains of two Israeli soldiers whose capture by Hezbollah had triggered the 2006 war, a report on Ron Arad, an Israeli pilot missing in action since 1986, and the remains of Israeli soldiers killed in the 2006 war were given to Israel. In exchange, Israel released Samir Kuntar, a Lebanese member of a Palestinian terrorist group who had killed an Israeli man and his young daughter in 1979, four Hezbollah fighters, the bodies of eight Hezbollah members, and the bodies of other terrorists, and information on four missing Iranian diplomats to the U.N. Secretary General. At a later date, Israel released some Palestinian prisoners. During a visit to Lebanon, Secretary Rice called for U.N. action on Shib'a Farms. Hezbollah has used that Israeli occupation to justify its "resistance" and rejection of disarmament, but says that putting the Farms in U.N. custody will not end its resistance. On June 18, Israel offered to start direct peace talks on all issues with Lebanon. The Lebanese government rejected the offer, stating that occupied Lebanese territory is subject to "U.N. resolutions that do not require any negotiations." Beirut demanded that Israel return Shib'a and provide maps of mines and cluster bombs left during the 2006 war. On July 13, new Lebanese President Michel Suleiman said the Shib'a Farms area should be liberated through diplomatic means, but, if diplomacy fails, military operations would be used. On August 13, he and Syrian President Asad stated that a committee would work to "define and draw the Syrian-Lebanese borders," but Shi'ba Farms will not be demarcated until Israel withdraws. On September 4, Hezbollah leader Nasrallah declared that his group would not disarm even if Israel withdrew from the Shib'a Farms and the northern Ghajar village because its weapons are needed to defend Lebanon from Israel. In his November 18, Report to the Security Council, Secretary-General Ban Ki-moon noted that there had been no breaches of the cessation of hostilities. He again cited Israeli concerns that Hezbollah was rebuilding its military capacity on both sides of the Litani River, but noted that UNIFIL had not been provided with nor found evidence of new military infrastructures or smuggling arms in its area of operation. The Secretary-General also noted that Hezbollah continued to maintain a substantial military capacity distinct from the Lebanese state in contravention of 1701. In addition, he called on Israel to cease all over flights of Lebanese territory that violate Lebanese sovereignty and 1701. On March 18, 2009, President Suleiman ruled out the possibility that his country would hold direct peace talks with Israel, saying that a regional conference would be the best way to resolve differences between the two neighbors. On June 12, U.S. Special Envoy for Middle East Peace George Mitchell met separately with Lebanese President Suleiman, Prime Minister Siniora, and parliamentarian (and Prime Minister-designate) Saad al Hariri in Beirut. Mitchell declared, "There will be no solutions at the expense of Lebanon." Suleiman advised, "any settlement in the region that is not based on the resolution of the Palestinian refugee issue is ineffective." He called for ending Israel's occupation of Shib'a Farms, Kfar Shuba hills, and the northern part of the town of Al Ghajar. There was increased tension on the Israeli-Lebanese border. On July 14, an explosion occurred at a suspected Hezbollah munitions site south of the Litani River. As the Lebanese continued efforts to form a government, Israeli and Hezbollah officials exchanged threats. On August 6, Defense Minister Barak said that Israel was "not ready to accept a situation in which a neighboring country has in its government and parliament a militia that has its own policy and 40,000 rockets aimed at Israel." He added that, Israel would use all necessary force if there were a fresh conflict on its northern border." An Hezbollah official responded that if Israel "commits an error," then it would find that the 2006 conflict was "just a bit of fun." On August 10, Prime Minister Netanyahu denied tensions were increasing, but repeated that" if Hezbollah joins the government, it will be clear that the Lebanese government will be held responsible for any attack coming from its territory against Israel.....It can't hide and say, 'It's Hezbollah, we don't control them.'" The next day, he denied that there was any unusual tension or activity on the border, claiming "this is a media storm, nothing else." In an August 14 speech, Hezbollah Secretary General Sayyid Hassan Nasrallah warned that if Israel bombed Beirut, then Hezbollah would bomb Tel Aviv. "We have the ability to hit any city or town in your entity." On September 11, two 122-mm rockets were fired from Lebanon into northern Israel. Israeli officials held the Lebanese government responsible for any firing done from its territory and Israeli forces responded with artillery fire against the Lebanese village from which the rockets were fired and by scrambling fighter jets across the border. There were no reports of injuries on either side. It was the first such incident since February. A group calling itself the Ziad al Jarrah division of the Abdallah Azzam Brigades later claimed responsibility on a website used by supporters of Al Qaeda. (Al Jarrah was one of the 9/11 hijackers and Azzam was close to Osama bin Laden.) The claim could not be verified. Israel reportedly believes that the perpetrators are a Palestinian-Sunni group with links to global jihadists backed by Al Qaeda. UNIFIL is focusing its investigation on extremist groups linked to Palestinian refugee camps. Prime Minister Fouad Siniora voiced concern that the incident was aimed at dragging Lebanon into a crisis, and he charged that Israel's response was "an attack on Lebanon and its sovereignty." Of Jordan's 3.4 million people, 55 to 70% are Palestinian. (The official figure is 42%.) Jordan initialed a June 1993 agenda with Israel on water, energy, environment, and economic matters on September 14, 1993. On July 25, 1994, Israeli Prime Minister Yitzhak Rabin and King Hussein signed the Washington Declaration, a non-belligerency accord. A peace treaty was signed on October 26, 1994. (See "Significant Agreements," below). The border was demarcated and Israel withdrew from Jordanian land on February 9, 1995. More agreements followed. Although supportive of the peace process and of normalization of relations with Israel, on March 9, 1997, King Hussein charged that Israeli Prime Minister Benjamin Netanyahu was "bent on destroying the peace process...." After Israeli agents bungled an attempt to assassinate Hamas official Khalid Mish'al in Jordan on September 25, 1997, the King demanded that Israel release Hamas founder Shaykh Yassin, which it did on October 1, with 70 Jordanian and Palestinian prisoners in exchange for the detained Israeli agents. On December 5, 1998, the King called for Jordanian-Palestinian coordination, observing that many final status issues are Jordanian national interests. King Hussein died on February 7, 1999, and was succeeded by his son Abdullah. King Abdullah II said that the Palestinians should administer the Muslim holy sites in Jerusalem, a traditional responsibility of his family, and proposed that Jerusalem be an Israeli and a Palestinian capital, but rejected a Jordanian-Palestinian confederation. Until Israel and the Palestinians reach an accord, however, Jordan insists on its right to maintain and oversee the holy sites. On November 21, 2000, Jordan stopped accreditation of a new ambassador to Israel because of Israeli "aggression" against the Palestinians. On March 18, 2004, the King met Prime Minister Sharon to discuss Israel's security barrier and disengagement from Gaza. In February 2005, Jordan sent an ambassador to Israel; in March, its foreign minister visited Israel for the first time in four years. In a March 14, 2007, address to a joint session of Congress, the King pleaded for U.S. leadership in the peace process, which he called the "core issue in the Middle East." He suggested that the Arab Peace Initiative is a path to achieve a collective peace treaty. On September 9, 1993, PLO Chairman Yasir Arafat recognized Israel's right to exist, accepted U.N. Security Council Resolutions 242 and 338, the Middle East peace process, and the peaceful resolution of conflicts. He renounced terrorism and violence and undertook to prevent them, stated that articles of the Palestinian Charter that contradict his commitments are invalid, undertook to submit Charter changes to the Palestine National Council, and called upon his people to reject violence. Israeli Prime Minister Yitzhak Rabin recognized the PLO as the representative of the Palestinian people and agreed to negotiate with it. On August 29, 1993, Israel and the Palestinians announced that they had agreed on a Declaration of Principles on interim self-government for the West Bank and Gaza, after secret negotiations in Oslo, Norway, since January 1993. Effective October 13, it called for Palestinian self-rule in Gaza and Jericho; transfer of authority over domestic affairs in the West Bank and Gaza to Palestinians; election of a Palestinian Council with jurisdiction over the West Bank and Gaza. During the interim period, Israel is to be responsible for external security, settlements, Israelis in the territories, and foreign relations. Permanent status negotiations to begin in the third year of interim rule and may include Jerusalem. Signed on May 4, 1994, provides for Israeli withdrawal from Gaza/Jericho, and describes the Palestinian Authority's (PA) responsibilities. The accord began the five-year period of interim self-rule. Signed on October 26, 1994. (Also called the Taba Accords or Oslo II.) Signed on September 28, 1995. Annexes deal with security arrangements, elections, civil affairs, legal matters, economic relations, Israeli-Palestinian cooperation, and the release of prisoners. Negotiations on permanent status to begin in May 1996. An 82-member Palestinian Council and Head of the Council's Executive Authority will be elected after the Israeli Defense Force redeploys from Jenin, Nablus, Tulkarem, Qalqilyah, Ramallah, and Bethlehem, and 450 towns and villages. Israel will redeploy in Hebron, except where necessary for security of Israelis. Israel will be responsible for external security and the security of Israelis and settlements. Palestinians will be totally responsible for Area "A," the six cities, plus Jericho. Israeli responsibility for overall security will have precedence over Palestinian responsibility for public order in Area "B," Palestinian towns and villages. Israel will retain full responsibility in Area "C," unpopulated areas. Palestinian Charter articles calling for the destruction of Israel will be revoked within two months of the Council's inauguration. Initialed by Israel and the PA on January 15, 1997. Details security arrangements. Accompanying Israeli and Palestinian Notes for the Record and letter from Secretary of State Christopher to Prime Minister Netanyahu. Signed on October 23, 1998. Delineated steps to complete implementation of the Interim Agreement and of agreements accompanying the Hebron Protocol. Israel will redeploy from the West Bank in exchange for Palestinian security measures. The PA will have complete or shared responsibility for 40% of the West Bank, of which it will have complete control of 18.2%. The PLO Executive and Central Committees will reaffirm a January 22, 1998, letter from Arafat to President Clinton that specified articles of the Palestinian Charter that had been nullified in April 1996. The Palestine National Council will reaffirm these decisions. President Clinton will address this conclave. (Also called Wye II.) Signed on September 4, 1999. Israeli Prime Minister Barak and PA Chairman Arafat agreed to resume permanent status negotiations in an accelerated manner in order to conclude a framework agreement on permanent status issues in five months and a comprehensive agreement on permanent status in one year. Other accords dealt with unresolved matters of Hebron, prisoners, etc. (More briefly referred to as the Road Map.) Presented to Israel and the Palestinian Authority on April 30, 2003, by the Quartet (i.e., the United States, European Union, United Nations, and Russia). To achieve a comprehensive settlement in three phases by 2005. Phase I calls for the Palestinians to unconditionally end violence, resume security cooperation, and undertake political reforms, and for Israel to withdraw from areas occupied since September 28, 2000, and to freeze all settlement activity. Phase II will produce a Palestinian state with provisional borders. Phase III will end in a permanent status agreement which will end the conflict. From the Gaza Strip, reached on November 15, 2005, calls for reopening the Rafah border crossing to Egypt with European Union monitors on November 25, live closed circuit TV feeds of the crossing to Israel, Palestinian bus convoys between the West Bank and Gaza beginning December 15, exports from Gaza into Israel, and construction of the Gaza seaport. Read by President Bush at the Annapolis Conference, November 27, 2007. Prime Minister Olmert and President Abbas express their determination to immediately launch continuous, bilateral negotiations in an effort to conclude a peace treaty resolving all core issues before the end of 2008. They also commit to immediately and continuously implement their respective obligations under the Road Map until they reach a peace treaty. Implementation of the peace treaty will be subject to the implementation of the Road Map, as judged by the United States. Foreign aid issues related to the peace process are covered extensively in other CRS reports. For details, please see CRS Report RS22967, U.S. Foreign Aid to the Palestinians , by [author name scrubbed], and CRS Report RL33222, U.S. Foreign Aid to Israel , by [author name scrubbed], CRS Report RL32260, U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2010 Request , by [author name scrubbed]. In general, in order to ensure that Israel has a partner for peace, Congress has provide assistance for the development of Palestinian institutions, security forces, and democracy, including language that prohibits any assistance for Hamas unless it meets international conditions with respect to Israel, and requires good governance practices. It also has appropriated considerable military assistance for Israel and included language ensuring Israel's "qualitative military edge" over its regional neighbors. Congress also has increased aid to Jordan, in part to short up its position as a voice of moderation and for peace in the region. Israel annexed the city in 1967 and proclaimed it to be Israel's eternal, undivided capital. Palestinians seek East Jerusalem as their capital. Successive U.S. Administrations have maintained that the parties must determine the fate of Jerusalem in negotiations. H.Con.Res. 60 , June 10, 1997, and S.Con.Res. 21 , May 20, 1997, called on the Administration to affirm that Jerusalem must remain the undivided capital of Israel. Congress has repeatedly prohibited official U.S. government business with the Palestinian Authority (PA) in Jerusalem and the use of appropriated funds to create U.S. government offices in Israel to conduct business with the PA and allows Israel to be recorded as the place of birth of U.S. citizens born in Jerusalem. These provisions are again in P.L. 111-117 , the Consolidated Appropriations Act, 2010, signed into law on December 16, 2009. The State Department does not recognize Jerusalem, Israel as a place of birth for passports because the U.S. government does not recognize all of Jerusalem as part of Israel. A related issue is the relocation of the U.S. embassy from Tel Aviv to Jerusalem. Proponents argue that Israel is the only country where a U.S. embassy is not in the capital, that Israel's claim to West Jerusalem, proposed site of an embassy, is unquestioned, and that Palestinians must be disabused of their hope for a capital in Jerusalem. Opponents say a move would undermine the peace process and U.S. credibility in the Islamic world and with Palestinians, and would prejudge the final status of the city. P.L. 104 - 45 , November 8, 1995, provided for the embassy's relocation by May 31, 1999, but granted the President authority, in national security interest, to suspend limitations on State Department expenditures that would be imposed if the embassy did not open. Presidents Clinton and Bush each used the authority several times, and President Obama did so on June 5, 2009. The State Department Authorization Act for FY2002-FY2003, P.L. 107 - 228 , September 30, 2002, urged the President to begin relocating the U.S. Embassy "immediately." President Bush replied that the provision would "if construed as mandatory ... impermissibly interfere with the president's constitutional authority to conduct the nation's foreign affairs." The State Department declared, "our view of Jerusalem is unchanged. Jerusalem is a permanent status issue to be negotiated between the parties." The Obama Administration, in line with its demand for an end to all settlement activity beyond the 1967 Green Line (armistice line), objected to Israeli construction of new settler housing at the former Shepherd Hotel in a predominantly Palestinian neighborhood of East Jerusalem. Israel maintains that Jerusalem is not included in the areas under discussion for a construction freeze. President Bush signed the Syria Accountability and Lebanese Sovereignty Restoration Act, P.L. 108 - 175 , on December 12, 2003, to hold Syria accountable for its conduct, including actions that undermine peace. On May 11, 2004, he cited the Act as well as the International Emergency Powers Act, P.L. 95-223 , October 28, 1977, as the basis for his authority to issue Executive Order 13399 block property of certain persons and prohibit the exportation or reexportation of certain goods to Syria. In 2006 and 2008, President Bush issued additional executive orders on the subject. On May 7, 2009, President Obama declared a one-year continuance of the national emergency with respect to Syria to allow the sanctions to remain in place. In a letter to Members of Congress, he said, "Syria poses a threat to U.S. interests" and accused its leadership of "supporting terrorist organizations" among other actions. Sec. 328 of the Conference Report ( H.Rept. 110 - 478 ) for H.R. 2082 , the Intelligence Authorization Act for FY2008, agreed to in the House on December 13, 2007, would have limited spending of the intelligence budget to 30% until each member of the intelligence committees has been informed with respect to intelligence regarding the facility targeted on September 6. The Administration objected that this provision would circumvent the Executive's authority to control access to extraordinarily sensitive information. The Senate agreed to the Conference Report on February 13, 2008, by a vote of 51-45 and the bill was cleared for the White House, but it was not signed. On April 24, National Security Advisor Stephen Hadley, CIA Director Michael Hayden, and Director of National Intelligence Mike McConnell presented evidence to congressional committees that the Israeli target was a nuclear reactor, designed by and being built with the assistance of North Korea. Hayden said that the reactor was within weeks or months of completion and, within a year of entering operation, it could have produced enough material for at least one weapon. These officials reportedly acknowledged lack of evidence indicating that Syria was working on nuclear weapons designs and that they had not identified a source of nuclear material for the facility. They expressed "low confidence" that the site was part of a nuclear weapons program. They also denied U.S. involvement in planning or executing the September 6 strike. Experts suggested that the inability to identify a source of fuel raised questions about when the reactor would have been operational and agreed that the inability to identify facilities to separate plutonium from fuel raised further questions about whether the reactor was part of a weapons program. Damascus has allowed the International Atomic Energy Agency (IAEA) only one visit to the site and has turned down requests for follow-up visits and for access to other sites. The IAEA has said that the building had characteristics of a nuclear facility and that its inspectors had detected "significant" traces of man-made uranium at the site. On September 15, 2009, the U.N. Human Rights Council's Gaza Fact-Finding Mission, headed by South African Judge Richard Goldstone, presented its report on the December 2008-January 2009 conflict between Israel and Hamas, which Israel refers to as Operation Cast Lead. The report concluded that "there is evidence indicating serious violations of international human rights and humanitarian law were committed by Israel ... and that Israel committed actions amounting to war crimes, and possibly crimes against humanity. The report also found "evidence that Palestinian armed groups committed war crimes, as well as possibly crimes against humanity in their repeated launching of rockets and mortars into Southern Israel." The Mission asked the U.N. Security Council to order Israel and Hamas to conduct credible investigations into the alleged crimes. If either side fails to do so within six months, it said, then the evidence should be referred to the International Criminal Court prosecutor in the Hague. Israel is not a member of the International Criminal Court, which can only prosecute Israeli citizens if the Security Council orders an inquiry. Israel rejected the idea of a special investigation and denounced the report for ignoring its right to self-defense, making unsubstantiated claims about its intent, and challenging Israel's democratic values and rule of law. Israel further criticized the report for ignoring Hamas's deliberate strategy of operating within and behind the civilian population in Gaza, and charged that the Mission's goal is to instigate "a political campaign against Israel." An Israeli Foreign Ministry spokesman stated, "We are speaking to members of the Security Council and countries that are conducting operations in Afghanistan. Our message is this: If this U.N. report is allowed to set a precedent, no country can feel safe in defending itself against terrorism or any other kind of threat." Prime Minister Netanyahu vowed not to allow Israeli officials to go to the Hague. On September 18, the U.S. State Department criticized the report's "overwhelming focus" on and "sweeping conclusions of fact and law" with respect to Israel, while making more general and tentative conclusions regarding "Hamas's deplorable conduct." PA President Abbas is said to have been weakened by initially trying to postpone action in the U.N. Human Rights Council on the Report until March 2010, as did the United States. Abbas's effort left him vulnerable to charges in the Palestinian media and from Hamas and other Arab governments of betraying the Palestinian people. He then reversed his position and supported rapid efforts to condemn Israel. The U.N. Human Rights Council and the General Assembly adopted the Report; the United States voted against the recommendation in both bodies. The Council's resolution condemned Israel, not Hamas, which the Report also criticized. It is believed that the Security Council is unlikely to take up the matters because all five of the permanent members oppose its involvement. The United States voted against the adoption of the Report in both U.N. bodies. On September 18, the U.S. State Department criticized the Report's "overwhelming focus" on and "sweeping conclusions of fact and law" with respect to Israel, while making more general and tentative conclusions regarding "Hamas's deplorable conduct." U.S. Ambassador to the U.N. Susan Rice expressed concern about the Mission's "unbalanced, one-sided, and unacceptable" mandate, which was to investigate Israel's "war crimes." On September 29, at the Human Rights Council, Assistant Secretary of State for Democracy, Human Rights, and Labor Michael Posner encouraged "Israel to utilize appropriate domestic review and meaningful accountability mechanisms to investigate and follow up on credible allegations" and called on Hamas to launch an inquiry into the firing of rockets into Israel during the fighting in January. Israeli Prime Minister Netanyahu suggest that "If the report reaches the international court in Hague, it will bring the peace process to a halt because Israel won't take the risks necessary to achieve peace if it is not assured the right to defense itself." On November 3, the House of Representatives passed H.Res. 867 , describing the Goldstone Report as "irredeemably biased and unworthy of further consideration or legitimacy." S.Res. 10 , agreed to by unanimous consent in the Senate on January 8, 2009, and H.Res. 34 , agreed to in the House on January 9, by a vote of 390-5, 22 present, recognize Israel's right to defend itself against attacks from Gaza, and reaffirm the United States' strong support for Israel, and support the Israeli-Palestinian peace process. H.Res. 130 , introduced on February 4, 2009, expressing support for the appointment of former Senator George Mitchell as Special Envoy for Middle East Peace. | After the first Gulf war, in 1991, a new peace process consisting of bilateral negotiations between Israel and the Palestinians, Jordan, Syria, and Lebanon achieved mixed results. Milestones included the Israeli-Palestine Liberation Organization (PLO) Declaration of Principles (DOP) of September 13, 1993, providing for Palestinian empowerment and some territorial control, the Israeli-Jordanian peace treaty of October 26, 1994, and the Interim Self-Rule in the West Bank or Oslo II accord of September 28, 1995, which led to the formation of the Palestinian Authority (PA) to govern the West Bank and Gaza Strip. However, Israeli-Syrian negotiations were intermittent and difficult, and postponed indefinitely in 2000. Israeli-Lebanese negotiations also were unsuccessful, leading Israel to withdraw unilaterally from south Lebanon on May 24, 2000. President Clinton held a summit with Israeli and Palestinian leaders at Camp David on final status issues that July, but they did not produce an accord. A Palestinian uprising or intifadah began in September. On February 6, 2001, Ariel Sharon was elected Prime Minister of Israel, and rejected steps taken at Camp David and afterwards. On April 30, 2003, the United States, the U.N., European Union, and Russia (known as the "Quartet") presented a "Road Map" to Palestinian statehood. It has not been implemented. Israel unilaterally disengaged (withdrew) from the Gaza Strip and four small settlements in the West Bank in August 2005. On January 9, 2005, Mahmud Abbas had become President of the PA. The victory of Hamas, which Israel and the United States consider a terrorist group, in the January 2006 Palestinian parliamentary elections complicated prospects for peace as the United States, Israel, and the Quartet would not deal with a Hamas-led government until it disavowed violence, recognized Israel, and accepted prior Israeli-Palestinian accords. President Abbas's dissolution of the Hamas-led government in response to the June 2007 Hamas forcible takeover of the Gaza Strip led to resumed international contacts with the PA. On November 27, at an international conference in Annapolis, MD, President Bush read a Joint Understanding in which Abbas and Israeli Prime Minister Ehud Olmert agreed to simultaneously resume bilateral negotiations on core issues and implement the Road Map. On May 21, 2008, Israel, Syria, and Turkey announced that Syria and Israel had begun indirect peace talks in Istanbul via Turkish mediators. Later in the year, Israeli and U.S. elections appeared to disrupt negotiations on all tracks and the end of the Israeli-Hamas cease-fire in December and the subsequent outbreak of violence in Gaza led to the official suspension of peace talks. President Obama has affirmed U.S. support for a two-state solution to the Israeli-Palestinian conflict and named former Senator George Mitchell as his Special Envoy for Middle East Peace, but negotiations have not resumed. Congress is interested in issues related to Middle East peace because of its oversight role in the conduct of U.S. foreign policy, its support for Israel, and keen constituent interest. It is especially concerned about U.S. financial and other commitments to the parties, and the 111th Congress is engaged in these matters. Congress also has endorsed Jerusalem as the undivided capital of Israel, although U.S. Administrations have consistently maintained that the fate of the city is the subject of final status negotiations. See also CRS Report R40101, Israel and Hamas: Conflict in Gaza (2008-2009) , coordinated by [author name scrubbed], CRS Report RS22768, Israeli-Palestinian Peace Process: The Annapolis Conference, by [author name scrubbed], CRS Report RL33566, Lebanon: The Israel-Hamas-Hezbollah Conflict, coordinated by [author name scrubbed], and CRS Report RS22967, U.S. Foreign Aid to the Palestinians, by [author name scrubbed]. |
There are several ways to measure traffic safety: the number of highway fatalities; the number of serious injuries from crashes; the economic loss to people involved in crashes; and the social cost of emergency response and accident-induced traffic delays. To understand these numbers in context, other measures are often applied to produce rates such as number of events per million miles traveled, per million registered drivers, and per million persons in the total population. Similar measures can reveal trends for narrower categories such as vehicle occupants and bicyclists. The fatality rate per 100 million vehicle miles traveled (VMT) is the most commonly cited measure of traffic safety, due in part to the seriousness of that outcome and in part to the fact that fatalities are closely tracked and unambiguous. Nearly every crash involving a fatality is investigated and clearly identified as a vehicle-related incident. In contrast, crashes involving injuries or property damage may be reported inconsistently by local public safety agencies or may not come to the attention of authorities; reported data on the numbers of serious crashes and of crashes involving injuries are estimated based on sampling. As Figure 1 indicates, the fatality rate has improved significantly since the passage of the first federal highway safety legislation in 1966. However, the improvement has not been continuous. The fatality rate dropped rapidly, from around 5.5 per 100 million VMT to around 3.2, in the first decade of federal oversight. As the fatality rate has become lower, reductions in that rate have necessarily become more modest: over the past 20 years it dropped from around 1.8 to 1.1. There have been four periods of abrupt declines in the fatality rate since 1970, all of which coincided with recessions; in each instance, the decline was followed by a period of little improvement or even an increase in the fatality rate as the economy emerged from recession. The number of people killed in traffic-related crashes dropped from a high of around 55,000 in 1972 to around 33,000 in 2013. This decline took place in the context of significant increases in both the number of licensed drivers and annual VMT (see Table 1 ). Although the fatality rate from motor vehicle crashes has fallen to a record low, other measures indicate that improvement in traffic safety has stalled. The rate of crashes resulting in serious injuries was significantly higher in 2013 than in 2008, and the overall crash rate has been rising ( Figure 2 ). Highway safety rates and trends vary by state. Fatality rates tend to be lower in more urbanized states. In addition, some states have relatively strict laws concerning safety matters, such as enforcement of mandatory seat belt use and requirements that motorcyclists wear helmets, while other states have fewer safety laws or enforce such laws less vigorously. The fatal crash rates for passenger cars, light trucks, and large trucks have fallen steadily since the 1980s. The same is not true for motorcycles. The fatal crash rate for motorcycles doubled between 1997 and 2005, then fell sharply in 2006 and 2007. Since then, there has been no further improvement. The motorcycle fatal crash rate in 2013 was slightly higher than in 1996 (see Figure 3 ). Motorcyclists are somewhat more likely to be involved in a crash than other drivers. However, a motorcyclist is much more likely to die as a result of a crash than is a driver of a car or light truck; in 2013 the likelihood of a motorcyclist dying in a crash was more than 26 times that of a passenger car occupant. Figure 4 compares the fatality rate for occupants of motorcycles and passenger cars. The causes of the recent trend in the motorcycle fatality rate—rising, then falling back to near the level reached in the mid-1990s but no lower (see Figure 5 )—are not clear. Motorcycle registrations increased during this period, but at a lesser rate than the increase in the fatality rate, and registrations continued to increase even as the fatality rate declined after the recession. The median age of motorcyclists has increased from 27 in 1985 to 41 in 2003 —a change that would be expected to reduce fatality rates, as older drivers are generally less likely to be involved in crashes than younger ones—but the average age of motorcyclists dying in crashes has also increased. The proportion of fatally injured motorcycle operators on a bike with an engine size greater than 1,400 cubic centimeters has risen from 1% in the mid-1990s to around 30% today, suggesting that the combination of older riders and larger, heavier bikes may be a factor in rising fatality rates. One factor that appears to be important in motorcycle deaths is alcohol. While 23% of passenger car drivers involved in fatal crashes in 2013 were legally intoxicated, the figure for motorcyclists was 27% (though this was down from 33% in 1995). Large trucks—vehicles with a gross vehicle weight rating greater than 10,000 pounds—represented only around 4% of registered vehicles in 2013. But the average large truck is driven far more than the average passenger vehicle, and large trucks are involved in crashes at a rate proportionate to the distance they are driven rather than their proportion of vehicles on the road. Large trucks accounted for 9% of total vehicle miles traveled in 2013 and represented 9% of vehicles involved in fatal crashes. The crash involvement rate of large trucks, like that of most other types of vehicles, has fallen significantly since 1988 (see Figure 6 ). Large trucks can be divided into two groups: single-unit trucks and combination trucks such as "semi" tractor-trailers. Only around 25% of all large trucks are combination trucks, but these account for 61% of total truck mileage. Combination trucks experience 1.7 fatal crashes per 100 million VMT, compared to 1.1 for single-unit trucks. This is noteworthy, since drivers of combination trucks do most of their driving on the Interstate System (see Table 2 ), on which accident and fatality rates are far lower than on the local roads on which most single-unit truck mileage is logged. Fatal large truck crashes often involve multiple vehicles. Over 90% of the persons killed in such crashes are occupants of the other vehicle(s) rather than occupants of large trucks (see Table 3 ), so the decline in fatalities in crashes involving large trucks is likely due at least in part to improved crashworthiness of cars and light trucks (see Table 3 ). Driver intoxication is a far less significant factor in large truck crashes than in crashes involving passenger vehicles. Of greater concern with respect to drivers of large trucks is fatigue. Where the average noncommercial driver might drive for a couple of hours, divided into two or more periods, on a typical day, a commercial driver might spend up to 12 hours driving. One survey of commercial drivers found that 25% reported having fallen asleep while driving at least once during the previous year. However, fatigue is not a risk confined to commercial drivers; in a 2006 study of crashes involving both passenger vehicles and large trucks, fatigue was listed as a contributing factor for 8% of the commercial drivers—and for 15% of the passenger vehicle drivers. Commercial drivers and vehicles are subject to random roadside inspections by law enforcement personnel checking for compliance with federal and state regulations. Each year safety groups sponsor a "Roadcheck," a three-day "blitz" of commercial vehicle inspections. The dates are announced months in advance, so while the inspections during that period are still random, drivers and trucking companies could be aware of a heightened possibility of being inspected. During the 2015 Roadcheck, roughly 70,000 vehicles and their drivers were inspected; 5% of the drivers and 18% of the vehicles were found to have violations so serious that they were placed out of service. The most common cause of out-of-service orders for drivers was violations of hours-of-service regulations; for vehicles, it was brake problems. The trend over time for vehicle condition has been improving; in 1991 around 5% of drivers and 35% of vehicles were placed out of service during the Roadcheck period. Miles traveled exposure data are not available for pedestrians, so pedestrian fatality rates are typically reported as a proportion of the total population. The pedestrian fatality rate fell by more than half between 1975 (7,516 pedestrians were killed, a rate of 4 per 100,000 population) and 2013 (4,735 pedestrians were killed, a rate of 1.5 per 100,000 population). How much of this reduction is due to safety measures (such as additional sidewalks, pavement markings, and lower speed limits) and how much to a reduction in exposure (as the proportions of workers walking to their workplaces and students walking to school have declined) is not known. In 2013, 14% of pedestrians killed were children under the age of 15. Consistent miles traveled exposure data is not available for bicyclists, and highway safety organizations including the National Highway Traffic Safety Administration (NHTSA) within the U.S. Department of Transportation (DOT) tend to report the number of bicyclist fatalities rather than calculating a rate based on population. The number of bicyclists killed in traffic crashes has generally declined since 1975, and has risen following the Great Recession. Data indicate that 722 cyclists were killed in 2004 (0.25 per 100,000 population), 628 in 2009 (0.20), and 741 in 2013 (0.24). The recent increase may simply be tracking the general increase in vehicle-related accidents and fatalities following the 2007-2009 recession, but it may also be related to increased bicycle usage. Although there are no reliable data on bicycle VMT, the proportion of American workers who bicycle to work rose from 0.4% in 2000 to 0.6% in the 2008-2012 period. The average age of bicyclists killed in crashes increased from 24 in 1988 to 44 in 2013. At least three in five bicyclists killed in crashes were not wearing helmets. Intoxication is a factor in both pedestrian and bicyclist fatalities; one-third of pedestrians and one-fifth of bicyclists killed in 2013 were legally intoxicated. Government policies influence highway safety in important ways. However, some of the change in accident and fatality rates over the past several decades is attributable to factors beyond the scope of federal highway safety policies. The risk of a crash is not uniform for all drivers. Drivers under age 25 have significantly higher accident rates and rates of involvement in fatal crashes than drivers 25 or over (see Table 4 ). Since 1975, the number of licensed drivers under 25 has fallen by nearly 3 million; that cohort accounted for 22.6% of all licensed drivers in 1975, but only 12.5% in 2013. The spread of stricter licensing requirements for the youngest drivers plays some role in this decline, but so do economic factors and personal preferences that lead young people to obtain driver's licenses at later ages or to drive less frequently. The proportion of the U.S. population that lives in rural areas declined by seven percentage points, from 26.4% to 19.3%, between 1970 and 2010. Drivers in rural areas have higher fatality rates per 100 million VMT than drivers in urban areas, so a reduction in the proportion of VMT by rural drivers would tend to lower the overall fatality rate. Interstate System highways are among the safest roads in the nation due to design characteristics that eliminate intersections and separate opposing lanes by a median or barrier. In 1975, the proportion of all VMT that took place on Interstate highways was 17%; in 2014, it was 25%. All else being equal, the greater share of driving occurring on Interstate highways would be expected to lead to lower accident and fatality rates. Generally, as fuel prices rise, people respond by driving less. This leads to a smaller number of fatalities, but the effect of fuel price changes on the fatality rate is small. One study estimated that a 10% decrease in the price of gasoline is associated with a 1.6% increase in fatal crashes. However, another study found that higher fuel prices lead some drivers to shift from cars to motorcycles, leading to an increase in motorcycle VMT, which in turn is associated with a higher fatality rate. Periods of economic recession are associated with declines in traffic crashes, injuries, and deaths. VMT also tends to decline in recessions, but the proportional reductions in deaths, injuries, and serious crashes are much greater than the reduction in VMT. Similarly, as the economy emerges from recessions, crashes, injuries, and deaths from vehicle accidents increase at greater rates than the increase in VMT. Studies of the possible causes for the sharp decline in fatalities during recessions find that rising unemployment is associated with reductions in both vehicle miles traveled and the number of crashes per 100 million VMT. The decline in fatal crashes per 100 million VMT during recessions is associated with a decline in fatal crashes involving a drunk driver. In the late 2000s, the general long-term downward trend in U.S. traffic deaths was punctuated by two consecutive years of dramatic year-over-year decreases coinciding with the period of the Great Recession and resulting in the lowest fatality rate recorded to that point. The Secretary of Transportation, in announcing this good news, cited the improvement as evidence that DOT's efforts to improve safety were succeeding. However, since 2010, the improvement has stopped. This raises three questions: Why did the fatality rate drop so dramatically in the late 2000s, why did it stop dropping, and to what extent are DOT safety efforts responsible for these changes? While it seems clear that the Great Recession played a role in the changing rates, to date researchers have not found convincing answers to these questions. There are four basic tools available to government to improve traffic safety: engineering, education, enforcement, and emergency response. These tools may be used, in different ways, to achieve three traffic safety goals: reducing the number of crashes; reducing the severity of crashes; and improving medical care for people injured in crashes. As indicated in Table 6 , each of these tools is better suited to achieving some goals than others. Federal policy efforts fall primarily into the categories of engineering and enforcement. Driver education and emergency response to traffic incidents are handled largely by state and local governments with little federal involvement or funding. Federal involvement in education and enforcement of safe driving practices has come through funding for state activities. As behavior of passenger car drivers is largely under the authority of states, not of the federal government, Congress is not able to mandate driver behavior. Instead, it has had to rely on both carrots (incentive grants) and sticks (penalties that reduce federal transportation funding) to influence state governments to adopt and enforce traffic safety measures affecting driver behavior. In recent years, Congress has largely restricted itself to using incentives rather than penalties to influence state enforcement efforts. Federal involvement in engineering has proceeded by way of establishing standards for highway and vehicle designs and funding safety-related improvements in highway infrastructure. The way roads are designed has a significant impact on their safety. For example, as noted earlier, the Interstate Highway System, although it typically carries a high density of traffic at high speeds, has relatively few crashes thanks in large part to its design elements, including the absence of intersections and the physical separation of vehicles moving in opposite directions. Reconstructing roads to reduce crash risks can be as simple as adding traffic-calming features such as speed humps or as extensive as adding lanes for passing or turning. Since road design improvements have a continuing effect, in contrast to enforcement efforts, even relatively costly improvements may be cost-effective when considered in light of the number of drivers affected. The vast majority of federal-aid highway funding is available for road design improvements. One of the core highway formula programs is the Highway Safety Improvement Program, which provides funding to eliminate hazardous road locations or features. In 2015, the Highway Safety Improvement Program distributed $2.2 billion to the states. The fact that injury and fatality rates have fallen much more steeply than crash rates since the mid-1990s suggests that changes in motor vehicle design have improved occupant protection, reducing the probability of a fatality in the event a serious crash occurs. The federal government has mandated vehicle safety improvements since 1966, when DOT required seat belts as standard equipment on all passenger vehicles beginning with the 1967 model year. Since then, NHTSA has mandated a number of other vehicle design standards to improve safety. These standards, published in NHTSA's Federal Motor Vehicle Safety Standards (FMVSS), require now-familiar equipment such as airbags, high-mount brake lights, antilock brakes, and electronic stability control. They also govern vehicle design in less obvious ways such as a regulation standardizing headlight placement. NHTSA spent $130 million to oversee motor vehicle design and engineering in FY2015. Estimates of the safety impact of these standards vary, in part because a number of the safety standards were mandated beginning with model year 1967 vehicles, eight years before the establishment of the nationwide system for reporting fatal crashes. Another complication is that it is difficult to differentiate the effects of vehicle improvements from other factors that affect crash and fatality rates. For example, the introduction of safety belts was a significant safety improvement —wearing a safety belt reduces the risk of injury in a crash by around 42%—but safety belts are effective only when worn, and increasing use of seat belts is not always correlated with significant reductions in crash fatalities. One theory to explain this is that the type of person who chooses to wear a seat belt may also be the type of person who is less likely to engage in other risky driving behavior, such as speeding or driving while intoxicated. The theory that vehicle safety improvements lead drivers to drive in a riskier manner—variously called the Peltzman effect, risk compensation, or risk homeostasis—does not appear to apply to seat belt use; studies have found little or no evidence that belted drivers are more likely to be involved in a crash. Yet another complicating factor is that similar vehicle improvements might have become widespread even in the absence of federal standards. Early federal motor vehicle safety standards forced automakers to add equipment that the industry had been resisting, such as seat belts and airbags. More recently, perhaps influenced by the safety rating programs of NHTSA and other entities, automakers have been adding safety features beyond those required by federal standards, such as side-impact airbags, adaptive cruise control, and automatic braking. Yet another complicating factor is that the safety impact of vehicle improvements is not simply cumulative. For example, by reducing the number of single-vehicle crashes, electronic stability control also reduces the safety impact of safety belts and air bags, which protect occupants from injury in the event of a crash. Thus the total safety impact of a combination of vehicle safety features may be much less than the sum of the impacts of each feature. NHTSA has estimated that vehicle safety technologies are responsible for roughly half of the reduction in the risk of death for vehicle occupants between 1960 and 2012, with "everything else," which includes social and demographic changes such as those previously discussed, improved road designs, efforts to make drivers drive more safely, and improvements in emergency medical response, accounting for the other half. The most effective of the initial safety improvements—such as collapsible steering columns that reduced injuries to drivers in head-on collisions, safety belts, and roof crush resistance standards—protected vehicle occupants from the effects of crashes. In recent years the availability of electronic sensors and controls enabled manufacturers to add features that can help to avoid crashes altogether. These include electronic stability control, adaptive cruise control, automatic braking, and on the horizon the integration of these features and others to produce a self-driving car. In one study, researchers estimated that improvements made in passenger vehicles after the 2000 model year prevented 700,000 crashes, prevented or reduced the severity of injuries to 1 million vehicle occupants, and saved 2,000 lives in calendar year 2008. Educating and training road users seems an obvious way to improve their safety. But there is little evidence that education is effective in reducing crashes. In large part this is because the vast majority of crashes are due to driver behaviors such as driving while intoxicated, driving too fast for conditions, and becoming distracted, and these are errors of judgment rather than of ignorance or lack of skill. Although motorcycle advocacy groups often call for more education of motorcyclists and of drivers as alternatives to mandatory helmet laws, there is no evidence that such efforts have an effect on motorcycle safety. Safety-related education is primarily the responsibility of state governments, and federal spending for this purpose is minimal. The establishment and enforcement of rules governing road use, such as limiting speeds, prohibiting driving while intoxicated, and requiring the wearing of safety belts, is a proven method of improving road safety. However, these are areas over which Congress does not have authority with respect to drivers not engaged in interstate commerce; rather, they are under the control of the states. The federal government is directly involved in enforcement with respect to commercial vehicles that operate across state lines, though even there most of the enforcement is done by state law enforcement agencies. Federal spending on enforcement, through both NHTSA and the Federal Motor Carrier Safety Administration, which regulates truck and intercity bus safety, came to $1.3 billion in FY2015. Much of this went for grants to states to support their enforcement efforts. Congress has employed two approaches to influence states to act on traffic safety issues: penalties and incentives. Penalties have been of two types: the loss of a portion of a state's federal highway funding (a "strong" penalty), and the transfer of a portion of a state's highway funding to highway safety purposes (a "weak" penalty). Of these two approaches, the strong penalty appears to have been more effective in influencing state legislatures to act. One example of a strong penalty law, adopted by Congress in 1966, provided that states that did not require motorcyclists to wear helmets within 10 years could lose a portion of their federal highway funds. In response, 48 states adopted such laws between 1966 and 1975. After the threat of losing federal highway funding was removed in 1976, 27 states repealed those laws by 1979, illustrating the power of federal financial sanctions in overcoming state-level opposition. Language in the FY2001 DOT appropriations act provided that states that did not make it illegal to drive with a blood alcohol content (BAC) of .08% or higher would lose a portion of their federal highway funding beginning in 2004. At the time of enactment, 19 states had such laws; by the end of FY2004, every state had such a law (see Table 7 ). Strong enforcement, however, can evoke resistance, which may lead to the enforcement effort being scaled back. This has occurred at both the federal and state levels. For example, two of the four laws in Table 7 were repealed by later Congresses. The "weak" penalty—having a small portion of a state's federal highway funding transferred from other programs to highway safety activities—appears to have less influence on the actions of state legislatures. There are currently two transfer penalty statutes: one requires a state to have a law making it illegal for an occupant of a motor vehicle to have an open container of alcohol; the other requires a state to have a law requiring a repeat offender convicted of driving under the influence of alcohol (DUI) to use an ignition interlock device for one year or have his or her license suspended for at least one year. The penalty for a state not having such laws is that, in each case, the Federal Highway Administration will require that a small portion of the state's federal-aid highway funding be used for certain safety-related purposes; there is no overall loss of federal highway funding. These two penalties have been in effect since FY2000. The transfer penalties appeared to have a significant impact initially; almost half the states changed their laws to comply with the federal requirements within the first three years that the transfers were applied (see Table 8 ). But in the succeeding 13 years, almost none of the remaining states have changed their laws to comply with the requirements. The Government Accountability Office (GAO) interviewed state safety officials in a handful of states about the impact of the transfer penalties; some felt that the penalties had been important in motivating their legislatures to enact laws complying with the federal requirement, but officials in New York State, which had complied with the open container requirement but not the repeat offender requirements, felt that the transfer penalty amount was too small to influence the state legislature. As of FY2016, 13 states were not in compliance with the requirement concerning open containers, and 16 states were not in compliance with the requirement regarding repeat DUI offenders (see Table 9 ). This suggests that the "transfer of funding" penalty is less effective at influencing state legislators than is the "loss of funding" penalty, although it is possible that the transfer of funding penalty would be more effective if the penalty amount were larger. Congress has not adopted a new loss-of-funding penalty related to traffic safety since 2000. This may reflect, in part, a growing deference to state discretion on the part of Congress in the area of traffic safety, though there is also evidence against that interpretation; Congress has, for example, taken away state discretion to use federal highway funding to support automated traffic enforcement, forbidding states to use any of their federal highway funding for that purpose. The incentive approach has had inconsistent impacts. In the 2012 surface transportation authorization legislation, Congress created or extended seven highway safety incentive grant programs. In the three years following passage, as Table 10 shows, these incentive programs had little impact in inducing states to enact legislation that would qualify them to receive the grants: in FY2013, states received 195 grants out of a possible 350, while two years later states received 193 grants. Federal motor vehicle safety standards have required that lap and shoulder belts be provided in cars manufactured since the 1960s. Seat belts are the simplest way to reduce deaths in traffic crashes; NHTSA estimates that more than 10,000 lives are saved each year because occupants of vehicles in crashes wore safety belts. But safety belts have no safety benefit if they are not used. Congress created an occupant protection incentive grant program in 2000 to make grants to states that adopt various measures in order to improve the rate of seat belt (or child restraint) use. There was also a one-time grant to encourage states to adopt a primary enforcement law. These programs have granted well over $1 billion to states since 2000. Prior to 2000, 49 states and the District of Columbia had seat belt laws, but only 14 states had primary enforcement laws; as of February 2016, 34 states and the District of Columbia had primary enforcement laws. As the number of states with primary enforcement seat belt laws has increased, the nationwide seat belt use rate has gone up (see Table 11 ). Almost one-third of traffic fatalities involve an alcohol-impaired driver (one with a blood alcohol content [BAC] above the legal limit, currently .08%). The proportion of drivers involved in fatal crashes who were impaired by alcohol declined from 35% in 1982 to 20% in 1997; since 1999 the proportion has remained just above 20% (see Figure 7 ). The impact of federal and state DUI-prevention policies on this trend is not clear. During the period of that decline, from 1982 to 1997, the per capita consumption of alcohol in the United States declined, the number of young drivers decreased, the proportion of female drivers increased, there was increased publicity about the drunk-driving problem, and national citizen activist groups dedicated to eliminating drunk driving were established. There was also a decline in alcohol-related crashes in other countries, so other factors may have played a role as well. Moreover, as Figure 7 shows, while the decline in the proportion of drivers involved in fatal crashes who had high blood-alcohol content was quite significant, the decline stopped around 1996. Congress does not have the power to directly regulate alcohol consumption by the general public; that is a state authority. Hence federal policies concerning impaired driving have sought to influence states to regulate alcohol consumption, especially in connection with driving. In 1984 Congress passed the Minimum Drinking Age Act. The act provides that states that do not set a minimum age for purchasing alcohol and for being in possession of alcohol in public will lose a portion of their federal transportation funding. Within a few years every state had such a law. The impact of this law on reducing drunk driving fatalities, while substantial, is difficult to isolate, as many states enacted other supporting laws (for example, laws setting a minimum age for drinking alcohol and making it illegal for an underage person to have any measurable blood alcohol content). Studies estimate that stiffer laws accounted for less than half of the reduction in the proportion of drunk drivers involved in fatal crashes between 1982 and 1997, with demographic factors accounting for the rest. In 2000 Congress directed that any state that did not have .08% BAC as its per se threshold for driving while intoxicated would lose a portion of its federal transportation funding beginning in FY2004; all states had enacted such a limit by 2005. A statistical analysis suggests this tightening of the legal intoxication standard for drivers may have made a small contribution to lowering the proportion of alcohol-impaired drivers involved in fatal crashes after 2001. There have been two significant improvements in alcohol-impaired driving numbers since 1997; neither, however, is attributed to policies targeting impaired driving. The number of teens involved in alcohol-impaired crashes has declined, but that has been attributed to the introduction of graduated driver-licensing laws, which have reduced the rate of teen driving by delaying the age at which teens can get an unlimited license. And there was an overall drop in alcohol-impaired crashes starting in 2007, which reflected the overall decrease in crashes and fatalities in every mode starting that year, largely due to the economic recession. Fatality rates due to alcohol-impaired driving vary significantly from state to state, and even from area to area within states. For example, in 2013 the proportion of drivers involved in fatal crashes who had a blood alcohol content of .08% or higher was 21% nationwide; among the states it varied from a low of 13% (Utah) to a high of 32% (South Carolina). Factors such as rural versus urban population, road conditions, and economic activity, as well as state laws and programs and socioeconomic factors, affect the rate of DUI activity. Speeding is associated with crashes involving injuries and fatalities, since the faster a vehicle is moving, the more energy is absorbed by occupants during a crash and the greater the likelihood of serious injury. Excessive speed has been shown to increase the likelihood of crashes. Congress currently has no policy to discourage speeding. In 1974, Congress adopted a national maximum speed limit of 55 miles per hour (mph). That change was estimated to have saved 2,000 to 4,000 lives annually due to reductions in the number and severity of crashes. In 1987 Congress amended the law to allow speeds up to 65 mph on qualified segments of rural Interstate System highways; most states responded by raising rural Interstate speed limits. In 1995, Congress repealed the law entirely. After the repeal most states raised speeds on their Interstate highways. Studies suggest that the elimination of the maximum speed limit resulted in an increase in the number of crashes and deaths, especially on Interstate highways. Estimates suggest that reinstituting a national maximum speed limit would save between 1,000 and 3,000 lives per year. It would also have some benefit in reducing fuel consumption. However, from a cost-benefit perspective, studies suggest that the cost of the additional travel time imposed by a lower speed limit may outweigh the value of the reductions in crashes, injuries, and fatalities. Congress has made it harder for states to enforce speed limits by barring the use of federal transportation funding for automated speed enforcement. Studies indicate that automated speed enforcement is an effective way to enforce speed limits. Driver distraction is estimated to be a factor in 10% of fatal crashes. Driver distraction is difficult to detect, as it typically leaves no evidence, and drivers have incentives not to admit to being distracted. There are many possible sources of distraction, some of which have been around as long as there have been cars, such as eating while driving, talking to passengers, and looking at objects outside the vehicle ("rubbernecking"). The recent proliferation of cell phones and smartphones and their use by drivers has led to growing concern about driver distraction. Studies looking at cell-phone records indicate that cell-phone use increases the risk of being involved in a crash by a factor of four. Many states have passed laws prohibiting hand-held cell phone use by drivers, but allowing hands-free usage. Studies of driver distraction indicate that it is the driver's attention to the conversation—cognitive distraction—rather than the physical encumbrance of driving with one hand while holding a phone that is the primary source of distraction; hands-free phone use is as distracting to drivers as hand-held phone use. Text messaging, which combines cognitive distraction with diverting the driver's eyes from the road, is significantly more distracting than carrying on a conversation. Automakers are potentially expanding the sources of driver distraction by offering Internet-connected information/entertainment systems on new vehicles. There are as yet few effective countermeasures to drivers engaging in distracting behavior. While surveys indicate that most people are opposed to cell-phone use while driving, they also indicate that most people engage in such behavior at least occasionally. Forty-six states and the District of Columbia ban text messaging by all drivers, 38 states and the District of Columbia ban cell-phone use by novice drivers, and 14 states and the District of Columbia ban all drivers from using hand-held cell phones while driving. Studies indicate that such laws alone have little impact; intensive enforcement of such laws can be effective in the short term, but it is relatively expensive. The only countermeasure that has been clearly proven to work is graduated driver licensing—that is, limiting the driving opportunities for teens. Congress established a distracted driving incentive grant program in 2012 to encourage states to prohibit texting by all drivers, and prohibit cell-phone use entirely for drivers under age 18. To qualify for a grant, states are required to have these as primary violations, to have no exception for use while stopped in traffic, and to have a minimum fine for first offenders and an increased fine for repeat offenders. Only one state qualified for a grant under this program in FY2014 and FY2015. In December 2015 Congress deleted the requirement for an increased fine for repeat offenders; this is expected to allow more states to qualify for grants. Injuries to the head are the most common cause of fatalities among motorcyclists; they are also a common type of nonfatal injury. The only policy approach that has been demonstrated to be effective in reducing motorcycle crash deaths is a law requiring all motorcyclists to wear helmets ("universal helmet law"). As noted above, Congress enacted a penalty for states lacking a universal motorcycle helmet law in 1966, but repealed it in 1975. In 1966, no state had a universal motorcycle helmet law; by 1975, 47 states had adopted such legislation. The motorcycle fatality rate per 100,000 motorcycles declined from 127 (1966) to 67 (1976). After Congress repealed the law in 1976, 27 states repealed their mandatory helmet laws within three years, and the fatality rate per 100,000 motorcycles rose from 67 (1976) to 91 (1979). Universal helmet use legislation was again passed by Congress in 1991, repealed in 1995, and unsuccessfully proposed on occasion since then. The absence of mandatory helmet laws may be related to the fact that the motorcycle fatality rate is roughly what it was 20 years ago, while fatality rates for occupants of cars and light trucks have declined. Currently, 19 states, the District of Columbia, and four territories have universal helmet laws; 28 states and one territory require helmets for young riders, and three states have no helmet requirements. The observed use rate for helmets in states varies, but as a group, helmet use in universal helmet law states approaches 100%, while in other states it averages around 50% (see Figure 8 ). NHTSA has estimated that if every state had a universal helmet law, nearly 1,000 motorcyclist deaths would be prevented each year. Some motorcyclists wear helmets that do not comply with the DOT standard; these so-called "novelty helmets" do not offer the same degree of protection in a crash. State enforcement authorities have observed that the existence of such helmets makes it difficult to enforce helmet use laws (which require a DOT-compliant helmet). NHTSA has initiated a rulemaking that would restrict the sale and use of noncompliant helmets. Congress has established a motorcycle safety incentive grant program under which DOT "shall award grants to states that adopt and implement effective programs to reduce the number of single- and multi-vehicle crashes involving motorcyclists." Congress established six criteria; a state can qualify for a grant by having any two of the six. Two are numerical measures (reducing the number of motorcycle deaths and the rate of crashes involving motorcycles compared with the previous year; reducing the number of deaths and rate of crashes involving impaired motorcyclists compared with the previous year). The four remaining criteria are policy measures: offering motorcycle rider training courses; having a program to increase motorist awareness of motorcyclists; having a statewide program to reduce impaired driving that includes specific measures to reduce the number of motorcyclists riding while impaired; and using all fees collected for motorcycle training and safety programs for those purposes. As noted above, there is no evidence that the types of training programs encouraged by three of the six criteria are effective in reducing crash or fatality rates. The safety policy that has been proven to be effective in reducing motorcyclist deaths—a universal helmet law—is not among the options for qualifying for the motorcyclist safety grant program. The key element in emergency response is reducing the amount of time between a crash and the provision of medical assistance to injured victims. Federal highway safety programs play virtually no role in this aspect of emergency response. Although U.S. highway safety statistics have steadily improved, there is room for further improvement. Since 2010 the reductions in U.S. fatality and injury rates have stalled, and preliminary estimates indicate that traffic deaths increased by 9% in the first nine months of 2015 compared to the same period in 2014, while VMT increased by less than 3%. Also, while the U.S. highway safety record was once the world's best, in recent years the highway safety performance of several other industrialized nations has surpassed that of the United States. There are several policy actions Congress could consider that are recommended by safety advocates as being relatively low-cost but effective interventions. These include actions dealing with seat belt usage, motorcycle helmets, automated traffic enforcement, and implementation of new vehicle safety technologies. A survey found that 87% of front-seat occupants wore seat belts in 2014. The rate was 90% in states with primary enforcement seat belt laws, and 79% in states with other laws. Other countries have achieved higher use rates: Australia (96%), England (95%), and Canada (92%). NHTSA estimated that in 2013 an additional 2,800 lives would have been saved if all unrestrained passenger vehicle occupants five years of age and older had worn seat belts. As noted above, the incentive grant program Congress created in 2005 to encourage states to adopt mandatory belt use laws with primary enforcement was judged to have reached its ceiling by 2012, with 34 states and the District of Columbia having adopted such laws for front-seat passengers, and 17 states and the District of Columbia having adopted such laws for all vehicle occupants (front and rear seats). Options available to Congress to increase the number of states with primary enforcement laws for seat belt use by all occupants include an incentive program with a much greater value of incentive, a program that would penalize states that do not adopt such laws, or a combination of the two. Ninety nations, representing 77% of the world's population, have universal mandatory helmet laws, including a standard for helmet performance. In Australia, the reported helmet use rate by motorcycle operators is 99%. Universal helmet laws have been shown to be very effective in promoting helmet usage, because a violation of the law is easily seen. Currently, 19 states and the District of Columbia have universal helmet laws. NHTSA estimates that if every motorcyclist wore a helmet meeting DOT standards, hundreds of motorcyclists' lives would be saved each year. However, Congress has prohibited NHTSA from lobbying state legislatures to encourage the adoption of universal helmet laws, and it omitted adoption of universal helmet laws from the list of safety measures required for a state to receive a motorcycle safety incentive grant. In the surface transportation authorization enacted in 2015, Congress prohibited states from using federal highway safety funding to check motorcycle helmet use and to create checkpoints that specifically target motorcyclists. Automated traffic enforcement, such as the use of cameras to capture evidence of speeding and running red lights, has several advantages in encouraging compliance with traffic laws. Such tools reduce the risk that officers enforcing traffic laws will be attacked by suspects they approach or be hit by passing cars, allow monitoring of many more intersections and miles of roadway, and may be less costly to deploy than police officers. In numerous studies, red-light cameras have been shown to decrease the number of both red-light violations and crashes involving injuries and fatalities at signalized intersections. A review of 28 studies measuring the effect of speed cameras found that speed cameras reduced the number of crashes in an area, generally from between 14% to 25%, and also reduced the number of crashes resulting in injuries or deaths. A number of other countries have made extensive use of speed cameras in their highway safety programs. For example, in France, use of automated enforcement was a key feature of a highway safety initiative announced in 2002. Australia introduced such cameras in 1989; 2,300 cameras were in place by 2009. The percentage of light vehicles in free-flowing traffic exceeding the speed limit by more than 10 kilometers per hour (roughly 6 mph) dropped from 36% in 2001 to 10% in 2009. In the 2012 surface transportation authorization act, Congress prohibited states from using any federal-aid highway funding for automated traffic enforcement (except in school zones), and prohibited states from using any of their federal highway safety funding for automated traffic enforcement; Congress continued these prohibitions in the FAST Act. In a further disincentive to the use of automated enforcement, Congress required states in which automated enforcement systems are in operation to use some of their federal safety funding to conduct a biennial survey of those systems. Since driver error plays a major role in traffic crashes, the prospect of reducing the role of the human driver in driving decisions is considered to have great potential to reduce crashes and the resulting deaths and injuries. Industry is racing ahead with developing and implementing driver-assistance technologies, with the goal of largely, if not entirely, replacing the human driver. NHTSA has been studying the impact of driver-assistance technologies in the context of considering what features might be added to the list of mandatory safety standards. The last such addition was in 2007, when electronic stability control was mandated for all passenger vehicles beginning with the 2012 model year. It is estimated that it takes around 17 years for the U.S. automobile fleet to turn over, and this time period has been lengthening due to the increasing reliability of cars and decline in crashes, so the impact of new vehicle technologies is likely to take some time to appear. There is also a question about how quickly new safety technologies reach higher-risk drivers, as those at highest risk are younger drivers who may be less able to afford new vehicles. DOT has announced that it would work with industry, states, and other stakeholders to accelerate the deployment of autonomous vehicles, and has proposed a 10-year, $4 billion program to test connected vehicles. Given the potential safety impact of the new collision-avoidance technologies and the lag in the spread of such technologies, an analysis of the costs and benefits of a program to encourage drivers to replace older cars with new cars equipped with these technologies may be worthwhile. Recent experience with the Consumer Assistance to Recycle and Save Act of 2009 (which created the so-called "Cash for Clunkers" program paying vehicle owners to scrap old cars and purchase new, more fuel-efficient ones) can help inform the prospects of such a proposal. | In 2013, 32,000 Americans were killed in crashes involving motor vehicles. Motor vehicle crashes are a leading cause of death for Americans overall, and the number one cause of death for teenagers. Millions of people are injured in crashes annually, and motor vehicle crashes are estimated to have cost some $242 billion in 2010 in lost productivity, medical costs, legal costs, property damage, and time lost in congestion caused by crashes. The number of people killed in crashes has declined significantly over the past decade. The reasons for this sharp decline are not entirely clear. While traffic safety agencies have attributed it, at least in part, to their safety efforts, it is in line with a general trend: as measured by the number of miles people are driving, the rate at which people are killed in traffic crashes has been declining steadily since records began to be kept in 1929. Congress has played a role in improving highway safety. Making road travel safer was one of the responsibilities Congress gave to the federal Department of Transportation (DOT) when it created the department in 1966. Congress has directed DOT to improve the safety of automobile design and of road design, as well as to support programs to improve driver behavior. An oft-cited statistic in traffic safety is that as many as 90% of road deaths are due at least in part to driver error or misbehavior (such as driving too fast for conditions or driving while drunk or distracted). Driver behavior is a state, not federal, matter; in an effort to address it, Congress has enacted programs that encourage states to pass laws to promote safer driving. The role of driver behavior versus road design and traffic management is a subject of debate. Some analysts note that road designs and traffic management arrangements often allow, or even encourage, driver error and misbehavior, and so play a larger role in crashes than is often recognized. One of the core highway capital improvement programs Congress has authorized is intended to fund safety improvements to highway infrastructure. A federal study estimated that half of the improvement in highway fatality rates since 1960 was attributable to improvements in vehicle safety technologies, with social and demographic changes, driver behavior interventions, and improvements in road design playing smaller roles. Most of the vehicle safety technologies analyzed in the study increased the likelihood that vehicle occupants would survive a crash. More recently, technological development has focused on preventing crashes. While some crash-prevention technologies, such as automatic braking and lane departure warnings, are available now, others, such as vehicle-to-vehicle communication and vehicles that can operate without human intervention, are not yet on the market. Given that most vehicles remain in use for many years, it may be a decade or more before the majority of cars on the road incorporate those new technologies. There is opportunity for further improvement: crash and injury rates are no longer declining, and preliminary estimates indicate the fatality rate increased significantly in the first nine months of 2015. Several other nations have significantly improved their highway safety rates in the past few decades, surpassing the U.S. rates. Policy options that might further reduce traffic crashes, injuries, and fatalities include encouraging states to adopt stronger laws regarding use of seat belts and motorcycle helmets, encouraging the use of automated traffic enforcement to reduce speeding and failure to stop at red lights and stop signs, and accelerating the deployment of new vehicle safety technologies. Motorcycle helmet laws and automated traffic enforcement have encountered public opposition. |
Iran's ballistic missile program dates to the late 1970s after the Shah was overthrown and the Islamic Republic of Iran established. The new Iranian government embarked on a ballistic missile program marked by considerable secrecy. Many consider that Iran's ballistic missile development was in full force by the mid-1980s during its protracted war against Iraq, during which Iran reportedly launched more than 600 ballistic missiles. Today, there is little disagreement among most experts that Iran has acquired some number of ballistic missiles from other countries and has developed other ballistic missiles indigenously or in cooperation with others. Iranian ballistic missile proliferation has been a matter of U.S. and international concern. At the same time, however, there has been considerable public disagreement over precisely what kinds of ballistic missile systems Iran has or is developing itself or in cooperation with others. This is because there is little transparency in Iran's ballistic missile programs, which has led to some degree of a lack of confidence in Iran's public assertions of its activities. Finally, details about Iranian ballistic missile programs remain classified in the United States. Because of the secrecy inherent in the development of weapon systems, especially in less open societies, open-source analyses reflect a wide-range of technical views and assessments. This report provides a brief description of what is publicly discussed regarding Iran's ballistic missile programs ; it does not discuss Iranian cruise missiles or rockets. These latter weapons were a source of concern when some reportedly Iranian-made rockets and other missiles may have been used by Hezbollah against Israel in 2006. Charges of Iranian military support to Iraqi insurgents do not include Iranian-made rockets or missiles, however. This report first examines Iran's long-range ballistic missile programs because those efforts generally drive the greatest concerns within the United States, especially when coupled with concern over the development of Iran's nuclear capabilities. A brief overview of Iran's medium and short-range ballistic missile programs then follows. Traditionally, the United States has defined long-range or Intercontinental Ballistic Missiles (ICBMs) as those ballistic missiles capable of ranges greater than 5,500 kilometers (about 3,400 miles). To date, five countries have deployed operational ICBMs (all with nuclear weapons): the United States, Russia, China, France, and Britain. Other countries, such as Iran, are believed by some observers to have ICBM programs in varying stages of development. In 1999, the U.S. intelligence community assessed that at some point the United States would probably face ICBM threats from Iran. This remains the official U.S. position, that "Iran could test an ICBM in the last half of the next decade using Russian technology and assistance" (emphasis in the original). A similar report was issued in 2001. This assessment is often interpreted that Iran will have ICBMs by 2015, but the unclassified intelligence statements place various caveats on that potential capability. These intelligence statements serve as the official U.S. basis for assessing the Iranian ICBM threat to the United States and its friends and allies. These assessments drive U.S. military efforts designed to respond to such threats, such as the U.S. Ballistic Missile Defense (BMD) program in general and the U.S. proposed missile defense system in Europe specifically, as well as U.S. diplomatic efforts to curb Iranian long-range ballistic missile programs. These assessments, in conjunction with official U.S. assessments of Iranian nuclear weapons development, contribute significantly to ongoing U.S. concerns over Iranian threats to U.S. and international security. These assessments do not mean, however, that there is universal agreement within the U.S. intelligence community on the issue of an Iranian ICBM. According to these unclassified statements, some argue that an Iranian ICBM test is likely before 2010, and very likely before 2015. Other U.S. officials believe, however, that there is "less than an even chance" for such a test before 2015. Furthermore, U.S. assessments are also conditional in that an Iranian ICBM capability would have to rely on access to foreign technology, from, for example, North Korea or Russia. Finally, it is argued that an Iranian ICBM could develop from an Iranian space program under which a space-launch vehicle program might be converted into an ICBM program. Some have argued that Iran could develop and test such a space launch vehicle by 2010. Some observers argue that although the U.S. position may be based upon a realistic assessment, it is also a worst-case analysis of the potential threat from Iran. They argue that "with rare exception this level of threat has rarely turned out to be the historical reality." Beyond these general U.S. public statements about Iranian ICBM developments, there are few unclassified details. Further, non-official public sources reflect little technical or program consensus regarding an Iranian ICBM program. Some have referred to a program called the Shahab-6 (or Kosar in some instances) as a potential ICBM development program, perhaps derived from North Korean or Russian missile technology, or both. Although Iran continues to declare it has no plans to develop an ICBM program, there appears to be considerable public uncertainty and debate as to whether the Shahab-6 is an actual design study concept, or an active or abandoned Iranian ICBM or even space-launch program. In January 2004, Iran's Defense Minister reportedly announced that Iran would launch a satellite within 18 months. Iran then launched its first commercial satellite on a Russian rocket in 2005, and announced that it had allocated $500 million for space projects over the next five years. In February 2008, Iran reportedly launched a low-orbit research rocket in preparation for a later satellite launch. The Bush White House called that launch "unfortunate." In August 2008, Iran said it successfully launched a rocket that could carry its first satellite, but U.S. defense officials said the test aimed failed shortly after launch. In early February 2009, Iran successfully launched its Omid (Hope) satellite on a Safir-2 (or Ambassador-2) rocket , which has a range of about 155 miles. A Pentagon spokesman said this launch was "clearly a concern of ours" because "there are dual-use capabilities here which could be applied toward the development of long-range missiles." Many experts believe that Iran's Shahab-3, which sometimes appears also to be called the Zelzal-3 ballistic missile, is a derivative of the North Korean No-Dong 1 ballistic missile. It has a reported range of about 1,000 to 1,500 kilometers. This could reach potential targets throughout most of the Middle East. Some have speculated that North Korea, Iran, and Pakistan entered into a cooperative effort at one point to develop a missile of this range and capability. Other observers have alleged Russian assistance in Iranian development of this missile. Some reports suggest that Iran has already deployed a number of medium-range ballistic missiles (MRBMs). Of all Iranian ballistic missile programs, there seems to be more publicly available information in relative terms about this particular missile system than others. Even so, there remains considerable and varying differences in open sources about this system. Longer range versions of the Shahab-3, variously referred to as Shahab-3 variants, the Shahab-3A, Shahab-3B, and Shahab-4, and a BM-25, may have range capabilities of 1,500-2,500 kilometers. These missiles potentially could reach targets throughout the Middle East, Turkey, and into southeastern Europe. Some have reported that perhaps several dozen or more of these missile types may be deployed and operational. Some Chinese, North Korean, or Russian involvement is suspected. In 2006, Iran announced the successful test of a Fajr-3 MRBM comparable to the Shahab-3, although U.S. and Israeli intelligence analysts reportedly expressed skepticism. In mid-July 2008, Iran launched a number of ballistic missiles and rockets of varying ranges during military exercises. Some observers noted the missile launches were in direct response to long-range Israeli air force exercises at the time. Iran claimed it flight tested a 2,000 km version of the Shahab-3 that could carry a 1-ton warhead. If accurate, this missile could hit targets throughout the Middle East and Turkey. But some analysts are skeptical of these Iranian claims pending further technical analyses of these recent military exercises, and others have cited Iranian exaggerations of its missile capabilities in the past. Various major international media retracted initial images of the missile launches because they were reportedly digitally altered. Bush Administration officials said Iran did not test new technologies or capabilities, but said the missile launches were evidence of the need for its proposed missile defense system in Europe. Secretary of State Rice stated the exercises were not helpful and that Iran should refrain from such activities. Iran said it successfully test fired a 2-stage solid-fuel missile with a 2,000 kilometer range in November 2008. At the time, a Pentagon spokesman said he could not confirm the launch occurred, but that this was consistent with the fact that Iran continues to develop a ballistic missile program that poses a threat to Iran's neighbors in the region and beyond. Other reports have also surfaced over Iran's development of a much longer MRBM with ranges of 4,000-5,000 kilometers, or even a space launch vehicle derived from these efforts that some refer to as the Shahab-5. The degree to which this effort might be actually underway also is highly uncertain. Iran is widely believed to have deployed a number of short-range ballistic missiles (SRBMs)—those with ranges less than 1,000 kilometers. In addition, Iran is believed to have various other SRBMs under development, either indigenously or in varying degrees of cooperation with countries such as China, North Korea, or Russia. Beyond these speculations, however, open source materials do not reflect a consensus over technical capabilities and performance. Additionally, there appear to be considerable differences in descriptions of the numbers of systems operational or deployed and even the agreed-upon names of SRBMs ascribed to Iran. Some of the more commonly referred to Iranian missiles are discussed briefly. Some believe that Iran may have imported perhaps 200 Chinese CSS-8 (or Tondar-69) SRBMs in the late 1980s, as well as a number of associated launch systems for their operational deployment. The CSS-8 may have a range of about 150 kilometers. Iran may have developed an SRBM in the 1990s called the Fateh A-110 (also apparently referred to as the Mershad or Zelzal-2 variant). According to various reports, this missile may have been developed with Chinese, Syrian, and North Korean involvement. This missile may have a range of about 200 kilometers and may have become operational around 2004. Some believe that Iran acquired several dozen Chinese M-11 or CSS-7 SRBMs and associated launch vehicles in the mid-1990s, although China has denied this. The M-11 reportedly has a range of around 280 kilometers. Iran may also possess a number of SRBMs with ranges of 200-300 kilometers that it might have acquired from Libya or North Korea. Some may have been produced or modified indigenously. These have variously been referred to as the SCUD-B, SCUD-B variants, or Shahab-1 SRBMs. Iran might also possess a few hundred SRBMs with a range of about 500-700 kilometers or so. These SRBMs have sometimes been referred to as the SCUD-C and Shahab-2. Analysts have expressed uncertainty over whether the Iranians developed and built these missiles on their own, or had help from China and North Korea. Finally, there are some reports of an operational SRBM with a range up to 800 kilometers, which may possibly be referred to as an M-9 variant, DF-15, or CSS-6. Reportedly, the PRC produced the M-9 for export and Iran has acquired some number of them. | Iran has an active interest in developing, acquiring, and deploying a broad range of ballistic missiles, as well as developing a space launch capability. This was spotlighted several times since 2008. In mid-July 2008, Iran launched a number of ballistic missiles during military exercises, reportedly including the medium-range Shahab-3. At the time, a Pentagon spokesman said Iran was "not testing new technologies or capabilities, but rather firing off old equipment in an attempt to intimidate their neighbors and escalate tension in the region." Subsequent analysis of the July 2008 missile launches shows Iran apparently digitally altered images of those launches. Iran announced other missile and space launch tests in August and November 2008. In February 2009, Iran announced it launched a satellite into orbit and "officially achieved a presence in space." This short report seeks to provide an overview of the reported or suspected variety of Iranian ballistic missile programs. Because there remains widespread public divergence over particulars, however, this report does not provide specificity to what Iran may or may not have, or is in the process of developing. This report may be updated. |
The useful properties of thousands of chemicals provide a wide range of benefits to American consumers and bolster the U.S. economy. These benefits occasionally come with a price, however, as exposure to certain substances, such as lead, pesticides, or asbestos, may lead to adverse effects on human health or the environment. Congress has enacted various laws to manage chemical risks associated with chemical use in industrial processes and production, agricultural practices, and residences and consumer products. Concerns about the effects of chemicals, as well as regulation of chemicals by the U.S. Environmental Protection Agency (EPA), continue to emerge, prompting additional congressional consideration. This report briefly describes selected legislative issues related to chemical production, processing, distribution, and use (including past use)—activities that generally are regulated under chemical laws implemented by EPA. Such laws generally target different, often overlapping, sets of chemicals, depending on how they are used or how people might be exposed. For example, the Toxic Substances Control Act (TSCA) directs EPA to regulate industrial chemical processes and interstate commerce in bulk chemicals; the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) mandates regulation of the sale and use of chemicals intended to control pests in agriculture and other applications; and the Emergency Planning and Community Right-to-Know Act (EPCRA) addresses regulation of hazardous chemicals in storage or routinely or accidentally released to the environment. Chemical risk management laws and their implementing regulations also differ in the extent to which they impose potential burdens on regulated entities and in the degree of protection afforded to human health and the environment. Congress oversees EPA's implementation of these and other statutes and may consider new legislative proposals that would revise regulatory authority. Selected chemical issues discussed below were considered by the 112 th Congress and may be of interest to the 113 th Congress. Key issues include the adequacy of TSCA for regulating potentially hazardous chemicals; whether to expand information disclosure requirements under various laws; how to safeguard the integrity of scientific advice; overlapping statutory requirements for control of pesticides applied to surface water; whether to provide authority to implement international treaties; and regulation of contractors working in older homes that contain lead-based paint. The Toxic Substances Control Act (TSCA) authorizes EPA to identify potentially dangerous chemicals in U.S. commerce and to regulate their production (including importation), distribution, and use to prevent "unreasonable risks" to human health or the environment. EPA has rarely applied the broad authority provided by TSCA, however, even though it applies to all "chemical substances," a term defined by the law to include lead, chlorine, plastics, and most other elements and compounds. TSCA has been difficult for EPA to implement, at least in part, because it requires EPA to justify each regulation by demonstrating that the chemical to be regulated poses an unreasonable risk. Concerns about the difficulty, cost and long delays in regulating have prompted some critics to propose statutory (as opposed to regulatory) bans of specific chemicals. Other critics of TSCA have proposed amending the statute to provide EPA with more specific authority to manage chemical risks. A few TSCA critics would rewrite TSCA to make it more closely resemble Europe's recently adopted law, which is attempting to phase out more dangerous chemicals in favor of less risky substitutes and forcing manufacturers to prove the safety of their products. Still others would prefer a very targeted approach to TSCA reform, which would leave most of the statute intact. Senator Lautenberg introduced S. 1009 , the Chemical Safety Improvement Act, in the 113 th Congress. It would rewrite TSCA, increasing EPA's discretionary authority to gather information about chemicals in commerce and to regulate unreasonable risks. This bill has bipartisan support, including support from Senator Vitter, the ranking member of the Senate Committee on Environment and Public Works. S. 1009 probably is meant to supersede Senator Lautenberg's earlier proposal, S. 696 , the Safe Chemicals Act. Another issue that may concern the 113 th Congress involves public disclosure of chemical information. Federal laws and legislative proposals aimed at reducing human exposure to potentially harmful chemicals often require some kind of information sharing between product manufacturers or distributors and customers, clients, or potentially exposed bystanders. This may consist of a public announcement in some form or a product label listing ingredients or including written instructions for appropriate use, storage, or disposal. There are many ways in which information must be shared under existing federal and state laws. For example, the federal Emergency Planning and Community Right-to-Know Act (EPCRA) requires manufacturers and certain other businesses to report to EPA annually on emissions of some 600 hazardous chemicals. The intent of EPCRA disclosure is to inform communities about chemicals released into the environment and to which the public might be exposed. EPA makes these reports available to the general public in the form of a Toxic Release Inventory (TRI). Congress enacted laws like EPCRA in part because required disclosure of information has been seen by some as a relatively benign form of regulation (compared to prohibition of production, for example). Information provision theoretically works with the free market, allowing consumers or bystanders who receive information to make informed choices. For example, disclosure may discourage consumers from using certain products containing chemicals perceived to be hazardous and promote substitution of "safer" products. The regulated community, on the other hand, often argues that required information disclosure can imply risk where little or none exists, unfairly discouraging commerce in and use of, chemicals that are safe when used as intended. In addition, affected industries sometimes object to such requirements because the information disclosed might be useful to business competitors. Finally, tracking and reporting of releases consumes resources that might otherwise go to business development. Under the Obama Administration EPA has expanded public access to information about chemicals in commerce. For example, in May 2012, the Bureau of Land Management (BLM) in the Department of the Interior proposed revisions to its oil and natural gas development rules in response to the increased use of hydraulic fracturing on federal and Indian lands. The proposal would require public disclosure of chemicals used during hydraulic fracturing, tighten requirements related to well-bore integrity, and add requirements for managing water used and produced in hydraulic fracturing operations. In response to extensive public comments on the proposed rule, in May 2013, BLM published a Supplemental Notice of Proposed Rulemaking (SNPR) and Request for Comment. In the SNPR, BLM requests comments on the multiple changes in the proposed rule and provides 30 days for public comment. EPA recently reviewed and released information in its files when chemical manufacturers no longer have met EPA requirements for protection of confidential business information (CBI) under TSCA. In addition, EPA responded favorably (in part) to a petition filed under TSCA Section 21, agreeing to initiate rulemaking to require submission of data on environmental or health effects and exposures to hydraulic fracturing chemicals. EPA expects that its rule "would focus on providing aggregate pictures of the chemical substances and mixtures used in hydraulic fracturing" to complement the well-by-well disclosure programs of many states. Further information disclosure by EPA under EPCRA might be on the horizon in response to a citizen petition. Seventeen environmental advocacy groups petitioned EPA to require additional public reporting of chemical releases by the oil and gas producers. Currently, oil and gas production is not covered by the reporting requirements of EPCRA, but the growth of hydraulic fracturing as a means of oil and gas production and the use of certain chemicals in that process may make this petition and EPA deliberations more salient. In the 113 th Congress, H.R. 1921 , the FRAC Act, and Section 301 of S. 332 would require a person conducting hydraulic fracturing operations to disclose to the state (or to the EPA Administrator if he or she has primary enforcement responsibility in such state) the chemicals intended for use in underground injections before the commencement of such operations and the chemicals actually used after the end of such operations, and would require a state or the Administrator to make such disclosure available to the public. S. 1009 , which would reform TSCA, would narrow the conditions under which data about chemical substances may be treated as confidential business information. In addition, S. 1009 would increase public disclosure requirements related to chemical hazards. EPA relies on input from scientists outside the agency to ensure that its regulatory decisions are based on sound science. EPA receives this input in various ways, but one common mechanism is through expert panels. Panels are formed to advise EPA staff on scientific issues and the state of knowledge and to peer review draft EPA documents, on request, for accuracy and comprehensive-ness. Many panels are formed to provide advice on particular, often technical, topics, but scientific panels also may be very general, such as EPA's Science Advisory Board (SAB) which oversees numerous more specialized panels. Although these panels are intended to provide scientific advice, rather than policy direction, the information they provide often has strong implications for EPA's policy decisions. In such cases, the advice may be controversial, and some, especially critics of the policy decisions, may question whether panel members are providing objective advice in an impartial manner. For this reason, Congress requires that the SAB and most other advisory panels operate under the Federal Advisory Committee Act (FACA). FACA requires that committee membership be "fairly balanced in terms of the points of view represented," and advice provided by committees be objective and accessible to the public. Panel members are subject to applicable ethical standards (5 Code of Federal Regulations Part 2635) and are required to file financial disclosure reports and to take annual ethics training. However, some Members in the 112 th and 113 th Congresses questioned the balance among SAB members with respect to their sources of research funding. H.R. 1422 in the 113 th Congress would amend the Environmental Research, Development, and Demonstration Authorization Act of 1978, which created the SAB. The proposed amendment would require that "the scientific and technical points of view represented on and the functions to be performed by the Board are fairly balanced among the members of the Board." To that end, the bill proposed to revise the nominating process and composition of the Board in several respects, the effect of which appeared intended to increase representation of state, local, and tribal governments and of potentially regulated entities, while disclosing potential financial conflicts of interest among scientists who might benefit from EPA grants, contracts, cooperative agreements, or other financial assistance. EPA also solicits scientific input through workshops, hearings, and stakeholder meetings. The purpose of these is usually to explore a topic or to ensure input from experts with differing perspectives, often including people with practical experience as well as researchers and academics. Input often is received from such groups at several points during a deliberative process, for example, when EPA is developing a hazard or risk assessment for a chemical, as it does for its Integrated Risk Information System (IRIS). IRIS stores and integrates scientific information relevant to human health risk assessment for chemicals of particular regulatory interest. Originally intended for internal use, IRIS now is widely cited and underpins many federal, state, and local regulations. Many criticize IRIS, however, for being scientifically out of date and incomplete. In addition, critics agree that the IRIS process for developing definitive toxicity assessments of chemicals is too slow and needs to be streamlined. Some reportedly would prefer fewer reviews of IRIS assessments by other federal agencies, while others prefer earlier involvement of stakeholders, to "get it right the first time." The Natural Resources Defense Council (NRDC) and the Science and Environmental Health Network released an issue paper that calls for greater emphasis in IRIS risk assessments on other recommendations of the NAS: incorporation of human variability with respect to vulnerability to harm from toxic chemicals; reliance on science-based assumptions when information is absent; consideration of risks due to multiple chemical exposures; and assumption that low levels of exposure impart risks, unless there is good evidence otherwise. The House Subcommittee on Oversight, Committee on Science, Space and Technology, held a hearing on the issue July 14, 2011. At that hearing, the EPA Assistant Administrator for Research and Development testified that The IRIS program is now entirely managed by EPA and EPA strives to ensure that all of its science assessments undergo rigorous, open and independent external peer review and that multiple opportunities exist for public review and comment. Additionally, changes in IRIS assessments that occur during the interagency and public process are documented and explained, ensuring a transparent final product. Nevertheless, EPA continues to revise its process to meet criticisms leveled by the National Academy of Sciences (NAS) in its April 2011 response to EPA's draft assessment of formaldehyde. NAS indicated that the draft assessment "was not prepared in a logically consistent fashion, lacks clear links to an underlying conceptual framework, and does not sufficiently document methods and criteria used to identify evidence for selecting and evaluating studies." The National Research Council (NRC) recommended that EPA more rigorously edit its assessment documents; more fully discuss its methods; develop concise statements of its criteria for identifying, selecting, excluding, or emphasizing particular studies for hazard assessment and deriving toxicity values, using uniform approaches to evaluate the strengths and weaknesses of critical studies; and prepare standardized evidence tables to accompany descriptions of the studies used. The 112 th Congress addressed this issue in the conference report for the Consolidated Appropriations Act, P.L. 112-74 , which directed EPA to "incorporate, as appropriate" the NRC recommendations into the IRIS risk assessment process. In addition, EPA was required to include documentation describing how those recommendations were addressed in draft assessments released in FY2012, and to contract with the National Academies to conduct up to three reviews of IRIS assessments that EPA proposed to make final, including an assessment of inorganic arsenic. Congress directed NAS to complete its reviews within 18 months of the contracted date. Finally, the conference report expressed the view that "future IRIS assessments must not only be grounded in sound, objective, and peer-reviewed science and methodologies but should also provide risk managers with realistic values that will result in enhanced protection of human health." The National Academies Committee on Inorganic Arsenic held a meeting to discuss EPA's draft inorganic arsenic assessment on May 29 and 30, 2013. Congress may oversee EPA's implementation of these requirements or might otherwise revisit this issue in the 113 th Congress. The Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) requires EPA to regulate the sale and use of pesticides in the United States through registration and labeling and to restrict usage of pesticides as necessary to prevent unreasonable adverse effects on people and the environment, taking into account the costs and benefits of various pesticide uses. The sale of any pesticide is prohibited in the United States unless it is registered (licensed) and labeled to indicate approved uses and restrictions. It is a violation of the law to use a pesticide in a manner that is inconsistent with the label instructions. The 113 th Congress may continue to examine apparent overlapping jurisdiction between provisions of FIFRA and the Clean Water Act (CWA). The CWA is the principal federal law governing pollution in the nation's surface waters. In recent years, federal courts have held that aerial application of a pesticide over and into U.S. waters requires authorization under the CWA's National Pollutant Discharge Elimination System (NPDES) permit program, even when the pesticide use meets other requirements of federal law, including FIFRA. These decisions drew the attention of many pesticide applicators, including public health entities (such as mosquito control districts), concerned with how the rulings might affect their need to control pests associated with diseases such as the West Nile virus. In November 2006, EPA finalized a rule seeking to resolve the conflict over the regulatory scope of the CWA and FIFRA related to pesticide use, in light of the recent litigation, by promulgating clarifying circumstances under which a CWA permit is or is not required for activities carried out pursuant to FIFRA. However, in 2009, a federal court rejected EPA's argument that residual and excess pesticides do not require a CWA permit because they are adequately regulated by FIFRA, and the court vacated the rule. In June 2009, the federal court granted an EPA request for a delay in the effective date of the court's ruling. In response, EPA developed a general CWA permit for pesticide applications covered by the ruling. General permits minimize regulatory burdens on pesticide applicators and state permitting officials, but there still is significant concern about the impact of EPA's actions. EPA issued the pesticide general permit on October 31, 2011, as required by the court. EPA estimated that the universe of affected activities subject to CWA permits initially would be approximately 5.6 million applications annually, which would be performed by 365,000 applicators covering four use patterns: (1) mosquito and other flying insect pest control; (2) aquatic weed and algae control; (3) aquatic nuisance animal control; and (4) forest canopy pest control. Under the final permit, pesticide discharges that occurred before January 12, 2012, were automatically covered, but those occurring after that date have to apply for coverage. EPA and states are now implementing the permit requirements. In spite of EPA's general permit in response to the 2009 court ruling, Congress has considered legislation to affirm that a CWA permit is not required for use of FIFRA-approved pesticides. In the 112 th Congress, the House passed H.R. 872 , a bill that would amend FIFRA and the CWA to provide that neither EPA nor a state may require a CWA permit for discharge of a pesticide whose use has been authorized pursuant to FIFRA. The Senate Agriculture Committee approved the bill without amendment in June 2011. Language identical to H.R. 872 is included in the 2013 farm bill legislation ( H.R. 1947 ) approved by the House Agriculture Committee. Similar proposals have been introduced in the 113 th Congress ( H.R. 935 , S. 175 , and S. 802 ). Some older pesticides are persistent organic pollutants (POPs) that are global contaminants of concern to many nations. The United States has signed three international agreements to reduce the production and use of POPs and to regulate their trade and disposal. President George W. Bush submitted two of these agreements, which are formal treaties, to the Senate for advice and consent, where they will remain pending Senate action. If the Senate consents, and if Congress passes legislation needed to implement the treaties and the executive agreement in the United States, then the treaties could be ratified and the agreements would become binding U.S. law. President Obama also supports ratification, but two U.S. statutes are inconsistent with the agreements: TSCA and FIFRA. Congress has considered but has not enacted proposals to amend the statutes. S. 696 in the 113 th Congress would add a new section to TSCA authorizing actions that would allow U.S. implementation of the three international agreements. Another issue before Congress relates to chemical contamination from lead-based paint, which is banned by the Consumer Product Safety Commission but remains in older homes, where it may be hazardous to young children. Congress amended TSCA to establish a grant program in 1992 to assist states in reducing lead-based paint hazards in private and federally assisted residences. The problem of lead-based paint hazards, although improved, has not been eliminated. Thus, Congress annually appropriates more than $100 million to the grant program, which is administered through the Department of Housing and Urban Development. Congress annually adjusts the parameters of grant programs to reflect its priorities and is likely to do so again in the 113 th Congress. A bill introduced in the 113 th Congress, H.R. 1282 , would extend the categories of eligible grant recipients to include families living in all housing, including efficiency apartments, and to streamline paperwork requirements, making it easier to apply for a grant. | The useful properties of chemicals provide many benefits to consumers and bolster the U.S. economy, but these benefits may come with a price, as exposure to certain chemicals can lead to adverse effects on human health or the environment. This report briefly describes selected issues related to regulation of chemicals in commerce by the U.S. Environmental Protection Agency (EPA) that are of potential interest to the 113th Congress. Concerns about the complexity, cost, and delays in regulating chemicals under the Toxic Substances Control Act (TSCA) have prompted proposals (such as S. 1009 in the 113th Congress) to amend the 1976 statute. Some would provide EPA with specific authority and mandates to ensure adequate management of chemical risks. Others would amend particular provisions, leaving most of the law intact. TSCA reform is a high priority for some in the 113th Congress. Another issue is whether to expand or restrict EPA's authority to require disclosure of chemical information under the Emergency Planning and Community Right-to-Know Act (EPCRA) or TSCA. Bills in the 113th Congress, H.R. 1921, the FRAC Act, and Section 301 of S. 332 would require oil and gas producers to disclose identities of chemicals used in hydraulic fracturing. Other administrative and legislative initiatives also would mandate more public disclosure. The integrity of scientific advice provided to EPA may be another salient issue. Some Members of Congress have expressed concern about the composition of EPA's Science Advisory Board (SAB). H.R. 1422 would require a rebalancing of "the scientific and technical points of view represented." EPA's Integrated Risk Information System (IRIS) has been criticized by some for being out of date and incomplete, while the process of conducting chemical risk assessments is said to be slow. The National Research Council (NRC) made recommendations to improve IRIS reports in 2011, and Congress directed EPA to "incorporate, as appropriate," NRC recommendations and to contract with the National Academy of Sciences to conduct several reviews of IRIS assessments, including one for inorganic arsenic. Pesticides issues generally are resolved under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), which directs EPA to regulate the sale and use of pesticides through registration of products. The 112th Congress was interested in apparent overlap between FIFRA and the Clean Water Act (CWA). At issue is whether FIFRA is sufficient alone to ensure protection of water quality or whether certain pesticide applications require a CWA permit. In response to a court order, EPA issued a general permit requiring applicators to minimize pesticide discharges to waters. House-passed H.R. 872 in the 112th Congress would have exempted aerial pesticide application activities from water permit requirements. The Senate Committee on Agriculture, Nutrition, and Forestry approved the bill in June 2011. Language identical to H.R. 872 is included in the 2013 farm bill legislation (H.R. 1947) approved by the House Agriculture Committee, as well as in H.R. 935, S. 175, and S. 802. Another issue of potential interest is whether to amend both TSCA and FIFRA to accommodate certain international agreements intended to reduce production and use of persistent organic pollutants (POPs) globally. In the 113th Congress, S. 696 would add a new section to TSCA, authorizing actions allowing U.S. implementation of the three international agreements. Finally, as it considers appropriations, Congress may actively consider what amount of federal grant money should be made available to address lead-based paint hazards in older homes. H.R. 1282 would streamline paperwork requirements, making it easier for people to apply for a grant. |
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